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
How does an accidental American get a TIN instead of an SSN? The IRS seems to be pushing for SSNs but the person does not want to enter the system, just have a TIN for the banks till he can get his CLN.
I’ve often mused that SS numbers follow a distinct pattern, and that so long as that pattern is followed, I can’t imagine that an overseas bank would know whether a person accidentally moved a couple of digits around and (oops!) provided a non-existent number. Or even if a non-existent number were deliberately provided.
The pattern, by the way, is XXX XX XXXX (three numbers, two numbers, then four numbers).
@Thomas
If you are a US citizen, I don’t believe that you are eligible for an ITIN. It’s an SSN or nothing.
If all you need is to make the bank shut up until you renounce, you can try stalling them by telling them that you are in the process of renouncing and/or have been unable to obtain an SSN due to the pandemic. Or you can invent a number, following the format above (if you wish to fake an ITIN, follow these instructions: “The ITIN is a nine-digit number that always begins with the number 9 and has a 7 or 8 in the fourth digit; for example, 9XX-7X-XXXX”). You may have trouble using a fake number if the bank wishes to see a card or other paperwork validating the SSN – we’ve heard occasional reports of this.
If you don’t want to enter the US tax system, don’t file any US tax returns. Obtaining an SSN won’t put you in the US system. More to the point, since the ITIN was devised to help undocumented immigrants pay US taxes (as well as others who don’t qualify for an SSN, such as NRA spouses who are included in joint filings) obtaining an ITIN instead of an SSN makes no difference from the standpoint of putting yourself on the IRS radar.
If you are subject to FATCA reporting, you are already “in the system” to a very limited extent. This is basically meaningless if you are planning to renounce. As I’m sure you’re aware, tax compliance is not necessary for renunciation.
PS to the above. In terms of FATCA reporting, you are “in the system” to the extent that somewhere in a dusty, unused database, the US will have your name and a few bits of data about your bank account. Currently the IRS does not appear to check these records to see if a person is filing tax returns. As long as you don’t file, you are not “in the system” in any meaningful way.
I’m not sure if this is the proper forum to ask this…apologies if not.
I’m a dual US/Canadian citizen living in BC and have filed FBARs for years so am on the IRS radar but have not filed US tax returns as my annual income is less than $10k. My 86-year old dad is Canadian only, living in BC and is planning to leave me a significant inheritance. Any ideas on the US tax implications? Any recommendations for cross-border tax advisors/lawyers in the Vancouver area? Any help is really appreciated.
You do not have to declare the inheritance in any way. You would only be expected to file a tax return if your income exceeded the threshold whatever that might be. Our best advice is to not start. Until you do you are well below the radar. It is doubtful that IRS uses FBARS to initiate anything against non residents. The only possible exceptions are for whales not minnows. FBARs appear to also be used when an individual is brought to their attention by other means.
Can you renounce your US citizenship. That would simplify your life. The consulates have been closed so there is a considerable backlog but they should start up again soon.
SKL tax in Vancouver are reputable and expert. We have used them. They are ‘by the book’ .
PS you might want to avoid going by your real name.
@Alison Poling
There shouldn’t be a problem as long as your father’s assets are not in the USA.
https://myrawealth.com/insights/do-i-have-to-pay-taxes-on-an-inheritance-from-a-foreign-relative
@Alison
As others have said, there are no direct US tax consequences of your Canadian inheritance. Whether you then want to continue with US tax compliance is another matter. A “significant” inheritance will almost certainly generate enough income to be reportable, and if it contains investments there may be an additional US reporting burden (Canadian mutual funds or ETFs can be a bother for anyone wishing to report them correctly).
Before or after you come into your inheritance, you need to decide between the three basic approaches:
1. attempt US tax compliance
2. renounce US citizenship (with or without tax compliance – it’s not necessary or required, but it would be much simpler to do this before you inherit)
3. ignore it and file nothing; stop FBARs while you’re at it
PS Were you aware that you are eligible for $3200 in stimulus benefit this year, if you file a 2020 US tax return? That nicely offsets the cost of renunciation, with enough left over for a weekend away.
Thanks so much for the great info/advice. I’ve been considering renouncing …I understood I had to have filed US tax returns for the previous 5 years to apply and the backlog for an appointment would likely push it to 6 or 7 years. Concerned I may become less “minnow,” more “whale” with the inheritance….I know, rough problem to have!
