Liberty and justice for all United States persons abroad

The Isaac Brock Society

US expat tax and FBAR: Discussion thread (Ask your questions) Part Two

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

Participants will need to provide their e-mail address (real or fake) and an alias. The only written rule is that participants must use a same alias each time they post (and not “anonymous” or derivatives thereof).

Bear in mind that any responses that you get from participants is peer-to-peer help, and it is not intended as a replacement for professional advice. Also, the Isaac Brock Society provides this disclaimer: neither the Society nor any of its members are professionals. We offer our advice here only in friendship and we recommend that our readers seek professional advice if they need it.

If you wish to receive an e-mail notification of comments, check the box to that effect when making your first comment.

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.

3,618 thoughts on “US expat tax and FBAR: Discussion thread (Ask your questions) Part Two”

  1. @heidi, yes I know. I’ve been using that trick for years. In fact that was the reason I first got a British passport; my mother hated the thought of me coming back through the aliens line when I returned to the UK.

    Keeping the boarding passes as additional proof is excellent advice. The more documentation you have to back up your travels the better.

  2. You may also be risking your provincial health care because you were out of the country for more than 6 months. Be careful of that and note that it has nothing to do with the US.

    When you re-enter Canada, the form that you fill out on the plane indicates what country you are returning from. So, they have that information, but do they actually process it and enter it into the computer? Do they bother to ask how long you were in the US in order to send accurate information to the US?

  3. @ whatami
    OK, then maybe only 5.9 mths out of Canada, but still could be ‘suspected’ of being over 120 days (rolling average) in the USA because of travel on to to another country.
    Sounds like a bureaucratic nightmare to keep track.

  4. @medea
    I only used my US passport once to enter the UK as my British one was being renewed. The agent asked me how long I was staying, I said two weeks, he then said “welcome home”. I guess he saw my British birthplace on my US passport. What a difference to the reception I used to get re-entering the US. “Where have you been, why did you go, how long have you been gone, what have you been doing?” It felt like I had only been allowed out on parole. Once when I told them I had been to bury my Father, they didn’t even reply or give condolences.

  5. @heidi, your comment brings back memories for me too. I remember, this was back in the late 1960s, when we’d been over to the UK to visit relatives when we returned the American passport agent said exactly the same thing: Welcome home. Of course I was travelling with my US passport (only one I had at the time), but I don’t recall a similar welcome on my last couple of trips back (90s and 2007) even though I still used the little blue book.

  6. @ Medea,
    It wasn’t the US passport agent who said “welcome back” it was the UK one, even when I had handed him my US passport to enter Britain, he picked up that I had a UK birthplace. I have NEVER been welcomed back into the USA.

  7. @heidi, yes I got that. I was making the point that no ones seems to bother to greet you these days, no matter where “home” is. Sad really. I know they’re busier now than they used to be many years ago, but does it really take that much longer just to welcome someone either home or to your country?

  8. @medea
    Agree, but the US agents seem intent on being downright unwelcoming. I know so many people who now avoid traveling there because of the interrogation they get at the border. If I didn’t have family there I would never set foot in the place again.

  10. One of the last times I drove over the border using my US passport, the border agent asked me why I wanted to live in Canada and started complaining about how expensive it is to live in Canada. It’s as though he was trying to taunt me. I just smiled back and gave him the answers he wanted to hear. When I used to travel on my Canadian, I got told I should be using my US to cross into the US. You can’t win with these folks.

  11. Has anyone noticed this provision in the USA Canada Tax Treaty? In its definition of resident, it states:

    “For the purposes of this Convention, the term “resident” of a Contracting State means any person that, under the laws of that State, is liable to tax therein by reason of that person’s domicile, residence, citizenship, place of management, place of incorporation or any other criterion of a similar nature … For the purposes of this paragraph, an individual who is not a resident of Canada under this paragraph and who is a United States citizen or [LPR] is a resident of the United States only if the individual has a substantial presence, permanent home or habitual abode in the United States, and that individual’s personal and economic relations are closer to the United States than to any third State.”

    Very notably, it makes a very unusual exception for U.S. Citizens that I haven’t seen in other treaties (not that I’ve examined many). This only applies to individuals who are not resident in Canada, and to those who have lost all meaningful ties to the US. There are, of course, a number of issues.

    How can someone not resident in Canada, and not considered a resident of the US under the treaty, seek benefits under the treaty? Perhaps by investing in Canada as a non-resident? Unfortunately most of the treaty benefits are accorded only to residents of the two countries, but there might be exceptions: Article XI, Paragraph 8 (interest) and Article XII, Paragraph 8 (royalties).

    Another concern is the ‘savings clause’ which, on the face of it, seems to override the residence provisions just as it does with the tie-breaker provisions in most other treaties. However, the exception highlighted above is clearly at odds with the savings clause, and would have no meaning unless it was intended to be an exception to the savings clause. Also the residence clause was added as part of the third protocol signed between Canada and the USA in 1995. The savings clause had been in the treaty since the beginning, so according to the ‘later in time’ principles of US law, it should override the savings clause. It is true that the savings clause was later modified in the fifth protocol, but not substantively, and presumably not with the intent to override the residence exception, otherwise they would have removed it in that protocol.

