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.

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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.

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

  1. @Duke, Maz and tdott (and all the IBS “troops/therapists”):

    I will likely file a final 1040 (even if it is below threshold) and file a final FBAR (probably with Dec 31 2013 values). I will also file the 8854 – I don’t want to be a covered expatriate (my parents live in the US and I need to know I can visit them if possible future legislation gets passed). Sadly I do have assets in the US (pre-FATCA) that are not easy to liquidate that make this whole exercise a bit more “real”. This has been a difficult situation (as I am sure it is for most) and I appreciate all of the support (specifically and generally).

    I’ve had my CLN for over 6 months now and I just can’t wait to be finally “out” (I do feel tremendously better now with it though – I can sleep at night!)…which strangely feels almost impossible. Maybe once the SOL has passed I will feel better. Honestly though – until CBT is abolished I don’t think I will feel 100%. Thats why the lawsuit is so important, and that the fight continue.

    Even though I am going to be filing my final FBAR, the 8854 and my last return, doesn’t mean I am not going to continue to support IBS and the cause (like many of you “pioneers” – thank you). Just reading others stories and the support we show each other is therapeutic for me (and I think for many other lurkers who don’t comment – I think I can speak for them in thanking you all).

    I will let you know what I do end up doing (waiting for my accountant to tell me what he thinks) and what becomes of it. Thank you again.

  2. http://blogs.angloinfo.com/us-tax/2015/02/23/why-the-us-tax-system-needs-to-change/
    ‘Why the US Tax System Needs to Change’
    February 23, 2015

    Notes the damage done to those the US persists in deeming ‘taxable persons’ outside the US who have no economic connection:
    “……Not only are such Americans facing decreased job, banking and investment opportunities abroad, they are seeing their marriages and personal relationships crumble, are having increased concerns with personal security and are facing what feel like insurmountable obstacles in trying to become US tax compliant….”

  3. OK, I KNOW that this has been asked a million times but my aging grey matter cannot remember all of the naggly details of each unique situation. I was chatting with a friend and here is his story:

    Born in the US to an American father and Canadian mother. He came to Canada at 17 years old and was told/assumed when he obtained his Canadian passport that he would be losing US citizenship. He travels very frequently on a Canadian passport with a US place of birth and has never been told he needed a US passport nor has he ever had one. Is he in the snake pit with the rest of us? He also has a Canadian born daughter. If he is toast is she OK?

  4. @Charl,

    What year was he born?
    When you say “when he obtained his Canadian passport”, how and when did he get Canadian citizenship?
    When was the daughter born in Canada (year and month)?

  5. @ Charl
    Not knowing all the details, it sounds like he was dual from birth, with all the baggage that carries, and even though he passed his USness to his daughter she was born in Canada so it may be undetectable. So forgive the flippancy — he is toast but she might be able to coast (if she never admits to having a U.S. parent).
    http://london.usembassy.gov/cons_new/acs/passports/robirth.html

    A child born outside of the United States to one U.S. citizen parent and one non-U.S. citizen parent may be entitled to citizenship providing the U.S. citizen parent had been physically present in the United States or one of its outlying possessions for five years, at least two years of which were after s/he reached the age of fourteen.

  6. @Charl,

    The quote that @EmBee gave only applies if the daughter was born on or after November 14, 1986. I can’t find what it means to have been born before that date. I don’t know why, as I’m sure I’ve seen it before. The age and number of years is/was a bit different before 1986.

