US Citizen Filing For Taxes in the US

[jes_ON]

Absolutely. My main goal is to understand all the new recent changes.

Great! Also interested in knowing about RPPs.

 

[santoki]

My accountant is telling me that we need to file my wife's US return before her Canadian one. He says the US return is due by April 15th. I had read that it's due by June 15th or 30th. Can anyone clarify?

 

[keesio]

US returns are normally due by April 15th. However, if you live abroad, you have an automatic extension until June 15th (June 30th is the FBAR deadline - don't forget that too). And if that is not enough, you can file for an extension until October (you have to fill out a request form). Note that the October extension doesn't cover you for payment, just filing. So if you owe, they will slap interest on it.

http://www.irs.gov/Individuals/International-Taxpayers/U.S.-Citizens-and-Resident-Aliens-Abroad---Automatic-2-Month-Extension-of-Time-to-File

And you almost certainly have to do your Canadian first. Otherwise you can't determine what your FTC (Foreign Tax Credit) is - basically how much Canadian taxes you paid, so you can use that credit to offset US taxes. It is partially why citizens abroad have the extension - because you usually have to file the taxes in your country of residence first to then do the US taxes.

Is your accountant experienced with cross border tax filing? Surprised he doesn't know this basic details

 

[santoki]

US returns are normally due by April 15th. However, if you live abroad, you have an automatic extension until June 15th (June 30th is the FBAR deadline - don't forget that too). And if that is not enough, you can file for an extension until October (you have to fill out a request form). Note that the October extension doesn't cover you for payment, just filing. So if you owe, they will slap interest on it.

http://www.irs.gov/Individuals/International-Taxpayers/U.S.-Citizens-and-Resident-Aliens-Abroad---Automatic-2-Month-Extension-of-Time-to-File

And you almost certainly have to do your Canadian first. Otherwise you can't determine what your FTC (Foreign Tax Credit) is - basically how much Canadian taxes you paid, so you can use that credit to offset US taxes.

Is your accountant experienced with cross border tax filing? Surprised he doesn't know this basic details

He's not. I've only used him for Canadian returns. He's recommending me firms for cross border tax filing, but I'll be attending the event you sent me and asking for more contacts there.

I've asked him twice now and he's made it clear that we have to file the US return first and it's due by April 15th. I'll have to show him your link. Thanks.

 

[keesio]

He's not. I've only used him for Canadian returns. He's recommending me firms for cross border tax filing, but I'll be attending the event you sent me and asking for more contacts there.

I've asked him twice now and he's made it clear that we have to file the US return first and it's due by April 15th. I'll have to show him your link. Thanks.

Well there are a few things that you can claim from your US return that you can include in your Canadian one. Maybe that is what your accountant want to know and wants the US return done first. But in my opinion, that is outweighed (by a lot), the advantage of doing your Canadian one first.

But again, each case is different. At the event, there will be an accountant from a firm that specializes in cross border taxes. One member of the expat group uses him and said good stuff about him. I can also give you information on my accountant.

 

[keesio]

Keesio, when you go to that group, could you note down what he says about reporting requirements for registered savings plans (RRSPs, RESPs, and TFSAs)? I would really like to know precisely what the requirement will be, in light of yesterday's announcement. Posting that here on this forum would be a real service.

I attended the session yesterday. It was a pretty basic presentation in the sense that it was at a very high level. I'd say the vast majority of the information I already knew. But I was able to confirm a few things. First off:

RRSP - covered under US-CDN tax treaty. Interest earned in an RRSP is not taxable until after when you start to withdraw from an RRSP. You must file form 8891 with your 1040 in you have an RRSP

RESP - NOT covered under US-CDN tax treaty. Classified as a trust. Interest earned is taxable every year. If only one parent is American, it is recommended that the non-American parent open the RESP in their name only, so to avoid any tax responsibility with the US. You might need a 3520a/3520 like below. Sorry I didn't pay close attention to this one since it didn't apply much to me.

TFSA - NOT covered under US-CDN tax treaty. Classified as a trust. Interest earned is taxable every year. Also need forms 3520 and 3520a filed every year. I bluntly asked the accountant if it is worth it for US citizens to have a TFSA and he said "probably not", especially if what you have in the TFSA is not much.

The info on RESP and TFSA that was in the presentation was the same as I always heard. I asked if about the recent changes and he said that the changes are too recent and lacking in detail to recommend any changes in strategy regarding the two.

The last thing of interest was how the US sees mutual funds as some sort of foreign entity / corporation. Basically it is complex and you need to carefully consider the additional overhead when investing in mutual funds.

It was a lively discussion. Some were completely taken aback. One women decided right then and there that it is not worth it to have a US residency she rather give up her US green card and is going to a port of entry the next day to do it!

 

[on-hold]

Thanks for this post -- do you mean that the guy giving the presentation hadn't taken the new tax treaty into account? Because I had understood that this treaty did include RESPs.

Probably, I should just ask my bank, even though it's astonishing what they don't know -- last time I asked my financial advisor, who turned out to be a dual Canadian-American citizen, and she had no idea she was supposed to file an American return . . .

