For catching up, your risk depends on your income and the kind of stuff going on in your life (owning businesses, etc.). Here are the category of choices:
1. Just prepare the tax returns and file them. Good for regular people; the likelihood of you owing any U.S. taxes is low. You have risks of penalties (undisclosed bank accounts = FinCen 114 form filled in online -- that's the biggest one). If you are a very small potato floating in the stew pot of life, that's probably fine. You either start now and ignore the past, or you go back in time and file. Usually three years is sufficient, sometimes six.
2. Search for "Streamlined Procedure" via your favorite search engine and you'll find the IRS official "Come to Jesus" program for US taxpayers abroad who are "low risk." Like most bureaucratic endeavors to write rules controlling all humans, the procedure is contradictory. If your income tax is under $1,500 you are probably safe. If your income tax is even slightly above $1,500 in any one year, the program's FAQs say it's OK but the questionnaire you have to fill out says you are not eligible for a "no penalties, just file" solution to the problem. Find the questionnaire, look at question 2, then look at the paragraph below question 3.
3. If your situation is more complicated (higher income, or you own stock in Canadian corporations -- like your business!) etc., you need a more nuanced analysis. Here your primary risks are undisclosed financial accounts (heavy penalties for not filing FinCen Form 114, IRS Form 8938), Form 5471 (you own stock in a foreign corporation), Form 8621 (you--God Forbid!--bought regular Canadian mutual funds as an investment), or you have a Canadian tax-free account that is not an RRSP or RRIF. You need someone to tell you the best way to jump back into the pond.
4. You have gobs of money and high income. In that case you look attractive as a mugging candidate for the IRS. There's money to be made here for the government, and they like to threaten you with life-altering penalties (300% of your bank accounts is something I have seen as an opening bargaining position) and prison. You really shouldn't Come to Jesus on your own here. You need the Pope and St. Peter to guide you. :-)
The problems that The One and Only Netai (I love that, by the way) complained of in the business context apply equally in the individual context. So take care in how you choose a solution. Shoot me an email and perhaps I can connect you with someone in Canada who can help you. I will be in Toronto next Tuesday, FWIW.
Email sent. I'm probably somewhere between 2 & 3 (my income has gone up fairly substantially over the last two years) but there are some complicating factors.
It seems the Financial inCentives here are FuBARed. Seriously, this is making my head spin. Sure I get taxed out the wahzoo here in Australia, but at least is sort of simple
1. Just prepare the tax returns and file them. Good for regular people; the likelihood of you owing any U.S. taxes is low. You have risks of penalties (undisclosed bank accounts = FinCen 114 form filled in online -- that's the biggest one). If you are a very small potato floating in the stew pot of life, that's probably fine. You either start now and ignore the past, or you go back in time and file. Usually three years is sufficient, sometimes six.
2. Search for "Streamlined Procedure" via your favorite search engine and you'll find the IRS official "Come to Jesus" program for US taxpayers abroad who are "low risk." Like most bureaucratic endeavors to write rules controlling all humans, the procedure is contradictory. If your income tax is under $1,500 you are probably safe. If your income tax is even slightly above $1,500 in any one year, the program's FAQs say it's OK but the questionnaire you have to fill out says you are not eligible for a "no penalties, just file" solution to the problem. Find the questionnaire, look at question 2, then look at the paragraph below question 3.
3. If your situation is more complicated (higher income, or you own stock in Canadian corporations -- like your business!) etc., you need a more nuanced analysis. Here your primary risks are undisclosed financial accounts (heavy penalties for not filing FinCen Form 114, IRS Form 8938), Form 5471 (you own stock in a foreign corporation), Form 8621 (you--God Forbid!--bought regular Canadian mutual funds as an investment), or you have a Canadian tax-free account that is not an RRSP or RRIF. You need someone to tell you the best way to jump back into the pond.
4. You have gobs of money and high income. In that case you look attractive as a mugging candidate for the IRS. There's money to be made here for the government, and they like to threaten you with life-altering penalties (300% of your bank accounts is something I have seen as an opening bargaining position) and prison. You really shouldn't Come to Jesus on your own here. You need the Pope and St. Peter to guide you. :-)
The problems that The One and Only Netai (I love that, by the way) complained of in the business context apply equally in the individual context. So take care in how you choose a solution. Shoot me an email and perhaps I can connect you with someone in Canada who can help you. I will be in Toronto next Tuesday, FWIW.