# Filing US Taxes



## canmc

I was listening to the radio tonight and realized that I should be filing US tax returns in addition to Canadian. Great! Luckily I last filed in 2008 so I will only have 2 returns to file, but still makes me nervous when dealing with the IRS.

I looked at the IRS website and it looks like I would file a 1040 and 2555. I am a US citizen and permanent resident of Canada married to a Canadian citizen. We also had our first child in 2010. All of their examples are for 2 married US citizens. I assume I would mark married filing separately even though we are not both filing. My husband would not have to file a US tax return and does not have a social security number so do I just leave his information blank? I assume I only report my income, but do I have to report my RRSP and any of our investments that we have together? We don't have a social security number for our son yet, but am planning to report his birth in Toronto when I can make an appointment and apply for that then. 

I only work part-time so cannot imagine that I would owe any taxes, but am worried as I will be filing 2 years very late. I did file Canadian taxes so I have all my earnings information. I think I read that I have to convert that to US dollars. Any suggestions on what exchange rate I use to do that?

Thanks in advance for your help.


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## canmc

Just trying to fill out form 2555...I really have to keep track of every time I go to the states. My head is going to explode filling all of this out!


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## Bevdeforges

First of all, don't panic. You are far from the only US citizen to be caught in this situation and the US is doing a big advertising blitz in Canada at the moment over the issue. As long as you're not hiding any "offshore" assets or income, you should be able to simply file the returns and be done with it.



> I looked at the IRS website and it looks like I would file a 1040 and 2555. I am a US citizen and permanent resident of Canada married to a Canadian citizen. We also had our first child in 2010. All of their examples are for 2 married US citizens. I assume I would mark married filing separately even though we are not both filing. My husband would not have to file a US tax return and does not have a social security number so do I just leave his information blank? I assume I only report my income, but do I have to report my RRSP and any of our investments that we have together? We don't have a social security number for our son yet, but am planning to report his birth in Toronto when I can make an appointment and apply for that then.


Correct on the forms to file. I find it's usually easier to start with the 2555, carry over the final figure to the line they say on the 1040 and then fill in the rest of the 1040. 

Yes, you file "married, filing separately" and put "NRA" in the space that asks for your husband's SS number. (NRA does not stand for "National Rifle Association" but rather "Non-resident alien")

There is apparently a form you can file (8891) to declare your Canadian RRSP as a retirement account and it will be treated like a US IRA (i.e. you won't pay tax on the earnings as they accumulate, but only when you start withdrawing funds on retirement).

You should go ahead and get your son his SS number, but you don't really need it to file your return unless you are taking him as your dependent. Given that your earnings should all be covered by the earned income exclusion, you probably don't need to take him as your dependent anyhow.

You probably should report your joint investment accounts on a Treasury form (which is a separate filing). For that, you need a Schedule B, but just go to the bottom of the form and check the little box asking if you have overseas financial accounts. The number of the Treasury form is there on the Schedule B, which you send to a different address. It's only a declarative filing, no taxes to pay.

Oh, and on the 2555, don't bother trying to recall every trip you made to the US. Since you're using the "bona fide resident" criteria, it's not critical - and I would just list the longer visits back to the US, say those of a week or more. The visits back to the US are more crucial if you are trying to qualify under the "physical presence" test because there's a limit to how much time you can spend in the US on that one.
Cheers,
Bev


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## canmc

Bevdeforges said:


> First of all, don't panic. You are far from the only US citizen to be caught in this situation and the US is doing a big advertising blitz in Canada at the moment over the issue. As long as you're not hiding any "offshore" assets or income, you should be able to simply file the returns and be done with it.
> 
> 
> 
> Correct on the forms to file. I find it's usually easier to start with the 2555, carry over the final figure to the line they say on the 1040 and then fill in the rest of the 1040.
> 
> Yes, you file "married, filing separately" and put "NRA" in the space that asks for your husband's SS number. (NRA does not stand for "National Rifle Association" but rather "Non-resident alien")
> 
> There is apparently a form you can file (8891) to declare your Canadian RRSP as a retirement account and it will be treated like a US IRA (i.e. you won't pay tax on the earnings as they accumulate, but only when you start withdrawing funds on retirement).
> 
> You should go ahead and get your son his SS number, but you don't really need it to file your return unless you are taking him as your dependent. Given that your earnings should all be covered by the earned income exclusion, you probably don't need to take him as your dependent anyhow.
> 
> You probably should report your joint investment accounts on a Treasury form (which is a separate filing). For that, you need a Schedule B, but just go to the bottom of the form and check the little box asking if you have overseas financial accounts. The number of the Treasury form is there on the Schedule B, which you send to a different address. It's only a declarative filing, no taxes to pay.
> 
> Oh, and on the 2555, don't bother trying to recall every trip you made to the US. Since you're using the "bona fide resident" criteria, it's not critical - and I would just list the longer visits back to the US, say those of a week or more. The visits back to the US are more crucial if you are trying to qualify under the "physical presence" test because there's a limit to how much time you can spend in the US on that one.
> Cheers,
> Bev


