Olivier Custeau, Fiscaliste, B.A.A., M. Fisc., EA

Relief Procedures for Certain Former Citizens

American citizen living in Canada  —   —  Share

Tax relief for Americans who renounced their citizenship

As a US citizen, you have an obligation to report your worldwide source income to a US tax return annually and to report your foreign bank accounts there, regardless of where you reside.

If you have renounced your US citizenship after March 18, 2010, but never fulfilled your US tax obligations, the US Department of Revenue (Internal Revenue Service or IRS) implemented a new temporary measure allowing you to rectify your situation with the US tax authorities without being subject to the departure tax (expatriation tax) otherwise applicable.

Conditions must be met in order to use the Relief Procedures for Certain Former Citizens program, such as:

  • Have renounced their American citizenship after March 18, 2010;
  • Have no filing history as a US Citizen or Resident;
  • Not have exceeded the IRC threshold for average annual net income tax for the 5-year tax period ending before their date of expatriation;
  • Have a net worth of less than $2 million at the time of expatriation and when submitting under these procedures;
  • Have a total tax debt of $25,000 or less for the 5 tax years preceding his expatriation as well as the year of his expatriation;
  • Agree to complete and submit all federal income tax returns required for the 6 tax years in question.

With the existing exchange of information agreement between Canada and the United States, Canadian financial institutions are now required to validate with their clients whether they have American citizenship or if they have renounced their citizenship, and to keep these informations.

Good news, you are eligible!

If you qualify for the Relief Procedures for Certain Former Citizens program, you will be required to complete your US income tax returns for the most recent six years and you will normally not be subject to departure tax and no penalties will apply. You will need to provide proof of surrender of your citizenship. If you use this program without qualifying, your US tax returns will be processed through normal procedures and penalties and interest will apply.

This article is not a tax opinion and covers only part of the information relevant to the IRS Relief Procedures for Certain Former Citizens program. We recommend that you make an appointment with one of our tax experts to validate your eligibility for the program and meet your tax obligations.