Friday, August 5, 2016
Only two governments in the world - the United States and Eritrea - subject their citizens to comprehensive worldwide taxation regardless of where they live. There are more Americans living in Canada than in any other foreign country. While the two countries have generally similar income tax systems, there are a number of areas of incompatibility. As a result, US citizens living in Canada encounter significant limitations on their ability to carry on their activities or plan their affairs, compared with non-US citizens. In addition, the reporting burden imposed by the US Internal Revenue Service is heavy, and growing. A more aggressive enforcement policy in recent years has induced increasing numbers of Americans abroad to relinquish their US citizenship or green-card status. This article discusses the history of this phenomenon, and the tax consequences for Americans in Canada who give up their US status.