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.
@CN888, first of all don’t panic. No, you won’t be subject to 10 years of taxation; that may only possibly apply if you spend more than 30 days a year in the US which is easy to avoid. Calm down. As Pacifica777 says, you need to work through this slowly and methodically, step by step.
So this is now confusing me somewhat. Firstly the rules say that the date you notify the State Department, i.e. your appointment date, is the one that will be used for your expatriation and not the date in September 2004. Can anyone confirm?
Secondly, bearing in mind that said expatriation notification will take place in 2014 does CN888 work with the income figures for 2004 or the ones for 2013?
CN888 if your average net income tax liablity for the 5 years ending before your expatriation date (2004) is more than $124,000 you should file. If your net worth is $2million or more on the date of your expatriation you should file. If 2014 is used as the expatriation date then the income tax liability figures are as follows:
$139,000 for 2008, $145,000 for 2009, $145,000 for 2010, $147,000 for 2011, $151,000 for 2012 and $155,000 for 2013. The net worth figure remains at $2 million plus. To get anywhere near these tax liability figures, whether for 2004 or for 2014, you’d need to be earning around $400,000 to $450,000 US per annum from my calculations using the IRS’s tax table.
http://www.irs.gov/publications/p17/ar02.html#en_US_2013_publink1000265415
If your income tax liability is less than these amounts you don’t need to file. If your net worth is less than $2 million you don’t need to file. Your only obligation would be to file an 8854 with a lot of zeros in it to meet the compliance criteria.
Is my reading of this correct folks?
@CCD888,
Tax is definitely not my long suit, but FWIW my reading is that people who expatriate from 2008 on just file regular tax forms (1040,etc) up to the time of expatriation (5 past year and one partial year) and one 8854, and that’s it.
And that as per (g)(B) of s. 877A of the tax code (link in above comment and the text is also in beginning of the 8854 instructions), IRS would consider your expatriating date to be 2013, the day you notified the government of your Sep 2004 relinquishment.
Not sure what, or if, covered expatriates would have to file in the future, but being dual you can avoid being covered even if you’re of high net worth, etc.
@MedeaFleecestealer
I’m afraid you’ve got it mostly wrong in your last post. Can it be deleted?
If you successfully claim expatriation prior to June 2004, then there is no tax filing required, no 8854, nothing.
If the expatriation act is after June 2004, then the IRS expatriation date is the date you notify the DoS, and you have to file according to form 8854. In this case there is little difference between claiming a Sep 2004 date and renouncing now, other than the $450. The 5 previous years are prior to the submission of the 8854, not 2004.
Where you went wrong is all your net worth and tax thresholds. Those thresholds determine if you are a covered expat or not, not whether you have to file or not.
As I posted above, I believe the 10 years of continued filing is only if you are a covered expat. One of several reasons why one does not want to be a covered expat.
@WhatAmI, thank you for the detailed explanation you gave. I became a Canadian in September 2004, when I thought it was April 2004 earlier. I will try to decide whether to renounce and then back file or file and then renounce. The FBAR deadline and requirements is also what’s worrying me. Going back 6 years, I don’t remember some of the bank accounts I’ve had because I’ve closed some due to moving or just not happy with the service fees etc. How tough that going you be trying find the account numbers of the closed accounts and the previous balances.
The back filing I assume can get information off the tax returns filed here in Canada.
@MedeaFleecestealer, thank you for trying to figure this out for me. Normally I wouldn’t be saying how my much I earn, but I’m not ashamed to say my annual income is below $40,000 per year. No where near the numbers which you wrote. I’m also a single parent. You see why I’m panicking? I live pay cheque to pay cheque practically so if I’m whacked with fines and penalties for never filing (because I didn’t know inwas suppose to)what would I do?
@Pacifica777 thank you for your explanation as well. Oh that’s awful… So now would it be considered renouncing instead of relinquishing? And it’s going to be 2014 date on my CLN if I renounce. Bummer…
@WhatAmI, thank you for clarification. I suppose it won’t make much ofva difference other than the $450. As well since I don’t have a SSN I was wonderingif trying to apply for that before renouncing would make filing my back taxes less complicated to do. My US passport is also recently expired so I would need to get that before applying for the SSN.
@ CD888
So far, they don’t seem to be assessing penalties to people living overseas (except in the OVDP/OVDI programs). The fact you have no assets in the US, and they know that for practical purposes they can’t forcibly collect from outside the US (you’re protected by s. 26A8 of the Canada-US tax treaty, for example), it’s not worth their while to harass people in your situation. I’m not saying they absolutely can’t or won’t – because I can’t absolutely know that – but you are really really not low-hanging fruit.
