Tax Questions
Ask your questions about Tax and FBAR here.
This thread will be focused closely on tax questions and answers. If the conversation starts to ramble, those comments will be moved to another thread.
Related threads:
Tax Discussion Thread. Instead of focusing on specific questions and specific cases, broader ideas can be discussed on the Tax Discussion Thread.
Tax Compliance (or not) Discussion Thread
Sub-threads (more will be added as they occurs):
Previous Tax thread:
US Expat Tax and FBAR discussion thread, part 1
US Expat Tax and FBAR discussion thread, part 2
How does an accidental American get a TIN instead of an SSN? The IRS seems to be pushing for SSNs but the person does not want to enter the system, just have a TIN for the banks till he can get his CLN.
I’ve often mused that SS numbers follow a distinct pattern, and that so long as that pattern is followed, I can’t imagine that an overseas bank would know whether a person accidentally moved a couple of digits around and (oops!) provided a non-existent number. Or even if a non-existent number were deliberately provided.
The pattern, by the way, is XXX XX XXXX (three numbers, two numbers, then four numbers).
@Thomas
If you are a US citizen, I don’t believe that you are eligible for an ITIN. It’s an SSN or nothing.
If all you need is to make the bank shut up until you renounce, you can try stalling them by telling them that you are in the process of renouncing and/or have been unable to obtain an SSN due to the pandemic. Or you can invent a number, following the format above (if you wish to fake an ITIN, follow these instructions: “The ITIN is a nine-digit number that always begins with the number 9 and has a 7 or 8 in the fourth digit; for example, 9XX-7X-XXXX”). You may have trouble using a fake number if the bank wishes to see a card or other paperwork validating the SSN – we’ve heard occasional reports of this.
If you don’t want to enter the US tax system, don’t file any US tax returns. Obtaining an SSN won’t put you in the US system. More to the point, since the ITIN was devised to help undocumented immigrants pay US taxes (as well as others who don’t qualify for an SSN, such as NRA spouses who are included in joint filings) obtaining an ITIN instead of an SSN makes no difference from the standpoint of putting yourself on the IRS radar.
If you are subject to FATCA reporting, you are already “in the system” to a very limited extent. This is basically meaningless if you are planning to renounce. As I’m sure you’re aware, tax compliance is not necessary for renunciation.
PS to the above. In terms of FATCA reporting, you are “in the system” to the extent that somewhere in a dusty, unused database, the US will have your name and a few bits of data about your bank account. Currently the IRS does not appear to check these records to see if a person is filing tax returns. As long as you don’t file, you are not “in the system” in any meaningful way.
I’m not sure if this is the proper forum to ask this…apologies if not.
I’m a dual US/Canadian citizen living in BC and have filed FBARs for years so am on the IRS radar but have not filed US tax returns as my annual income is less than $10k. My 86-year old dad is Canadian only, living in BC and is planning to leave me a significant inheritance. Any ideas on the US tax implications? Any recommendations for cross-border tax advisors/lawyers in the Vancouver area? Any help is really appreciated.
You do not have to declare the inheritance in any way. You would only be expected to file a tax return if your income exceeded the threshold whatever that might be. Our best advice is to not start. Until you do you are well below the radar. It is doubtful that IRS uses FBARS to initiate anything against non residents. The only possible exceptions are for whales not minnows. FBARs appear to also be used when an individual is brought to their attention by other means.
Can you renounce your US citizenship. That would simplify your life. The consulates have been closed so there is a considerable backlog but they should start up again soon.
SKL tax in Vancouver are reputable and expert. We have used them. They are ‘by the book’ .
PS you might want to avoid going by your real name.
@Alison Poling
There shouldn’t be a problem as long as your father’s assets are not in the USA.
https://myrawealth.com/insights/do-i-have-to-pay-taxes-on-an-inheritance-from-a-foreign-relative
@Alison
As others have said, there are no direct US tax consequences of your Canadian inheritance. Whether you then want to continue with US tax compliance is another matter. A “significant” inheritance will almost certainly generate enough income to be reportable, and if it contains investments there may be an additional US reporting burden (Canadian mutual funds or ETFs can be a bother for anyone wishing to report them correctly).
Before or after you come into your inheritance, you need to decide between the three basic approaches:
1. attempt US tax compliance
2. renounce US citizenship (with or without tax compliance – it’s not necessary or required, but it would be much simpler to do this before you inherit)
3. ignore it and file nothing; stop FBARs while you’re at it
PS Were you aware that you are eligible for $3200 in stimulus benefit this year, if you file a 2020 US tax return? That nicely offsets the cost of renunciation, with enough left over for a weekend away.
