Taxes for Expats From North America - Considerations for Canadians and Americans Working Abroad

. 3 min read

April is tax return deadline time in the United States (April 15th, with an automatic 2-month extension for calendar-year returns until June 15th) and Canada (April 30th). This means April is an extremely busy month for accountants, bookkeepers, and other tax advisory professionals. Not to mention stressful for those among us who choose to complete our own returns.

Though American and Canadian expats from these countries are working far from home and consuming government services in another country, that doesn't mean they are exempt from filing tax returns and paying taxes to their home countries.

Here are some high-level tips about taxes for expats from North America, though the most up-to-date and exhaustive resources can be found on these US Internal Revenue Service (IRS) and Canadian Revenue Agency (CRA) websites.

The hopefully obvious, but necessary disclaimer: The advice in this article is for general interest only, and is based on tips curated from trusted sources about taxes considerations for expats from the US and Canada.

For the latest guidance for your personal or business tax situation, please:

  • Consult with a professional accountant
  • Review the IRS, CRA or authoritative 3rd party web resources linked within this article
  • Contact the government tax organization in your country

This article is intended only as a starting point for conservations with a tax lawyer, accountant or tax agency.

How to Save on Overseas Tax Remittances

If you are an expat living abroad and owe money to the IRS or CRA, here are five ideas you might not have thought of to save money on taxes:

1.     Set Rate Alerts for currency exchange rates to US or Canadian dollars which will optimize your money, and help you find the currency exchange rate peaks in volatile markets.

2.     If you believe your tax bill will be a significant sum of money, make incremental transfers throughout the tax year from an XE Money Transfer account for what you estimate your taxes owing will be.

If you believe you will owe a significant sum to the IRS or CRA, instead of having it in the local currency of where you are living, you may spend it frivolously as opposed to meeting your tax obligations in your home country. If the money is exchanged already to a different currency, you will be less apt to grab and spend because of the hassle.

3.     If you have an attorney or accountant that can manage these funds in an escrow account, transfer funds to that account so they can pay your taxes on your behalf.

4.     Arrange a forward contract for regular payments abroad, based on a specified rate for you and a money services business like XE. A forward contract is an agreement between you and a money services business for a defined period of time. Forward contracts hold your preferred exchange rate constant for a defined period of time, even if the rate between your home country and the one where you currently reside is volatile.

Moving to a different country, be it from the United States, Canada or otherwise doesn't necessarily end your tax obligations to the government in your home nation. Whether you plan on moving back to North America or not, failing to file your taxes and pay what you owe is important.

Time and Distance Don't Defeat Tax Collectors

As time passes, interest on tax debts increases, whether you are in the country or not. Years may pass, seemingly without incident, if you don't file. The CRA and IRS have long memories though, and they can reach across borders and oceans to force you to file, demand payment for outstanding taxes, or take other action.

Before you leave Canada or the United States, contact a local tax expert, or the IRS or the Canada Revenue Agency about your obligations for when you move overseas.

If you do owe money to the government back home, don't add insult to injury and exchange money through the banks.

Open up a free XE Money Transfer account and get a quote for the money that you owe. If you need to make incremental payments, for a significant sum of outstanding tax debt, or for ongoing sales taxes, an XE representative can help you to lock in at a specified rate with a forward contract.