Tax Questions Thread
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
@Bluesky
You are overthinking this. Put down anything – they won’t care. Or file nothing – they won’t care.
What Ron said. A major advantage of filing nothing is that it guarantees you won’t make any mistakes. Also you don’t have to sign any form “under penalty of perjury”. All US tax and reporting obligations cease the day you lose US citizenship.
The IRS knows this perfectly well and that’s why they don’t bother anyone who has renounced, regardless of what they’ve filed or not filed.
Has anyone whose renounced recieved inheritance from a US citizen living in the US or abroad, had any issues with the irs? Or is it the case once you renounce your free?
@bluesky
https://www.taxesforexpats.com/expat-tax-advice/Analyzing-Your-Tax-Situation-if-you-Expatriate.html
Read inheritance tax section
Inheritance is paid on the estate of the deceased in the US , you are free to inherit unhindered by any further ties to the IRS.
Furthermore, if the US citizen abroad has no US assets, it’s quite possible that nothing will be done to inform the IRS about the estate.
“Furthermore, if the US citizen abroad has no US assets, it’s quite possible that nothing will be done to inform the IRS about the estate.”
As long as the executor of the estate is able to avoid the ‘was the deceased an American citizen? ‘ question if asked.
I do wonder, who would ask such a question?
And what could they do if the answer was “yes” other than try to scare the executor?
Some solicitors/ lawyers are aware of citizen based taxation as banks are. I believe the question ‘is the deceased a tax resident anywhere else’? is a question that could be asked. Thats why it is important to make your executor aware of the situation.
Yes. I was asking that question somewhat rhetorically, I admit.
It’s very important that an executor either be completely ignorant of the deceased’s US person status (with no obvious indicia to then reveal it) or be prepared for the possible question, so that they can answer “no” and avoid the needless expense of bringing the estate into US tax compliance.
Most often , the executor, is someone acqainted with your history ,if so .
I’d be straight about the subject with the executor and inheritors and immediately eliminate the executor if there any doubts. Find someone with common sense and a logical mind and then threaten them with hell fire beyond the grave if they don’t listen to your wishes.
Found out about this website last week. Tons of info and very interesting. Question about FBAR.
I had never heard of this until this year on a Facebook page. I am a dual citizen ( Can and US ). Been living in the US for 16 years. I became a US citizen 10 years ago. We moved from Montreal to the US in 2004 my wife and I. She is American.
I have a REER in Quebec ( it’s like a 401K in the US worth 40K can ) and a pension plan with a company I worked for in the 80′s worth 60K can. Money is just sitting there. Not sure what to do with it yet. Now I find out I am suppose to report this (FBAR) when I file my taxes in the states… ( FYI, we have filed with the IRS 16 years in a row and always paid every penny we owe them ).
So I asked my H&R Block preparer if he knew of FBAR ( he obviously did ) and asked why he never mentioned this to me. He said he didn’t think to ask as he never thought I had these 2 accounts in Canada . Long story short, I asked him what he thought I should do and if I was suppose to report those 2 accounts to FBAR ( that is the only money I have in Canada apart from a bank account with approx $3000. I’m a kind of worried after reading a ton of things about FBAR in the last of couple months. My preparer has been doing some research and he doesn’t seem to be 100% sure what to do. I have no problem filing the FBAR, I have nothing to hide but I’m worried the IRS might ask why I am filling out the FBAR now and not the 15 previous years ?
Any suggestions ? Should I just file this FBAR thing in the future or is it better to call the IRS and explain the situation ?
Tks
Neely
The good news is, none of your Canadian accounts are likely being reported to the US under FATCA, so the IRS won’t know about them, on some day far into the future when it is able to deal with FATCA data. (First off, banks would need to know that you are a US citizen and resident, which they might not. Second, I don’t think any of those accounts would qualify for reporting under the terms of the IGA.)
Note that in addition to FBAR, you’d need to report some or all of those accounts on your 1040, on Schedule B I believe. If there was income earned in the REER the US might consider it taxable, so that’s potentially another thing to report. If H&R Block doesn’t know this, fire them.
Going forward, you could continue to ignore your Canadian accounts, though as a US resident that might be a bit risky. You would not be the first person who moved to the US with unreported assets in your home country. Alternatively there is the domestic version of the streamlined program, an amnesty for people in your situation to catch up on reporting. It may include mandatory penalties but worth looking into.
Calling the IRS might be an interesting experience these days.
@Neely
Suggest that you not rely on advice from a third party blog (including this one). Suggest that you seek advice from CPAs or other tax professionals who are NOT located in the United States and will recognize that this is a simple problem to solve and will be able to advise you. Also, should you move back to Canada you will find that Canada imposes similar rules with a Form T1135 requirement.
