US Citizen Filing For Taxes in the US

[J.M.]

[
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.


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

If it is required by law. Maybe I don't understand all of this stuff since I am not that far down the path of life, but if I still need to file taxes while living abroad, I will, unless I choose to renounce my U.S. citizenship. I don't want any issues if I decide to move back some day in the future.

 

[keesio]

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.

FATCA came about via the Obama administration. Republicans want to eliminate it and actually taxation by citizenship, calling it a government overreach (it is).

Yes the FEIE is 97K... but earning more than that isn't what i call "rich". If you are the sole earner of a large household, you not "rolling in it" at 100K. And yes the taxes you do pay over that amount can be offset by FTC... but there are so many rules and clauses that is BS. Like if my Canadian employer sends me to the US on a business trip, those days spent are considered US sourced income and not covered by FEIE. The mutual funds b.s.. The TSFA being a trust. RESP. etc..

Now if I do everything right, I can reduce my US taxes to a nominal amount (usually from 200-800 USD). But the tax planning and the filing is a pain and out of fear of screwing it up, I pay an accountant 1K to do my US taxes. Really, that is the part that bugs me. I have to pay someone 1K a year to figure out that I owe the US government a small amount, usually less than what owe my accountant. While I pay $20 to TurboTax to do my Canadian taxes which is where most of my taxes are paid.

As for the IRS never assessing FATCA penalties to regular people who owe little or no taxes... well I'm not so sure... I thought I have read some cases of even regular people getting hit with fines in countries with high taxes like Canada. And if I'm mistaken, then good. But the IRS certainly doesn't make this public. They make it clear that the rules apply to everyone. And if that is just for show... or maybe 'symbolic', well... reminds me of this good quote from someone on the citizenship forum when discussing a clause in the new citizenship bill:

No, I agree completely -- basically, a 'symbol' is anything that is more important than it actually is. In this case, it is highly unlikely that the clause will EVER be applied in a practical manner; and if it is, then it shows that anti-immigration sentiment has grown. Symbolically, however, it represents a certain attitude towards immigration and immigrants that is not, shall we say, equitable.

 

[keesio]

Good article.

http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/dual-citizen-its-best-not-to-ignore-the-tax-rules/article16639806/

Bottom line:

"You should fill out the proper forms to declare your bank accounts and RRSP – and, unfortunately, stay away from RESPs and TFSAs."

 

[on-hold]

It's worth noting that this article came out before the announcement of the new tax treaty (which I've seen surprisingly little analysis of).

Here's the funny thing about an RESP, also - once you open one, you can't modify it. For example, we opened one for our kid in my and my wife's name. Once we found out about the U.S. situation, we tried to take my name off it -- can't be done. It's not a bank account, it's something registered with the Canadian government.

 

[keesio]

It's worth noting that this article came out before the announcement of the new tax treaty (which I've seen surprisingly little analysis of).

I thought the announcement of the new treaty came out in late January or something like that. The article mentions that the new FATCA treaty comes into effect in July 1st so it sounded like to me that the article was written after the fact (unless she just assumed that Canada would sign off on it eventually).

 

[Rosie1957]

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.

May I step in and comment? The basic rule in dealing with Canadian-US returns is that the country where the income originated gets first kick at the can in assessing taxes. These taxes can then be used to claim a "foreign tax credit" on the *other* country's return. Which return has to be done first depends on where the taxpayer's income originates.

Where things get complicated is if the taxpayer has income originating from both countries. An example would be a US citizen who retired in the States and is collecting a US pension but who has since immigrated to Canada and is working part-time here, has interest from a Canadian bank, etc. In this case one really has to do the returns in tandem! Do the returns as far as calculating the basic federal and provinical tax amounts. This will allow you to allocate the tax among the different income sources. Then go back and claim the Canadian tax on the Canadian source income on your US return as a foreign tax credit. Claim the US tax on the US source income on your Canadian return as a foreign tax credit. (Apply federal first, then provincial if you have any leftover.)

 

[lheenj]

Hello guys,

I have some questions. I'm married to a US citizen, what is the best option for filing? married separately or jointly?

if filing married separately, Do I need to file my own tax return in US even I'm not a US citizen?


Thank you

 

[keesio]

Hello guys,

I have some questions. I'm married to a US citizen, what is the best option for filing? married separately or jointly?

if filing married separately, Do I need to file my own tax return in US even I'm not a US citizen?


Thank you

It depends. If you husband has a higher income and if you don't earn much income and is a dependent of your husband AND you don't mind the IRS getting information about your finances (and other information), then you can consider filing jointly in the US to take advantage of some tax breaks if his income exceeds the FEIE and the FTC doesn't completely eliminate any taxes owed to the US

Otherwise filing separately is recommended.

And if you file separately, you do NOT need to file any US taxes. Just your husband.

 

[lheenj]

thank you keesio for the information

atleast i don't need to file a US tax return. we decided to file it separately then

 

[keesio]

Yeah, most file separately unless there is a clear benefit.

btw - note that if you have any joint accounts, your husband needs to report those accounts to the IRS and US treasury because his name is on it. And he will need to report income from them. Some couples avoid even joint bank accounts because of this.

 

[santoki]

I was just looking over this thread and realized we haven't listed the actual forms that need to be filled out to complete a basic return on your own (FBAR included)

Can anyone with knowledge of it step in?

 

[keesio]

I was just looking over this thread and realized we haven't listed the actual forms that need to be filled out to complete a basic return on your own (FBAR included)

Can anyone with knowledge of it step in?

Other than the 1040, the other forms that are needed really depend on the each situation. Though most certainly the form for the FEIE will be needed and probably the FTC, if you earn any income. The other stuff will depend on what kind of accounts/assets you have and how much are in them (you only need an FBAR is you have over 10K total in "foreign" accounts combined). That is why having an accountant at least for the first time is a good idea.

btw - that form for the US Treasury is no longer called FBAR but something else (I can't remember the name right now). The form still works the same. But now you can only electronically file it - which is a good thing IMHO since you get proof of submission and the submission is instant.

 

[santoki]

Other than the 1040, the other forms that are needed really depend on the each situation. Though most certainly the form for the FEIE will be needed and probably the FTC, if you earn any income. The other stuff will depend on what kind of accounts/assets you have and how much are in them (you only need an FBAR is you have over 10K total in "foreign" accounts combined). That is why having an accountant at least for the first time is a good idea.

btw - that form for the US Treasury is no longer called FBAR but something else (I can't remember the name right now). The form still works the same. But now you can only electronically file it - which is a good thing IMHO since you get proof of submission and the submission is instant.

I found the new site for filing the FBAR. I believe it's still called an FBAR but is part of the "Financial Crimes Enforcement Network".

http://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html

Actually, question related to the FBAR filing. If my spouse is filing "married, filing separately" do we still need to include maximum account values for jointly owned accounts?

 

[keesio]

Yup it certainly looks like it

 

[santoki]

Yup it certainly looks like it

But then that would require me to get a TIN, wouldn't it?