If you relinquish, the advantage would be you would save the $450, and have the 2004 date as your official date of termination of citizenship if that has personal significance for you. But it does appear, as discussed above, that IRS would consider 2014 your expatriation date.
I’m a little puzzled as I don’t know how the citizenship card procedure for persons born dual operates/operated. You got your card in April 2004 but signed the oath in September 2004. Was it that you applied for the card in April 2004 and you had to pick it up and sign an oath then? Or something like that? The reason I’m asking is that I don’t want to leave any stone unturned.
@Northernstar, I am also waiting for my CLN, went to Toronto to Relinquish as well. I have been waiting 4 months now..I am getting nervous, I hope it comes soon. I wish we had gotten some sort of receipt that we had Relinquished. I have thought about sending a email or calling to see if they have any update. When my son Renounced I called for him and she told me it was still in Washington and had not been processed yet, so I guess they can type in the name to see what stage it is at. Please let me know if you hear anything, and I will let you know if I hear anything.
@ saddened123
Send that e-mail inquiry (express your concern about not having any proof of your appointment) and when the consulate replies be sure to screenshot their e-mail and print it out. It’s not great proof but it’s some proof that you were actually at that appointment. My husband is waffling between relinquish and renounce and the no proof for a relinquishment thing is a factor in that waffle. (He’s taking $450 with him just in case.) I’m hoping he will think of asking about that when he goes for his appointment which is very soon. We have our motel booked and fingers crossed that there isn’t a blizzard for those 2 days we will have to spend in the big city. It’s a 3 hour drive for us.
@Pacifica777 all i know is the date AP shown on my citizenship card shows 04 2004 but then when i found my official certificate today it showed when i made my oath to Canada it says on the bottom you officially became a Canadian Citizen on sept. 10, 2004. My biggest confusion how hard it will be for me to file my back taxes if i relinquish asap becausei don’t havea SSN. how would get one if I’m no longer a US citizen? If i had to apply for one, i will have to renew my US passport as well. I feel like nothing working for me. I’m damned if i do and damned if i dont. It seems, regardless of what i choose to do i have to file the FBAR reports for last 6 years by June anyway. Again my issue with that isi have had quite a few bank accounts over the last 6-8 years i would say. Some not for very long and some were online types. I can’t remember which branches and didn’t keep the bank statements for them all since were online statements. Trying to gather that will be a headache in itself.
@CD888
I wouldn’t assume that you need to renew your passport to apply for a SSN. Be warned that getting the SSN is horrible. A friend of mine had to send a marriage certificate, property tax bills going back decades, all sorts of things.
All this FATCA and FBAR nonsense is due to dishonest American taxpayers. The 8854 and the exit tax is due to US billionaires leaving the country with all their money. The IRS practice of defining expatriation dates after 2004 is due to dishonest Americans who lived overseas, got foreign citizenship, stopped paying taxes, but kept renewing passports and using embassy privileges, etc, and then tried to claim back-dated relinquishment when they obtained their foreign citizenship. All of these actions by dishonest Americans, and the result is screwing up our lives as Canadians? Costing us money? It pisses me off to no end. I picked up a bag of pears in Superstore the other day. It said “Product of USA”, so I put it back.
@Pacifica777 thank you for trying to help me figure out all the angles. I’m trying to not leave any stone unturned as well. Not sure if you or anybody here would know… Are there any reliable Canadian tax companies that can help you prepare and file the 6 years of FBAR if i choose to relinquish first? Would they be able to help file the back taxes needed as well? Or would one suggest that this should be done with a US tax company because they know and have all the forms that would have to filed. I have read about the nightmare and headaches of tax people who file it wrong
@CD888,
Good question. My 90-yr-old mother renounced a month ago. I’ve had quotes between $3000 and $23,000 for tax filing. You want a firm that does “cross-border” tax filing, and I think, one that says they do lots of Streamlined procedure filings. The one I was going to use told me yesterday that they can’t touch my mother’s filing until their busy season ends at the end of April. I googled and picked another one that I may go with as I’m afraid to wait that late. You have over a year to file though.
What city do you live in (near)?
@WhatAmI. do you think it would be as much of a nightmare to apply for a SSN if i were to renew my passport then submit the application to apply for the SSN before renouncing? I guess some of these nitty gritty details could have a much bigger impact on the decision of when to renounce than i thought.
@ CD888,
Yes, there are Canadian accountants competent in this, and there are people here who have been quite satisfied with their accountant, so someone will probably recommend theirs. Particularly if they have an idea of where you live, someone may be able to recommend someone local.