 

[keesio]

Thanks for this post -- do you mean that the guy giving the presentation hadn't taken the new tax treaty into account? Because I had understood that this treaty did include RESPs.

He was saying that the details were not clear whether it was covered or not and if so, what exactly is covered. Basically he doesn't know for sure yet.

What I understood from the agreement was that RRSP, RESP and TSFA accounts do not have to be reported by CRA to the IRS. But you still have to. And the RESP and TSFA are still taxable.

Probably, I should just ask my bank, even though it's astonishing what they don't know -- last time I asked my financial advisor, who turned out to be a dual Canadian-American citizen, and she had no idea she was supposed to file an American return . . .

That is scary. But not totally surprising. There were people in the meeting yesterday have lived in Canada for decades. They had no idea until recently.

 

[on-hold]

Man, that's annoying -- I honestly do not understand why the IRS is unable to behave with a sense of proportion over this. Their reporting requirements for RESPs are some complex crap normally used for large trusts that have full-time administrators. If they really are dense enough to tax a child's college fund, perhaps they could produce a simple form for it?

Frankly, if my bank isn't going to report my RESP to the IRS, I am going to have a very very hard time convincing myself to do so.

 

[santoki]

I know a couple of dual citizens that haven't lived in the US for close to 20 years and who have never filed. They never have a problem renewing their passport or entering/exiting the country to visit. So much like the other people at the meeting the other day, these people were clueless about needing to file. But, if these people have gotten away with it for 20 years, what the heck is the point of filing at all?

 

[keesio]

But, if these people have gotten away with it for 20 years, what the heck is the point of filing at all?

Because (and the accountant touched on this yesterday too) Canada just signed the FATCA treaty with the US which goes into effect June 2014 and it will get harder to hide your tax obligations to the US due to the information sharing between CRA and the IRS.

 

[keesio]

Man, that's annoying -- I honestly do not understand why the IRS is unable to behave with a sense of proportion over this. Their reporting requirements for RESPs are some complex crap normally used for large trusts that have full-time administrators. If they really are dense enough to tax a child's college fund, perhaps they could produce a simple form for it?

Frankly, if my bank isn't going to report my RESP to the IRS, I am going to have a very very hard time convincing myself to do so.

The tax laws are like the US with their NSA spying. To try to catch the .001% of population who may plan hostile acts against them, they justify spy on everyone and abuse the rights of 99.99% of the population that mean no harm. The IRS, in trying to go after the wealthy 1% who are intentionally trying to hide their assets in off-shore accounts, come up with blanket tax obligations that put hardship on the other honest 99% who live abroad and have "foreign assets"

 

[on-hold]

Here is something to remember, Americans. One of the effects of the Republican's long war on the U.S. government has been the semi-gutting of the IRS. Its ability to audit people has gone way down (although audits of rich people have been reduced more than audits of the middle class). Firstly, you have to earn quite a bit of money to be liable for U.S. taxes (~100,000 dollars). Secondly, I believe that what you pay over that is a marginal rate. Thirdly, despite FATCA, the IRS's ability to come looking for you is minimal; and they know that people who are really dodging taxes are not in Canada, they're in the Cayman Islands, Panama, and Singapore.

And to the good name of the IRS, I have never heard of anyone being assessed for a FATCA penalty in the absence of unpaid taxes. In other words, the penalties are not applied to all violators, but to violators who benefit from their violation. It's not the catch-all bogeyman some people claim.

 

[J.M.]

I believe the U.S. government has been taking about 25-30% of my pay, though I usually get a decent return after filing...

Here is something to remember, Americans. One of the effects of the Republican's long war on the U.S. government has been the semi-gutting of the IRS. Its ability to audit people has gone way down (although audits of rich people have been reduced more than audits of the middle class). Firstly, you have to earn quite a bit of money to be liable for U.S. taxes (~100,000 dollars). Secondly, I believe that what you pay over that is a marginal rate. Thirdly, despite FATCA, the IRS's ability to come looking for you is minimal; and they know that people who are really dodging taxes are not in Canada, they're in the Cayman Islands, Panama, and Singapore.

And to the good name of the IRS, I have never heard of anyone being assessed for a FATCA penalty in the absence of unpaid taxes. In other words, the penalties are not applied to all violators, but to violators who benefit from their violation. It's not the catch-all bogeyman some people claim.

Even if that is true, I am just too upstanding to risk it. Same with my wife's emergency room bill here in the states... she has no credit here, she is a Canadian visitor, and there isn't really any way they can try and get it from her once we leave, BUT I still will pay what we owe. Just the way I am wired.

 

[on-hold]

[
Even if that is true, I am just too upstanding to risk it. Same with my wife's emergency room bill here in the states... she has no credit here, she is a Canadian visitor, and there isn't really any way they can try and get it from her once we leave, BUT I still will pay what we owe. Just the way I am wired.
[/quote]

You would pay an accountant for 30 hours of work to file a return for your kid's 5000 dollar college fund?