# Basic questions re: filing US taxes



## NQ17 (Feb 13, 2012)

Hello all, first post!

I'm a US citizen living permanently in Canada. I've become aware of my obligation to file, which I haven't done. I've lived here 7 years now, settled permanently with no plans to return but no wish to renounce.

Most of the past 7 years I have not earned enough income to be required to file under "married filing separately." However the past couple of years, I have and I'm starting to feel really nervous about not having filed the US returns (once I knew I had to).

I don't have a very complicated financial situation at the moment, only income from standard employment and, this past year, provincial student aid (loans and grants). Spouse is a non-resident alien (Canadian citizen).

Thanks to this site I have learned I can write NRA in the spouse SSN area, something that was not clear to me earlier and was discouraging me from even attempting to file my returns myself. The other thing is converting my income to USD, what conversion rate do I use?

In all years I have earned well under the amount covered by the FEIE, but I have heard that you can only apply the FEIE if you're filing on time? So if I'm filing past year returns I can't apply it?

Also I have heard that there are fees for filing past year returns and that they are not mailed to the same place. On the IRS website it says nothing about fees and to mail past year returns to the address given on your notice. As I'm doing this voluntarily I've received no notice, so where do I send them?

Also how many years do I need to send? I've heard 3 and 6. I've also heard to file for years you don't technically have to file just to start the clock running. And what other forms do I need to file? I've heard about the FBAR but don't know much about it...

Sorry for all the questions. Canadian taxes are so straightforward whereas US taxes make me so nervous I get butterflies in my stomach just thinking about it! (I moved here just after I turned 18 so have never filed US taxes for myself).

I'm also very nervous about future financial planning, such as buying a home and retirement/pension plans, and estate planning. What happens if I one day inherit something from family? It's all so complicated and seems very unfair to me, it makes being a US citizen almost a burden, should you have the misfortune to prefer living elsewhere/fall in love in another country. We're going to have to structure our entire financial lives around my citizenship. I was considering renouncing but I don't think I can really go through with it. I still have family there and intend to visit and travel, and who knows what I will want to do in my old age? Not to mention it's just emotionally wrenching to think of. How sad is it though that that appears as a possible reasonable option?

Anyway thanks for listening and thanks in advance for any advice!


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## byline (Dec 5, 2011)

NQ17 said:


> Also I have heard that there are fees for filing past year returns and that they are not mailed to the same place. On the IRS website it says nothing about fees and to mail past year returns to the address given on your notice. As I'm doing this voluntarily I've received no notice, so where do I send them?


I wonder if you are confusing FBARs with income tax returns? FBARs are mailed to the U.S. Treasury Department, income tax returns to the IRS. I mailed all of my past returns to the IRS, and there were no fees (other than what I paid my accountant to prepare them).

Likewise, there were no fees to submit past FBARs. I owe no taxes in the United States, and so simply completed the 2010 FBAR and sent it to the address on the form: http://www.irs.gov/businesses/small/article/0,,id=148849,00.html

The basic rule about the FBAR is that if you have more than $10,000 in any financial account in your name (single or joint) in a given tax year, then you have to file an FBAR. Financial accounts including chequing, savings, RRSPs, investments, etc. It's also important to bear in mind that tax-free savings accounts in Canada are _not_ tax-free in the U.S.

Most of all, don't panic. Those of us in your same situation have been there, done that and been through a lot of angst. It's very easy to get down on yourself. Don't!


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## NQ17 (Feb 13, 2012)

Thanks! Well on the IRS website it mentions that if you are filing a past due return you may have been given a different address to send it to. But that's given the assumption that you are filing the return because the IRS has already sent you a notice that you need to file it, and the possible alternate address would have been included there. But I guess that's a bit like having had an account "sent to collections" and since that hasn't happened to me I can send them to the usual place?

So at no time during the past 7 years have I had $10,000 in my accounts. Does that mean I don't need to file any FBARs or do I need to file one just to show that I haven't needed to file one? (does that even make sense? lol!)


