You know what they say about death and taxes, right? Nothing is certain except for these two. As a citizen of Canada and the U.S., you have to file your taxes every year. If you are a green card holder, you need to file a U.S. tax return in Canada alongside Canadian tax returns. You are obligated to file it whether you have moved to Canada recently or living there for your whole life. But the majority of the U.S. citizens there do not know how they should do that. For Canadians who need to file U.S. tax returns, we advise that you keep up to date about cross-border tax changes. Tax laws keep changing, and these changes impact you directly as a tax filer.
Filling in the Required Information in Form 1040
You must file tax returns using Form 1040 if you earn income exceeding the CRA's threshold and IRS, respectively. This form typically contains two pages. Usually, this form needs to be filed by April 15th yearly. Form 1040 can either be mailed or electronically filed. One needs to provide information about the filing status, such as name, address, Social Security Number, and dependents. Some information about one's spouse might also be required. The form also asks tax filer about full-year health coverage and the wish to contribute $3.0 to presidential campaign funds. In the 1040 income section, you need to report the types of income you have earned; in the same section, you can also claim deductions. For instance, you can claim for exclusion of your earned income utilizing Form 2555.
Claiming for the Omission of Earned Income:
Attaching Form 2555 with Form 1040 can help you exclude Canadian employment income from U.S. taxation. You can claim exemptions under the bona fide resident test, physical presence test, exclusion of foreign earned income, and allowable foreign housing exclusion/deduction. You will no longer need Form 1116 to get reductions in U.S. taxes which you are obliged to pay for your earned income in Canada once you fill in Form 2555.
About FBAR (Foreign Bank Account Reporting) and Having a Relieved Tax Season
As a citizen of the U.S. living in Canada, if you have a financial interest earned on your foreign account surpassing USD 10,000, you need to disclose it according to the law. You must file the FinCEN 114 electronically; otherwise, you will be subjected to significant fines and penalties. Please approach a tax consulting service to ensure you remain on the safe side. Tax experts can help you with assets management also in Canada.
Conclusion:
As an American living in Canada, you need to file both the U.S. tax return in Canada and Canadian tax returns. Form 1040 is the general income tax form you need to fill in with the required information. You can also claim certain deductions for the incomes you might have earned in Canada by filling in the income section of Form 1040. If you do not file your U.S. tax return on time in Canada, there will be significant fines and penalties. Lastly, you should utilize a tax consulting service by contacting the experts to file your U.S. tax return on time and avoid penalties.