Tax Questions
Ask your questions about Tax and FBAR here.
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Tax Compliance (or not) Discussion Thread
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US Expat Tax and FBAR discussion thread, part 1
US Expat Tax and FBAR discussion thread, part 2
There I go transposing digits again…
It was suggested I should post some questions on here to see if anyone can help me? I renounced US citizenship early last year.. British citizen and renounced US citizenship. I file a 1040 and a 1040NR and an 8854 form. I had a small amount of US income from 1st January 2019 last year to date I renounced later that month. So presumably I complete a normal 1040 form for that plus any non US income on it and then reading , I also complete a 1040 NR form for any US Income after the date of renunciation which was zero in my case? I write dual status statement return on the top of the 1040 and dual status return the 1040NR?
On the 1040 NR form it asks various questions after Page 1 on page 2 such as? “your occupation in the United states”? Does that refer to when you were living and working in the US as US citizen or now you rare not and what does it mean? Another question on Line 55 on the 1040NR it says Self Employment tax attach schedule SE 1040 or 1040NR) If I had self employment income from Jan 1st to the date of renunciation so I put that on form 1040 for the part of year I was a US citizen or on this 1040NR form? I did not have any self employed US income after I renounced so the 1040NR is a confusing form. it goes on for 5 pages and page 4 even asks tax on income not effectively connected with a US trade or business? Do I put all worldwide income including any US income on the 1040 to the date of renouncing and then on the 1040NR just any US Income (which was none) so zero and if there is self employment tax form the st January to the date of renunciation only does that go on the 1040 or the 1040NR?
Kabby, To the best of my ability;
Put none or not applicable for US occupation.
You had no US source income after you renounced. Therefore, you report zero income of any kind on the 1040 NR.
As Maz57 said, it will be inevitable that there will be errors if you do it yourself. Hopefully, the sums involved will be trivial or immaterial so they won’t bother you..He is correct when he says the only people who get in trouble are those who attempt to comply.
When you filed the previous 5 years, did you ever owe any money to the US?
If not, and you don’t bother filing for 2019, I bet they never contact you. It’s not worth their time. They have no resources.
We never filed for the final year. Haven’t heard a word. That was 3 years ago..
Hi Portland. in answers to your questions. In my past filings i only owed social security tax on self employed earnings (small amount) so the year i renounced last year presumably i put that small income on the ordinary 1040. Now do I also put that income on the 1040NR even though there was none after my renunciation date.? In other words looking at the 1040 for 2019 (seems to have changed again from 2018) do I carry over the self employment tax from line 15 of the 1040 to say line 55 of the 2019 1040NR or does that not show on that as it shows on the 1040 and anyway is after the date i renounced and there was no other US sourced income after the date i renounced? At the bottom of the 1040NR li71 it says payments.There is payment of self employment tax on the 1040 but do I also put it down on the 1040NR also or do I just put zero everywhere on the 1040NR as there was no US sourced income after i renounced?
As far as I know, you write ‘dual status statement’ at the top of the 1040 and don’t sign it
You carry the amounts on the 1040 over to the 1040NR. I would write in ‘ from 1040’ for each item you carry over. You write ‘ dual status return’ at the top of the 1040 NR and sign it. It goes to Austin along with a copy of your 8854. A second copy of the 8854 goes to Philadelphia.
I bet you never hear from them again.
I have not posted here in a long time but I thought I should share the following experience regarding the CLN (Certificate of Loss of Nationality).
My wife renounced her US citizenship on October 17, 2018 (the day marijuana became legal in Canada).
She received her CLN in the mail in December 2018.
She filed her last 1040/1040NR about one year ago.
Case closed.
We have not herd from the IRS since then.
Regarding the CLN:
Several years ago my wife had opened a discount brokerage account with one of the major banks here in Canada. At the time she answered truthfully to all questions on the application, including the questions about US citizenship. A few weeks ago, she opened a Tax Free Savings Account within that same umbrella account. She had to fill the same forms and answer the same questions. When asked whether she was a US citizen or a US tax person, she answered “No”. Well guess what? A couple of weeks later the brokerage house called and said “There is a problem. When you first opened the account (years ago) you said you were a US citizen and now you say you are not a US citizen. Which one is the correct answer? So she explained to them that she had renounced. They asked for proof. She sent a copy of her CLN. Case closed.
