Informing US that spouse is no longer living there

[mister_h]

Last weekend my spouse landed and now we're just waiting for her PR card. One thing that we're wondering: is there anything she needs to do to inform the US that she is no longer a resident there? For instance, she's received letters before to appear for jury duty, and that's going to be a problem since she's now living in Canada.

Any feedback is appreciated.

 

[PMM]

Hi

Last weekend my spouse landed and now we're just waiting for her PR card. One thing that we're wondering: is there anything she needs to do to inform the US that she is no longer a resident there? For instance, she's received letters before to appear for jury duty, and that's going to be a problem since she's now living in Canada.

Any feedback is appreciated.

No, just send the court a letter that she no longer lives there and now is a resident of Canada.

 

[Midcityjohn]

I would take care of jury duty thing asap. Legal issues could creep up later. Maybe simply telling them she does live in that state anymore could work. But I would not let to many people know I'm living in CA. There is an ongoing legal fight between Canada and the US regarding taxes and US citizen's earning in CA. Failing to pay taxes on money earned in Canada could lead to jail time and loss of social security benefits. I'm from the US pondering the same issues.

 

[mister_h]

Yes, this is what we're concerned about as well, that's why I was asking about the best way to handle it.

 

[AmericaninQuebec]

She needs to inform them immediately that she is no longer residing there, otherwise yes there can be legal repercussions for not showing up for jury duty. Also, as a U.S. citizen she is required by U.S. law to file an income tax report every year even if all income is earned outside the U.S. There is a tax treaty between the U.S. and Canada though, so if she earns all income in Canada and properly lists it as foreign earned income on her tax return then she should not have to pay additional taxes in the U.S. I filed jointly last year with my husband on money I had earned in the U.S. and money he had earned in Canada. His portion was really rather simple, and was subtracted completely out of gross taxable income. We received the full refund from the federal government for taxes I paid as well, so I'm certain that they did not double tax him even though he filed jointly with me.

I'm not 100% certain why the U.S. government is making a big deal out of hunting down U.S. citizens in Canada who don't file their U.S. income tax returns (there must be a loophole I don't know about that let's them hide money here), but it's true that they are and it's been in the news recently. Definitely worth the hassle of doing it if it means avoiding a legal battle later on.

 

[Midcityjohn]

From what I understand, the government of Canada is telling/ordering banks not to release financial information to the IRS. But that would not excuse the US from arresting her when traveling abroad for tax evasion. All in all, I think it will solely depend on your income level. If your income is not so high, you wont really owe any taxes or might get a tax credit refund in the US on Canadian income. If you earned a lot, then you could file to see what happens and to play it safe. If they take too much then you could make the hard choice to renounce US citizenship. Sounds drastic but it would be rock solid protection. And you could always get it back in the event of necessity.

 

[AmericaninQuebec]

From what I understand, the government of Canada is telling/ordering banks not to release financial information to the IRS. But that would not excuse the US from arresting her when traveling abroad for tax evasion. All in all, I think it will solely depend on your income level. If your income is not so high, you wont really owe any taxes or might get a tax credit refund in the US on Canadian income. If you earned a lot, then you could file to see what happens and to play it safe. If they take too much then you could make the hard choice to renounce US citizenship. Sounds drastic but it would be rock solid protection. And you could always get it back in the event of necessity.

I'm curious as to at what income level one would find themselves paying less tax in Canada than in the U.S.? I really am curious btw, not being obnoxious. I suppose it depends on the province (I know in QC income tax rates are generally much higher than in the U.S.)? I think it also depends on how you treat your income. If you list it as foreign earned then it is deducted from your gross taxable income, but then you can't get tax credits/refunds. I forget the title for the other option, but basically you get a tax credit for all the tax you paid on your income in Canada. If you do it that way then I suppose you could still qualify for a refund (especially if you still have investment earnings or something like that in the U.S.).

Best bet is to find an accountant or tax attorney in one of the major cities that has experience with this and consider it a worthwhile investment (at least for the first year or two, until you're certain how to do it yourself).

 

[AllisonVSC]

From what I understand, the government of Canada is telling/ordering banks not to release financial information to the IRS. But that would not excuse the US from arresting her when traveling abroad for tax evasion. All in all, I think it will solely depend on your income level. If your income is not so high, you wont really owe any taxes or might get a tax credit refund in the US on Canadian income. If you earned a lot, then you could file to see what happens and to play it safe. If they take too much then you could make the hard choice to renounce US citizenship. Sounds drastic but it would be rock solid protection. And you could always get it back in the event of necessity.

