tinytortoise said:
I just want to know if it's true there are large consequences from the IRS if you establish a retirement fund or buy a house because I want to do both while a Canadian PR and hopefully one day, citizen. And there is no way I would ever give up my US citizenship. This blog post sounds so dire.
The problem with these forms (3520 and 3520-a for trust accounts, for example) is that the penalties for not filing them are onerous - like $10,000 each year. There should not be a problem owning real estate in Canada, but there are new financial asset reporting requirements. Congress finds it easy to villify ex-pats as tax dodgers, though Mitt Romney really proved there's no reason to leave the US - you can avoid paying taxes legally and still stay in the US.
What's frustrating about these forms is that they generally don't involve much (if any) money. For example, a TFSA is not taxable in Canada but it is taxable in the US. If your combined Canadian tax rate is higher than your US tax rate, you'll find that even though the TFSA is "taxable" in the US, the foreign tax credit income exclusion will cover it for most people, so you wont owe anything to the US. But you have to fill out the 3520 AND 3520-A (since your bank probably won't complete the latter) and that's
ten pages added to your tax return.
Oh, and forget about filing electronically.
Further, if you DO have to pay US tax, Canada will then give you a tax credit for it to offset your Canadian taxes. The whole thing is a bit crazy...
There is one small ray of sunshine: if you are outside the US on tax day (April 16 this year) you have two additional months to file your return - so it's due in mid-June.