Keep that CLN in a safe place.
Keep a photocopy of it in another safe place.
Keep a pdf copy of it in a safe place.
And never tell a bank that you are a US citizen, whether that’s true or not true.
Not only is it advisable to not tell them you are a US citizen, for many Canadian institutions its now absolutely necessary to lie because otherwise the online account opening process will be stopped dead in its tracks if you answer yes to the US question. (“…we’re sorry, but we are unable to open accounts for US customers at this time….”)
All but one of the several institutions I personally deal with (mostly online) have implemented a strict no US customer policy. In some cases their policy pre-dates FATCA, in other cases it seems to be a result of FATCA.
And yes, a CLN is now a far more valuable document than a US passport.
https://www.cibcmellon.com/en/newsroom/publications/straight-talk/2020/st20200114-updated-cra-guidance-fatca-crs.jsp
This notice might be of interest to the folks who think continueing to lie will last forever. As thr IRS cintinues to squeeze, I wonder ,not if but when ,our canadian banks and weak canadian government will keel in .
CIBC has so intergrated fatca with the crs that they now call the IRS , the INTERNATIONAL revenue service.
It should be clearly emphasized the distinction between fatca and crs at the lawsuit.,otherwise fatca will be considered as only the US version of crs and fatca’s harm as simply necssary side effects.
Yea, they really do refer to the IRS as the International revenue service. Good grief.
Having read the CIBC Mellon document, I see no clear evidence of increased squeezing. There are three separate points in the article:
1. Fines of $2500 per account opened without self-certification. I read this as being CRA fines against banks that open accounts without requiring self-certification for FATCA or CRS. (Not fines to be imposed on customers who refuse to self-certify.) However, as all major banks have been requiring self-certification for up to five years now, I’m not sure what problem this rule is actually solving. There is no suggestion in this text that self-certification needs to be tightened up by demanding, for example, that anyone opening a new account produce ID showing place of birth. In other words, it’s still easy to lie. Nothing has changed on that front.
2. IRS notification of non-compliant institutions. It’s not obvious from the statement what if any changes were made to the rules, but in general the trend is towards less squeezing, as the IRS slowly becomes aware of harm to lower-income US persons abroad. Hence the extension, yet again, of the requirement to gather TINs, and complaints about account closures. Furthermore I don’t think we have any recorded instance yet of a financial institution being deemed non-compliant.
3. The final paragraph is a bit of a mystery. “Due to the changes to the CRA documentation requirements, CIBC Mellon will open a new account for an account holder only when it receives all the required tax documentation for the account…” I’m not sure what that means, nor what it has to do with FATCA rules specifically. I can only assume that this is relevant for institutional investors and high net-worth individuals, who are CIBC Mellon’s customers.
PS All that being said, I think it would be useful to try and obtain a copy of the revised draft of the FATCA and CRS guidance, or to be watchful for any changes to the guidance from CRA. A close reading of the current guidance makes it quite clear that one can easily choose not to disclose US person status, with little fear of negative consequences. Were something to change, it might be necessary to readjust strategy, both on a personal level (and possibly with respect to the lawsuit).
For Canadian citizens living in Canada, the absolute worst case scenario would be if your bank somehow found out you were a US citizen and forwarded your account information to the CRA, which then passed it on to the IRS.
If that happened to me, it my response would fall somewhere between ho-hum and so what. (Except for being incensed, of course.) I haven’t heard any reports of the IRS even sending letters to Canadians discovered via FATCA reporting. I’m sure the IRS is well aware that those who want to comply already do so and those who don’t want to comply can’t be compelled to. The damage being done in Europe isn’t due to the IRS; its their overzealous banks that are the culprit.
Unless you live in the US or own significant US assets, what IRS really stands for is Impotent Revenue Service.
“The damage being done in Europe isn’t due to the IRS; its their overzealous banks that are the culprit”
100% agree with that, Barclays, HSBC, LLoyds, UBS, Credit Suisse, all those that have commercial dealings with vast amount of USD’s. We are the sacrificial lambs so those with the dirtiest hands don’t get slapped with fines.