Thank you Bev. I appreciate your answer. As I am late filing anyhow, I guess there is no rush to get these filed asap. If I don't owe any taxes hopefully I won't have big fines. It does help to know there are lots in my same situation. Perhaps they will go easy on us.


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## TO_andrew

*All Tax Forms and Instructions*

If you are looking for all the necessary tax forms for previous years. I've been using this archive site.

Do a search for Uncle Fed dot com and IRS Tax Forms, Instructions, & Publications

Forms and instructions are included.

Cheers~!


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## Bevdeforges

All prior year tax forms and instructions are available on the irs website. Prior Year Products
Cheers,
Bev


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## TO_andrew

*Some confusion*

There is some confusion about FBAR. I spoke with three different IRS agents last Friday and only one person knew what the form was. Each gave me a 1-800 number that doesn't work internationally, found a local number and the person couldn't answer all of my questions on how to interpret the following: 

1. Certain foreign financial accounts jointly owned by spouses;
2. United States persons included in a consolidated FBAR;
3. Correspondent/nostro accounts;
4. Foreign financial accounts owned by a governmental entity;
5. Foreign financial accounts owned by an international financial institution;
6. IRA owners and beneficiaries;
7. Participants in and beneficiaries of tax-qualified retirement plans;
8. Certain individuals with signature authority over but no financial interest in a foreign financial account;
9. Trust beneficiaries; and
10. Foreign financial accounts maintained on a United States military banking facility.

Agent gave a standard answer of "the Treasury has its definitions to these, but I don't have access to that".

It is quite frustrating.


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## AtHomeInCanada

My situation is like so many others! I have lived in Canada since 1975 I was a child. I have been raised as Canadian. I am a permanent landed immigrant. I have lived and worked here all my life since, raised a family, paid all my taxes here. I am a law abiding citizen!

I just found out about the US filing requirement a week ago (and while out of town)! I panicked and sent in the OVDI request to Philadelphia and Austin, asking for a 90-day extension so I could get home and figure everything out. I don't even have a Social Security number! So the fact is, I can't even file anything. I tried to verify over the phone if I was ever assigned a SSN, but the SSN administration told me I need to verify my identity *in person*, so NOW I am taking a day off work to travel to the nearest U.S. Consulate! Just to start at square one.

Now I am wondering if I should have gone the 'Quiet Disclosure' route? As I am not hiding any assets, I am just an ordinary citizen, living an ordinary honest life, yet applying for OVDI to a criminal investigation office because I understood that is the best course of action if you have Canadian RRSPs! (They are my ONLY savings for retirement, I don't have a pension, and so it terrifies me to think the IRS will take a big chunk of my savings!)

If I go the 'Quiet Disclosure' route NOW, will I be flagged and end up in audit anyway? With higher penalties that could wipe me out financially. One accountant told me it "depends on your risk tolerance." Well I don't have any! I am a very conservative saver. That is why I applied to OVDI, as I hoped to qualify for the 5% reduced penalty. Now I am hearing stories of "bait and switch" and that no one ends up with that low of a penalty.

At the heart of everything, I truly do now want to be a Canadian citizen, but heard you cannot renounciate U.S. citizenship without completing all the IRS forms anyway! Also, how can I renounciate if I am not officially a Canadian citizen yet -- am I 'naturalized' by now? After being here since I was a child?

I feel like I'm in limbo. I've contacted 4 accountants, all of whom quoted me $15,000 to file the forms for me. I can't afford to pay those kind of fees AND whatever the IRS will take. I'm afraid of what an immigration lawyer would cost. I'm mentally exhausted, now crying myself to sleep at night, sick with worry, and so unsure what to do next. There doesn't seem to be a place to go for help. All the laws between Canada and the U.S. are in conflict with each other (banking, privacy, tax). Innocent people are stuck in the middle.