  7. @Charl,

    Here it is:

    http://travel.state.gov/content/travel/english/legal-considerations/us-citizenship-laws-policies/citizenship-child-born-abroad.html

    If your friend’s daughter was born before Nov 14 1896, she is NOT as US citizen. If born Nov 14 1986 or later, she IS. This assumes the US parent lived in the US for the time period described:

    Birth Abroad to One Citizen and One Alien Parent in Wedlock

    A child born abroad to one U.S. citizen parent and one alien parent acquires U.S. citizenship at birth under Section 301(g) of the INA provided the U.S. citizen parent was physically present in the United States or one of its outlying possessions for the time period required by the law applicable at the time of the child’s birth. (For birth on or after November 14, 1986, a period of five years physical presence, two after the age of fourteen, is required. For birth between December 24, 1952 and November 13, 1986, a period of ten years, five after the age of fourteen, is required for physical presence in the United States or one of its outlying possessions to transmit U.S. citizenship to the child.) The U.S. citizen parent must be the genetic or the gestational parent and the legal parent of the child under local law at the time and place of the child’s birth to transmit U.S. citizenship.

  9. @WhatAmI and Embee

    Thanks so much. You’d think I’d know this stuff by now but unfortunately my brain is full, no new information allowed. Damn, at my age I’m trying to remember the names of my children!

    I think he needs to visit IBS….AND DONATE!!!!!

    I LOVE IT….one is toast the other can coast! Embee, you sure have a way with words. I am envious.

  10. As if it isn’t enough hoops to jump through trying to get compliant, I’ve just been round the houses today trying to buy TurboTax for 2013 and 2012. Apparently they don’t let anyone who doesn’t have an American address on their credit card purchase their products. The nice ladies I spoke to on their help line (1-800-446-8848, in case anyone else find themself in a similar position) first advised me to try on Amazon. Surprisingly, I was able to buy a used copy of 2012 on UK Amazon, but could only find 2013 on the US site, and — surprise! — was unable to get it shipped to me (and the download versions sold by Amazon would not sell to my address). So I went back to TurboTax helpdesk, and they got me a download if I used my mother’s US mailing address. They suggested that anyone else in a similar position (out of the States, but having somewhere in the US they could use for a mailing address — although it is an email download you end up with) call them. I’m surprised they aren’t capitalising on this market, and selling us a 3-year package rather than putting barriers up to buying their product. Anyway, now I’m stumped because the wage form that the tax program refers bears little resemblance to my UK payslip. Do I just muddle through somehow? How have others done this, especially anyone in the UK with PAYE?

  11. Sylvan Moon. You muddle through. Make your best guess. Their computers can’t match slips and have trouble with currency exchanges so they pretty well take your word for it. If little $$ is involved, it won’t matter. Hardly any small actors are audited.

  12. i was born in the usa, moved to canada when i was 15 months.
    i am now working for my first time as i graduated from my medical residency last yer
    what are my us financial obligations

  13. They are too long to elaborate here. Start with the links on the right -introductory material. Go to ‘new to this,start here’ Come back with specific questions when you have done some serious reading. Remember. You might or might not be American. You may wish to renounce, or not. If not, you are eligible for the so called streamlined route to compliance .

  14. @gml. You haven’t shared enough of your facts for anyone here to give you much in the way of specific comments about your situation. As Duke has suggested there is a wealth of information on this site and you can begin the educational process! If you have a US birthplace you are a US citizen unless you have relinquished or renounced.

    It sounds as if it may be possible that you had no US filing obligation for prior years if your income was below the threshold. If that is the case you can simply file a 2014 return by the June 15, 2015 deadline and continue filing going forward with no need to enter a “compliance program”. Don’t forget about FBAR if you have more than $10,000 aggregate financial accounts.

    If you are thinking of renouncing your US citizenship and putting all this behind you once and for all, do it sooner rather than later before your net worth grows to the point it makes you more interesting to the US government.

