Filing taxes in the US

[Prelude_dude]

My wife is an american; with the new rules that Canadian Financial Institutions need to supply the IRS with their citizens banking details, we have to file taxes to the IRS for the last 5-6 years now....

I have some basic accounting knowledge as I do my own CDN taxes with the assistance of tax suite programs. I have no idea what I am doing for US taxes.

Hiring an accountant for this is going to cost a boat load of money, with a new baby and a new house, I would rather attempt to do this myself. Our CDN taxes are quite simple, we do not have a ton of investments or anything so I am hoping this will be relatively quick.

Anyone have any expertise or advise on where to start or begin with this?

Thanks!

[sabad66]

If it's just your wife that is American, you won't have to do a return. Just have your wife file as Married filing separately.

I don't think you'll have to go back 5-6 years. You should be able to get by with the streamlined procedure which is 3 years of back taxes (2013, 2012, 2011 years) + 6 years of FBARs. FBARs are pretty straight forward, but it's just a PITA to go back and get your records.

Overall if she made < 90k for the last 3 years then it will be very easy. Just do it using the Foreign Earned Income Exclusion so she won't have income tax to pay. If she made > 90k, easiest way is to exclude the first 90k via FEIE, then look at the foreign tax credits for the amount over 90k. Still shouldn't have any income tax to pay using this method too.

For investments, are they under your name or hers?

Also, would suggest she closes any TFSA she may have in her name as they are not treated as tax-free in the US.

I just went through all of this and am finally caught up so ask away if you have any further questions. I did a paper submission for the streamlined, but will probably try some software next year now that I know exactly which forms need to be filled out.

Just start with the 1040, 2555-EZ (or just the regular 2555 if you don't qualify for the EZ) and go from there.

[broken_legs]

Land of the Free strikes again!

Sorry about your luck, OP. Have you considered getting a different wife?

Seriously though, if you're married and shes in Canada, shouldn't she become a naturalized Canadian citizen? ie Dual Passport holder. SO if she goes to a bank in Canada as a Canadian Citizen, how are they going to know shes American?

Lastly, roughly 3000 people per year are denouncing their US citizenship. Have you guys had this talk yet?

Rgs,
B

[ZenOps]

There seems to be a six month wait on renouncing a US citizenship

http://globalnews.ca/news/1519628/want-to-shed-u-s-citizenship-get-in-line/

They highly suggest you avoid the Toronto US consulate, and try either Montreal or Ottawa.

Renunciation seems to require it be done in person, and I don't think there is a US consul of high enough rank in Calgary (don't know for sure anyhow) that supports the paperwork. If it does, then its the one by the downtown library.

However, it is the only way for an born american parent to be assured that their offspring will not have to pay the IRS in dual taxation.

If things start to sour more in the US, the wait time can be extended to a few years. And a warning to all, the US does have the ability to not allow any citizens to renounce their citizenship (you and any children you have may be stuck paying taxation to the US forever.)

Germans know the score on this one, when things are going good and you are winning the wars - it was great to be a German citizen. But as soon as things started going bad - they were unable to escape the taxation scheme that bankrupted 98% of the population.

Watch yourselves.

[thetransporter]

when you go to the lawyers/accountants they want a a lot of money .

call the IRS HELP LINE
the program is changing and make sure you have the update to date information on it

i got tired with the helpline in texas so next time i was in the US i just went into a H&R block

[killramos]

Originally posted by ZenOps
There seems to be a six month wait on renouncing a US citizenship

http://globalnews.ca/news/1519628/want-to-shed-u-s-citizenship-get-in-line/

They highly suggest you avoid the Toronto US consulate, and try either Montreal or Ottawa.

Renunciation seems to require it be done in person, and I don't think there is a US consul of high enough rank in Calgary (don't know for sure anyhow) that supports the paperwork. If it does, then its the one by the downtown library.

However, it is the only way for an born american parent to be assured that their offspring will not have to pay the IRS in dual taxation.

If things start to sour more in the US, the wait time can be extended to a few years. And a warning to all, the US does have the ability to not allow any citizens to renounce their citizenship (you and any children you have may be stuck paying taxation to the US forever.)

Germans know the score on this one, when things are going good and you are winning the wars - it was great to be a German citizen. But as soon as things started going bad - they were unable to escape the taxation scheme that bankrupted 98% of the population.

Watch yourselves.

