US Individual Income Tax Return (Form 1040)

The American tax system taxes individuals based on citizenship as well as on residency. This means U.S. citizens residing in Canada have an ongoing annual obligation to file an individual income tax return (Form 1040) to report worldwide income.

Although the same income is reported by the U.S. citizen on both of their Canadian and U.S. income tax returns, double taxation is generally mitigated through the use of foreign tax credits or foreign earned income exclusions. The foreign tax credit mechanism allows for Canadian income tax paid or accrued to reduce the amount of U.S. income tax otherwise payable on Canadian sourced income that is taxable on both the Canadian and U.S. income tax returns. Alternatively, the foreign earned income exclusion mechanism allows the U.S. citizen to exclude foreign earned income from their taxable U.S. income up to a specified amount ($97,600 for 2013, indexed annually for inflation) if the taxpayer meets specified tests.

U.S. citizens and residents living abroad are entitled to an automatic 2-month extension to June 15, 2014 to file their individual income tax return and pay the tax; however, interest will be charged from April 15, 2014 on any unpaid tax. If they are unable to file their return by the June 15, 2014 extension date, they can request an additional extension of time to file up to October 15, 2014 by filing Form 4868. However, an extension of additional time to file does not give an additional extension of time to pay any tax due. Penalties could apply for late payment of taxes and late filing of returns and schedules, in addition to applicable interest charges.

Quon and Associates can help you prepare your US individual income tax return. Call us or visit our website for more information. 403-250-5111

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