# US Expat tax - first time filer questions



## CanadianAbroad13

Ack! I've only recently learned of my filing obligations in the US; I'm born in Canada, lived in Canada until 2008 at which time I moved to Ireland. I work for a US multinational but for their EU entity, but I have 'non-earned' income such as employee stock purchase plan, restricted stock units, and minimal interest earned in savings accounts ($50-$400 a year which I pay tax on). Didn't realize I had to file, always thought once I (if I) ever move to the states I'd then have to file there and also report on any worldwide income, but didn't realize that as an individual never residing in or working in the US I had filing obligations.

I'm trying to gather everything up to file 6 years of FBARs which seems relatively straight forward other than understanding what exchange rates to use for back years (advice?), but also looking into how I can tidy up previous years of income tax forms. I actually have an accountant in Ireland whom I've become disgruntled with - lack of service, long delays, and ultimately he hasn't even filed anything for me yet, despite having my Irish paperwork for 2 years and he prepared 2009-2010, I paid him, and he still hasnt filed with Revenue! He also seems unclear how to treat my stocks in Ireland but that's another story. So I'm thinking of getting my 2011 and 2012 paperwork back from him and trying to find a local accountant who can file both Irish and US taxes for me so I can get completely tidied up and up to date. I'm totally up to date on my Canadian taxes including my rental income I received since I've left for my apartment back there.

So! Here's where I'm confused. I understand I can exclude regular earned income up to the 90k(ish) threshhold....what happens if you earn over 90k? (Note I'm using 90k as an example, I know it's a little more than that) Also, what happens if you have 'unearned income'? I.e. lets say you earn salary 100k a year, plus another 25k from interest, rental income, stocks, etc. Can you exclude 90 of the 100k and then use tax credits for the remaining 10k and tax credits for the unearned income? Or can you only use one or another? I suspect I don't owe any tax since I live in high income countries plus I earn right around the cusp of the earned income exclusion, but I'm confused if I go over the excluded amount and/or how to handle the non-earned income. If my exclusion + housing or whatever covers my earned income can I still use tax credits for the unearned income? Also I read if you are more than 1 year overdue you cannot use the earned income exclusion - is that true??

Confused, worried, and losing sleep  

Also particularly vexed about this given I'm not even allowed to vote in the US. I tried to before and was told since I've never lived there any parents weren't in states that allowed children to vote from abroad within that state, I cannot vote. How is this even legal? How is this not taxation without representation? I already have to deal with taxes in two countries, now a third. OK, rant over, please help me


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## Nobledreamer

I can't answer your questions about the unearned income because I have no personal experience with that. But I can tell you that you can use xe dot com site to get a historical rate for the appropriate year. I'm pretty sure the directions indicate you use the rate for the last day of the year. That is what I have done and no problems so far. When I filed the first four years (late), I used the earned income exclusion. It is not possible to use the FEIE for a partial year filing or for a final 1040NR. 

Did you take Irish citizenship? Do you have any real reason to return to the US? Have you ever used any of the benefits of USC such as passport, applied for any sort of benefits etc? Do you have a Social Security Number? It's entirely possible you're not on their radar. Just something you can consider.


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## Nononymous

You have a non-US birthplace. Do you have any "official" connection to the US at all - passport, social security number, whatever? If you do not, you are probably well and truly under the radar, and can travel to the US on your Canadian passport without alerting the authorities to your US citizenship. If this is the case, I'd think long and hard about whether it's in your interests to become compliant. 

If your parents registered your birth for citizenship purposes that probably won't put you on the radar, as it will be a piece of paper somewhere in the archives.


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## CanadianAbroad13

I have a passport, and actually stupidly got a SSN in 2011 whilst visiting the US so I could facilitate ease of move as I was considering moving to the states. Didn't realize the headache and hassle all this can cause! Plus I'd still like the option to move to the states and I certainly don't want any hassles in the future.

