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.
Hi I am a Canadian born and raised. I have never lived or worked in the US. My parents are American.
I am in the process of renouncing my US citizenship. I want to be legal also, I would still like to travel south.
I need to file my last three years US tax and 6 years FBAR. I do not have a SS# and dont want to apply for one, as I am eligible for a SS# I cannot apply for a ITIN.
Can someone point me in the direction of someone that can help me file my taxes in Calgary. I have contacted H&R Block but they cannot help me without a SS#.
I just need the paperwork filed out.
@banany
“What do you do about form 8854 if your CLN arrives after you’ve filed your American taxes? Do you send it on by itself to IRS?”
In most cases, you should have your CLN by the tax deadline (June 15 for US citizens abroad). In any case, you know the date when you renounced, so I would use that and file your tax forms (including 8854, which also needs to be sent separately to the US Treasury Dept.) as if you had it. It’s not your problem that the DOS is taking so long.
Caveat: Just my opinion – I’m neither a tax professional nor a lawyer.
@Not amused, I too have wondered about what to do if you’re approaching the filing deadline but still haven’t yet received the CLN. I believe that one can still file 4868 for an extension till October 15 and even December 15 if necessary. But I’m not sure if for the final year one can take an extra extension.
Another concern is that one cannot be completely certain that his or her renunciation has actually gone through and been approved until receipt of the CLN. What on earth would one do if, after filing 8854, she finds out to her horror that she is still, in fact, a U.S. person??
I am guessing that they could file for an extra full year year as a U.S. person and then file 8854 with this delayed final partial year tax return to finally be able to officially log out of the U.S. tax system.
As an aside, I’ve also wondered if in the year of when filing the final partial year tax return if the final F Bar needs to actually be for that entire year.
For example, I’d imagine that I would only need to include all my accounts on 8938 for the segment of year that I was still a U.S. person; but I wonder if for the f bar they still expect account information for the whole calendar year; so if I opened a new brokerage account after renouncing, would that still need to be declared on f bar.
@monalisa1776
I personally wouldn’t take an extension. Imagine if you had a tax liability and because you took an extension you had to pay additional interest on that tax liability, only because the DOS delayed your CLN! Out of the question. I can understand being a bit nervous about filing for a partial year without having the CLN, but on the other hand, I’m not aware of anyone who renounced who was denied a CLN. (In any case, I definitely would not file as if I hadn’t renounced, i.e. for the full year, disregarding the renouncing date.)
Regarding the FBAR for the final year, that issue came up recently here. I think it was “Watcher” who said he had inquired and they told him to just amend the line stating that it’s for the full year to reflect the renunciation date. In any case, they’re definitely not entitled to any information about any accounts whatsoever post-renunciation!
Just my 2 cents, as always.
@Not amused, I still wouldn’t feel safe filing 8854 until I knew for certain that my renunciation had gone through. I still wouldn’t be surprised if they start rejecting more renunciations, especially if the numbers shoot up even higher.
As for extensions, I would indeed rather file before the standard 15 June deadline but it’s out of my control because I’m dependent on my accountant who always files for a maximum extension and actually tends to file all her clients returns at the same time, usually just before 15 December. She will not be rushed, no matter what I say. But thank God, at least I trust her ability. I am more vulnerable than most here in that I had to amend several years’ very complicated returns so am very dependent on her to ensure everything is correct.
I have pleaded with them, especially as I am considerate enough to send in my organizers well ahead of time, but when you’re dependent on their expertise, you don’t have much choice. I also believe she thinks that filing as late as possible reduces the risks of an audit because they seem to conduct audits in batches at certain times of the year.
I suspect that she procrastinate like a student leaving an assignment to the last minute, but not a lot I can do when I’m having to rely on her. It’s all the more reason that I will be so relieved not to have to keep doing all this cumbersome, expensive filing year after year!!
As for having interest on any tax liability, they have their clients overpay on their estimated payments well ahead of time so that hopefully I will enjoy a substantial refund after filing my final tax return next year for a partial 2013.