Renouncing your citizenship is not a "rock solid protection" from US taxes. First you must verify with the IRS that you were current in your taxes for the previous 5 year period. Then, anyone renouncing U.S. citizenship will immediately be taxed on all their global unrealized gains, meaning all stock portfolios, real estate, art, and most other kinds of property and assets will be taxed as though they were immediately being sold at current market rates. In addition, anything given or left to any heirs by ex-U.S. citizens will immediately be taxed at U.S. gift rates. I think it's 45%.

I'm not sure repatriation is a cake walk either. You don't just get a do over. Both natural born and naturalized US citizens who have renounced would, as I understand it, have to go through the naturalization process by applying to become US permanent residents and then satisfy the citizenship requirements.

 

[Midcityjohn]

Capital gains tax is lower than most income tax. But I would think if your regular earnings are high enough abroad then they would defiantly charge some tax. As far as refunds, I think most credits start at earnings above 3k..ish and could be on US only earning to get it. I bet most people do not file in the US on Canadian income. Just way the risks in your personal financial situation. The IRS is not able to truly know what your earning here in Canada....right now.

I don't think I would renounce my citizenship. But if it came to it, I would make sure I didn't owe anything in back taxes. Then slowly sell/move my assets abroad then renounce to avoid any undue tax. Would not be the first to renounce over taxes.

 

[AmericaninQuebec]

A friend of mine shared this link with me the other week: http://mobile.kayescholer.com/news/emerging_trends/20111014

I think it's pretty clear that the IRS and US government are only going to get more aggressive, so for those of us immigrating to Canada it would be in our best interest to file our tax returns.

After rereading the article, it sounds like it's more about them wanting to find people who are sheltering/hiding money over the border than to tax people working over the border, but they have to crack down on everyone to find the few that owe taxes.

 

[mister_h]

Ok, thanks for the feedback so far. Who should we contact to get the full details on this and what we should do so we're not hit with any nasty surprises? Canadian lawyers? IRS?

 

[AmericaninQuebec]

Capital gains tax is lower than most income tax. But I would think if your regular earnings are high enough abroad then they would defiantly charge some tax. As far as refunds, I think most credits start at earnings above 3k..ish and could be on US only earning to get it. I bet most people do not file in the US on Canadian income. Just way the risks in your personal financial situation. The IRS is not able to truly know what your earning here in Canada....right now.

I don't think I would renounce my citizenship. But if it came to it, I would make sure I didn't owe anything in back taxes. Then slowly sell/move my assets abroad then renounce to avoid any undue tax. Would not be the first to renounce over taxes.

You can exclude up to $95,100 annually in foreign wages at present moment (http://taxes.about.com/od/taxhelp/a/ForeignIncome.htm). Any income earned after that is taxed at the applicable rate for your total income. It seems like it's only a good option for those earning up to the cut-off amount.

If you're earning more than that you'll want to look into using the Foreign Earn Income Tax Credit, which is more complicated (http://taxes.about.com/od/taxhelp/a/ForeignTaxCred.htm). For the FEITC you would get credit for $Tax x (Canadian earned income/total worldwide income), so that generally means if you earned 100% of your income you would get total credit for taxes paid in Canada. This would be where having a tax specialist helping you would likely be a good idea.

 

[AmericaninQuebec]

Ok, thanks for the feedback so far. Who should we contact to get the full details on this and what we should do so we're not hit with any nasty surprises? Canadian lawyers? IRS?

Contact the court so she can get out of jury duty, and just be sure that she files her federal tax returns every year. The IRS has a helpful hotline for Americans living abroad (I used it last year), but they are not accountants or tax attorneys. If tax time rolls around and you guys are confused by it, then I'd recommend calling around until you find an accountant or tax attorney who has handled this stuff before. I did mine without assistance last year, and it took a lot of time and stress.

She'll probably also want to look into updating her address with the social security administration and getting a new passport to reflect her new address. For the last one she'll have to contact the U.S. embassy/consulate closest to you, because she is living abroad.

 

[mister_h]

Ok, so my original question was a bit misunderstood. It's about the basics of moving. Does my wife (American citizen with Canadian PR) need to inform the state she was living in that she has moved? An example of how this could be a problem is being called for jury duty. While she has not currently been called, it seems like there is something she could proactively do to ensure her (lack of) residency with the US is known.

Also, her employer is in the US so she will continue to earn money from a US institution. We are planning to seek tax advice and realize she will be paying both US and Canadian taxes. Any recommendations on places to use or avoid? We were thinkign H&R Block simply because they are in both countries and may have more experience with the laws (we will of course ask beforehand).

I may be off topic now, but a friend of hers who is Canadian and working for the same US company said she has to pay the Canadian goverment taxes for OHIP coverage. One year it was $250 and another year she paid $4,000. Does this have anything to do with the amount of OHIP she uses in that particular year? We were uncomfortable prying too much into the personal life of her coworker to ask these questions.