I have been living in Canada with my husband (who is not a US citizen), since 2004. In 2011 I started a home based (at my home in Canada) business with a US company who pays me in US dollars. They sent me a 1099Misc with the income in box#7 for Nonemployee compensation. Do I have to pay taxes in both Canada and the US? How do I file claiming the income? Am I not exempt from paying taxes in the US, since I am a legal permanent resident of Canada and claim this money on my income taxes that I file jointly with my husband in Canada?

No, you are NOT exempt from U.S. taxes.

If you retain U.S. citizenship, you are REQUIRED to file an annual tax return every year. Now, the Foreign Earned Income Exclusion (Form 2555) and/or the Foreign Tax Credit (Form 1116) may negate any tax being owedm, but you STILL have to file.

The only to avoid it is to renounce your U.S. citizenship.

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