Am I screwed?
August 16, 2011 12:24 PM   Subscribe

I moved to Canada in 2008, but I haven't paid US taxes for the past three years. How much trouble am I in?

I moved to Canada in 2008 and am a permanent resident. I earn nothing taxable from anything I left in the US, and I remember hearing vaguely that Americans have to pay taxes based on income above a certain level no matter where they live. I stupidly interpreted that to mean "don't have to file unless above a certain amount", which apparently is not the case. I don't think I go above the maximum income, but I have an appointment with a HR Block US specialist tomorrow and am bringing them my T4s from the years I didn't file in the US. I'm not sure I need to bring anything else.

I've gone across the border several times since moving here and not had any trouble with Customs, but I am freaking out thinking that I am going to be socked with a huge amount or arrested or something even though I wouldn't have owed anything had I filed on time. Can anyone let me know how much trouble I could be in and if there's anything I can do about it now? I'm not even sure I should file.
posted by anonymous to Law & Government (9 answers total) 1 user marked this as a favorite
 
Whatever H&R Block tells you about what you may or may not owe, you will not be arrested at the border for unpaid taxes.
posted by DarlingBri at 12:36 PM on August 16, 2011


I am not a tax professional.

When I had foreign earned income in 2004 and 2005, the exclusion was $70k. You didn't have to pay taxes on the first $70k of foreign earned income, but you *did* have to file.

My guess is that unless you were over the exclusion, you *should* only have token penalties for not filing. Good luck. (Also, H&R block might not be your best option, as my understanding is they specialize in helping the averageish taxpayer do an averageish return. I could well be wrong about that, though you may want someone with a little more experience specifically around foreign earned income.
posted by colin_l at 12:37 PM on August 16, 2011 [1 favorite]


If you're a US Citizen, you are taxed on income you make outside the country. That includes if you have a job in Canada. This is one reason why so many US ex-pats (or so I hear) renounce their US citizenship after moving out of the country.

I'm not sure how this will affect you. My advice would be to contact a CPA. You'll probably owe a few years of back taxes with interest.
posted by tckma at 12:38 PM on August 16, 2011


Have you been outside the US for 331 days? That is a key factor. You may also be helped by being a 'bona fide' resident of Canada - but I'm sure only a tax lawyer would be able to interpret that term.

Linky
posted by scolbath at 12:43 PM on August 16, 2011


Also, H&R block might not be your best option, as my understanding is they specialize in helping the averageish taxpayer do an averageish return. I could well be wrong about that, though you may want someone with a little more experience specifically around foreign earned income.

I agree with this strongly. Income tax for expatriates can be very complicated, and you should use a tax professional who focuses on (or at least has experience with) this area.
posted by Rock Steady at 1:06 PM on August 16, 2011


Another suggestion for a tax pro instead of H&R Block. No offense to anyone working at H&R Block.

2008 = greater than 331 days
posted by yerfatma at 1:14 PM on August 16, 2011 [1 favorite]


"If you're a US Citizen, you are taxed on income you make outside the country. That includes if you have a job in Canada. This is one reason why so many US ex-pats (or so I hear) renounce their US citizenship after moving out of the country."

This is wrong. In most cases if you are resident abroad you can make about $90,000 without paying tax. Here are some basic facts, and right at the top of this form (PDF) is the test for whether you qualify.

My understanding (not a tax pro, have just researched this a lot because it applies to me) is that you are now essentially in the same situation WRT penalties and late filling as a US resident citizen who made over the minimum to file and failed to file but did not owe any tax because of credits, deductions etc (this is assuming you don't owe). On paper there are some big things they can do to you, but everything I have ever read says they are focused on getting money owed and much harsher to people they have to chase, and if you're a regular person, come forward to fix it yourself, and are only three years behind, you're way, way down the list. So it's not good but it's almost certain they won't throw the book at you. I bet nothing happens at all, but what do I know...

I think you need to bite the bullet and get this fixed with a pro you can really trust. It sounds stressful and if you ever plan to return to the US, it's not going to go away.
posted by crabintheocean at 1:22 PM on August 16, 2011


...and that thing about mass US citizenship renunciations due to expat taxes? It's totally bogus.
posted by Wylla at 5:09 AM on August 17, 2011 [1 favorite]


At the very least see a CPA specializing in US expats living in Canada, maybe a lawyer specializing in the same thing, not H&R Block, please. PM me if you want a recommendation.
posted by phoenixy at 11:53 AM on August 17, 2011


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