Category Archives: Issues regarding US persons abroad

At an NDP event last night I met a fellow whose son has written this.

Do not take this as an endorsement as much as potentially useful info for those who wish to “not remain hidden.”

American citizens abroad have always had an obligation to file U.S. income tax returns. In recent years the IRS has stepped up enforcement of this obligation against U.S. citizens who live in Canada. For the first time, many American citizens in Canada who have little or no connection with the U.S., other than their citizenship, have become aware of their U.S. tax responsibilities. Filing dual tax returns can appear daunting, but need not be difficult. Most people’s tax situations are not complicated. But instead of completing their returns themselves, they pay financial professionals hundreds of dollars.

This book provides an alternative solution. This plain language guidebook helps American citizens in Canada complete and file their U.S. tax returns.

Tax Guide for “US Persons” in Canada

Shadow Raider says

The enduring mystery of U.S. #offshore cash https://t.co/mbZjIUyJk1 – Fascinating explains why cash rich companies borrow to pay dividends

— U.S. Citizen Abroad (@USCitizenAbroad) May 9, 2013

This is a fascinating article. It explains why companies keep a higher percentage of their cash outside the United States and why they are likely to continue to do so. The U.S. is “cash strapped” and printing money. Yet, it won’t allow its corporations to bring its money back to invest  in the U.S. How can this not be bad policy?

Excerpt includes:

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This has just been posted on the Moodys Tax Advisors blog.

IRS says hundreds of thousands of US citizens are not reporting Canadian trusts

This week the IRS released statistics on the number of returns it received in 2010 from US citizens with foreign trusts. The results are startling (you may find the report by clicking here). In all of Canada only 324 returns were filed that report ownership in a non-US trust, which likely means hundreds of thousands of US citizens residing in Canada had not filed the appropriate returns.  This is important for two reasons: first, the penalties for not filing are draconian (but waivable); and second, last week the US Government Accountability Office (GAO) issued a report that encouraged IRS to pursue those taxpayers who file late returns using a technique known as “quiet disclosure.”

Background

The US State Department knows of more than 687,000 US citizens residing in Canada but most experts agree that the actual number is several times that number.  Many common Canadian retirement and savings vehicles are considered foreign trusts under US law. These vehicles include registered education savings plans (RESPs), tax free savings accounts (TFSAs), registered disability savings plans (RDSPs) and the like. Of course, typical Canadian trusts used for income splitting and succession are also considered foreign trusts and carry the same reporting obligations. Any US citizen who owns, contributes to, or receives a distribution from any of these trusts must report that interest on the appropriate form at the appropriate time or face severe penalties.

Penalties for Failure to File

Contributions to or distributions from any of these trusts triggers the obligation to file US tax form 3520 on or before the due date of the US income tax return (form 1040). The failure to file penalty for the form 3520 is a minimum of $10,000. In addition, an ownership interest in any of these vehicles triggers the obligation to file the US form 3520-A on or before March 15. The failure to file this form triggers a minimum $10,000 penalty. Both of these penalties can be waived if the taxpayer has “reasonable cause” for not having filed.

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Shadow Raider has brought this to our attention and asked that it be posted:

The Ways and Means and Senate Finance Committees have just launched the website TaxReform.gov and are asking for the general public to submit comments on tax reform again. This time,  they even said they want “horror stories”, and many Americans abroad and immigrants have such stories to tell.

The form on the website asks for a US address, but, as Shadow Raider points out, “I suppose you could use your voting address (or perhaps try to input a foreign address using one of the obsolete postal abbreviations at the end of the list)”.