The FBARs should be relatively easy to fill out (in terms of not needing accounting skills) because it’s listing the high balance in each account each year, so they’re pretty straightforward.
Sorry, but I have gotten myself a bit confused.
I’m getting confused because I was thinking you were born dual – therefore you had always been a Canadian citizen – and then in 2004 took an oath of allegiance when you got your citizenship card – and that the oath would have been the relinquishing act.
But your citizenship certificate says you became a Canadian citizen on Sep 10, 2004 (not the day you were born). Which doesn’t make sense to me because they issued the Citizenship Card 5 months prior to that date.
It may make perfect sense and I’m just not gettin’ it – as I mentioned, I’m not very familiar with the issue of citizenship cards for duals-at-birth — and this whole thing has a way of tying one’s head in knots.
@WhatAmI. I live in Toronto. I had emailed one company in the US who seems to specialize in expat taxes and suggested the streamline procedure to me. I was about to consider that but my guy told me to wait. They said through the streamline procedure i would likely qualify for 3 years back filing plus this year and 6 years of FBAR report filing. They quoted me close to $3000. Buti guess that depends on how complicated it could get. I mean if they ask for more half way what can you say?? That’s why I’m hesitant. I’m certain it will exceed that amount for sure and i won’t have a choice but to pay if i want to meet the deadline. I know if i renounce I’ll havea year to it but the FBARS would need to be done June this year am i correct?
Doing this will take away all my savings. 🙁
@Pacifica777 i live in Toronto. I have a way of confusing people because i ask too many questions lol. You have no idea how much i appreciate the patience and support that you and several others have given me here. At a time like this when you feel like your world is crumbling down on you, a little bit of patience and sensitivity goes a long way… Thank you.
I think I got it now – that you weren’t dual at birth – that crept into the comment stream somewhere. As someone mentioned earlier today, it’s really too bad we can’t display a person’s comments about their case consecutively in one place when we are all brainstorming together about it.
Happy to share what information and support I can — as I think we all are because we’re all going through it or have gone through it. Soon you’ll probably be answering questions and easing a person’s journey through this too.
@Pacifica777 regardless i just wanted to express my gratitude:)
At this point based on my situation where it stands, I’m pretty much trying to decide between filing through the streamline procedure and then renounce later since I’m not exempt from the pre June 3, 2004 law anymore. This way it will allow me to possibly renew my US passport in order apply for a SSN. The application says one needs to send them a current (non-expired) passport along with your birth certificate. I’m thinking if renounce prior to doing this it may make it much harder for me to apply. Not sure if my thinking on would be correct. I would however if that wasn’t my concern prefer to just relinquish using sept 10 ,2004 as my date of expatriation even the IRS would use 2014 for tax reasons. My true feeling is i never considered myself to be American other than being born there. But convenience wise i may have to reconsider
@Em, That is a good idea! So many times I have thought I wish I would have renounced so at least I would have some proof. The lady at the Consulate laughed when I asked her the day I relinquished if I could get a receipt that I had relinquished. She said NO, you did not pay anything. I thought I know that but just give me something to prove I was here. I don’t understand why they don’t just give us a copy of what we both signed at least it is something.
Wishing you and your husband good luck that day, I am sure it will go well.
CD888. My advice to you for what it’s worth is to get your CLN by renouncing or showing that you relinquished. The main difference is $450. And then do absolutely NOTHING else.
You can’t file without a SSN. You can’t easily get a SSN . You certainly can’t get one without going to Buffalo and a Ton of hassle.
Bubble busting entered OVDI over 2 yrs. ago and has heard nothing. Petros refused to file FBARs and has heard nothing. The ‘amnesty’ programs are for criminals- not you.
The only other reasonable option is to renounce and file 5 yrs of 1040s. You won’t owe a nickel and there won’t be any fines. Remember 1) they cannot collect from Canadians living in Canada . 2) they wouldn’t bother to try because it’s not in their interest to chase after people like us. They have much more fruitful ways to spend their limited resources.
We had months of sleepless anxiety and contemplated The OVDI. As we gained knowledge , we became unafraid.
CD888. Please please please read this exquisite comment from Sceptical.
http://isaacbrocksociety.ca/relinquishment/comment-page-30/#comment-1011812
@KalC, thank you for your advice. Can i ask if filing back 5 years of 1040’s will require a SSN? And thank you for your support. I greatly appreciate your advice, i really do.
I’m not sure. You need either a SSN or a TIN. (Taxpayer ID no. ) not sure how to get the latter. Getting a SSN is a right royal pain.