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I'm a Canadian-US dual citizen (born in the US to Canadian parents) but I've lived in Canada my whole life (aside from the first 3 weeks). I've never had an American passport or a SSN. I've never filed a tax return in the US, or really done anything there other than some cross-border shopping and being born there.

I've heard that US citizens living abroad need to file taxes in the US. Is this something I'm going to get into trouble for in the future? Should/can I just renounce my US citizenship? Or will it be revoked soon enough with a republican congressional bill against anchor babies? Or can I just continue ignoring things, and assume that since I don't have a SSN, the IRS doesn't have me on record, and won't bother me? Or do I really need to go through the process of getting a US passport and SSN (much of which requires in-person visits to embassies / consulates and other government agencies in both Canada and the US)?

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3 Answers

up vote 6 down vote accepted

The short answer, per the IRS, is yes.

Whether the IRS will come after you, whether you should renounce your US citizenship or what the Republicans will do, I can't answer. If you're really concerned with the question of legality, I'd recommend to talk to an international tax lawyer.

(As an aside, if you do decide to file you can simply request an ITIN number, no need for SSN and passport - follow the link from the above linked article)

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Yes, you need to file. They can and (anecdotally) do ask people to file returns going back over decades of time when the person has had no financial connection to the USA. – poolie Dec 14 '10 at 22:40
I think the work you want is "renounce" not "denounce". – DJClayworth Jan 26 '11 at 15:07
@DJClayworth: thanks! changed. – Korneel Bouman Jan 26 '11 at 15:46
up vote 3 down vote

Renouncing your citizenship would not remove your tax obligation from past years, and may not remove your tax obligation for the future.

In fact, beginning the process of renouncing your citizenship may trigger a review of your tax records.

See Renunciation of U.S. Citizenship from the U.S. Department of State, especially section E. TAX & MILITARY OBLIGATIONS /NO ESCAPE FROM PROSECUTION.

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up vote 2 down vote

Yes, you'll probably have to file. Maybe you'll have something to pay.

See here: http://www.irs.gov/publications/p54/ch04.html - most notably the Foreign Earned Income Exclusion that ceilings at 91K USD.

However, you really need to check with a tax pro.

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There's also a tax treaty with Canada, so income tax paid in Canada offsets any income tax otherwise due from the U.S. tax return, so a balance due is unlikely (but possible, perhaps, under some circumstances?) – Chris W. Rea♦ Dec 15 '10 at 0:27
IRS Publication 901 covers tax treaties. irs.gov/publications/p901/index.html – Chris W. Rea♦ Dec 15 '10 at 0:30
The treaty is surprisingly - how can I say this diplomatically? - aggressive in terms of allowing taxation pursuit of foreign-based US citizens. I guess the exemptions and potential offsets are better than nothing... – gef05 Dec 15 '10 at 1:26

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