Questions about US

I found this web site and hopefully you can help answer some questions I have. I am a Canadian citizen. However, I am also an American citizen. I live full time in Canada.

We are thinking about purchasing an investment property (fix up and sell) in NY. I have family there. How would my taxes be handled? We are self employed in Canada as well. And how much money can I bring back to canada with out the bank notifying the government? Should I file taxes in Canada or US?

THanks,
Jen

You must file tax returns in both countries if you live in Canada and are a US citizen, you should already be doing that.

If you're still living in Canada full-time and it's just an investment property it doesn't really have any effect on your Canadian taxes per se, although the investment property will be subject to Canadian capital gains tax, but that would be the case wherever it is.

If you derive income from it, i.e. rent it, then the income is subject to US income tax and you would have to claim a foreign tax credit in Canada for that tax.

As a US citizen you are legally required to file a 1040 every year together with a Form 2555 (or 2555-EZ) so you would just report the rental income on your 1040 because that would be US-source.

If you don't file US tax returns currently, you need to start doing it, the IRS usually requires seven years worth of returns. It's not a tremendously big deal unless your income since 2006 has been pretty high (usually over $100,000 or thereabouts) when the foreign exclusion limit was introduced.

Basically you just file 2555-EZ for each year, put your income on there and the declared amount will work out to zero on the 1040 so there is no tax to pay, unless you're significantly over the foreign exclusion limit which was $87,600 for 2008. Read the instructions for 2555-EZ, it's pretty straightforward. You can get the forms from http://www.irs.gov

You need a social security number as well, you can get one through the US consulate if you don't currently have one.

The capital movement reporting limit is $10,000. That really isn't how the government finds out about your capital movements though, in Canada you have to file T1135 to declare foreign assets and in the US it's the FinCEN FBAR form.

The FinCEN form is not commonly known about in my experience, if you read the instructions for it, even non-resident US citizens have to file it although I'm willing to bet hardly any of them do. However it's not a tax form and in the US it's a criminal offence not to file it.

You've got to do all this regardless of what you're doing in the US.