As far as I can tell, the IRS has done NOTHING to help Canadian residents. There is no IRS office in Canada, not even a phone number. The embassies don't handle tax matters. The International taxpayer assistance line is in Puerto Rico! All the "toll free" numbers don't even work when dialing from Canada. I spent *one hour on hold* to the IRS office, and the agent just rattled off a bunch of form numbers for me to complete. There is no where to go, except reading online, and from other expats.

I feel emotionally wiped out. If anyone has any advice for me, please help!


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## AmTaker

AtHomeInCanada said:


> If I go the 'Quiet Disclosure' route NOW, will I be flagged and end up in audit anyway? With higher penalties that could wipe me out financially. One accountant told me it "depends on your risk tolerance." Well I don't have any! I am a very conservative saver. That is why I applied to OVDI, as I hoped to qualify for the 5% reduced penalty. Now I am hearing stories of "bait and switch" and that no one ends up with that low of a penalty.
> 
> ...
> 
> I feel like I'm in limbo. I've contacted 4 accountants, all of whom quoted me $15,000 to file the forms for me. I can't afford to pay those kind of fees AND whatever the IRS will take.


If you meet the conditions (but you have to meet them completely) and it sounds like you do, then you will get a penalty of 5%. But even a 'mere' 5% seems unfair in your situation. 

I don't know if there is any real difference between quiet disclosure and applying for the OVDI, then opting out. Even in quiet disclosure, the IRS knows that you have disclosed, so it should be considered pretty much the same. But realistically, they have very little interest in people like you, so please try not to be so worried. I think that just filling in forms quietly should suffice. 

That 15K number for tax forms seems outrageous and truly extortionate. If you're a DIY'er, you could probably do pretty much all of it yourself.


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## Vangrrl

canmc said:


> I was listening to the radio tonight and realized that I should be filing US tax returns in addition to Canadian. Great! Luckily I last filed in 2008 so I will only have 2 returns to file, but still makes me nervous when dealing with the IRS.
> 
> I looked at the IRS website and it looks like I would file a 1040 and 2555. I am a US citizen and permanent resident of Canada married to a Canadian citizen. We also had our first child in 2010. All of their examples are for 2 married US citizens. I assume I would mark married filing separately even though we are not both filing. My husband would not have to file a US tax return and does not have a social security number so do I just leave his information blank? I assume I only report my income, but do I have to report my RRSP and any of our investments that we have together? We don't have a social security number for our son yet, but am planning to report his birth in Toronto when I can make an appointment and apply for that then.
> 
> I only work part-time so cannot imagine that I would owe any taxes, but am worried as I will be filing 2 years very late. I did file Canadian taxes so I have all my earnings information. I think I read that I have to convert that to US dollars. Any suggestions on what exchange rate I use to do that?
> 
> Thanks in advance for your help.



My situation is very similar to yours, except I'm a Canadian citizen and have lived here most of my life.

My own opinion is that you keep your non-US family members off the IRS radar unless absolutely necessary. 

I have 2 kids, one who is a US citizen (probably a mistake on our part) and one who probably is, but hasn't been registered. I have a SSN for the elder one and I am reporting him on my US taxes, but I'm leaving the little one off completely and have no intention of registering her birth until she is old enough to decide that she wants US citizenship (or if for some unexplained reason, we are relocating to the US as a family). With a Canadian place of birth and a Canadian passport. As it stands right now my son will be filing US tax returns for the rest of his life (unless he renounces). I don't want to burder her with the same requirement unless it is beneficial to her to do so.

Just my opinion and this topic seems to be evolving over time, so I might change my mind going forward but for now, that's our plan!


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## TO_andrew

*CRA won't collect fines or levies*

There is an article in at the Vancouver Sun, stating the the CRA won't collect fine or levies issued by the IRS. The subsequent part of this, is that the CRA won't allow anyone to reach into RRSP, RESP, TFSA, etc.

Google "Opinion: Canada Revenue Agency won’t pile on victims of IRS campaign against Canadian residents" dated August 22st.


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## Nursiegirl

canmc said:


> Thank you Bev. I appreciate your answer. As I am late filing anyhow, I guess there is no rush to get these filed asap. If I don't owe any taxes hopefully I won't have big fines. It does help to know there are lots in my same situation. Perhaps they will go easy on us.