@maz57
And if indeed that worst-case scenario came to pass, you could then close those accounts, take your money, walk down the street to a different bank and open new accounts without disclosing your US person status. Problem solved. The IRS would receive one year’s data at most.
@foma
I find it amusing that both the IRS and European governments are now complaining about banks closing or refusing to open accounts for US persons, and the IRS is quietly revising deadlines for collection of TINs.
“The damage being done in Europe isn’t due to the IRS; its their overzealous banks that are the culprit.”
Europe is many nations, not one. The damage is being done where local law requires banks to record the information on national ID which includes place of birth. These banks cannot ask if a person is tax resident elsewhere and take the answer at face value.
“100% agree with that, Barclays, HSBC, LLoyds”
Not one if a problem in the UK for UK residents.
“I find it amusing that both the IRS and European governments are now complaining about banks closing or refusing to open accounts for US persons, and the IRS is quietly revising deadlines for collection of TINs.”
I fail to see what is so funny. The revising of a deadline makes this not an issue any more?
@Mike:
“Not one if a problem in the UK for UK residents.”
Having been a UK resident and having a UK bank account, I have been told catagorically that my accounts will be shut down if I do not advise them of my citizenship status and if I have a TIN or SS#, same for my local bank (Credit Suisse) now that I live in Switzerland, that they will close my account unless I provide them with a TIN/SS#, as the passport clearly states POB, cannot really say not a US citizen. Shutting the account is not an option, as the mortgage is tied to them.
UK banks do not ask to see passports, back to what I was stating about bank in certain countries needing ID that shows place of birth.
I have two UK accounts, one recently opened, neither has asked any questions about citizenship only asking if I am tax resident in another nation.
Which UK bank is demanding your citizenship status, and what does that mean? Do they have reason to think you are an American?
Barclays Bank, they have been sending letters for the last 9 years, I just ignore them. Then end of 2019 they sent a letter saying they believe I am a US citizen and I need to send proof to the contrary, not really bothered as been draining that account to below $10k, so they can take a flying F***!
Cannot do much about our Swiss account as we are stuck with them through the mortgage.
I use the word ‘I’. but really it’s my wife. Just a bit of insight, I personally have another bank account and on that I had to sign to confirm that I am not related to anyone of US status or have a US phone, address or interest in the US, now that is invasive!! Of course I said no!
@Mike
It’s funny in an ironic way. The US created this mess, and now some IRS official moans about account closures? European governments signed the IGA, and now they are unhappy with the consequences for dual citizens?
What the repeated extension of the TIN deadline tells me is that ultimately the IRS doesn’t care about non-residents outside the US tax system. They were never a target, but in some countries have been collateral damage, thanks to overwrought banks.
Switzerland is a special case, but otherwise the extreme variation in treatment of identified US persons makes no sense to me. Why were Canadian banks making no effort to collect missing SSNs last year, while the Dutch and French were so worked up about it? The IGA is basically the same for every country.
I’ve been with NatWest since 1986. They’ve never contacted me about my citizenship status, so I wonder if they never bothered to record it back when I opened the account (as a US citizen). On the other hand, the company I use for my ISA did have me fill out the appropriate form, and confirmed in writing that the US marker was removed after I sent them my CLN.
Formerpatriot, Pacifica. For some reason cant reply to your messages and being rejected as undeliverable & spam?
Kabby
Hi Kabby,
I just wrote to you using my other e-mail account.
Hello. I just want to confirm I am doing the right thing.I am filing form 8854 expatriation statement (I renounced US Citizenship in 2019 last year) I am confused about Page 1, Part II section A, question 1. It asks enter your US Income tax liability for the 5 years ending before the date of expatriation. So in my case 2018 backwards 5 years. I paid zero Income tax but paid self employment tax other taxes) so made a payment of taxes. Do I put zero or the amount of TOTAL tax I paid on that line?
Kabby. Put zero for each year. They ask for income tax you paid. Don’t get worried. After you file, you will not hear a word.