@Alison
Becoming a whale in the future is certainly a consideration for renouncing.
You do not need to be tax compliant to renounce . The embassy will not ask about tax compliance. In fact many here have filed nothing and have not heard a thing from the IRS post renunciation. The fact that you are below the threshold to file excuses you anyway. You could file an 8854 after renunciation if you would like to complete the tax process or not bother.
@ Allison,
You don’t need to be up-to-date on US taxes before renouncing. The CLN is issued and remains valid regardless of your tax status, as citizenship status isn’t dependent on tax status. Some people, who have no ties to the US, choose to renounce and not file anything with IRS.
As regards filing and renunciation:
If you’re under the minimum income limit for filing, you didn’t have an obligation to file for those years. So, it would be correct to certify on your 8854 that you complied with your obligation.
If you did have an obligation to file any or all of the five previous years, you have until June 15th of the year following renunciation to do so – when the 8854 is due — as you certify on the 8854 that you are in compliance.
I’ve posted some general information with links regarding the procedure and relation between DoS and IRS in the context of renunciation/relinquishment.
I strongly concur with the others who recommend renouncing before receiving income that would trigger US tax obligations.
@Alison
You are currently up to date on your taxes. As of today, you are fully compliant. You file FBARs and you are not required to file income tax returns because your income is below the reporting threshold. If you sign up to renounce prior to your inheritance, all you will need to do after is file Form 8854 and you’ve formally exited the US tax system without doing anything improperly or incorrectly.
If an advisor has told you that you need to be compliant then they are fibbing and you need a more honest advisor. There is absolutely no need to be compliant before or after renouncing.They are not related.
If you have thought about renouncing, it would be a good idea to join the queue now. The line hasn’t moved because of covid and is rather long.
https://ca.usembassy.gov/u-s-citizen-services/loss-of-nationality/
Moot point in this case, because @Alison is in fact fully US tax compliant at this at present, due to low income. If an advisor has told her that she needs to file 5 years’ US tax returns going forward before she’s allowed to renounce, that is beyond wrong – never speak to that advisor again.
Does anyone know an alternative phone number to 800-829-0922?
A friend of mine is trying to contact IRS. This is in regard to a matter I mentioned on April 11th – their final filing, done in March 2020, which seems to be in limbo.
They have problems getting through on this number, 800-829-0922. Very lengthy hold, and, although an 800 number, it’s not free from their overseas location.
I think 800-829-0922 is the general number for reply to certain notices. Does anyone know another number — besides this one or 267-941-1000 (the general foreign tax number) — where one might get through quicker?
@pacifica
I called Philadelphia direct in 2014
+1 267 941 1000
Called around 11am EST, got through straight away.
Agent was able to access my file and correct an incorrect tax debt attributed to my final individual filing . Tax had already been paid when spouse and I had filed jointly the year before.
If Lee hasn’t heard from them since April, I would assume they have checked his filing and not bothered to inform him the file is closed, like they do with most of us.
Thanks, Heidi. It appears that Lee’s file is still open (or not coded as closed in the IRS database). I should have mentioned in my comment that Lee wants to contact IRS because they got another notice from IRS recently, with the same wording as the April notice, containing, “ Please allow an additional 60 days for us to obtain the information we need and let you know what action we’re taking.”
@Pacifica777
I spent at least a year replying with a full explanation to their constant demands before I finally managed to speak to someone. She said my file was available and she could see that all my letters had been received but it appeared no one had had time to deal with it. She cleared it immediately.
I would imagine that is the case with Lee , that these are computer generated letters and he has been put on the back burner. I would imagine if there was any large discrepancy where they thought they could gouge any money, he would have heard by now.
I hope he has some success with that number.
Lee should not be bothered. He will have endless frustration trying to get through and all for naught.
Portland is right. Lee should forget about it and get on with his life. He is a free man and they have no jurisdiction over him, as long as he doesn’t have any US based assets or pensions.
Good news from my friend Lee!
I’d posted some questions on Lee’s behalf, regarding a problem with their post-renunciation IRS file.