I am in a similiar situation and hope they do go easy on all us "small" liabilties. This website is a great resource and definately makes one feel more at ease.
My info is being prepared and I am sending it this week once completed with a nauseous feeling in my stomach I can't seem to get over.


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## Canuck-1

This and other similar threads are very enlightening and informative. Thanks to all for your contributions. 

Sorry to sound like a broken record, but my situation is similar. I was born in the US but brought to Canada as an infant by non-US parents in the 1950s. I went to the US in the 1980s for a couple years to work due to poor job market in Canada, but returned and lived here since. I filed US tax returns during that time, but stopped filing a few years after returning to Canada. I had one child born in the US before I returned to Canada. The second was born in Canada, but I did apply for the child's US citizenship when an infant. I've paid my Canadian taxes every year. Perhaps I was naive, but during all these years I was never aware of the US tax laws requiring me to file. 

I've recently become aware of the news about obligations to file US taxes. This has caught me off guard as I'm sure it has many others. I'm now in my late 50s and my two kids in their early 20s who until now were also not aware of the US tax obligations. I have a SSN, but they do not. They are looking to me for advice, but I don't know what I should do for myself let along advise them. 
All three of us have Canadian citizenship. None of us have any interest in moving to or working in the US.

Renouncing our citizenships to avoid future obligations is one avenue, but I've read many warnings about the IRS coming after you plus the financial commitments for filing back taxes; that will be challenging for me and impossible for my cash-poor kids. (Any advise you can offer here would be much appreciated.)

If renouncing is a good idea, then it seems to me the route to go is file my back taxes (including FBARs) first, then renounce my US citizenship, but will I incur many more costs? 
Since both kids are relatively young their route might be different, but I don't know what that is or how to advise them.
Does anyone know a good & reasonably priced US tax account in the Vancouver area?

Any advice on the above would be most appreciated.


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## Vangrrl

Canuck-1, your story is almost identical to mine except I'm 20 years younger 

What I am doing is back filing taxes for the last 3 years and claiming my US-born son as on my taxes. We both have US birthplaces and US passports and SSNs so I feel we are both "on the radar". We both need US passports to travel to the US (or will eventually once the US become more strict about this - I believe they are more in the warning phase right now at the border) so we need to be compliant. 

Whether you want to renounce or not, at this point, the path is still the same: identify yourself by filing back a few years with the aim of having 5 years of filed returns and hope they don't levy fines against you. Obviously we are all hoping that we will not be fined. Once you are tax compliant, you can either continue filing going forward or take steps to renounce. I don't believe there is any further penalty for renouncing - the rule is simply that renunciation doesn't exempt you from any previous tax obligatons - if you owed tax before you renounced, you are still responsible for paying that tax (which makes sense). Once I've filed 5 years, I'll keep renunciation open, but for now my husband and I are in our 30's and I'm not ready to completely close the door on ever living in the US (a Canadian wouldn't have to make that decision, so why should I?).

I think your elder child (like mine) is in the same boat as you. He'll need to identify as an American if he plans to travel to the US again. With regards to your younger child, you don't mention if your children's mother is a US Citizen. If she is, then I'd treat both kids as citizens, regardless of place of birth, since both parents will be filing US tax returns and eventually if your estate goes to both kids. But if she's a Canadian, I think your younger one can fly under the radar since he has no US birthplace or SSN. That's my plan with my younger one (although I haven't registered her birth)

As far as getting a SSN - I think your older son would be able to do that in person at whatever the closest SSN office is (does Bellingham or Blaine have one?). I would think that all you need is a US birth certificate. I imagine there is info online about it.

I believe there is an income threshold for filing, so its possible your children, if they are students, may not need to file back.


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## Bevdeforges

There are literally thousands of American citizens living overseas who are unaware of their obligation to file US taxes based on their worldwide income. The chances of you owing any significant amount of taxes is very slight, as is the chance of the IRS swooping down to assess massive fines or penalties.

Best course of action is to file the current year plus 3 back years (corresponds to the statute of limitations) and then to continue to file going forward. Unless you have complex financial arrangements, the forms aren't that difficult to fill out. All necessary forms are available on the IRS website in their Forms and Publications section, along with the instructions.

