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.
@Tdott, I need the statements to ensure I declare the correct amount of income and gains because it was a managed portfolio of stocks with many transactions (beyond my control), plus I had stocks moved between two accounts so wasn’t sure if they were sold/repurchased, etc. Thought it safer to make absolutely sure so that all the income is stated correctly!
I have a hypothetical question regarding a friend I will call Jane. Jane is a non-compliant Canadian ‘US person-slave’ who has been out of the workforce for about 10 years, with no plans to re-enter at least not on a full time basis, and no plans to become US tax-compliant.
Jane’s husband is the bread winner of the family. Jane and her husband sold the family home a couple years ago, and do not plan on re-entering the housing market anytime soon(unless the FATCA monster gets too close), so are planning to do a large lump sum RRSP contribution this week so that Mr. Jane can get a tax break from the Canadian government this year. An added bonus is that RRSPs are not FATCA reportable, so monies will have moved from a FATCA reportable account to a non-FATCA reportable account. Thank you Master. Flaherty sir (cough, cough).
Considering Jane’s ‘US person’ status, should Mr. Jane contribute to a spousal RRSP or a regular RRSP in Mr. Jane’s name? Even though RRSPs are not FATCA reportable, Jane is leery about doing a large spousal contribution in her name, but realizes that IF FATCA goes away, or RBT should miraculously be adopted by the Kiing, then she and Mr. Jane will have missed out on some future income splitting opportunities. Mr. Jane thinks Jane worries too much and should not let FATCA affect their decision.
Thoughts?
Re: above post, some of the details have been changed to protect Jane and Mr. Jane, should the Kings soldiers figure out who they are.
WK. that one’s a ‘no-brainer’. Jane worries too much and should not let FATCA affect their decision. There is way too much paranoia out there. Strangely I note the ladies seem far more affected than the men.
@DukeOfDevon,
You and Mr. Jane would get along well. Mr. Jane and Jane got in a huge argument when Jane had her OMG moment a year and a half ago. Mr. Jane told Jane that there was NO WAY the Canadian government would ever agree to FATCA. But here we are, with a signed IGA.
@DukeOfDevon,
Have you also noticed, that the freedom FATCA fighters are predominantly women? If it was up to guys like you and Mr. Jane, there would be no FATCA blowback, and the powers that be would decide our fate.
@Duke of Devon, that’s probably because it’s the women who run the daily finances and plan for the future. I do all our accounting stuff, including various tax returns. That’s not to say the OH couldn’t if he had to, but he leaves it to me as he’s not really that interested. He also thought I was overeacting when I first found out about FATCA. He didn’t think that when a W-8EN arrived for him to sign on one of our accounts.
@MedeaFleecestealer,
Mr. Jane is very good at earning and spending, and telling Mrs. Jane how to do things, but not so good at planning, saving, budgeting, etc. LOL.
…and level of risk adverseness is likely often lower for women than men. I scrimped and saved not to be a bag lady, and here I am again.
@monalisa1776:
Whew. I’m glad I don’t have to deal with any of that. Still, I feel your frustration – and I haven’t even figured out a plan, yet. 🙁
@Duke of Devon:
Ha! I was just the other day having a discussion with a female friend about the men in our life and how, for them, there’s never anything to worry about – until sh*t happens. Of course I’m not saying that about *all* men, just ours. 😉
@MedeaFleecestealer may have a point. I have always managed the finances, and so do most of the women I know who are in relationships with men. That’s a pretty small sample, but we do know that our brains work differently, and when men and women get together we tend to divide the tasks according to what suits us best. In our case, I happen to be the one who can deal with finances without getting too fussed about it, whereas when it comes to most everything else he’s the rock. It works pretty well.
Oops!
I don’t think there is any paranoia here – the Janes are moving money from a purely Canadian account to an account the US now has claim over, whether the US knows about it or not.
Tell me if I am wrong, but my understanding is that income within the spousal RRSP is now taxable by the US each year unless Jane makes an election to have it taxed upon withdrawal (which she isn’t doing if she isn’t filing). If her other income is low, she could easily end up owing taxes to the US government based on those RRSPs even if she owes nothing in Canada.
However, even with pension income splitting in Canada, there are some good reasons (from the Canadian perspective) to contribute to a spousal RRSP.
I am curious what other Brockers would advise.
@WhiteKat, yes, same here. So long as he has money he can spend he’s not worried.
@Wren, yes I think that’s true. Some because they’re housewives like me and are home so it’s simply easier for them to do it – and no I’m not going to say because they have more time because if they have kids that’s extremely unlikely. But they may be able to find some time a bit more often than men would. Still, maths was my weakest subject at school and the OH got an “A” level in it. I did do an accounting course years ago and that helps some, but as I’m home all day and don’t have kids to look after it is just easier for me to do them as I have the time to do so. And having things like calculators, computers, spreadsheets, etc, can make things a whole lot easier. I’ve just done our Swiss tax returns and I have a spreadsheet which gets updated year by year so by the time I have to fill in the forms the calculations have already been done. Even then it takes me about an hour to fill them in, still double checking that I haven’t made a mistake as I go along. I dread to think how long it would take if I still had to use paper, pen, fingers and toes! Eek!
