A push by the American tax authorities to root out cheats is causing anxiety among dual citizens north of the border, and has prompted a blunt response from Finance Minister Jim Flaherty.

"Most of these Canadian citizens, many with only distant links to the United States, have a very limited knowledge of their tax reporting obligations to the United States," Flaherty wrote in a letter published in major U.S. newspapers including The New York Times, The Wall Street Journal and The Washington Post.

"These are honest and law-abiding people, including many senior citizens now caught in a nerve-wracking situation," the letter continues. "Their only transgression is failing to file the (Internal Revenue Service) paperwork they were never aware they were required to file."

The recent crackdown by the IRS could be expensive for many Canadian with dual citizenship. They face fines of up to $100,000 or half the value of each asset, whichever is bigger. Even those who voluntarily file now may be penalized $10,000 for each account.

Americans are required to file a return annually regardless of where they live or work. Since 2009, the IRS boasts that it has collected $2.7 billion from 30,000 people worldwide.

American-born Maury Williams moved to Canada 40 years ago. He's always paid taxes here and owes none in the U.S. but he still can't escape the taxman south of the border.

"The long arm of the U.S. is reaching into Canada," he told CTV News. "So I am estimating in the end it's going to cost me somewhere in the order of $30,000."

While Williams is paying up for fear of arrest if he goes to the U.S., many of the estimated 1 million dual citizens who pay taxes in Canada had no idea they also had to file in the U.S.

Some are now hiding from fines that could run into the millions.

One man, who asked not to be identified, said that his liability amounted to everything he has.

"We're being made into criminals because we didn't fill in this myriad of forms," he said.

Canadian banks are also being targeted under the U.S. legislation. In three years, they'll face added tax on U.S. profits if they don't turn over the names of American customers.

As Terry Campbell, president and CEO of the Canadian Bankers Association, put it: "They're trying to conscript Canadian banks to act as an arm of the U.S. tax authorities and we don't think that's the way to do it."

With a report from CTV's Roger Smith and files from The Canadian Press