As Vangrrl mentioned, if your children are still students and can be claimed on your forms as dependents (for which they will need social security numbers), then they aren't obligated to file unless they have income in their own names in excess of the filing threshold.
Cheers,
Bev


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## Pathologic1

I hate to sound like a broken record but I hate seeing people as paranoid as I was.

When worrying about FBAR fines it is important to remember:
1) No honest Canadian taxpayer has ever been forced to pay an FBAR fine. In fact no one without criminal tax evasion charges has ever been forced to pay. It is true you could be the first but there are bigger, scarier risks in life (driving in your car for instance, death and mayhem).
2) These are not tax penalties. They cannot merely say you owe it to them like with taxes. They have to take the case to civil court to have it levied. This also means the CRA won't enforce the payment as if they were taxes owed to the US. And Canada has already said they will not help collect such fines from Canadians. The the American civil court also has no authority in Canada so they would have to take it to a Canadian court. 
3)The stated purpose of all this is to get expats to file. Penalizing people with such absurd penalties certainly won't get more people become compliant. Instead everyone would hide and rush to read books like "creditor protection in BC" to restructure their savings making them inaccessible to creditors. The result would be no one filing and no money available to seize. They want everyone to file.
4) You should really notice who is spreading the paranoia. As Bevdeforges has indicated, it's those that stand to make money from this. Primarily lawyers. Take what they say with a boulder of salt. Ask them to show you anyone that can be considered an honest taxpayer in a non tax haven country like Canada, Britain, etc. that has been compelled to pay these FBAR fines. None? Oh ya the theoretical Boogeyman is after me so I should give you a bunch of money to protect me. Nonsense. Unless you are hiding something which is potentially considered criminal tax evasion. 
5) It would be very expensive to chase you and they need to be efficient and take in more than they spend. Going slowly through two court systems with very questionable results just isn't what they are after. Chasing small very costly fish just isn't going to happen. 

Finally, I have seen the Canadian civil courts in action and by the time any such case worked its way through the US and Canadian courts you would have had more than ample time to become "broke". 

So file, relax and wait for nothing to happen as has happened to thousands before you.


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## Mona Lisa76

Pathologic1 said:


> I hate to sound like a broken record but I hate seeing people as paranoid as I was.
> 
> When worrying about FBAR fines it is important to remember:
> 1) No honest Canadian taxpayer has ever been forced to pay an FBAR fine. In fact no one without criminal tax evasion charges has ever been forced to pay. It is true you could be the first but there are bigger, scarier risks in life (driving in your car for instance, death and mayhem).
> 2) These are not tax penalties. They cannot merely say you owe it to them like with taxes. They have to take the case to civil court to have it levied. This also means the CRA won't enforce the payment as if they were taxes owed to the US. And Canada has already said they will not help collect such fines from Canadians. The the American civil court also has no authority in Canada so they would have to take it to a Canadian court.
> 3)The stated purpose of all this is to get expats to file. Penalizing people with such absurd penalties certainly won't get more people become compliant. Instead everyone would hide and rush to read books like "creditor protection in BC" to restructure their savings making them inaccessible to creditors. The result would be no one filing and no money available to seize. They want everyone to file.
> 4) You should really notice who is spreading the paranoia. As Bevdeforges has indicated, it's those that stand to make money from this. Primarily lawyers. Take what they say with a boulder of salt. Ask them to show you anyone that can be considered an honest taxpayer in a non tax haven country like Canada, Britain, etc. that has been compelled to pay ithese FBAR fines. None? Oh ya the theoretical Boogeyman is after me so I should give you a bunch of money to protect me. Nonsense. Unless you are hiding something which is potentially considered criminal tax evasion.
> 5) It would be very expensive to chase you and they need to be efficient and take in more than they spend. Going slowly through two court systems with very questionable results just isn't what they are after. Chasing small very costly fish just isn't going to happen.
> 
> Finally, I have seen the Canadian civil courts in action and by the time any such case worked its way through the US and Canadian courts you would have had more than ample time to become "broke".
> 
> So file, relax and wait for nothing to happen as has happened to thousands before you.


 Thissounds about right. My only concerns are that many Canadian (US citizens living in Canada) may be inadvertantly invested in Canadian-based mutual funds which could face punitive US taxation if deemed by the IRS to be pfic's or 'passive foreign investment companies'. These usually require a separate 8621 form per fund and are complex to file, thus nessecitating the use of a specialized (and expensive) accountant.

