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
Thanks for the replies and advice everyone. I feel somewhat more confident that the sky is not falling.
You really only realize how crazy this situation is that many of us find ourselves in when you begin to begin to look into what the potential outcomes are of taking steps to become compliant.
Blood pressure feel free to return to normal!
Well now, some US “expats” want the USA to send “stimulus checks” intended to stimulate the US economy (no, it’s not about helping individuals) to foreign nations where those nations may tax those checks and anything left will be used to stimulate the economies of those nations, not the USA.
Oh yea, they are going to be bending over backwards to make that work.
Of course, they will shrug off that little light that went on, the one shining on the fact that this is EXACTLY what they expect of US citizens abroad, that they send money for which they get nothing in return, money that is taken out of the economy of the nation in which those US citizens live.
Excuse me, struggling to keep breakfast down.
But yes, they will now surely shine a light on their own epic hypocrisy when it comes to US tax policies, just expect some epic squirming and mental gymnastics to justify that hypocrisy, not end it.
I just saw something on the CNN site suggesting that the $1200 “stimulus check” would go to anyone with less that $75k Adjusted Gross Income on their 2018 or 2019 tax return. Isn’t the AGI the number you get *after* taking the FEIE? (That’s how the student loan repayment dodge supposedly works.) This would make it a nice little bonus for many well-paid non-residents.
Second question, related to the first: can you file a US tax return with a PO Box instead of a street address?
@Ron Henderson
I read on CNN today that those filing with an ITIN won’t qualify for a stimulus check. In the past that has also included people with valid SSNs who jointly filed a return with a spouse with an ITIN. I guess having an ITIN makes you a third-rate US person equivalent to an illegal immigrant.
https://edition.cnn.com/2020/03/26/perspectives/stimulus-checks-undocumented-taxpayers/index.html
Yep. The only “right” having an ITIN guarantees is the right to pay US taxes. I.e. a “US person for tax purposes” but nothing else.
Interesting. If so inclined, I could file a simple 2018 or 2019 return using my SSN, possibly with the address of a mail-forwarding service, and cheerfully score half the renunciation fee. And this might not be the last of the stimulus checks either.
@RH.
Inadvertently, I did exactly what you are suggesting about a decade ago and a $300 cheque from the US Treasury promptly appeared in my mailbox. I had just back filed 3 zero tax owing returns and the $300 refund was the unexpected result. It was only later that I found out it was some sort of Bush era stimulus measure.
The cheque was the only piece of paper in the envelope and is the one and only communication I have ever received from the IRS.
I say go ahead and stick it to the bastards. Let Trump stimulate the Canadian economy for a change. Fair is fair.
@Ron:
Second question, related to the first: can you file a US tax return with a PO Box instead of a street address?
Yes. We’ve done so for 29 years.
I found a mail-forwarding service in Canada for $20 plus $2 per letter. Regular street address, not a PO box. 1040 won’t need to show anything beyond an income number that’s under the FEIE.
Will wait for more details on the program but if it works, this sounds like a safe and fun way to both stick it to the man and cut the price of renunciation by half, if not more.
So Mr. Trump apparently wants his signature on all the stimulus checks.
https://slate.com/news-and-politics/2020/03/trump-wants-signature-coronavirus-stimulus-checks.html
This most definitely does not discourage my plan for one-time temporary compliance!
@RH
As much as I would like to stick to them, couldn’t they use that as further justification for nosing into one’s finances. IMHO, I would treat contact with the IRS the same way as with covid-19, give them both a very wide berth.
It’s a risk, but really they will have better things to do. If all you give them is a (possibly random) employment income number, no FBAR or FATCA reporting, no mention of RRSP or TFSA accounts, or other investments, then there’s not much to go on. Just a name, an SSN and the address of a mail-forwarding service.
@ RH. Re: Cheques signed by Trump.
What the hell is he thinking? That con-man moron has stiffed so many people and businesses for so many years that no bank in its right mind would consider cashing such a cheque. (Except maybe Deutsche Bank, lol.)
@ RR.
Sending zero balance owing returns and getting a Bush era stimulus cheque never caused me any problem, but that was a decade ago. Also SSA sends me a small benefit every month (direct-deposit so they know my account #) and that has caused no problems. I think they are too disorganized to mount an effective response to anything. Now if you were to file a return that contained a glaring error that might trip the IRS computers…..
@RH
I wish you luck. I really do. As for myself, even as a calculated risk, I’d rather not have any dealings with the devil . Much better for one’s health.
Reminds me of a suggestion offered up to accidentals and those born abroad to apply for a passport in lieu of renouncing in hopes of receiving a doc saying that further evidence is needed to prove citzenship and in which case that doc could be used to affirm non US ness. That process presents some risk , especially if one is gifted that sacred passport in turn.