Does anyone have any input on my original questions?

Another question:

I bought an apartment in Canada in 2004. I lived in it until moving to Europe in 2008. I rented it for the remainder of 2008 and through November 2009 and paid rental income tax in Canada. I then sold it in December 2009 (sale closed January 2010). I didn't owe any taxes in Canada on the sale since it was my primary residence there for the required period of time. Do I risk owing anything in the states?! I think since I lived in it for 2/5 years I can exclude up to 250k of gains, is that right? I had less than 250k in gain. Is there both an income tax and a capital gains tax liability here or am I clear?


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## Bevdeforges

OK, first don't panic. You're far from the first "accidental American" to suddenly discover the US tax obligation.

The current FEIE is up to something like $96K (it's adjusted for inflation each year). As you reckon, you can exclude the first $96K (or whatever it is for the year) from your salary (exclude = formally on form 2555). You then apply income tax paid to your country of residence (Ireland, I gather) against the US tax liability on the remainder. You wind up doing the same on "unearned" income - from bank interest, rents or whatever.

I wouldn't bank on finding a single accountant to handle both your Irish and US taxes. Check with either the US consulate or any local US expat associations to see if they have the names of any US tax advisors who can handle your US taxes.

Or, an Nononymous points out, do a long hard look at what sort of "exposure" you might have to determine what you want to do - both in terms of back filing and/or just starting to file this year and going forward. Or whatever you can live with. 
Cheers,
Bev


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## CanadianAbroad13

OK, any advice on the house sale? I've read something about currency exchange loss/gains too on it...does that apply if you didn't use USD at any point?


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## Bevdeforges

CanadianAbroad13 said:


> OK, any advice on the house sale? I've read something about currency exchange loss/gains too on it...does that apply if you didn't use USD at any point?


It looks like the home sale is ok under the US rules. It was your principal residence for the necessary period of time and as long as the gain was less than $250K you don't even need to declare it on the tax returns for the year of sale. (At least that's what the lawyer told me when we sold my parents' house.)
Cheers,
Bev


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## DavidMcKeegan

I agree with Bev, you won't have to worry about reporting the house (as long as your gains were less than 250K) as it would have been considered your primary residence for US purposes as well.

If you are interested in coming forward, now is actually a pretty good time to do so. With the new Streamlined program in place you can file the last three years of taxes, and six years of FBAR, and be considered caught up. Best of all, if you don't owe anything to the US (which is entirely possible given you are living in a high tax country and that you will be using the FEIE), you don't have to worry about any fines or penalties coming for coming forward (as these are usually assessed on taxes owed).

Hope this helps!


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## BBCWatcher

Just out of curiosity, why the FEIE for a filer living in a comparatively high tax jurisdiction? I've never really understood that recommendation, at least as a blanket one. Solely relying on the FTC seems like the better option.


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## DavidMcKeegan

BBCWatcher said:


> Just out of curiosity, why the FEIE for a filer living in a comparatively high tax jurisdiction? I've never really understood that recommendation, at least as a blanket one. Solely relying on the FTC seems like the better option.


You are right, using the FEIE is not always the best way to go if a person is living in a high tax country. You would have to have more details to determine which is the best route to go (i.e. which way will save the most money). I just used the FEIE for simplicity as more people seem to understand the rules surrounding that.


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## BBCWatcher

Except I don't think the FEIE/FHE are any simpler from a tax preparation point of view. Rather the opposite, actually, since many/most people at all income levels still go through the FTC path for something on the unearned income side.

My point is that, especially with tax prep software (online and otherwise, include free stuff like TaxAct) it's easier if you just skip the FEIE/FHE questions on your first pass through and see where you are because all the other questions are the same. Then, if and only if the U.S. tax owed is greater than zero, go back, spend time answering the "bonus" FEIE/FHE questions (days spent outside the U.S., housing expenses, etc.) and see if you do any better.


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