The problem is that I’d imagine that for my final tax return that I may face a big tax bill because I don’t think they can use the standard deduction for a partial year, plus because I spent a couple weeks in U.S., don’t think I’ll be able to use the Friends either. I could be wrong but believe I’ll have to rely on foreign tax credits (form 1116) only.
Friends equals ‘FEIE’ foreign earned income exclusion, thanks editor, *lol*
@monalisa1776
Sure, you know what’s best for your own personal situation.
“The problem is that I’d imagine that for my final tax return that I may face a big tax bill because I don’t think they can use the standard deduction for a partial year,”
I did for 2012, and my return has just been approved. If you think about it, it wouldn’t make sense not to allow the full standard deduction for a partial year. If they didn’t allow it, I would have expected them to reduce my tax bracket by pro-rating it for the partial year as well! (Ha ha).
@CalgaryM
Unfortunately — and I do mean that, you are a US citizen by virtue of being born to your US citizen parents, so IRS rules apply to you. H&R Block is correct.
Here are two links, discussing this. You will likely have the same issue with any Canadian tax preparer. You could try to figure all this out by yourself and try without by yourself — or may get better advice from someone else on this site.
http://www.irs.gov/Individuals/International-Taxpayers/Taxpayer-Identification-Numbers-%28TIN%29
http://www.serbinski.com/taxation-in-usa/ssn-and-itin.shtml
There is the school of thought that if you have a Canadian passport that identifies you as a Canadian, i.e. not born in the US, you may not want to ‘poke the sleeping bear’. You may wish to do lots of research on this site to give you different points of view / arguments to help you make your own individual decisions, which we each must do. Unfortunately, and it doesn’t make sense to me, doing the correct and legal thing, may be detrimental to your welfare. (My view is that my Canadian-born kids who I did not register with the US (and likely the case for you too since you don’t have that Social Security Number) should have had a CHOICE to claim US citizenship. As we see, that is not the common sense reality.
@Not amused, that’s good to hear but had always assumed that everything was pro-rated, including even the tax brackets. However, I think you could be correct because they still require an 1040-N.R. for the portion of the year you’re no longer a U.S. person. Obviously, it would thus make sense that the tax brackets were not prorated then.
However, was still of the impression that one could only use the personal exemption rather than both the personal exemption and standard deduction. But maybe this is only the case if for subsequent years you had to continue filing 1040-N.R.s if, for example, you still had substantial U.S.-sourced income from perhaps an American brokerage account.
Hi Brockers. I’m delighted to have found this site, but with all the knowledge you have, I can’t seem to find a “primer” on the subject on the site. I’d like to ask a question though.
I’m a Canadian citizen, born here, who married a US citizen. I lived in the USA for the first 3 years of our marriage, then we both moved to Canada in 1992 where we continue to reside. As a typical family, we have 2 children, about 70K in RESPs, and close to 300K in RRSPs, and own a house. The libertarian in us made sure we ignored the pages about declaring US history when opening these accounts.
I was given a green card in 1988, with an expiry date of 2000. During it’s validity, I did indeed file my zero dollar US tax returns, but promptly ceased to do so after the card expired. My wife filled out her tax returns until about 2003, but then quit with a “why bother, what business is it of theirs anyway” attitude, with which I whole heartedly agree. My entire family has been travelling into the US frequently without issue, except for the (laughable) time when a border agent gave us stern instructions as to how to get our children registered as US citizens as they ghet older (yeah, right….).
So, where do I stand? Am I free and clear as my green card expired? I still have a social security number (that’s for life, no?). Where does my wife stand. Does the USG even know the answer to these questions? Would it be advantageous to get the name in her mother’s will changed to my name? Should I move all my RESPs and RRSPs to other financial institutions with zero US exposure.
Sorry, but I haven’t found a consistent answer to these questions anywhere, and plan to just stay away from the whole monster and not bother with any form of “compliance.” Why waste money when I’m not a criminal. Never visiting the US again would be just fine with both of us. There are lots of great places one can travel in the world.