My understanding of the matter from someone who is considering renouncing is that if the US deems you renouncing in order to avoid paying taxes they have the ability to prevent you from ever entering the country gain post renunciation. No more Hawaii, Puerto Rico, Disneyland, or New York.

I believe it is called the Reed Amendment.


In 1996, Congress included a provision in the expatriation law to bar entry to any individual “who officially renounces United States citizenship and who is determined by the Attorney General to have renounced United States citizenship for the purpose of avoiding taxation by the United States.”

Supposedly it is completely unenforced but considering the current situation i see that changing.

Watch what advice you are giving people...

[ZenOps]

Oh, if you intend to someday be a beach bum (Hawaiian welfare recipient) then of course, do not renounce.

But for those who are actually working and making money the $1,500 per year (assuming you get someone to fill in your IRS tax forms, even if you owe next to zero dollars in actual taxation) adds up very quickly, especially if you have to do one parent and two children. Thats kissing $4,500 away every year just to maintain tax compliance, of which if you miss - the potential is jail.

Say, you have 40 working years and assuming that tax form filing will not go up in price. Thats basically $180,000 you and your two kids will have given the US government to maintain tax compliance over your families lifetime (not even counting a single dollar of actual tax you might owe)

Many full time, career oriented expats in Canada do not like the idea of subsidizing Hawaiian welfare recipients, and are the ones most likely to renounce.

The ones that are not making any money, and intend to be welfare bums and eventually move to Hawaii - are the ones to keep their US citizenship.

Also: I would suggest that noone attempt to fill out their IRS tax forms by themselves for at least the first year. If you have to pay a professional $1,500 then do it - and request a copy so that you can read it over yourself to fill out in future years. Full documentation should be around 700 pages. If you just get the part where you "sign" and then come back and pay another $1,500 next year, don't do it - ask for the whole thing if you don't want to be chained to your tax preparer forever.

In comparison I believe a basic Canadian full documentation is 35 pages (that nearly noone reads through either, lol)

[JustinL]

Originally posted by broken_legs

Seriously though, if you're married and shes in Canada, shouldn't she become a naturalized Canadian citizen? ie Dual Passport holder. SO if she goes to a bank in Canada as a Canadian Citizen, how are they going to know shes American?

Lastly, roughly 3000 people per year are denouncing their US citizenship. Have you guys had this talk yet?


The banks are supposed to do due diligence in ferreting out their American clients. If they ask if you are American and you lie, then the IRS finds out... the penalties for willful failure to file an FBAR form are insane. It's the higher number of $100,000 or 50% of the value of each account... per year you fail to file the form.

Renouncing will get you out, but to renounce you need to be tax compliant for the last few years. They also raised the cost to renounce from $450 to $2350 last month.

[ZenOps]

I'm not entirely sure why the Harper government decided to go for compliance with FATCA.

Really, its probably hundred thousands of dollars for maybe a couple hundred thousand US persons in Canada that do not understand why they have to pay maintain US tax compliance (direct penalty, or by way or proxy as tax compliance)

Money of course that does not benefit the Canadian economy - at all. It pretty much goes to the IRS (and of course Hawaiian welfare recipients indirectly)

Harper is suprisingly unpatriotic, I never expected FATCA to pass on his watch.

Someone on your block probably will not be able to contribute to the Canadian economy because all the money hes made will go to tax compliance with the US.

Justice or legalized theft? If the Canadian government were a criminal organization, technically you could call what they are doing right now as *ratting* on your own people to the guy with the biggest gun.... Just saying....

I'm glad I'm not a US citizen.

http://www.virgin.com/sites/default/files/legacy/kitesurf6-14343.jpg

[Prelude_dude]

Sooo complicated!! *sigh* such an ordeal,i am going to have to do so much more research into this.

Zenops you mentioned that offspring are considered American?? How does this work, our daughter is born here in Calgary, I am Canadian, my wife is American. Is she considered dual because of my wife's status? Are we supposed to declare (not sure if this is the right term) my daughter or something?

We have discussed renouncing, but my wife is from Hawaii and her family is living in Hawaii... and she does not want to give up her American Citizenship in the event we were to every pick up and move there. Which is probably unlikely in the next 50 years..... as we will probably retire there.

I'll give the IRS help line a call I guess.

Thank you for all the valuable information!

[JustinL]

Here is the rule for offspring:



http://www.uscis.gov/us-citizenship/citizenship-through-parents
The U.S. citizen parent had been physically present in the U.S. or its territories for a period of at least five years at some time in his or her life prior to the birth, of which at least two years were after his or her 14th birthday.

