How to File US Taxes From Canada for US Citizens

The United States employs a unique system of citizenship-based taxation, meaning US citizens and green card holders are generally subject to US tax on their worldwide income, regardless of residence. This requires individuals to be aware of their filing responsibilities when living and earning income abroad.

Understanding Your US Tax Obligation from Canada

The United States operates on a principle of citizenship-based taxation, which differs from most countries that tax based on residency. This means US citizens and green card holders in Canada are still obligated to file US federal income tax returns on their worldwide income. Eritrea is the only other country with a similar system.

A US tax filing requirement is triggered if an individual’s gross income, from all sources globally, exceeds specific annual thresholds. For the 2025 tax year, these thresholds are $15,000 for single filers and $30,000 for married individuals filing jointly. Individuals who are self-employed with net earnings of $400 or more are also required to file a US tax return, regardless of their total income.

Key Tax Concepts for US Citizens Abroad

To prevent double taxation for US citizens living in Canada, several mechanisms are available, primarily the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC). These provisions help reduce or eliminate US tax liability on foreign-sourced income.

The Foreign Earned Income Exclusion (FEIE), claimed on Form 2555, allows eligible individuals to exclude foreign earned income from US taxation, up to $130,000 for 2025. Qualification requires meeting either the Physical Presence Test (330 days in a foreign country during any 12-month period) or the Bona Fide Residence Test (bona fide resident of a foreign country for an entire tax year). This exclusion applies only to earned income, not passive income like dividends or interest. A foreign housing exclusion or deduction may also be available.

Alternatively, the Foreign Tax Credit (FTC), claimed on Form 1116, provides a credit against US tax liability for income taxes paid to a foreign country. This credit helps prevent income from being taxed by both the US and the foreign country. It applies to various foreign-sourced income types, but limitations apply, such as the foreign source income limitation. Taxpayers cannot claim the FTC on income already excluded by the FEIE. Unused credits can be carried back one year and forward for up to ten years to offset future US tax liabilities.

The US-Canada Tax Treaty prevents double taxation and resolves tax residency issues. Its “saving clause” allows the United States to tax its citizens as if the treaty did not exist. However, some treaty provisions are exceptions to this clause and can still apply to US citizens, such as rules for pensions and social security that may reduce withholding taxes.

Information Gathering and Required Forms

Preparing a US tax return while residing in Canada requires gathering specific documentation from Canadian sources and understanding which US tax forms are applicable beyond the primary Form 1040. This preparatory phase ensures all necessary financial information is available for accurate reporting.

Common Canadian tax documents include:
T4 slips for employment income
T4A slips for pensions or annuities
T3 slips for trust income
T5 slips for investment income (dividends, interest)
Investment statements, bank statements, mortgage interest statements, and property tax assessments are also relevant. Information from these documents is essential for completing US tax forms.

Beyond Form 1040, the main individual income tax return, US citizens abroad frequently use several schedules:
Schedule 1: Reports additional income sources like self-employment income (calculated on Schedule C), rental property income, foreign pension distributions, or unemployment compensation.
Schedule B: Required if interest or dividends exceed $1,500, or if an individual has foreign financial accounts, requiring disclosure of signature authority.
Schedule D: Reports capital gains and losses.
Schedule E: Reports supplemental income and loss, often from rental real estate or royalties.
Schedule SE: Calculates self-employment tax.

FinCEN Form 114, the Report of Foreign Bank and Financial Accounts (FBAR), is required if the aggregate value of all foreign financial accounts exceeds $10,000 at any point during the calendar year. To complete the FBAR, individuals need the name and address of each financial institution, account number, account type, and the maximum value held in each account during the year, converted to US dollars.

Form 8938, Statement of Specified Foreign Financial Assets, is required under the Foreign Account Tax Compliance Act (FATCA) if the value of specified foreign financial assets exceeds certain thresholds. For single filers abroad, the threshold is $200,000 on the last day of the year or $300,000 at any point. For married individuals filing jointly abroad, thresholds are $400,000 on the last day or $600,000 at any point. Required information includes asset description, maximum value, and any income generated. This form is filed with Form 1040.

The US Tax Filing and Submission Process

Once all necessary information has been gathered and the tax forms are prepared, the next step involves the procedural aspects of submitting the US tax return and making any required payments.

US tax returns from Canada can be submitted via e-filing through IRS Free File, commercial tax software, or a tax professional. E-filing offers speed, convenience, and quicker refund processing. While many commercial software options exist, few accommodate foreign addresses. For mailed returns, the address for Form 1040 for taxpayers outside the US is Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0016 USA.

FinCEN Form 114 (FBAR) has a separate submission process. It must be filed electronically through the BSA E-Filing System. The FBAR due date is April 15, with an automatic extension to October 15.

If taxes are owed, payments can be made from Canada via IRS Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or wire transfers. Tax payments are due by the original April 15 deadline to avoid interest and penalties, even if filing deadlines are extended for those abroad.

US citizens abroad receive an automatic two-month extension to file, moving the deadline to June 15. For additional time, Form 4868 can be filed before June 15 to request an extension until October 15. This extends filing, not payment. After filing, maintain thorough records of all submitted documents and payments.

Addressing Past Unfiled US Tax Returns

For US citizens in Canada who have not previously met their US tax obligations, specific compliance options are available to help them become compliant. These procedures are designed for individuals who have a history of non-compliance but whose failure to file was non-willful.

The Streamlined Foreign Offshore Procedures help non-willful taxpayers catch up on US tax and information reporting. Eligibility requires meeting the non-residency test (residing outside the US for at least 330 days in one of the past three tax years). Taxpayers submit the past three years of Form 1040 returns and six years of FBARs.

Form 14653, Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures, which certifies non-willful conduct, is required. There is no penalty for non-willful conduct for qualifying foreign residents. A specific mailing address must be used for submissions.

The Delinquent FBAR Submission Procedures are for individuals who reported all income and paid taxes but unintentionally failed to file FBARs. Taxpayers submit up to six years of past-due FBARs electronically through the BSA E-Filing System. A reasonable cause statement explaining the delay should be included. The IRS generally does not penalize failure to file delinquent FBARs if income was properly reported, taxes paid, and the failure was non-willful.

The Delinquent International Information Return Submission Procedures are for those needing to file informational returns, like Form 8938, without filing or amending income tax returns. This procedure requires a reasonable cause statement explaining the failure to file. Delinquent returns should be filed through normal procedures.

Given the complexities of these compliance procedures, consulting a qualified tax professional specializing in US expat taxation is recommended. This ensures adherence to regulations and helps determine the appropriate compliance path.