Thanks so much for the great info/advice. I’ve been considering renouncing …I understood I had to have filed US tax returns for the previous 5 years to apply and the backlog for an appointment would likely push it to 6 or 7 years. Concerned I may become less “minnow,” more “whale” with the inheritance….I know, rough problem to have!
@Alison
Becoming a whale in the future is certainly a consideration for renouncing.
You do not need to be tax compliant to renounce . The embassy will not ask about tax compliance. In fact many here have filed nothing and have not heard a thing from the IRS post renunciation. The fact that you are below the threshold to file excuses you anyway. You could file an 8854 after renunciation if you would like to complete the tax process or not bother.
@ Allison,
You don’t need to be up-to-date on US taxes before renouncing. The CLN is issued and remains valid regardless of your tax status, as citizenship status isn’t dependent on tax status. Some people, who have no ties to the US, choose to renounce and not file anything with IRS.
As regards filing and renunciation:
If you’re under the minimum income limit for filing, you didn’t have an obligation to file for those years. So, it would be correct to certify on your 8854 that you complied with your obligation.
If you did have an obligation to file any or all of the five previous years, you have until June 15th of the year following renunciation to do so – when the 8854 is due — as you certify on the 8854 that you are in compliance.
I’ve posted some general information with links regarding the procedure and relation between DoS and IRS in the context of renunciation/relinquishment.
I strongly concur with the others who recommend renouncing before receiving income that would trigger US tax obligations.
@Alison
You are currently up to date on your taxes. As of today, you are fully compliant. You file FBARs and you are not required to file income tax returns because your income is below the reporting threshold. If you sign up to renounce prior to your inheritance, all you will need to do after is file Form 8854 and you’ve formally exited the US tax system without doing anything improperly or incorrectly.
If an advisor has told you that you need to be compliant then they are fibbing and you need a more honest advisor. There is absolutely no need to be compliant before or after renouncing.They are not related.
If you have thought about renouncing, it would be a good idea to join the queue now. The line hasn’t moved because of covid and is rather long.
https://ca.usembassy.gov/u-s-citizen-services/loss-of-nationality/
Moot point in this case, because @Alison is in fact fully US tax compliant at this at present, due to low income. If an advisor has told her that she needs to file 5 years’ US tax returns going forward before she’s allowed to renounce, that is beyond wrong – never speak to that advisor again.
Does anyone know an alternative phone number to 800-829-0922?
A friend of mine is trying to contact IRS. This is in regard to a matter I mentioned on April 11th – their final filing, done in March 2020, which seems to be in limbo.
They have problems getting through on this number, 800-829-0922. Very lengthy hold, and, although an 800 number, it’s not free from their overseas location.
I think 800-829-0922 is the general number for reply to certain notices. Does anyone know another number — besides this one or 267-941-1000 (the general foreign tax number) — where one might get through quicker?
@pacifica
I called Philadelphia direct in 2014
+1 267 941 1000
Called around 11am EST, got through straight away.
Agent was able to access my file and correct an incorrect tax debt attributed to my final individual filing . Tax had already been paid when spouse and I had filed jointly the year before.
If Lee hasn’t heard from them since April, I would assume they have checked his filing and not bothered to inform him the file is closed, like they do with most of us.
Thanks, Heidi. It appears that Lee’s file is still open (or not coded as closed in the IRS database). I should have mentioned in my comment that Lee wants to contact IRS because they got another notice from IRS recently, with the same wording as the April notice, containing, “ Please allow an additional 60 days for us to obtain the information we need and let you know what action we’re taking.”
@Pacifica777
I spent at least a year replying with a full explanation to their constant demands before I finally managed to speak to someone. She said my file was available and she could see that all my letters had been received but it appeared no one had had time to deal with it. She cleared it immediately.
I would imagine that is the case with Lee , that these are computer generated letters and he has been put on the back burner. I would imagine if there was any large discrepancy where they thought they could gouge any money, he would have heard by now.
I hope he has some success with that number.
Lee should not be bothered. He will have endless frustration trying to get through and all for naught.
Portland is right. Lee should forget about it and get on with his life. He is a free man and they have no jurisdiction over him, as long as he doesn’t have any US based assets or pensions.
Good news from my friend Lee!
I’d posted some questions on Lee’s behalf, regarding a problem with their post-renunciation IRS file.
Lee learned today that their IRS file has been closed! They’re feeling great – and asked me to pass on their thanks to Heidi and all of you who replied. Your replies were a big help 🙂