[Prelude_dude]

Originally posted by JustinL
Here is the rule for offspring:



http://www.uscis.gov/us-citizenship/citizenship-through-parents

Sorry this government crap hurts my brain.

So my wife lived in Hawaii from when she was 14- 25(26), so as long as she doesn't go and live back in the states for longer than 2 years after our daughter is 14; then my daughter is not an American??


In general, a Child Born Outside the U.S. is a Citizen at Birth when the Child’s Parents Are Not Married to each other at the Time of Birth...IF
AND...

The genetic or non-genetic gestational legal mother is a U.S. citizen at the time of birth, and the birth date is after December 23, 1952 The mother had previously been physically present in the United States or one of its outlying possessions for a continuous period of at least one year.

In regards to the above quote, what is an "outlying possession"?? This could apply to us, as we were not married at the time of birth.

[killramos]

Originally posted by Prelude_dude


Sorry this government crap hurts my brain.

So my wife lived in Hawaii from when she was 14- 25(26), so as long as she doesn't go and live back in the states for longer than 2 years after our daughter is 14; then my daughter is not an American??



In regards to the above quote, what is an &quot;outlying possession&quot;?? This could apply to us, as we were not married at the time of birth.

i would assume its like Puerto Rico or Guam lol

[sabad66]

Originally posted by Prelude_dude


Sorry this government crap hurts my brain.

So my wife lived in Hawaii from when she was 14- 25(26), so as long as she doesn't go and live back in the states for longer than 2 years after our daughter is 14; then my daughter is not an American??



In regards to the above quote, what is an &quot;outlying possession&quot;?? This could apply to us, as we were not married at the time of birth.
No, two years after your wife was 14.

So yes, your daughter qualifies for citizenship, but as far as i know she isn't actually a citizen until you do the application.

[killramos]

Originally posted by sabad66

No, two years after your wife was 14.

So yes, your daughter qualifies for citizenship, but as far as i know she isn't actually a citizen until you do the application.

The issue is she could still be considered taxable oddly enough. The new system is messed.

[Toma]

Originally posted by Prelude_dude
My wife is an american; with the new rules that Canadian Financial Institutions need to supply the IRS with their citizens banking details, we have to file taxes to the IRS for the last 5-6 years now....

I have some basic accounting knowledge as I do my own CDN taxes with the assistance of tax suite programs. I have no idea what I am doing for US taxes.

Hiring an accountant for this is going to cost a boat load of money, with a new baby and a new house, I would rather attempt to do this myself. Our CDN taxes are quite simple, we do not have a ton of investments or anything so I am hoping this will be relatively quick.

Anyone have any expertise or advise on where to start or begin with this?

Thanks!

Same boat here, wife is dual.

Accountant we found here wanted $2000 to file the past 5 years.

We tried numerous American accountants, as the fee would be much cheaper, but none of them had a clue how to handle the process, and didn't seem interested in figuring it out lol.

It's a pain, for sure.

[Toma]

Originally posted by sabad66

No, two years after your wife was 14.

So yes, your daughter qualifies for citizenship, but as far as i know she isn't actually a citizen until you do the application.

Pretty sure citizenship is automatic, however, you apply for the actual certificate, not the citizenship? Not a 100% on that, but that was my understanding.

[JustinL]

My other piece of advice is to keep all your accounts separate. Insulate the Canadian partner from the toxicity of the the American. I have no shared accounts with my wife and liquidated pretty much all my TFSA and mutual funds.

The real kick in the nuts can be that Americans are required to submit FBAR forms on not only the accounts they are owners of, but also accounts they have signing authority on. That includes corporate accounts etc.

[Prelude_dude]

Originally posted by Toma


Pretty sure citizenship is automatic, however, you apply for the actual certificate, not the citizenship? Not a 100% on that, but that was my understanding.

well shit, so technically even though I do not get a certificate for my daughter, come time she is 18 and has income, she will forever need to file taxes to the IRS because she is Canadian/American?

fuck me.

Fortunately she does not have any TFSA's and we only have one joint savings account. We do own the house together though...

[ColoDano]

Originally posted by ZenOps
Oh, if you intend to someday be a beach bum (Hawaiian welfare recipient) then of course, do not renounce.