@PierreD
I am just running out the door down here in NZ, but wanted to give a quick answer. The reason for no primer, per se, is that the subject has been evolving over time, and the members commenting here have been learning and sharing with each other. There is no codified book, of YES and NO answers with specific actions one should take given one set of facts, which can vary from individual to individual.
However, there are answers to your basics which some very good Canadians who blog here can provide, although, you will/may get differing views, and you may still need to do your own due diligence. It is probably worth repeating the self evident, that you should not solely take the advice that you get anonymously from a blog. However, by reading here, you it can really begin to see the issues more clearly, as you decide the best course of action or inaction for yourself.
Got to run, and I am sorry I don’t have time today to digest your facts. Its my b-day, and my wife has plans for me besides just reading and commenting on blogs.
cheers
Re: green cards — another hard-to-understand paperwork requirement of the US. Why doesn’t expiration mean expiration — period? http://blogs.angloinfo.com/us-tax/2012/12/31/giving-up-your-us-green-card-make-sure-it-is-done-correctly-or-pay-the-price/; http://www.visajourney.com/forums/topic/186852-i-407-abandonment-of-status-too-late-to-file/. Perhaps you can find something here to determine your status, having only lived in the US for three years: http://www.sgrlaw.com/resources/trust_the_leaders/leaders_issues/ttl16/835/
Do your due diligence here at Isaac Brock and elsewhere to determine the answers for your family’s questions. What will happen when (if?) FATCA comes online is a question for which you will want and need to know your alternatives and possible consequences, especially with your banking needs in Canada, including the RESPs you hold for your children’s future education — they are considered “foreign trusts” by the US and, at this point, are not advisable for US citizens even if they are Canadian citizens. In your family’s case, they could be just in your name (if your green card status doesn’t get in the way). We don’t know if the USG has the answers to these questions and we each will have our own level of what year-after-year compliance with US citizenship will cost us, administratively, penalty-wise, and emotionally. For each of us, it is a day by day, week by week learning process, which has been life-changing. Your best protection is finding out for sure how this US extra-territoriality affects your family — now and in the future. Good luck in your research. The worst thing that you can do is stick you head in the sand and pretend none of it affects you. If you determine your family will be safe staying away from the whole monster (and it is indeed that!), great — but base that decision on knowing for sure, or at least as much as you can.
Many of us want complete resolution and have taken steps for renunciation or claiming our relinquishments of many years and in cases decades ago.
HAPPY, HAPPY BIRTHDAY, Just Me. Good for your wife for pulling you away from all this nonsense on your special day!
@PierreD, I posted this earlier maybe in a different thread:
Here is a “basic tax guide for green card holder”, directly from the IRS web site, which ironically talks more about how to surrender your green card, than the actual obligations like declaring interests from one’s home account and filing FBARs.
http://www.irs.gov/pub/irs-pdf/p4588.pdf
But as Just Me said, you need to educate yourself before doing anything.
@Just Me, Happy Birthday!
Happy birthday Just Me! Many happy returns of the day to you. Have a great celebration and forget all this stuff for a while.
@ PierreD
You and your wife’s situation is similar but not exactly the same as mine and my husband’s situation. You can read about it under “Profiles on some participants” (bottom black section). I would love to attempt to offer you some advice but you will see from my story that we did some things right and some things wrong so I would be of no help to you, except as a bad example. We “think” (never can be certain) we know now where we went wrong and what the correct actions should have been but generally we have come to the conclusion that we really cannot fix things ourselves and we cannot afford expert tax preparation (not available anyway living in a small town in rural Alberta). So we muddle through as best we can and take support from this site.
At this point I can only rely on Flaherty’s now outdated assurances that Canadian citizens will not be pursued by the CRA acting as a collector for the IRS. My husband continues to do his due diligence with the IRS until he acquires his Canadian citizenship (still waiting) and then renounces his US citizenship. I do not travel to the USA and he will not be traveling there either, once everything has been settled with his mother’s “estate” which pretty much amounts to a storage locker in the USA filled with stuff that needs to be given away and a non-interest bearing US bank account containing his inheritance (one third of which he gave away to US relatives).