If all you have are straightforward bank accounts and individual company shares then higher rates of Canadian taxation should offset any US taxation through foreign tax credits. But because I was invested in a combination of UK tax-free savings accounts and UK tax-free pooled investment funds, I didn't have enough foreign tax credits to completely offset my US taxation. 
Yikes. But I am optimistic that civil fbar penalties will usually be waived in non-willful expat cases, which is why the ovdi seeed way too harsh, even at the 5% penalty.


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## Peg

Mona Lisa76 said:


> Thissounds about right. My only concerns are that many Canadian (US citizens living in Canada) may be inadvertantly invested in Canadian-based mutual funds which could face punitive US taxation if deemed by the IRS to be pfic's or 'passive foreign investment companies'. These usually require a separate 8621 form per fund and are complex to file, thus nessecitating the use of a specialized (and expensive) accountant.


Read here that we can file form "8891 to declare your Canadian RRSP as a retirement account and it will be treated like a US IRA". Would that then negate this issue about the pfic's? Or do we need to do both?

:confused2:


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## Pathologic1

*You can only handle so much..*

We all have to face up to it someday.
We are only going to "try" to comply with the taxman at the IRS.
We are not going to become fully compliant.
After all they want ridiculous things, like any Canadian mutual fund, REIT or other trust, RRSP, TFSA, RESP, etc require filing form 3520 filed which the IRS estimates should only take 53 hours to complete. !!!
Forget it... My accountant did. And I suspect yours did too..


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## Canuck-1

With all due respect to the expats who still like to wave the stars & stripes on occasion, I’ve been bred in Canada so except for what is stated on my birth certificate I am essentially a Canadian at heart. I’m annoyed about this US taxation business because the US stands alone in the world with their philosophy. I agree with “Pathologic1” that the fear is bred by those who profit the most (lawyers and tax accountants), but the US government planted the seed. As such I’m considering renouncing because I don’t want to worry about this taxation crap in the future. 

(Please excuse my soapbox rant.)

I’m a law-abiding citizen who has always tried to do the right thing including filing my Canadian taxes annually, and US taxes when I lived there for a couple years in the 1980s. It doesn’t make me happy to feel like a criminal and get stressed out by this, which is why I’ve searched out this forum. Again, thanks to all for your comments and/or advice, but I do have a few more queries… 

From what I’ve read so far, it sounds like I should file my back taxes before I consider renouncing. With that in mind, I read somewhere that you need at least 6 or 8 years of back tax filing. Is that correct? Whatever the amount, it’s more that the 3 years some have suggested, so should I consider filing the full number of years they require now rather than leaving it to some year in the future? 

Also, I also read that renouncing can bring forth penalties and scrutiny on all assets including you RRSPs and home (property). Is that true? 

Has anyone done the renunciation routine and can offer advice to the above and anything else I could expect but not mentioned? 

BTW, my wife is Canadian; my financial picture is fairly standard (checking & savings accounts, RRSPs, RESP). I had a TFSA, but cashed it out because I was told they're taxable in the US. My home is fully paid full for, but worth some $$ in the Vancouver real estate market.


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## 416

Canuck-1 said:


> From what I’ve read so far, it sounds like I should file my back taxes before I consider renouncing. With that in mind, I read somewhere that you need at least 6 or 8 years of back tax filing. Is that correct? Whatever the amount, it’s more that the 3 years some have suggested, so should I consider filing the full number of years they require now rather than leaving it to some year in the future?
> 
> Also, I also read that renouncing can bring forth penalties and scrutiny on all assets including you RRSPs and home (property). Is that true?


You need five years to renounce. (Google "renunciation guide" for lots of useful information). 

As for your second question, that's something I'm curious about too. As a common-sense issue, the IRS should recognize that they have limited leverage over a foreigner living abroad with no US assets, but who knows what will happen in reality.

Renunciation and inheritance is an area I should pay more attention to. If I die, I don't want my assets to be subject to a US taxation system for transfer of assets from a US citizen's estate to a foreigner.


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## TO_andrew

*Form 8891 to Declare your RRSP an IRA*

Do you have to fill out this form every year or do you fill it out once and then don't have to do so moving forward?

Example. File 2006 1040 with form 2555 and attach the 8891 and then don't file the 8891 for subsequent years?


