US expat tax and FBAR: Discussion thread (Ask your questions) Part Two
Please ask your questions here about US Expat tax and FBAR.
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NB: This discussion is a continuation of an older discussion that became to large for our software to handle well. See US expat tax and FBAR: Discussion thread (Ask your questions) Part One.
@WhatAmI, thanks for the good reminder of Hodgen’s take on the TFSA;
This is a fairly recent post from Feb. 16, 2016.
https://hodgen.com/canadian-tfsas-and-the-certification-test/
Again, not meant as an endorsement.
For those planning to comply with the FBAR, here is an explanation of changes re the filing date:
FBAR Due Date Reminder – April 18, 2017 Extended to October 16, 2017 (2/26/17)
http://federaltaxcrimes.blogspot.ca/2017/02/fbar-due-date-reminder-april-18-2017.html
Usual caveat, I am not endorsing the author of the blog.
And,
I am not posting this in order to exhort compliance. Just to help those who are considering it or who choose to or feel they must.
@badger, you’re welcome but it was @maz57 just above who reminded me that Phil’s article was the one that finally inspired me to stop reading about TFSAs and 3520s.
Thanks @maz57 for the reminder about Phil’s article re TFSAs and 3520/A s.
: )
@Maz57,WhatAmI and Badger,
Thanks very much for the info on TFSAs.
@pacifica777,
You might want to take back your thanks to me after this post. I would be remiss if I didn’t pass on this blog that I happened to see this morning from Alex Marino at Moody’s who includes TFSA, RDSP and RESP in his list of accounts that trigger 3250 filing.
The blog is about renouncing and that the Reed-Schumer Amendment failed to pass again recently, and he only gives a list of “filing and reporting obligations required by US citizens residing in Canada” and the filing deadlines in passing as a helpful reminder on how to be compliant for Form 8854. No specific talk about those accounts and 3520 forms.
Their opinion does NOT change my mind though. I choose to believe Phil’s blog.
Yup, I’ll go with Phil, too. The nickname of Moody’s (the home of our old friend Roy Berg) is “compliance r us”.
Yup, Home of the $1000-per-form tax return. (January 2012 prices)
Not meant as an endorsement.
Knowing what I know now, including what I just read in looking for an answer for someone re adoption of a US child (see my comment, http://isaacbrocksociety.ca/2013/07/07/frustration-abounds-as-answers-are-not-received-accidental-americans-born-abroad-to-us-parents-and-not-registered-with-the-us-are-they-automatic-us-citizens-or-do-they-have-the-o/comment) and the amount of money I paid for advice and assistance to US tax law, US tax accounting and immigration/nationality professionals in Washington, DC, I too would go with the way Phil sees the reporting of TFSA, RDSP and RESP.
At this point, I don’t even know if what I am reading (nicely tucked away with no fanfare) is as I now interpret it. Unfortunately, I got no money-back guarantees.
Anyone who has expatriated after 2011 when the F.B.A.R started to. become seriously implemented, and who did not file the required forms (during the interval prior to expatriation), has committed a “CRIME” during those years prior to expatriation that could result in serious consequences should they attempt to enter the United States.
It would be wise to close holiday bank accounts, and remove tangible assets!
It remains unwise to either enter or to fly over the United States.
Currently barely 5% of those potentially liable have filed. Those people filing have benefits due to them from U.S. sources.
Regards,
Allan.
@allan osborn, source for what you said?
I renounced in 2013 and filed 7 years of FBARs (all I needed to do as I had no income for filing tax returns) and quite easily entered the States again last year for a holiday. Previous to my renunciation I’d filed no US tax papers of any kind for over 40 years.
@allan osborn
Yes, please cite instances of US customs questioning or detaining travellers purely due non-filing of tax returns or FBARs. Travellers could be former (renounced) US citizens with foreign passports, current US citizens with US passports, or US citizens with foreign passports that show a US birthplace (which is technically illegal but very rarely do they notice or say anything).
There is no evidence that tax information is available to CBP, or that non-compliance presents risks when travelling. To suggest otherwise is scaremongering.
