In terms of taxation, the US is the only country that imposes tax on US citizens wherever they are and wherever they acquire their income. On the contrary, most countries only acquire residents to pay taxes. If you go abroad or work abroad, you don’t have to pay taxes.
The strict rules of the Internal Revenue Service (IRS) require each citizen, regardless of where they reside, to report their worldwide income and file their US tax returns promptly each year. This means that U.S. citizens working and residing in a country must pay taxes for the money they earn from that country.
For some countries, such as Canada, U.S. has made an agreement to exempt U.S. citizens from being taxed for the income they earned and taxed in those countries for the purpose of preventing double taxation which is a great burden to an individual.
There are strict rules, however, that govern this. If a U.S. citizen fails to complete the U.S. tax return accurately and in a timely manner, a person can be charged with penalties, interests and can subject to double taxation. Furthermore, they can be denied of legitimate expenses.
There are three possible scenarios for a U.S. citizen in Canada:
• You’re a U.S. Citizen residing in Canada. A U.S. citizen can be exempted from filing taxes provided that they are a resident of Canada. The requirement for residency is a stay in Canada for a period of 183 days in a calendar year. This applies particularly to those that declares Canada as their primary area of residence. This, however, does not exempt him or her from filing taxes in Canada. He or she is still bound by the taxation laws of Canada and still must declare his or her worldwide income on a Canadian tax return.
• You’re a U.S. Citizen and Resident who works in Canada. Because Canada and the U.S. share borders, it is common for U.S. citizens and residents to commute to work in Canada. In this case, a person can be exempt from Canadian or U.S. tax depending on the situation. If a person earns from a work in Canada, normally, he or she would be required to pay Canadian taxes. However, if a person is earning from a U.S. company located in Canada, he or she may be exempted from Canadian taxes (but will be required to pay U.S. Taxes).
The rules regarding taxation between Canada and the U.S. are covered by article XXIV of the Canada-U.S. Income Tax Convention of 1980. The rules will specify whether a person can be taxed in Canada or in the U.S.
Filing US taxes from Canada is governed by a rule that require knowledge and experience. If you think this is beyond your skills or if you want assistance, there are a number of US Tax filing services that could help you with Filing US taxes in Canada. Not only will this save you time and effort, but it will also ensure that you follow the rules and laws accordingly, thereby avoiding any penalties or additional charges.