  16. Pingback: The Isaac Brock Society | US$10,000 non-filing fines for committing ordinary personal finance, and the OECD’s “generally accepted taxation principles”

  17. My friend is an Indian citizen. He had a Green Card from 1982 to 1996. When he worked and lived in US. His wife is a Naturalized US citizen. In 1996 he filed I-407 to return the green card. They are both living in India since 1992. They have been filing 1040 MFJ returns in US for income from their joint brokerage account in USA. It was ok as his earnings in India did not exceed the Foreign Income Exclusion. He also has a 500K IRA in USA. Since India is signing the agreement with US in September 2015 –
    1. Should he start filing separate returns 1040NR for me and 1040 for his wife for 2014 year?
    2. Will filing a 1040NR alert Indian Tax authorities of his account in USA?
    3. Does he need to update his W8-BEN with the broker?
    4. Is there a penalty for not doing this earlier?
    5. When he files W8-BEN will the account be reported to Indian tax authority?
    6. Should he distribute his IRA and pay 39% max rate of tax and gift that to his US Citizen Son in USA?

    or Should he continue to file MFJ – but the FBAR requirement is becoming unbearable and Indian laws are getting tougher on assets overseas. Holding on to IRA (not having reported it earlier in India) is a problem too.

    Any thoughts will be greatly appreciated by me and my friend.

  18. Over at http://forums.serbinski.com/viewtopic.php?t=9167&start=15&sid=3af274bf7bc7c00c300874d634b918dc
    someone says:

    I have spoken on numerous occasions with a very experienced US/Can tax specialist and it is his interpretation (and also the majority (but not all) of his collegues in the firm), that these items [RESP and TFSA] do not meet the requirements of a foreign trust and hence 3520/3520A. A TFSA can be simply a deposit savings account, and a USC has to report the interest income on the US return. CRA refers to an RESP as a contract, not a trust.

    Anyone aware of any tax professional taking this position? It seems unusual.

  19. Yes! I think the very much maligned (by IBS) Max Reed of SKL tax accountants in Vancouver ( a reputable firm, by the way, ) takes a similar position. It is certainly the easiest way to deal with them and unlikely to draw undue attention. Not being an accountant, I couldn’t be sure. But for low risk ,small minnows it sure would simplify things and would probably be worth doing that way.

  20. Back before I got so pissed off that I self-relinquished and quit doing US tax returns at all, I came up with a way to do an end run around the question of whether or not the IRS considers a TFSA to be a trust. My TFSA was lumped in with a bunch of other accounts under one umbrella account number. I just reported the umbrella number, totaled the income for all accounts and reported one amount on Schedule B. Never heard anything pro or con from the IRS.

    With the exception of the RRSP/RRIF the IRS doesn’t have a clue what all these Canadian registered accounts are. Now, under FATCA, they aren’t even reportable accounts so there is no point in making it too complicated. This a perfect opportunity for some “selective compliance”. (And to slip a few sticks in the spokes of the FATCA wheel!)

  21. Pardon my basic knowledge but for Superannuation in Australia does this influence our US tax liability?

  23. Could I get confirmation on this please….. I have an appt. very soon to renounce in Halifax. Completed are tax returns from 2010-2013 and 6 yrs. FBARS. I can’t get 2014 return completed in time for my appointment. I read here somewhere that I have until June to complete and file the 2014 return? Is that correct? I don’t want to take any chances that by not filing properly, I’ll become a covered expat.
    Thanks so much for any help on this.

  24. @ macker
    Your renunciation appointment has nothing to do with your tax filing. They won’t even ask. You will have until June 15, 2016 to complete and file the 5 required returns (2014, 13, 12, 11 and 10) plus a “partial” 1040 for 2015 (year of your renunciation) and form 8854 to ensure you are not “covered”. BTW, if you want you can extend your 2014 1040 filing date until October 15, 2015 using form 4868. NOTE: The filing date for “overseas filers” (be sure to put that at the top of each 1040) is automatically June 15th but for FBARS/FinCEN114 it is always June 30th (no extensions for that).

  25. @ Macker,

    It’s okay. 2014 returns are not due until June 15th (automatic two month extension for persons outside the US).

    “When to File
    If you are a U.S. citizen or resident alien residing overseas, or are in the military on duty outside the U.S., on the regular due date of your return, you are allowed an automatic 2-month extension to file your return and pay any amount due without requesting an extension.”

    http://www.irs.gov/Individuals/International-Taxpayers/U.S.-Citizens-and-Resident-Aliens-Abroad

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