But seriously ,I’d like to see someone try it and then write about the outcome.
I’ve drawn the line at digging up my spouse’s SSN from a long-rescinded green card so that I can recover the full amount of the renunciation fee (plus $50 left over) by filing jointly to receive $2400.
If I were to do this it would only be to fund renunciation, which is not necessary as long as we remain in Canada – but in our case this isn’t a given.
PS I can afford to renounce, but I love the idea of having the US government subsidize half the cost. Potentially more than half, if they need to cut additional cheques.
@ maz57
As for your Bush gift , if you filed returns ,voted, possessed their passport, at that time, then , you merited that gift ; otherwise , it was a freebee and may Allah shine His grace on you.
As for myelf , I ‘ll take nada from them nor will I give them anything. The simpler life is,the better.
I also receive receive SS coffee money ,no freebee ,however. I paid into it,I deserve it. Those were the days before the greenback green card.
@Robert.
Definitely on the same page. I filed returns in a panic, never voted, and only got a US passport under coercion when they tightened things up after 911. The day I became a Canadian citizen I went straight to the passport office and applied for a Canadian passport. I tossed that US passport in a basement box and it hasn’t been used since. I came across it recently while I was down there looking for something else. It has improved with age…all soggy and covered with slimy blue-green mold (sort of like the citizenship it represents)!
I consider the money to be equivalent to a jury compensation for pain and suffering.
@maz57
Certainly ,they have inflicted pain on many innocents and hopefully one day their reckoning will come.You did well. At least ,you got your ounce of flesh.Just to mention, I’ve never had the privilege of a US.passport . Didn’t have one when arrived nor had one when I left the US. Those were the good old days when you could cross the border without one.
911 changed a lot of things, as will this pandemic.
I wonder if anyone has considered the local taxes on this foreign passive income? Not to mention cost of cashing it and exchanging to local currency. Also a risk of raising questions with your bank regarding US person status. if indeed the local bank will cash it at all.
It would be a bitter victory to end up audited, identified as a US person and fined more than you eventually netted for failing to report it correctly locally.
That said, I wish people the very best in getting this utterly absurd payment caused by the utterly absurd US tax code. Idiocy begets idiocy, or play stupid games and win stupid prizes such as sending US economic stimulus money to foreign nations where the foreign tax man may well snaffle most of it.
I’m just waiting for this absurdity to make major news in the US and for the howls of outrage that the USA is supporting other nations residents through the corona crisis, money US residents should be getting.
@Mike
How can one be “audited, identified as a US person and fined” – and by whom?
One can easily deposit a US cheque into a Canadian bank account – they convert at that day’s exchange rate. Or one can open a US dollar account with a Canadian bank. It’s not a problem.
It is however true that an alert bank employee might question why a customer is depositing a US government cheque. So best to have a good excuse at the ready.
@Mike.
In Canada, I don’t think there would be any local taxes because Canada doesn’t have a gift tax. I found this on a Canadian tax website:
“Any resident of Canada who receives a gift or inheritance of any amount from almost any source (except from an employer) will not have to include this in their income.”
Arguably, these Trump cheques can be considered a gift because they certainly aren’t solicited or received in exchange for anything.
As for cashing a US dollar denominated cheque, I have done that many times with zero problems. I deposit the cheque into my US dollar account at a major Canadian bank and convert to Canadian dollars when the exchange rate is favorable. (I’ve sold quite a few US dollars lately as the Canadian dollar has tanked vs the US dollar.) There is normally a hold on the funds for several weeks while the cheque wends its way through the system, even cheques drawn on the US Treasury. I guess they’re worried they might bounce! No bank employee has ever raised an eyebrow. I imagine other countries will be different.
If it does make a stink in the US media, it will be the same media that has willfully ignored the damage that US CBT has been inflicting on expats for many years. Now that would be irony on an epic scale, wouldn’t it?
@Ron
How about: “This is a one time SS lump sum payment to correct an error. Lucky me, huh?”
I personally think that entering the US tax system for a mere $1200 cheque is as dangerous as playing with explosives, all for a short-term sum that will not make a significant difference to one’s life. Fake address or not, you’ll need a real social security number and real legal name. As someone else alluded to above, it’s like walking through a room full of coughing coronavirus sufferers to pick up your free donut.
We’ve been stupidly and honestly (yes, I did say stupidly) compliant for 30 years, so we qualify for the handout. But nevertheless I am nervous about receiving it. Anything that causes any US government official to glance at my file makes my hair stand on end because, as we all know, they can latch onto any little thing to trigger an audit and make one’s life living hell.