@Neely
1. Don’t bother phoning the IRS. Its virtually impossible to reach an actual person and even if you get lucky and do, that person will know nothing about foreign reporting. I’ve been there, done that, and its a waste of time.
2. Forget about H&R Block. They are useless for anything other than dead simple US returns. (If you spend an hour skimming this website you’ll know more foreign reporting on US returns than anybody at H&R Block.) Unless your financial affairs are extremely complicated, there are lots of relatively cheap software options available nowadays that will enable you to file correct and complete US returns, probably for less than you paid H&R to screw things up. Unlike H&R, at least the software is programed to ask you the right questions.
3. The simplest (and safest) thing to do is to file correctly (reporting your Canadian accounts) going forward. The IRS has no way of knowing how long those accounts have been in existence and isn’t likely to ask. Trying to fix past mistakes usually causes more problems than just doing it right going forward. The objective here is to avoid making yourself a nail sticking up which needs to be pounded down. You do that by filing returns that can be processed routinely by IRS computers without being kicked out for additional scrutiny by human eyes. After a year or two this will all be ancient history and nobody (yourself included) will care because you don’t have a tax problem, just a paperwork problem. (The US is, after all, known as “Form Nation”!)
Neely.. The REER is easy to deal with. As far as I can tell, a REER is the french name for the more familiar RRSP. Income earned inside a REER is tax exempt in both Canada and the US. Tho only tlme it is reportable is when money is taken out. This normally occurs after retirement but a REER can be collapsed anytime. All money taken out is taxable. REER s are supposed to be reported on fbars. However there is little reason to do so. The IRS will never know it exists. On the other hand, if you want to report it I would just do so going forward.
The pension plan is another kettle of fish. Defined benefit pension plans are almost impossible to value.
Defined contribution pension plans are easier to value. You would normally get an annual statement of its value.
The pension plan earnings are supposed to be included in your US income.
The pension plan itself is supposed to be reported on a fbar.
Calling the IRS would be a gigantic clusterf***. Don’t bother.
A lot depends on your level of anxiety. You could ignore both. You could file fbars for both going forward. You do not need to report the REER on your tax return unless you make a withdrawal. How to deal with any income within your pension plan is well above my pay grade. Do not reportit as a foreign trust- that would be asking for a world of trouble. There are reputable tax services other than H&R that specialize in theses problems. One that gets a lot of attention hear is IRS Medic. (15 minutes free, 30 minutes for 250$ according to their website) I have not used them. I’m neither an accountant nor lawyer. Just someone who spent 6 years getting my spouse sorted with the IRS.
Thank you all for the info. Still not sure what I will do with this FBAR BS. I’ll think about it.
Just as a FYI, I withdrew $10,000 out of my Quebec RRSP in 2010 to buy my son a car. 25% tax was automatically taken off by CAN CRA and I was sent a check worth $7500 which I deposited in my Wells Fargo account . Thought nothing of it. Never reported anything to IRS. Thought paying the 25% tax to CRA was all I needed to do. Call me dumb.
Neely
Not so dumb. Shows you that the IRS has no way to know. One rule of thumb of the Isaac Brock Soc. is “ don’t tell them anything they don’t already know “
@Neely -
(Disclaimer : I’m not a tax professional of any sort)
As you are a U.S. resident with non-trivial undisclosed accounts, seeking advice from a professional familiar with the Canadian and US tax systems might indeed be a good idea.
Phil Hodgen’s blog also has some good information that is worth reading. For example he has a long discussion on Canadian RRSPs and links to some information there including official IRS procedures for dealing with Canadian retirement accounts, and also a post about RRSPs not declared on FBAR:
https://hodgen.com/the-ultimate-rrsp-and-the-irs-essay/
(note the “delinquent FBAR sumission procedure” link in the next one)
https://hodgen.com/rrsps-never-reported-on-fbars/
Note also you should probably have been filing form 8938 with your returns along with FBAR as you seem to have more than $50,000 in foreign financial accounts. If you haven’t that’s a separate issue that will need to be dealt with.
Regarding Phil Hodgens,,I wonder if he has ever been asked:
Is it a crime in Canada to willfully not fill a a US tax return ?
@RR
Ask him. He does answer e-mails.
It is not a crime in Canada. you doing need to ask Phil Hodgens.
A sign of a good salesman is the ability to sell something something that one doesn’t really need.
Thank you all for your answers. Sure didn’t need this extra stress…
Neely