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
@ Heidi
For some reason, I never looked at the form number. Based on what you wrote , I can take a sigh of relief, I think . If the SSA takes that stance ,then the IRS should also.
John, Jenny, Jeff and Keith discuss how US COVID relief might affect Americans abroad and the fight against CBT.
https://www.podbean.com/media/share/pb-n3psh-d7fa8f#.XoYCEyyql_8.twitter
I still get a 1099 even though I notified SSA a few years back that I had lost my US citizenship. The IRS has shown absolutely no interest and there is no withholding, but that may be because according to the Canada/US treaty all government benefits are taxed only by the country of actual residence. (I.e. residence based taxation for government benefits. If that’s OK, why can’t they do the same with the rest?)
@Maz57
You cln’d – I think-and still receive the 1099 , interesting. Another question can that 1042s be used as proof of non US citzenship ,if ever needed.
Also, I wonder what would have happened if ever I would have wandered into a US tax attorney’s office?
Many thanks for all the responses.
United States: U.S. Territories And Freely Associated States Included In COVID-19 Economic Stimulus
https://www.mondaq.com/unitedstates/Food-Drugs-Healthcare-Life-Sciences/910090/US-Territories-And-Freely-Associated-States-Included-In-COVID-19-Economic-Stimulus
So the podcast was interesting. Apparently I’m not the only one out there thinking that now is not a bad time to start filing US tax returns.
A couple of points in response:
1. I would never recommend *staying* in the US tax system for $1200. File a “simplified” 1040 for 2019, cash your cheque or (hopefully) cheques, and go dark. Don’t continue filing once the money tap turns off, or start paying US taxes, or otherwise attempt to be fully and properly compliant. That would be dumb. Is there a risk to doing this? I don’t know. The IRS doesn’t seem to notice or care when someone stops filing, so probably not.
2. Is it immoral to do such a thing? Philosophers will debate this for years to come. Is it immoral to kick a bully when it’s down? I neither know nor care.
3. I would be interested to know the panelist’s positions on using the stimulus cheque to finance renunciation. One would simply be handing the cash back to the US government, using it’s own money to pay for an extortionately overpriced service. Is that immoral? I think not. Is it risky? Probably not.
4. Finally, there was a question about whether such freeloading would help or hurt the cause of ending CBT. I think it might help the cause to get on some Fox News comment boards and talk up all the free money we foreign people can suddenly get just by having a parent from the US. But maybe wait until we’ve all cashed our cheques first…
From Politico:
Stay tuned. One might not even need to file a proper 1040 and 2555, if the simplified return works for non-residents.
Time to open a throwaway account, RH. Or maybe you already have one with $10 in it that you haven’t used for years. Adds a totally different meaning to the term tax “return”, lol.
Myself, I’ve already got my strategy to avoid paying $2350 so I’m not going to risk poking the bear.
I don’t know if they’d do direct deposit to a Canadian account, even a US dollar account. I suppose one could try to set up a US burner account, somehow. You’d still want to file as a non-resident to keep the taxes owing to zero after taking the FEIE.
Actually, I would be very surprised if they didn’t offer the most basic of options, a cheque in the mail, on that abbreviated return. There are still many Americans that are living so hand-to-mouth that they don’t have a bank account. Probably the safest way to go.
SSA direct-deposits into my US dollar account although they will also convert to Canadian dollars at the prevailing rate and pay into a garden-variety account at a Canadian bank. I opted to receive in US dollars and do my own conversion when the rate is most favorable. Plus having a few US dollars on hand is useful for trips and x-border shopping. Sending SS benefits “overseas” is commonly done and certainly not an eyebrow raiser. The IRS may be different but I’m betting they will be more than happy to send you a cheque if you “ask” for it.
I think the cheque option will always be available. The issue for those who actually need the money – for rent rather than renunciation – is that it could take months to mail out 100+ million of the things.
Anyway, here’s the current plan:
Wait to confirm that non-residents qualify for the stimulus payout, and if this new simplified return will work as well as a regular 1040 + 2555 combo.
If the money is available, and particularly if it has increased beyond the initial $1200, file the minimum necessary to obtain it (a sub-FEIE income number and nothing else – no FBAR, no declaration of RRSP or TFSA accounts, etc.). Use a mail forwarding service rather than a real address. If direct deposit works in Canada, use a burner account, otherwise wait for the mail.
Spend the money on renunciation. As I’ve said, this is not really necessary for a regular non-compliant dual citizen in Canada, but personally I have two good arguments in favour of a picking up a free CLN: nervous parents and a possible future move to Europe, where the US birthplace definitely presents a problem. No reason to do the full five years’ FBAR and returns plus 8854 nonsense after renouncing either.