Lee learned today that their IRS file has been closed! They’re feeling great – and asked me to pass on their thanks to Heidi and all of you who replied. Your replies were a big help 🙂
Copied from another thread (the “move comment” function isn’t working):
JadeUK writes:
Hi, hoping for some advice! I have done my taxes the past several years because I believed (I know wrongly) I had to do so prior to renouncing. I have never done an FBAR as I thought I didn’t have to, but have since found out I’m a signatory on a bank account for work, I didn’t realise I was, I don’t even remember signing anything regarding this. I guess I have been for over a decade and never used it.
I am on the waiting list to renounce in London (a big trip for me and still no indication when it might be) and just incredibly anxious that I am even in the system because of all this. I don’t want trouble for me, my family, or for my work. I haven’t lived in the U.S. since I was 20, been away much longer than I was there.
I have not mentioned this to the US tax preparer. They are now telling me I should “revoke” FEIE on my next tax form and get a refund or something for child tax credits. I don’t want a refund or anything that will cause me more trouble, I just want this over with and wish I wasn’t even in the system.
I only work part time and make the equivalent of $19,000 a year. I feel ill worrying that they might come after me and ruin me. I couldn’t pay one of their massive fines, let alone many.
Any advice what to do would be gratefully appreciated. Should I just keep filing as I was, and not mention anything else, and not revoke the FEIE? Just keep going along I until I can get a renunciation appointment? (No indication when that will be.) I guess I should file this one (the 2021 one) because the tax people filed an extension for me to Dec 14th (I couldn’t face doing it when it was due, I hate it all so much) so they might look for it if I don’t file it as that went in?
Thanks so much for any advice, I hate all this so much. I lose so much sleep worrying.
(Sorry if I did not put this in the right place, please let me know if somewhere else is better!)
Hi Pacifica777, thanks for moving my question to the right place! Yes it is as above, thanks for any advice anyone can give.
@JadeUK
First off, relax. The IRS cannot harm you. All this paranoia is simply pointless. You are presumably aware that the IRS has no ability to enforce penalties in the UK? At your income level you are of no interest to the US government.
If you are concerned about your employer, either keep the FBAR thing quiet until you renounce, or explain the situation and ask to have your signing authority temporarily removed. Most likely their bank has no idea that you are a US citizen, so there would be no FATCA reporting.
What do you mean by not having mentioned to your tax preparer that you have been away from the US for more than 20 years? Did you use the streamlined program or did you suddenly panic and hire someone to file US tax returns for you?
Regarding the child tax credit, you could potentially receive $1,400 per year for each US citizen child with an SSN. Your tax preparer is advising that you switch from FEIE to FTC in order to do this. If you’re going to pay someone to file your taxes for you, then it doesn’t seem terribly rational to turn down money because you think that doing something perfectly legal will somehow “cause trouble” for you. That makes zero sense.
If you don’t want to file, don’t file. Tell the tax preparer that their services are no longer required. If you do want to file, do it intelligently so that you can claim any money that you are entitled to, and don’t lose sleep about it. You can still renounce, whether you continue filing or stop.
Sorry to be blunt, but you sound more like someone coping with serious anxiety than someone dealing realistically with their US tax issues.
PS If your children are dual citizens born outside the US, if possible have their non-US parent handle all banking so that they can easily conceal their US citizenship and avoid any FATCA reporting or restrictions. Going forward they will have no trouble at all ignoring their US tax obligations.
Hi, I meant I didn’t tell the tax preparer when I found out I was a signatory on the account. That did get me very worried when I found out because I thought I had been doing everything right. I don’t want big fines I can’t pay, especially when I was trying to do everything the right way. I’d have renounced by now if they hadn’t closed the consuls, I had the forms in 2019 and was planning to book an appt in early 2020. Yes it does make me anxious because they act so threatening, but I don’t have a general anxiety issue. I was very worried when I got the email from the tax preparer about FEIE as I didn’t really understand it and just don’t want to get into trouble.
I have had the taxes done the past several years (started before the pandemic) because I wanted to renounce. I did not do streamlined. I know now I didn’t need to but when I started doing them I was believing wrong info.
I just didn’t want to take any extra refunds if it would make them look into me more because of the work banking issue that’s just recently come up. I did get some of the automatic Covid payments in the pas because I had filed, but nothing I had to do anything like revoke anything for.
I think my first question came across as more panicked as it was copied without the spaces and line breaks, but I do find it all very worrying, and it does keep me up at night sometimes. The way they treat citizens on this isn’t right. I definitely wouldn’t want to not be able to travel to the US either as my parents are older and in poor health.