    Another concern is the language used in the residence exception. Initially it says “For the purposes of this Convention, the term “resident” of a contracting state means…”, then for the exception it says “For the purposes of this paragraph, an individual …” That might seem to restrict the exception to use only within that particular paragraph. Again though, that would seem to render the language meaningless because there is no application of that definition of residence within the paragraph.

    Of course, these tax laws are so complex that I’m sure I’ve misunderstood what’s going on here. If there are any Brockers with legal experience that could give it some consideration, I’d be much obliged.

  13. Hello. I see IBS quite focused on relinquishment and renunciation. Part of the strategy may be to reduce one’s wealth to get below the thresholds. One way to do this is gift your nonUS citizen spouse, in 2014 it looks like the limit is $US145,000. For those in Canada with 50/50 home ownership, then how to use this annual $145,000 gift allowance and apply it to your ownership in a home – so that what you do is recognizable by the U.S.?

  14. Interesting IRM document linked from a post at Jack Townsend site ongoing discussions of ‘new’ Streamlined.

    Interesting thread to follow on Jack Townsend’s site re the ‘new’ ‘simplified’ ‘streamlined’ http://federaltaxcrimes.blogspot.ca/2014/08/tidbits-on-new-streamlined-procedures.html#comment-1557759161

    The post above mentions an IRM for Streamlined. The link they cite is http://www.irs.gov/pub//foia/ig/spder/WI-21-0814-1244_Redacted%5B1%5D.pdf The document has been redacted in places. I note that the link includes ‘foia’ and ‘Redacted’ in it.

    The document is entitled:
    ‘IRM PROCEDURAL UPDATE
    DATE: 08/13/2014
    NUMBER: WI-21-0814-1244
    SUBJECT: Streamline Filing Compliance Procedures for Accounts Management International IMF
    AFFECTED IRM(s)/SUBSECTION(s): 21.8.1.27
    CHANGE(s):
    IRM 21.8.1.27 Added new IRM section and sub sections for the Streamline Filing Compliance Initiative.’

    Save a copy in case it disappears.

  15. ‘Iran Sanctions – Becoming US Tax Compliant Poses A Hidden Problem For Many Iranian-Americans’
    August 25, 2014
    “Along with a host of others, many US-Iranian dual nationals are now becoming aware of their US tax and reporting obligations and trying to become US tax compliant. All fine and good. In advising these clients, however, the professional cannot forget that Iran is a sanctioned country and that the US has some very complicated sanction rules in place with Iran. Generally, the sanction rules prohibit US persons from engaging in most business activities with Iran unless a license is first obtained from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC)…..”
    http://blogs.angloinfo.com/us-tax/2014/08/25/iran-sanctions-becoming-us-tax-compliant-poses-a-hidden-problem-for-many-iranian-americans/

  17. I very much doubt that Obama’s mother filed taxes or fbars while she was in Indonesia. And any account for the young Barack would also have been subject to fbar filing.

  19. I am looking for anyone who has had experience dealing with an old green card and expatriation. My situation is specifically the following.
    – I am a Canadian
    – I obtained a green card in 1994.
    – I was a student in the US from 1994 to 1999 (covering 6 years of actual presence in the US
    – In 1999 I moved back to Canada permanently
    – That year, I filed a 1040NR stating “Dual Status” on the front page and clearly indicating later on the form the exact date at which I left the US (I realize now that this was probably not the right way to proceed!!)
    – I did not know that I had to return my green card so it went in a drawer
    – One day at the US border (for a short visit) I got questioned and eventually told that I have to return my green card and that I could do that at a border post with an immigration agent.
    – Not knowing at this point that I might still have tax obligations, I went to a border post in 2008, filed an i-407 that was signed by the agent with a date of abandonment of my green card back to the day I left in 1999.
    – I have made no other filing (though my TIN number appears on my wife’s filings) she is a compliant US citizen abroad). However, in 2011, when we first found out about the need for my wife to report, I called the IRS (anonymously) not once but twice and I was told that I had no reporting requirements but everything I read now seem to contradict that.

    My questions:
    1) Am I a US person now
    2) In the positive, do I have any options beside the ruin of the expat tax or living in fear for the rest of my life?
    3) In the positive, has anyone dealt with a similar case (either voluntarily or being found out) and how was it handled by the IRS.
    4) Do I need a lawyer?

    Thanks

  21. @RMA
    What is the implication then? By 2008 I would be a Long Term Resident but I cant go back so I must pay the expatriation tax?

  22. @Tireofthis…I should clarify, I forgot to mention that the rules changed in 2008. if you signed your i-407 on or after June 16, 2008, you became a covered expatriate under HEART. If you signed it June 15, 2008 or earlier, you might still be a US person under the AJCA rules if you haven’t filled out an 8854

    See http://www.irs.gov/pub/irs-pdf/i8854.pdf

  23. TiredofThis. I’m unclear as to why you are concerned.
    You filed an I 407 that was witnessed by a border guy and dated back to 1999 ( about 15 yrs. ago)
    You have not been a US person since either 1999 or ( less likely) 2008.
    Forget about it . Sleep well. Donate part of what you would have paid to a lawyer to ADCS instead.

  25. @Duke of Devon says
    The date of filing on the i-407 is 2008 and the letter of the law appears to be, as @RMA says, that the expatriation is 2008, not 1999. If true, my fear is that they will eventually be on my case because my number keeps showing up on my family member’s forms and also because of FATCA

Comments are closed.

%d bloggers like this: