Liberty and justice for all United States persons abroad

The Isaac Brock Society

Posted on by Posted in Issues regarding US persons abroad 578 Comments

Please note this thread is an archive and no longer current.  The conversation is continued here:

Expat Taxes and FBAR

 

Please ask your questions here about US Expat tax and FBAR.


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578 thoughts on “US expat tax and FBAR: Discussion thread (Ask your questions) Part One”

  4. @Cornwalliscal

    Thanks for posting that link. The individual in question was posting at Brock on a regular basis when I first discovered this site back in January/2012. It is good to have an update that all has worked out for him.

  5. *@Corwalliscal, thanks for the link, just read it, GREAT NEWS 😀 :D!!

    I’m so pleased for him, as had followed his case both here and at Jack’s blog! 🙂 Good to know that there is still some decency left…

  6. Dear ij;

    So very happy to hear that for you the long, painful, and utterly meaningless path to ‘coming into compliance’ is finally over – and that you survived those dark days.

    If you still read posts here on IBS, I want to wish you well, and to say thank you for telling your story, and thus helping others here. May you and your family live long and prosper. May the force be with you!

    🙂

  7. Question: My wife was born in Canada and is a Canadian citizen by birth and a Canadian resident (she has lived in Canada he whole life).  At 17 (1986) she received a US passport applied for by her parents – which was never renewed.  She spent two summers in the US between 17 and 18.  Under the US Nationality law she is assumed to be a US Citizen under the “Birth abroad to one United States citizen” as her father is American and fits the criteria (her mother is Canadian).  My wife does not consider herself to be anything other than Canadian.

    So should she be concerned about the US Expat Tax and FBAR ?

  8. *Toby.  She can safely forget about it. To do otherwise would waste a lot of time and effort.

    You might get contrary advice. Evaluate it carefully. The other option is to renounce US citizenship at a consulate. Then she would be asked to contact the IRS and certify to them that she has been compliant with US taxes for 5 years and on and on and on and on. You cannot even be sure to get good advice from legal and accounting specialists.  

  9. *Cornwalliscal.

    Thanks for the response.  One thing I missed.  Should she be concerned about entering the US ?  I know that is one thing she is afraid of…. . 

    She would be entering under her Canadian passport showing her as Canadian born.  She is worried that somehow they would link up her old (maiden name) US passport from the 80’s with her current Canada Passport and somehow detain her for non payment of US tax.

  10. @Toby

    I really don’t believe your wife needs to worry with a passport showing a Canadian birth place. I really doubt they would be linking her up with an old US passport showing a different name. She should rest easy.

  11. *Toby.  The scenario she worries about just ain’t going to happen.  The only thing she needs to do is avoid reclaiming her US citizenship.

  13. Does anyone know which 6 year span of FBARs are required by that new ‘streamlined’ process of September 1st? Is it 2006, 7, 8, 9, 10, and 2011, or 2005-2010 back years, plus the one for 2011? All the descriptions just say ‘6 past years’. Ex. “To participate, taxpayers must file three years of tax returns and information returns along with six years of “FBARs” http://isaacbrocksociety.ca/2012/08/31/from-moodys-llp-breaking-news-irs-releases-details-of-new-procedures-for-non-compliant-taxpayers-living-abroad/

    The three tax years appear to be those for 2009-2011, but which FBARs aren’t clear.

    Thanks.

  14. *On Form 8854, where and how is the RRSP added in section V? and how is U.S. adjusted basis and gain/loss calculated?

  15. @CanadaExpat, I don’t think anyone, including the IRS, really knows.

    My suggestion based on common sense (as if that’s got anything to do with US tax!) would be to list the full value in column a, line 7 “Pensions… outside the US”.  As for basis and gain, there’s no real concept of those in a pension, so pick anything you like.  If you look at the form you’ll see that only column a of part V goes anywhere, and the rest is just ignored.  Maybe it has some obscure use for estate tax purposes, or maybe the IRS is simply collecting useless information here because the law says they have to.  Either way, it doesn’t seem to matter what you put in these.  Make one zero and the other full value?

    Where it might be tricky is if you’re bumping up against the exit tax and want to reduce your net worth to under $2MM.  In that case there’s a possible accounting argument for excluding some of the gross value of your RRSP (because if you withdrew it all tomorrow you wouldn’t actually get 100% of it).  It’s a hard argument to make though, and the IRS may disagree, so best avoided where you can.  If you’re really in that situation it’d be safest to withdraw enough from the RRSP before expatriating to put you unarguably in the clear.

    Stupid, stupid, stupid.  But that’s US tax law for you.

  16. *I came across your website earlier this year when I first learned about this whole US tax issue and have found a lot of helpful info here.  Thank you.

