FAQ: Common Questions

Common International Tax Questions - People taking notesQ:  I file my tax returns on time in Canada (or the U.S.) where I live, and may not meet the filing threshold to file a return in the other country from which I have income.  Should I file anyway?

A:  Yes.  If you had income from the other country and may be required to file, or if your income is eliminated by the operation of a tax Treaty or exlusion, failure to file will leave that year open in the other country while your home country return is closed by statute in three years.  If a return is never filed, the year never closes, so many years from now, if the second country assesses tax, you will not be able to amend your home country return to claim a foreign tax credit, resulting in double taxation.  Further, if you do not file a return to claim a Treaty or other exemption, the presumption may be that you do not want the protection offered by the Treaty, and it will later be denied.  Click for more information on filing requirements.


Q:  I work in the U.S. for a subsidiary of my Canadian employer, and am paid in Canada on payroll.  If I spend fewer than 183 days in the U.S. I am exempt from tax in the U.S.   Do I need to file in the U.S.?

A:  Yes.  A return is required to establish your claim to protection under Treaty article XV. Even though no tax is payable on the federal return, filing the return indicates your intent to rely on the Treaty for protection.  Some states which do not adhere to federal treaties may also consider you taxable at the state level.


Q:  I am a Canadian who moved to the U.S. during the year.  What are my filing options?

A:  In the year you enter the U.S., you can choose to file a "dual status" return, or you can elect to be treated as a U.S. resident for the entire year.  We normally calculate both scenario's to determine the best course of action.  Click for more filing status options for the year of your move.


Q:  I am a Canadian who lives in the U.S.  Should I keep my RRSP intact in Canada?

A:  It is recommended that you retain your RRSP intact in Canada until retirement, to maintain the deferral of taxes as contemplated when you made your original investment.  Click here for our RRSP information page for Canadian expatriates.


Q:  My broker tells me that it cannot deal with my RRSP since I have moved to the U.S.  Is this true?

A: The SEC has issued an order exempting Canadian broker-dealers from the rules which prohibit the use of a broker outside your contry of residence.  However, many brokers either are not aware of this ruling, or do not wish to maintain a relationship with a non resident client.  Here is a link to the SEC ruling which you can provide to your broker.


Q:  I am an American who has lived abroad for a long time and have filed returns in the U.S. each year, but I did not realize that I needed to report such things as bank and securities accounts, RRSP's, TFSA's, RESP's, or foreign corporate holdings.  Can I correct this?

A: U.S. citizens are required to file U.S. reports on foreign bank accounts, securities accounts, trusts and corporations regardless of where they may live.  Normally, where no tax is owing because income earned abroad has been fully reported for U.S. tax purposes, filing Foreign Bank Account Reports (FBAR's) for the past eight years will correct your filing obligations.  Periodically there are voluntary disclosure initiatives through which IRS encourages compliance.  Here is a link to the latest voluntary disclosure initiative offered by IRS.


Q:  I am an American who has lived abroad for a long time and have filed returns in Canada (or other countries) but did not file in the U.S.  Do I have to file back years taxes?

A: U.S. citizens are required to file U.S. tax returns and related reports on foreign bank accounts, securities accounts, trusts and corporations regardless of where they may live.  Normally, where no tax is owing filing the past six years of returns will correct your filing obligations.  Periodically there are voluntary disclosure initiatives through which IRS encourages compliance.  Here is more information.