Your comments about assets are, however, wise. Don’t screw around with the IRS if you have money or property in the US.
@Nonymous
Consider the source here,
“In this context it should be noted that where an individual was born in the United States the U.S. Department of Homeland Security insists that they use a U.S. passport to cross into the United States. There have even been some reported incidents of harassment at U.S. border checkpoints of Canadians seeking to cross into the United States using their Canadian passports on which the United States is indicated as their place of birth. In some instances questions were raised by U.S. border personnel as to whether such travelers had been filing their U.S. income tax returns.
Once a dual Canadian-U.S. citizen’s name, address and possibly their U.S. taxpayer identification number appears on a U.S. passport application, it would become easier for the IRS to try to collect further detailed information about possible unreported financial accounts and/or assets that such individual may have in Canada. To date there appear to have been no further published IRS follow-ups of information gleaned by Homeland Security at border crossings regarding the possible U.S. status of Canadian travelers into the United States. However, this too may come up in the near future as the IRS , in its aggressive search for new sources of U.S. tax revenue , pursues alternative routes for collecting taxes from U.S. taxpayers living abroad. It would seem clear that Canadians who were born in the United States or who have a U.S. green-card visa should be aware of these developments.”
http://www.equisi.ca/2-canadians-who-are-also-u-s-citizens-but-have-not-previously-filed-either-u-s-income-tax-returns-or-information-disclosure-returns-voluntary-compliance-strongly-advised-now-before-possible-irs-discov/
Which US (compliance condor) tax firm did you say you worked for, Allan? And exactly what are the benefits due to filers? The only part of your post you have right is your advice to close US accounts and remove tangible assets. The rest, quite simply, is incorrect.
@Bubblebustin
First paragraph is correct: the law states that US citizens must enter the US with a US passport, etc. But we know that this is seldom checked or enforced. I’ve only been hassled once for using a Canadian passport with US birthplace, and afterwards have continued to use it without further hassle. It’s entirely possible that a cranky border officer could ask tax questions – but that doesn’t mean that CBP has access to tax compliance information. As we’ve seen in the news lately, all kinds of odd questions are suddenly being asked of Canadians crossing the border – sorry, to be more specific, are being asked of non-white Canadians attempting to cross the border.
Second paragraph is all conjecture, full of “may” and “could” and “would”, with one big caveat: “To date there appear to have been no further published IRS follow-ups of information…” Yes, anything is possible, but for now its not a concern.
@What AmI,
re;
“Yup, Home of the $1000-per-form tax return. (January 2012 prices)”
And in my experience the enhanced prices charged by the ‘experts’ didn’t ensure error free returns and forms prepared well.
Not meant as an endorsement!
: )
I have completed and sent all necessary paper work for IRS associated with my relinquishment several months ago. I just received a reply from the IRS indicating that I did not include a Foreign Earned Income Exclusion (Form 2555) for the tax year 2016 (partial). If I do not comply, the IRS may either increase the tax I might owe or reduce the refund I may receive (should read–will not receive). Any thoughts? Thank you, any assistance is greatly appreciated.
Greg Seems innocent enough. Did you have foreign earned income on which you paid tax?
Do you need to reduce the income you report to the US in order to reduce taxes? If so you could use the Foreign Earned Income Exclusion or the Foreign tax credit but not both. Naturally, both are difficult to understand. Perhaps you owe no tax. In that case the notice was probably generated by a computer.
DoD – some good points, but note that you can use both the Foreign Earned Income Exclusion and the Foreign Tax Credit on a return, but only as long as they are not both used on the same income item. Typically use the FEIE for wages, and the FTC for tax on passive income, e.g. dividends, interest, and pensions, where the FEIE cannot be used because the income is not earned income. If the statement Greg filed has zero tax without claiming FEIE then no worries. Maybe it was claimed but the form not sent in?