    I have a specific tax question regarding Canadian pensions, CPP and OAS, and I’m hoping that someone might be able to answer it for me.  According to the IRS website, CPP and OAS are not taxable in the US if the person is a Canadian resident.  I read further that according to the Canada/US tax treaty that these Canadian pensions are treaty protected income and not taxable in the US if the person resides in Canada.  I came across form 8833 while researching the issue which I believe can be used to off-set the income.  Is there any truth to this???  I ask because when I had my parents (both retired and living in Canada) taxes prepared by a popular store-front tax firm, they actually owed quite a bit of tax.  The preparer told me that they did not owe any taxes against their Social Security Income, but in fact owed taxes against the Canadian pensions.  This makes very little sense to me and I question whether their tax return was prepared properly.

  17. *I’m not an accountant but it appears you are correct. Since OAP and CPP are not income for US purposes, they should not have to be even mentioned on their US returns. Form 8833 is irrelevant.

    Quote from IRS 
    >Question: Are the Canada Pension Plan and Canadian Old Age Security Benefits taxable? If they are, please tell me where they should be entered on Form 1040.Answer:

    Benefits paid under the Canada Pension Plan (CPP), Quebec Pension Plan (QPP), and Old Age Security (OAS) program:

    If the recipient is a U.S. citizen or green card holder who is a resident of Canada—

    • are taxable only in Canada.

  18. *Yes! Thank you very much Duke of Devon. That is the exact quote I read on the IRS website regarding CPP and OAS not being taxable.  My next step is phone the IRS to get instructions on how to back that income out of a tax return.  My understanding that that you MUST list all income, however to back something out that is not taxable, you must fill out a supplementary form (similar to the Foreign Earned Income Exclusion form) to show that it is not taxable.  The tax firm that prepared the taxes has been “researching” this issue for weeks now. 

  19. *I would just file an amended return. CPP and OAP are not income as far as the US is concerned for Canadian residents. Full stop. That is why the instructions do not point to a line on the return to enter CPP and OAP. They are meant to be ignored. I might also ask HR Block or whoever to make up the difference. They are stonewalling. They should know better if you and I can read English and figure it out. This is one of a very few IRS instructions that is crystal clear. Good luck.  

  20. *I just got off the phone with the IRS regarding Canadian pensions, CPP, QPP and OAS. They confirmed that these pensions are not taxable if the person resides in Canada.  Hopefully someone else will find this info helpful. 

    For the purpose of US taxation they are considered Social Security benefits and get declared on line #20B of the 1040.  You then re-write the amount in brackets on line 21.  There is a spot on line 21 where you can add a notation.  Write “US/Canada Income Tax Treaty Article 18”.

  21. *Thank you Duke of Devon.  I’ve been dealing with HR Block for months now regarding this issue.  I believe that they are stonewalling.  I don’t think they have as much expertise as they say they do.  I question whether their so called “expert” is actually a CA or a CPA.  My intention has always been to get them to realize their mistakes and reimburse my parents for the $1000 they charged them to prepare the return.  As for getting back the $740 (or portion of) they paid to the IRS, we’re undecided about that.

  22. *It’s less likely to cause confusion if you don’t enter CPP or OAP at all, anywhere, forget about them. That way the machine reading line 20 and 21 won’t go tilt.

    Good luck with HRB. No their clerks are not CPAs 

  23. Marie – Commiserations on your having to deal with the bloodsucker effluvia of the IRS, in your case H&R Block. A hallmark of this despicable detritus is to know little, to make egregious mistakes, to take too much time to do anything, to call their own self-education and remediation “research,” and to seek every such possible occasion to rip you off with. Your one consolation is that you have been dealing with bottom-tier “professionals” who charge you maybe 1/10 of what the high-class scammers think they deserve to get away with. Do not fear the IRS on this. Clear cut case. File an amended return. Get the $700 or whatever back. Eventually I found an honest number-and-form-cruncher who charges reasonable rates, who you can speak to without fearing five more minutes of billable time, and who fixes mistakes (everybody makes them) at no charge. Not everybody is a crook.

  24. I’m adding this here, though it probably deserves a separate post because it is worth noting (fell free anyone, to move it ).

    “IRS Never Told Taxpayers They Could Get Penalty Relief”
    Washington, D.C. (October 17, 2012) By Michael Cohn

    http://www.accountingtoday.com/news/IRS-taxpayers-tax-penalty-relief-64347-1.html?ET=webcpa:e6205:243968a:&st=email

    …”Approximately 1.45 million taxpayers who qualified for relief from tax
    penalties totaling close to $181 million never heard from the Internal
    Revenue Service that they were entitled to it and never received it,
    according to a new government report.”…..

    .”The report, from the Treasury Inspector General for Tax Administration, noted that the Tax Code imposes penalties on taxpayers with a filing requirement who fail to file a tax return or fail to timely pay the full tax shown on any tax return. The IRS waives those penalties for taxpayers who have demonstrated full compliance over the prior three years, but only if the taxpayers request penalty relief. The IRS does not widely publicize the opportunity to request this waiver, known as a First-Time Abate.”……

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