But for those who are actually working and making money the $1,500 per year (assuming you get someone to fill in your IRS tax forms, even if you owe next to zero dollars in actual taxation) adds up very quickly, especially if you have to do one parent and two children. Thats kissing $4,500 away every year just to maintain tax compliance, of which if you miss - the potential is jail.

Say, you have 40 working years and assuming that tax form filing will not go up in price. Thats basically $180,000 you and your two kids will have given the US government to maintain tax compliance over your families lifetime (not even counting a single dollar of actual tax you might owe)

Many full time, career oriented expats in Canada do not like the idea of subsidizing Hawaiian welfare recipients, and are the ones most likely to renounce.

The ones that are not making any money, and intend to be welfare bums and eventually move to Hawaii - are the ones to keep their US citizenship.

Also: I would suggest that noone attempt to fill out their IRS tax forms by themselves for at least the first year. If you have to pay a professional $1,500 then do it - and request a copy so that you can read it over yourself to fill out in future years. Full documentation should be around 700 pages. If you just get the part where you &quot;sign&quot; and then come back and pay another $1,500 next year, don't do it - ask for the whole thing if you don't want to be chained to your tax preparer forever.

In comparison I believe a basic Canadian full documentation is 35 pages (that nearly noone reads through either, lol)

For starters, anyone paying $1500 per person, per year, to file taxes is getting hosed, especially with a family, since the research needs to be done once, and fill out the correct forms with the correct information per person.

Also baffled at what tax professional is generating 35 pages for a Canadian return, or 700 for a US return.

Pretty sure that my US return, including all of the Foreign income tax paid info, copies of the Canadian return, calculations for exchange rate etc. is still under 20 pages.

As long as you are working and paying taxes properly in either the US or Canada, there should be no point where you would be owing tax to the other country that would be above the normal taxation for income earned, so as long as you file the return, you should never owe the US a penny if working in Canada, no matter if you owe or get a refund in Canada.

if you are working but under a certain income, and paying proper tax in Canada, it is actually possible to get a refund from the US for foreign income tax paid, without paying them a cent.

But what would I know, I am just a US citizen, married to a US citizen, and we both work and live here in Calgary. Oh yeah, and the wife is a tax accountant.

[sabad66]

Originally posted by ColoDano


For starters, anyone paying $1500 per person, per year, to file taxes is getting hosed, especially with a family, since the research needs to be done once, and fill out the correct forms with the correct information per person.

Also baffled at what tax professional is generating 35 pages for a Canadian return, or 700 for a US return.

Pretty sure that my US return, including all of the Foreign income tax paid info, copies of the Canadian return, calculations for exchange rate etc. is still under 20 pages.

As long as you are working and paying taxes properly in either the US or Canada, there should be no point where you would be owing tax to the other country that would be above the normal taxation for income earned, so as long as you file the return, you should never owe the US a penny if working in Canada, no matter if you owe or get a refund in Canada.

if you are working but under a certain income, and paying proper tax in Canada, it is actually possible to get a refund from the US for foreign income tax paid, without paying them a cent.

But what would I know, I am just a US citizen, married to a US citizen, and we both work and live here in Calgary. Oh yeah, and the wife is a tax accountant.
:werd: listen to this guy. Zenops sensationalizes this whole thing and doesn't know what he is talking about.

But the costs can be pretty high for having a "professional" get you caught up on US taxes (3 years of back filing + 6 years of FBARs). H&R block wanted $450 for a basic US return. Even some guys on kijiji wanted $500 per year.

So then i decided to devote 2 weekends straight into reading about it and figured out how to do it on my own. It's not that bad really once you get the hang of it. I even got a refund for my 2010 return since i was a student (thank you American Opportunity Tax Credit :) )

The only really shitty thing about this whole thing is that the US doesn't recognize TFSAs. So i went ahead and closed mine and am hoping they recognize them at some point in the future.


Does your wife do personal US foreign tax returns? How much does she charge?

[rage2]

Originally posted by sabad66
The only really shitty thing about this whole thing is that the US doesn't recognize TFSAs. So i went ahead and closed mine and am hoping they recognize them at some point in the future.
A big one for the average joe is capital gains on a primary residence. In Canada the exemption is unlimited, while in the US it's capped at $250k, with anything over that taxed by the IRS. It means a home upgrade/downgrade would be problematic if you purchased before the boom.

[sabad66]

Originally posted by rage2

A big one for the average joe is capital gains on a primary residence. In Canada the exemption is unlimited, while in the US it's capped at $250k, with anything over that taxed by the IRS. It means a home upgrade/downgrade would be problematic if you purchased before the boom.
Good point. But it's 500k if you're married, and also you could offset some of that by writing off your mortgage interest and property tax deductions (which you can't do in Canada).