@ All
My husband’s US and Canadian tax returns this year are already shaping up to be a DIY tax preparation nightmare (Taxmare for short). A few days ago he took a 7 hour drive to pick up US tax forms and instruction manuals at the nearest point he could find across the border. This year he also has his mother’s final tax return to submit (she passed away in 2012). We are only preparing to commence to thrash through the Taxmare and I’ve started a log to keep track of the hours we spend on this mess this year. I’ll let you know what the tally is when it is all over.
@ Just Me
Happy Birthday and you better not be reading this until tomorrow! 😉
@CalgaryM
I didn’t want to apply for a SSN either. I only am filing taxes so that I can be in the clear to renounce. I am a Canadian born abroad in the US so hiding felt too risky to me. Don’t know what I would do in your shoes. But should you decide to go the compliance route and need an SSN… I applied through the Calgary consulate. You would need to have proof of where you have been all these years while not living in the US as well as proof of your US status. You would need originals and also photocopies to leave there. You can’t phone the consulate to find out what you need to take & they also will not respond to e-mails. Nothing is said on official sites what you actually need. I only knew because of lawyer & accountant. But since it was a days drive away for me to go to consulate there was no way I wanted to have to go twice because of missing anything. My husband managed to track down the SS office in Minot, North Dakota. Guy was very friendly & helpful. Don’t have the number anymore but that would be the office to call for info if you’re in Western Canada. Was mad about having to apply for a SSN in person, but decided that it was just a good dry run so I’ll have a better idea what to expect when I go to renounce next year.
@Calgary411
Thanks for the information. I also have a US Passport, you are required to use it to travel to the US. So I can’t fly under the radar. I did find an accountant in the city that I think that I can work with and it looks like I will not owe anything. I am completing the FBARS myself as they are pretty easy, unlike the tax forms. I, like most of you are unhappy about my situation but I am moving as fast as I can to remedy this situation. I expect to be free of USP by September. I still dont want a SSN, but will do what is required to close this chapter. By the way I expect to pay around $3,000 to put an end to this.
@CalgaryM
Sorry, I also meant to say that yes if you want to file US income tax you would have to have a SSN whether you want one or not. A US citizen can only file using a SSN. Looking for a different accountant won’t help that problem.
@CalgaryM
Just saw your last comment. You are aware that if you’re going to be compliant and not subject to the exit tax that you will need to file 5 years of income tax prior to the year you renounced in & then finally a partial year for the the year up to date that you renounce?
@ Calgary M,
But you can still renounce this September — however, you’ll need to have the previous 5 years filed before June of 2014, as that’s when the exit tax form (8854) is due if you renounce in 2013, and on that form you have to certify that you’re in compliance for the previous 5 years.
@CalgaryM,
I’m glad you’ve found an accountant that will be able to help you get to resolution from this mess. It will be expensive, but when you’ve done it properly, including the back US tax returns and the 8854 for final check-out, you will be free. I (we) are so sorry you have to go through all of this. There are those here that understand — it may seem like fantasy to others you discuss this with. Good luck in completing all the steps to freedom, CalgaryM!
So according to CNN, minnows who correctly check the checkbox for foreign accounts on schedule B, but do not file form 8938 (because they do not need to if they are below the threshold) are at high risk of being audited. #1 on their list.
http://money.cnn.com/gallery/pf/taxes/2013/03/21/tax-audit/1.html
Actually, a tax lawyer last year told me that he would file the form, even if below the threshold. Maybe I should have listened to him…
@ Chris
I don’t know why the CNN would be throwing out this 8938 booga-booga. The IRS has a threshold for reporting and that’s it. Besides, they can always check the FBAR which would indicate a person is below the threshold. Number 1 on their list? I don’t see any reason why this would be so.
@Chris @ calgary411 @Medea Fleecestealer
Thanks. I officially became an old fart on the 21st. The silly NZ IRD sent me a notice asking if I wanted to apply for the old age pension. In good conscious, I couldn’t do it! I don’t deserve anything from the Kiwi tax payer. LOL
@Em…
I took your advice, but did sneak a peak after getting back from a day off over at Russell. You will want to visit when you come this way.. 🙂