Feeling pretty high just now as I finished all the IRS paperwork for 2016 after expatriating in September, and will drive over to mail through US Post since registered mail from Canada to US is no more. The paperwork in in 3 envelopes:
1. To IRS Austin
– a 1040NR dual status return for me with just some US Social Security income on it, not taxable due to a treaty, net zero tax
– a 1040 dual status statement for the part of the year before Sep 2016, married filing jointly as in previous years, I used joint filing since that choice is only suspended for a year in which both spouses have ceased being US persons, i.e 2017 for us. See the Dick Brown example on page 9 of IRS Pub 514 page 9. The 1040 statement included a 2555 exempting my very small wages, plus a 1116 Foreign tax credit for passive income category. Had to use itemized deductions as standard deductions not allowed for dual status years.
– 8854 original form certifying previous tax compliance, net-worth less than US$2million and no big tax payments to the US in prior years, thereby avoiding the burdens of becoming a covered expatriate
2. To IRS Philadelphia
– a copy of the 8854
3. To IRS Austin
– a 1040NR for my spouse with just some US Social Security income on it, not taxable due to a treaty; no tax
– the same 1040 Statement (joint) as was sent in with my own 1040NR; no tax.
– no 8854 (my spouse never was a US person).
Fortunately I had no 3520s, PFICs, blah blah. I did FBARs in January this year but don’t have to file an 8938 because we were below the US$400K limit for married joint filers outside the US. Real estate doesn’t count although it is part of 8854’s net worth.
I think this is correct but please don’t rely on any of it it as i am not a tax or accounting expert.
Peace at last.
I was born in US in 1946 but never lived there but never lived there – left at age of 3 months. Back for brief visits only.
I have Irish and Canadian citizenship. Last US passport expired over 30 years ago and not renewed.
Paid tax in Canada all my life. Never filed US tax return, Now retired.
If I never go to US again can my assets in Ireand and Canada be seized, and can I be extradited to US.
Would I be better to live in Ireland or Canada.
Thank You
The IRS has VERY limited ability to seize assets outside of the US. In the case of long-term expats with only local assets, they really have no way to get at your bank account or other financial assets.
Extradition is only for criminal matters and generally it must be a crime recognised by the country you’re being extradited FROM. If you’re tax compliant locally, I don’t see how they could extradite you.
All extradition examples thrown up by scaremongering compliance types involve crimes like fraud, money laundering, etc (or reasonable suspicion thereof). Simply not paying US tax on money that has already been taxed (or not) under the laws of your country of residence is not grounds for extradition.
@Christina B. Noone – I too left the US many years ago, though in my case I was an adult when I left. Like you, and the vast majority of US-born USCs living beyond US borders, I never filed US tax returns and that was never a problem.
FATCA can cause problems for US-born USCs living beyond US borders, because the FATCA legislation requires banks to identify USC accounts. If you’re having a problem with banks because of your US birthplace, you might want to consider renouncing your US citizenship; it costs $2350, but solves the problem permanently. That’s what I did and have had no further problems.
@ fn0 -– In your #1 above, I think you meant IRS Publication 519, the Tax Guide for Aliens (i.e., not 514). I’m following in your footsteps, having renounced in Vancouver late last year, and now trying to figure out joint vs. individual tax filing, etc. My spouse (who also renounced) and I have always filed jointly.
Seems like a very useful overview of strategies and things to think about in terms of penalties – though two of the authors are identified as IRS employees/counsel;
http://www.lawrice.com/documents/20131022-120900-Taxpayer.pdf
‘Taxpayer Penalties
Strategies in Client
Representation’
By:
Professor David L. Rice, Esq., California Polytechnic State University
John Colvin, Esq.,
Henry Schneiderman, Special Counsel to IRS Chief Counsels Office
Stuart D. Murray, Special Counsel to the Director, Office of Professional Responsibility, for the IRS
May 2013
New to this website and looking to renounce my US citizenship.
My question is about taxes for the past 5 years that I will need to bring to compliance for renunciation. I work remotely for a company based in California. Technically it is a US source income, but payroll is done in Canada, I get paid in Canadian dollars through a Canadian payroll company with all Canadian taxes deducted accordingly. I have been reporting (doing my own taxes) this as foreign income on my 1040 ever since I started working there. Have I been doing it right?
Thanks!