Even though a U.S. citizen may reside in Canada, the federal government requires that she file income taxes in the United States. The filing requirements are exactly the same, reporting any income gained worldwide and on the Form 1040. As a Canadian resident, you will also be required to report your income to Canadian authorities, but there are ways to report your income legally without being double-taxed. You'll need to ensure you take the proper steps on your U.S. return to exclude your income.
Things You'll Need
- IRS Form 1040NR
- IRS Form 2555 (Earned Income Exclusion)
- IRS Form 1116
Exclude up to $85,700 in income by completing Form 2555 and including it when you file your annual tax form. To qualify for the Earned Income Exclusion, you will need to reside in Canada for at least 330 days of the past year, and file by the June 15 tax deadline.
Claim tax-free income in the United States, such as your Social Security benefits, for another exemption. If you receive this benefit as a U.S. citizen residing in Canada, you will not be taxed in the United States. It can be taxed in Canada, however, and deductions are allowed on your Social Security benefits.
Claim the Foreign Tax Credit as a way to avoid being taxed twice, claiming a deduction on the taxes you pay in Canada and vice versa. To claim Canadian taxes as a U.S. deduction, you will need to add the Form 1116 to your 1040NR filing. You can also claim taxes you paid in the United States as a deduction for your Canadian taxes.
File your taxes in the United States, by June 15. As a nonresident citizen, you receive an extension that allows time for the filing and return of your Canadian taxes and determination of the liability for both nations. If you owe taxes in the United States, however, interest will begin to accrue from the federal April 15 tax date.