My wife moved from Seattle to Vancouver when she was 3 yrs old. Now a dual citizen, and having never worked in the US, she learned this month she owes upwards of $100K in income tax penalties for never having filed a US return. And we have 7 days to fix this problem.
What? Isn't there a tax treaty between Canada and the US, you ask? Why yes, Johnnie, there is. But the treaty does not say US citizens living in Canada are excused from filing. They are excused from paying taxes in both countries. The US is the only country in the world that taxes on citizenship, not on residency. Americans around the world must file. Every year. And they must pay us taxes on Cdn RRSPs and RESPs which are considered 'foreign trust accounts'. And they must pay $10k penalty every year they do not disclose each foreign trust account.
These idiots in Washington mismanage their budget and feel the need to throw anti-terrorism and money-laundering legislation at school teachers in Vancouver - just to keep their lights on. We had to hire a g'damn $700/hr Wash, DC lawyer just to keep our house and retain America's permission to fly over their airspace.
We seem to have 3 options:
Option 1) reason with the law. Explain that most 3 yr old Cdns are not experts in US tax law. Pay lawyer a lot, and hope for good settlement. May or may not bankrupt us.
Option 2) pay lawyer less and voluntarily come forward with a pre-defined set of penalties and taxes.
Option 3) do nothing and let them come for us.
We're taking door #2. And I'll be first in line to join a class-action suit to get our money back some day. So angry. Tell your American friends living around the world.