[ZenOps]

US person in the US is a couple hundred pages. Canadian person in the US is a couple hundred pages.

US person in Canada is a solid almost 700 pages.

Sure, you can get a basic no-frills for half price from your local corner McTax (HRblock), but it probably will not help you much if you intend to use it as a template to try and figure out how to file yourself in upcoming years. Fill it out wrong, and you get hefty fines. Fill it out really wrong, and you go to jail.

In the US they don't screw around with incorrect taxes, there is very little lenience "Oh I didn't know, can I just pay what I owe and some percentage penalty?" like in other countries.

Owe $885,300? The US will sue you and win $53.5 million.

http://www.bankrate.com/financing/taxes/tax-trouble-for-beanie-babies-tycoon/

[Perceptionist]

Originally posted by sabad66

Good point. But it's 500k if you're married, and also you could offset some of that by writing off your mortgage interest and property tax deductions (which you can't do in Canada).

What other implications would it have on your spouse if you filed together (assuming American citizen with Canadian spouse)? Would the spouse then be subject to additional US taxation as well, such as capital gains tax on their TFSA?

[JustinL]

700 pages does sound crazy. If you included all the instruction pages and had some huge number of mutual funds each requiring a PFIC or something I guess you could get up there.

A simple working schmuck like myself can really simplify the IRS returns, but it's the ones where it's not simple where I really feel sorry for people. It's also the disadvantages like no access to TFSA and inheritance tax that can be surprises. There are also the difficulties with knowing what to do with pensions, insurance, etc. that are treated differently in the US than Canada. Retirement is really the big question for me and my wife. When my income switches from earned income to passive income there will be more trouble with taxes. It really comes down to priorities: are the benefits of US citizenship worth more than the time, cost, and aggravation associated with it over the rest of your lifetime.

[ZenOps]

Under FATCA:

Failure to file $10,000 fine

Failure to file after recieving mailed warning from IRS $50,000.

[sabad66]

Originally posted by Perceptionist


What other implications would it have on your spouse if you filed together (assuming American citizen with Canadian spouse)? Would the spouse then be subject to additional US taxation as well, such as capital gains tax on their TFSA?
Ah good point.. i guess you would only get the 500k exemption if you file as married filing jointly. It would only be 250k if you're married filing separately.

But the answer to the question really depends. Probably would want to run the return both scenarios to see which way works out better. I'm not even sure if you can file as 'married jointly' if the spouse isn't american?

[Prelude_dude]

Since this was enforced back in July, does anyone know if there are any implications flying at this point?

We have not filed yet, and we are flying to Hawaii in December.

Would my wife be stopped at the border or anything of the sort?

Thanks guys, this thread has been amazing balls informative.

Now to figure out all these forms.... anyone else in this boat want to get together and have a filing party over some beers lol?

[JustinL]

Originally posted by Prelude_dude
Since this was enforced back in July, does anyone know if there are any implications flying at this point?

We have not filed yet, and we are flying to Hawaii in December.

Would my wife be stopped at the border or anything of the sort?

Thanks guys, this thread has been amazing balls informative.

Now to figure out all these forms.... anyone else in this boat want to get together and have a filing party over some beers lol?

I don't think you have anything to worry about with the border guys. Does your wife travel on a US or Canadian passport? The trouble will come when trying to renew a US passport if it comes to that.

For the forms, start with a 1040 from the current year and just chip away at it. Get the foreign earned income exclusion form and follow the directions on that. Remember to convert to US dollars. FBAR forms are filed online now, and you need to find the maximum balance for the year for each account you have signing authority over.

Biggest piece of advice is don't rush anything. Don't panic and make any big decisions until you've done your research. Don't join any amnesty programs until you have read about them.

[Prelude_dude]

My wife is only a Permanent Residence here, and travels solely with her US passport.

In terms of converting to US dollars, am I just using the current rate as of the day I am doing the documents?

Thanks!

[sabad66]

Originally posted by Prelude_dude
My wife is only a Permanent Residence here, and travels solely with her US passport.

In terms of converting to US dollars, am I just using the current rate as of the day I am doing the documents?

Thanks!
Use these:
http://www.irs.gov/Individuals/International-Taxpayers/Yearly-Average-Currency-Exchange-Rates