I have this question: I do know that the IRS and the State dept are not on the same page and that the IRS does not recognize the backdated date (1976 for me) on a CLN as the effective date for IRS purposes. Looking at my new CLN, there are TWO OTHER dates on it: (1) the date the CLN was approved by the State Dept in Washington, and (2) the date I appeared at the embassy to apply for the CLN (almost a year earlier than the approval date). So…..which of these does the IRS take to be the date of relinquiishment for IRS purposes?
So greatful to all here for the help and advice – wouldnt have been possible without IBS!!!
@woofy, If your date is 1976, why would you worry about the IRS? They are not going to do anything because they can’t possibly succeed in winning a tax liability against you. At least I can’t seem them bothering with you. Consider it your get out of jail free card.
The US tax code defines a US person as a resident or citizen of the US. Even the IRS knows better than to try to make the 2008 rules apply to someone who expatriated ten years prior to that date. It is even today a complete fiction to say that a person is not a “citizen” but hasn’t expatriated for tax purposes. I doubt that if this ever went to a real court, that this could be upheld. (And by real court, I don’t mean a kangaroo court located in the USA, but an impartial international court).
Guess its just my natural curiosity. Cant see me ever even visiting the US any more so nuthing to worry about in any event cause they cant do anything in Canada anyway. Just curious is all.
@woofy, that’s the response we’re giving to those who relinquished and receive the backdated CLN.
Main reason for getting the cln was to satisty the border guards maybe and the banks if they ever get too curious as to my personhood. If my bank decided to close my account (as in Switzerland) how would I pay my Canadian income taxes – they dont take cash lol. Wont use it ifn I dont have to.
I agree completely with your statement bout the courts. But I dont really wanna be the one that spends the rest of my life and fortune on lawyers to prove it. Might donate to a class action lawsuit tho if somebody elase wants to take em on.
@Wren, yes it IS damn frustrating. They probably won’t have my final tax return and 8854 ready till at least late September because it’s first come first serve…but I need to stick with this accountant since they also amended several years tax returns too, all unfortunately at higher than average risk of audit so need to know I can count on them to represent me if audited (held quite a number of mutual funds so there could be disputes about how they determined the PFIC taxation).
It was one reason I had originally planned to hold off and not renounce till all the statutes of limitation had run on those earlier tax returns involving PFICs. But I concluded in the end that I was safer just to go ahead and expatriate last year because I worried that it might become even harder to renounce, especially if appointments became much harder to get, delays in CLN, etc. So I took a calculated risk and went ahead and renounced….but the scary thing is that I believe my last five years of tax returns could be red-flagged because I renounced, as though they might assume I was trying to run away from something.
I thus won’t be in the clear till at least Autumn 2017 if not Autumn 2020!!!
I have done everything to the best of my ability to be fully compliant but could see the IRS deciding to make an example of me, as a means of punishing me for renouncing and not being a loyal American, etc.
If my final paperwork is filed in October, could imagine that it could be even sometime in 2015 before I’d even receive the refund I’m owed….I’ll consider myself damn lucky if I receive it all as their attitude could be a ‘FU’ for supposedly placing expediency over one’s Country!
aaa123 If you read the original post, we were told that Jane had no plans to become tax compliant. End of story.
I can’t help continuing to worry that the US Govt will view many of us renouncing as apostates and find some way to get back at us someday, like enforcing the Reed Act or passing the proposed Ex-patriot Act. If they can’t hit us with fines or the audit from Hell, they could actually more easily make it difficult to visit the US, own property there, etc.
I also wonder if they might lower the threshold for the Exit Tax, etc.
Don’t forget that when I recently flew into Philadelphia that I was questioned about why I wasn’t using a US Passport and made to show my CLN documentation, and even detained me in another room for over a half hour while they verifier that my CLN was genuine!!
@woofy,
We here at IBS believe that the IRS can’t and won’t come after you if the date of expatriation (1976 in your case) is prior to 2004. If it is after 2004, the IRS uses your date #2, the date you appeared at the embassy to notify them of your expatriation and apply for the CLN
@monalisa1776…. I assume u have a US birthplace (re: your recent PhillyHell CBP experience)
@crystal London, yes, I do have an unmistakable US birthplace.
@DukeOfDevon, Well, its not quite the end of the story. Jane is a woman, and its a woman’s prerogative to change her mind. If the witch hunt starts getting nastier (obviously as we heard today, RBT won’t be coming anytime soon), Jane might get even more paranoid than she already is, and ignore Mr. Jane’s insistence that she is overreacting, and decide its time to compliantly bend over for the IRS.
@aaa123, Good point.