# Couple of US tax questions



## sunshinegal (Feb 6, 2012)

Hi,

I am a dual Canadian-US Citizen. I have not lived a day of my life in the US, but I have US Citizenship through my mother. I realize now that I need to file both taxes and the FBAR in the US. I have a couple questions:

1) All of my employment income will be exempt through the foreign earned income exclusion. However, I have a small amount of interest each year. This falls under the personal exemption amount, though (I think the most I earned in one year was maybe $1400 US). Do I still need to file form 1116 if this interest income falls under the personal exemption?

2) I started a job working for the Federal Government of Canada in 2010. I am buying back some previous pensionable time for their pension plan (Public Service Pension Plan - it is a defined benefit pension plan). I transferred some of my money in my RRSPs to this plan to contribute towards buying back my past service. There were no tax implications for this in Canada. Will this have tax implications in the US, such a being considered a disposition? This money never went into any of my accounts - it went straight to the Government people that are dealing with my buyback of pensionable time. Is there a special way for me to report this for US taxes?

Thanks!
Michelle


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## Bevdeforges (Nov 16, 2007)

1.) Chances are, you won't need to file a 1116. You only do that if you need the tax credit to avoid having to pay to the US. 

Easiest way to handle things is to start with form 2555 - that declares and excludes your earned income. And the last line of the form tells you where to put the results on your form 1040.

Then, list your interest income on the Schedule B (since you have to file a Sch. B thanks to the question at the bottom about foreign bank accounts). Transfer the total from the Schedule B to the appropriate 1040 lines.

As long as your interest income is below the exemption and standard deduction amounts, your "tax due" should work out to be 0. If it doesn't, then you start looking into the 1116.

The exact amounts depend on your filing status (i.e. single, married filing separately, etc.) but unless you have a few thousand dollars in interest income (or income from other sources), chances are you'll have 0 taxes due.

2.) I don't know enough about the RRSP plans to be able to advise you on this. It would depend, I suspect on whether or not the IRS considers an RRSP to be a "tax deferred retirement plan" similar to a US IRA or 401K. Perhaps someone with more knowledge of the Canadian system can help here.
Cheers,
Bev


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