Americans living in Canada risk facing massive tax penalties

"DrCaleb" said
But it won't save them from back taxes. Only future ones.

The U.S. Foreign Account Tax Compliance Act, which comes into effect in 2013, will require non-U.S. financial institutions to tell the IRS about any clients who are American citizens.

"saturn_656" said
But it won't save them from back taxes. Only future ones.

The U.S. Foreign Account Tax Compliance Act, which comes into effect in 2013, will require non-U.S. financial institutions to tell the IRS about any clients who are American citizens.

Dueck said the IRS has the clout to pressure Canadian institutions that do business on both sides of the border into doing this. So the only way for Americans living in Canada to avoid being identified would be to have no dealings with any financial institution, or to commit perjury — an option he emphatically advises against — when their bank asks about their citizenship.

Even more chilling, he said, Canadian-born children of American citizens may not realize they may automatically get U.S. citizenship without ever making any effort to apply for or acknowledge it. So some may be at risk of penalties without even realizing they’re dual citizens.

That means that people like Kerry Knoll’s two teenage daughters, who have never had a U.S. address or earned a penny there but have dual Canadian and American citizenship, will have to file U.S. tax returns on accounts they hold in Canada and may face penalties.

“Suddenly we are being told that my daughter’s savings account from her summer job is considered an illegal offshore account by the Americans, something that I find preposterous,” Mr. Knoll said in an interview.

“My daughters might owe thousands out of their registered education savings plans (RESP). These are not even taxes, these are penalties because it was not reported. And the reason we did not report it is because we had no idea we were required to,” Mr. Knoll said.