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## Bevdeforges (Nov 16, 2007)

Actually, all good questions, and I'm sure there are lurkers who will be very happy that you asked them.



NQ17 said:


> Thanks to this site I have learned I can write NRA in the spouse SSN area, something that was not clear to me earlier and was discouraging me from even attempting to file my returns myself. The other thing is converting my income to USD, what conversion rate do I use?


These should work out just fine: Yearly Average Currency Exchange Rates 



> In all years I have earned well under the amount covered by the FEIE, but I have heard that you can only apply the FEIE if you're filing on time? So if I'm filing past year returns I can't apply it?


Nope, just file your back returns and take the FEIE. Be sure to download the proper year's 1040 and 2555 from the IRS website. There are a couple of things that have to be "timely filed" but the FEIE (form 2555) isn't one of them.



> Also I have heard that there are fees for filing past year returns and that they are not mailed to the same place. On the IRS website it says nothing about fees and to mail past year returns to the address given on your notice. As I'm doing this voluntarily I've received no notice, so where do I send them?


The IRS maintains a backlog of prior year forms and publications Prior Year Products Pub 54 for the appropriate years should have the address where to file.

There are no fees to back file. If you owe tax on those prior years, you have to pay interest and any penalties from the date the returns were originally due - but the interest on 0 is always 0, so you should be ok.



> Also how many years do I need to send? I've heard 3 and 6. I've also heard to file for years you don't technically have to file just to start the clock running. And what other forms do I need to file? I've heard about the FBAR but don't know much about it...


I see you already have the word on FBAR. For the income tax returns themselves, you only file for those years in which you had gross income over the threshold ($3700 for 2011, figure $3200 - $3500 in the prior 5 years or so). If you've only had income to report in the last couple of years, I'd just file 2011 and no more than 3 prior years (2010, 2009, 2008 - but only those years where you have income over the threshold amount - see the instructions for the 1040s for those years). Chances are you'll owe no taxes and as long as the back filings you do confirm this, you don't need to go back any further than that.



> Sorry for all the questions. Canadian taxes are so straightforward whereas US taxes make me so nervous I get butterflies in my stomach just thinking about it! (I moved here just after I turned 18 so have never filed US taxes for myself).


The first time you file is the toughest - but once you get the pattern going, it's pretty easy. Take a look at this thread to get you started: http://www.expatforum.com/expats/expat-tax/102555-foreign-earned-income-exclusion-simplest-case.html



> I'm also very nervous about future financial planning, such as buying a home and retirement/pension plans, and estate planning. What happens if I one day inherit something from family? It's all so complicated and seems very unfair to me, it makes being a US citizen almost a burden, should you have the misfortune to prefer living elsewhere/fall in love in another country. We're going to have to structure our entire financial lives around my citizenship. I was considering renouncing but I don't think I can really go through with it. I still have family there and intend to visit and travel, and who knows what I will want to do in my old age? Not to mention it's just emotionally wrenching to think of. How sad is it though that that appears as a possible reasonable option?
> 
> Anyway thanks for listening and thanks in advance for any advice!


Don't do too much future financial planning around your US citizenship. It's really not worth it. If you inherit from your family, it's primarily the executor of the estate who has to figure out what taxes need to be paid and how. Leave inheritances in the US until you actually need the money, and it's all very simple. 

Pension plans will normally need to be reported, but they shouldn't generate much, if anything, in terms of additional taxes. Buying a house shouldn't affect your US taxes much - you still get all the same exemptions and standard deduction, etc. as any US citizen resident in the US. Yes, it's a pain, but unless you have tricky financial investments (usually those designed to avoid taxes), it's manageable. Find out how to handle new financial accounts as you have the money to start getting into them. Tax law may change over the next few years, so it's kind of pointless to worry about things until you know what you're worrying about.
Cheers,
Bev


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