The US tax law determines that all individuals holding US citizenship are required to file annual income tax returns with the Internal Revenue Service (IRS). In addition, Canadian financial institutions are required to report to the IRS all accounts held by US citizens in 2013. The reason being, US wants to get the maximum tax it can collect from its citizens.
If you are a US citizen or green card holder, you must report your worldwide income to IRS or risk heavy penalties, it does not matter if you live in the USA or not.
If you are a US, Canada dual citizen, from 2013, all Canadian financial institution will report all your financial accounts, including RRSPs, TFSAs and chequing and savings accounts to IRS.
If you have lived, worked and paid taxes in Canada and do not want to be subject to the same rules as US citizens seeking tax havens in foreign countries, the only thing you can do is give up your US citizenship. Only then you will be exempt from this reporting requirement.
The IRS has issued a limited amnesty for US citizens and US green card holders who have not been filing their US tax forms to report their Canadian bank account by August 31.
The consequence of not reporting your foreign (including Canadian) financial information to IRS, is penalties, seizer of funds/assets, prison time.
We are the only US, Canada tax expert in Vancouver with extensive experience of filing dual citizen income tax return and also claim tax credits, so that you do not pay double tax on your same income. Feel free to contact us, for a free consultation session.