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## Pathologic1

Your main problem with a house in Vancouver is that you may be above the 2 miliion net worth level where they tax the hell out of you. But since your wife is Canadian you could transfer the ownership to her until renunciation is over.

Its five years of tax filings and you can still renounce its just that the IRS will still require you have filed 5 years back and the year in which you renounced.

The complete guide
Site Overview | Renunciation of U.S. Citizenship: A Web Guide


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## Peg

If you read the thread "US taxes for dual citizens" there are links to a renunciation guide, information about filing etc. If I was confident in the details I would answer your queries but I'm not yet there.


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## Mona Lisa76

Pathologic1 said:


> We all have to face up to it someday.
> We are only going to "try" to comply with the taxman at the IRS.
> We are not going to become fully compliant.
> After all they want ridiculous things, like any Canadian mutual fund, REIT or other trust, RRSP, TFSA, RESP, etc require filing form 3520 filed which the IRS estimates should only take 53 hours to complete. !!!
> Forget it... My accountant did. And I suspect yours did too..


I believe that Canadians' personal pension funds are covered in their tax treaty against having to file the 3520 because the US has apparantly officialy recognized their status as accaptable for US citizens living in Canada. However, as I inadvertedly set up a personal pension in the UK which I can't access till I'm at least 55 under their rules (or 59 and a half under US rules), I could have inadvertedly set up what the IRS considers a foreign grantor trust which could require a 3520 and 3520a. These two forms alone would result in an annual accounting bill of several thousand dollars. I'm terrified but I can't undo what I have done and I simply can't afford to pay ongoing accounting fees like that for a pension fund worth less than 30,000 pounds. My accountant, however, believes we can claim article 18 of the treaty but it's a grey area.

In a worst case scenario I could be hit with IRS fines for failure to file these onerous forms and feel so vulnerable since it will be impossible to close or cancel the pension plans. This is why I am going to move all my remaining assets to the UK where I live so it will be much harder for the IRS to enforce potential fines for not filing these terrifying forms.

I agree that the US tax system adds onerous complications and forces relatively small fish like me to pay out for accountants who typically deal with far wealthier clients; By having failed to get proper tax planning in the past, I have inadvertedly made things complex when I could have avoided all this with the right advice.

I feel frightened and bitterly disappointed but can only hope the IRS will be undestanding about the pension stuff. I wish I had never set it up in the first place but if they learn that my employer won't let me enter their employee pension scheme due to fatca and my US citizenship, I'd hope that I won't be punished for not filing 3520/3520A as it would cost me more per year than what I put into it each year (just a couple thousand). I hate all these double standards the US imposes on me, especially when I will never benefit from it (as I plan to remain in UK forever).

My heart is in the UK but my family would never forgive me if I renounced. I feel torn as a result. ip can honestly say I wish I'd just spent my money instead of seemingly being penalized for trying to be prudent. It's all the worry and uncertainty that all this has caused me, plus I face six years of the statute of limitstions since the pfic investments caused me to inadvertedly miss declaring over 25% of my UK income to the US.  

But I hope common sense will prevail with all this. No one over in UK hears about US expats being routinely harrased by aiRS so would imagine I should be fine (and thus US Canadians too). It's more likely that the lawyers and accountants take advantage of the situation as others have said...but what a nerve-wracking mess. Just hope there will be tax reform in near future. I'm so glad the Canadians are pushing back...wish the British would instead of being America's poodle


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## Fuller1212

What about the Form 8891 - does she need to fill that out to defer any taxes on RRSPs or RESPs?
Also, does she need to fill out the TDF 90-22.1 (FBAR), to list her foreign bank accounts?
I have much the same situation, and assume I need to do both.....

Thanks



Bevdeforges said:


