Sunday, 9 October 2011

IRS Tax Violation Crackdown on People with Dual Citizenship

The Internal Revenue Service has required American citizens living abroad to file income tax returns since the 1970s. However, many people who live in Canada and have both Canadian and U.S. citizenship have apparently been unaware of this rule. Now, the Internal Revenue Service is going after these people, in many cases taking them unawares.

The Internal Revenue Service has announced a major and growing effort to collect unpaid taxes from Americans living abroad. Many of these efforts are targeted at Americans living north of the border. For years, Canadians with dual citizenship have been able to travel freely to the United States, work, and study here. Now, they are also being asked to pay taxes here.

Not surprisingly, these demands by the Internal Revenue Service have not been welcomed. According to many Canadians with dual citizenship, they should not have to pay taxes, because they do not live here and are not availing themselves of the same services as domiciled Americans. They pay taxes in Canada, and many of them are simply unaware that they are required, as American passport-holders, to file income tax returns in the United States.

Many California tax attorneys would not blame them for not being aware of this rule, considering that the United States is virtually the only country in the world that requires all citizens living abroad to file income tax returns. Even Canadian politicians are weighing in on the debate, holding that Canadians with dual citizenship should not be hounded for tax returns like criminals. According to them, these are simply people who were not aware of the rule requiring them to report income, and deserve be treated differently.

There is no indication that the administration will react differently. The Obama administration has passed the Foreign Account Tax Compliance Act, which requires all persons with American passports to file tax returns going back to at least 2003.

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