The U.S. government is certainly a unique jurisdiction when it comes to taxation. Former residents find that the need to file a return every year for the rest of their lives can be quite burdensome, with many revoking their citizenship to avoid the hassle. One problem that American citizens living abroad have to deal with is Foreign Bank and Financial Accounts reporting, or the FBAR report. Each year American citizens must report to the IRS the value of their foreign bank accounts, with penalties for non-compliance. Many Americans living abroad don’t even realize they need to do this, so when the IRS comes knocking they can often be in for an unwelcome surprise.
Yet even we were STUNNED when we saw how big this surprise can be. As CBC reported, a Canadian resident is being sued $860,300 USD by the IRS for failing to file his FBAR. $860,300!!! While it is true that the individual in question was not in compliance, a ruling of this much is a stunning amount. The client did not even owe taxes based on the filings, he only needed to send the IRS the information.
So to all those American citizens living in Canada, ensure you are compliant! Ignorance will certainly not protect you, and you may end up getting a jaw dropping letter in the mail if you are not careful.