@maz57
My husband has a US$ account here in which to deposit his SS cheques (they’re paper not digital). I wouldn’t want him to give the IRS or SSA or any agency in the USSA the number of that account (agencies can communicate with each other down there — think they call it the rat line). This bank knows he has a CLN so they don’t even blink when he brings a US cheque in to deposit. I don’t think they’d blink even if he hadn’t showed them a CLN. Anyway, that’s just me. I don’t like direct deposit and most definitely don’t like direct payment.
Off topic opining (disregard if you wish) …
I’m disgusted and disturbed with all the cashless society talk these days and the mention recently of “digital wallets” seriously disrupts my comfort zone. I carry no credit or debit cards, remain smart phoneless and pray they don’t force those or any other form of electronic tracking on me because I find that creepy, even sinister. For many years (long, long ago) I worked in the medical field and that put me on call 24 hours a day, 5 days a week. I had a “beeper” which I called my leash to the hospital but I guess it was better than having to phone in every half hour when trying to be out and about. Unlike a smart phone, the beeper didn’t reveal my location. It would beep (had no voice ability) and then I’d dash off to a phone to let them know I was on my way (they had payphones back then and stores would let you use their phones when needed).
@EmBee
Good luck with that. Every business round here that’s still open is completely cashless now.
Expect some pretty stiff digital surveillance if you wish to travel anywhere in the coming years.
The SSA and the IRS can’t possibly talk to each other; they are engaged in diametrically opposed businesses. One does nothing but send money out and the other does nothing but rake it in.
Except now that the IRS has been tasked with a bit of sending business as well, maybe the two will get in a big fight over who is better at it. My bet’s on the SSA; the IRS is new at the game and will probably screw it up.
@EmBee. And I thought I was backwards because I still use a Blackberry so they don’t track me. You’ve got me beat by a country mile, lol.
@ Ron
Thanks for the good luck. I know I’ll need it but this town ain’t cashless yet and we don’t travel anyway (scenery is spectacular here and if/when we can resume finishing our homebuilt house we’ll be even more content here … we were so close when the lockdown happened). When possible, like when dropping a donation off to the food bank, I put cash/cheque in a little plastic bag to hand to them … just in case they’re super concerned about handling cash which, by the way, is actually cleaner than a credit or debit card. That’s because in Canada the bills are made of a polymer and can literally be laundered.
@ maz57
Interesting … didn’t know a Blackberry phone is untrackable … good! I once had my cousin’s cell phone (she’d left it behind when passing through going back to the coast) but I didn’t know how to work it so I could call her back before she got too many miles away. Thankfully a neighbour knew how.
In a worst-case but not unlikely outcome, with no effective vaccine, you may be facing permanent lockdown at home until you are willing to carry a device with (hopefully anonymized) GPS tracking tied to medical status. Being a voluntary Luddite might come at a very high price.
My husband’s final US tax filing was for the year 2013. Can we now destroy all the 1040s we have piled up for many years before that? What’s the point in keeping them when the only document of importance to us is his CLN?
EmBee–even if the IRS decided to audit anything that far back, would you even bother to reply to their letter?
https://www.americanbar.org/groups/business_law/publications/blt/2017/08/06_wood/
SOL is 3 yrs but there are other provisos
As bird person says, why would you bother?
Yes, my thought was, why keep anything at all? Should’ve gone into the recycling bin the day after renouncing.
@ BP, Heidi & Ron
Thanks, guys. That’s what I was thinking too but I’ve always saved our record keeping stuff so it’s good to get some validation that it’s okay to let it all go. I hope our little shredder is up to the task. When we closed our photo lab business many years ago I had several boxes of discarded prints which I felt, for our customers’ sake, should not be tossed into the trash. We had to rent a heavy-duty shredder because I soon found out they would not burn down properly in our burning barrel which BTW was not in the town (our home was on an acreage many miles away).
Maybe save a few for a future (post CBT) museum display? As in:
“Once upon a time the US actually taxed US citizens that lived in other countries. This barbaric practice was finally ended in 2xxx when the US switched to residence based taxation like every other country in the world. Here you see several perfectly preserved actual expat tax returns filed in 2xxx. Incredibly, people filed paper returns by mailing them to the IRS in that bygone era.”
(Kindly donated to our museum by the heirs of xxx xxxx after they were discovered in a cardboard box stored in the attic.)
We can hope, anyway. On the other hand, recycling them and turning them into face masks is probably more useful and will at least help with the current situation.
@ maz57
The one tax form I wished I’d kept for a “museum display” was a very old one of my father’s that I found after he passed away. It was 1 small page (about 4″x 7′) and had less than 10 lines (as best as I can remember). I think it was from sometime in the 1940s. Unfortunately I just chuckled over it and chucked it. We can no longer recycle here but if we could I’d only want our shreddies to go to making TP.
They aren’t exactly making this free-money thing difficult:
https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here
You basically need an SSN, one piece of ID and a mailing address. For direct deposit, super easy to set up a Transferwise multi-currency account with a US routing number.
If I filed head of household and claimed my 24 year old son, will he receive a check still for 1200 or will I get the extra 500?