> First of all, don't panic. You are far from the only US citizen to be caught in this situation and the US is doing a big advertising blitz in Canada at the moment over the issue. As long as you're not hiding any "offshore" assets or income, you should be able to simply file the returns and be done with it.
> 
> 
> 
> Correct on the forms to file. I find it's usually easier to start with the 2555, carry over the final figure to the line they say on the 1040 and then fill in the rest of the 1040.
> 
> Yes, you file "married, filing separately" and put "NRA" in the space that asks for your husband's SS number. (NRA does not stand for "National Rifle Association" but rather "Non-resident alien")
> 
> There is apparently a form you can file (8891) to declare your Canadian RRSP as a retirement account and it will be treated like a US IRA (i.e. you won't pay tax on the earnings as they accumulate, but only when you start withdrawing funds on retirement).
> 
> You should go ahead and get your son his SS number, but you don't really need it to file your return unless you are taking him as your dependent. Given that your earnings should all be covered by the earned income exclusion, you probably don't need to take him as your dependent anyhow.
> 
> You probably should report your joint investment accounts on a Treasury form (which is a separate filing). For that, you need a Schedule B, but just go to the bottom of the form and check the little box asking if you have overseas financial accounts. The number of the Treasury form is there on the Schedule B, which you send to a different address. It's only a declarative filing, no taxes to pay.
> 
> Oh, and on the 2555, don't bother trying to recall every trip you made to the US. Since you're using the "bona fide resident" criteria, it's not critical - and I would just list the longer visits back to the US, say those of a week or more. The visits back to the US are more crucial if you are trying to qualify under the "physical presence" test because there's a limit to how much time you can spend in the US on that one.
> Cheers,
> Bev


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## Bevdeforges

Fuller1212 said:


> What about the Form 8891 - does she need to fill that out to defer any taxes on RRSPs or RESPs?
> Also, does she need to fill out the TDF 90-22.1 (FBAR), to list her foreign bank accounts?
> I have much the same situation, and assume I need to do both.....
> 
> Thanks


To be honest, I don't know enough about the Canadian retirement funds to be able to advise you on the form 8891. (And actually, the 8891 is a relatively new form, so I'm not real up to speed on its purpose.)

Earlier on in this thread, someone was advising to report everything on the TDF 90-22.1 and include the interest or other earnings from everything you report on your income tax return. If you can do this without owing any tax, by all means, go for it! That way, you can't be accused of hiding anything. If they come back and say they need further forms, then you know whether or not you should be filing them.
Cheers,
Bev


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## Fuller1212

Thanks - sensible suggestions...

The only concern is the amount of time to put all this together. I'm guessing I'd only need to report the accrued income for the last 3 years, but even that would be tough, as I have 3 RRSP account, and I trade within them quite actively, so we're talking dividends and taxable cap gains. If it's more than 3 years, then that could be not a lot of fun.
Plus, I think you're suggesting I refile the tax returns with this income now included for perhaps the past 3 years - the 2555 won't exempt it, so I'd probably owe tax.....




Bevdeforges said:


> To be honest, I don't know enough about the Canadian retirement funds to be able to advise you on the form 8891. (And actually, the 8891 is a relatively new form, so I'm not real up to speed on its purpose.)
> 
> Earlier on in this thread, someone was advising to report everything on the TDF 90-22.1 and include the interest or other earnings from everything you report on your income tax return. If you can do this without owing any tax, by all means, go for it! That way, you can't be accused of hiding anything. If they come back and say they need further forms, then you know whether or not you should be filing them.
> Cheers,
> Bev


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## TO_andrew

Fuller1212 said:


> Thanks - sensible suggestions...
> 
> The only concern is the amount of time to put all this together. I'm guessing I'd only need to report the accrued income for the last 3 years, but even that would be tough, as I have 3 RRSP account, and I trade within them quite actively, so we're talking dividends and taxable cap gains. If it's more than 3 years, then that could be not a lot of fun.
> Plus, I think you're suggesting I refile the tax returns with this income now included for perhaps the past 3 years - the 2555 won't exempt it, so I'd probably owe tax.....


Can't you just lump in all the income into the first line. And doesn't it all cancel out in the end?


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## TO_andrew

*Tax Credits, etc*

Think getting US expats abroad to comply is not the smartest thing for the IRS. I did my 2010 taxes using all the forms, etc and ended up with the IRS owing me $4594 in a refund. Multiply that for the six years, is over $27,000 in refunds owing. 

Now do that for every middle income expat and the IRS just dug a bigger hole for the US Government to dig itself out of.


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## Peg

TO_andrew said:


> Think getting US expats abroad to comply is not the smartest thing for the IRS. I did my 2010 taxes using all the forms, etc and ended up with the IRS owing me $4594 in a refund.


Can you share any details to explain how that happened? i.e., how do we get some? Seriously, different deductions allowed on the US return? Did you deduct your mortgage interest?


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## TO_andrew

Peg said:


> Can you share any details to explain how that happened? i.e., how do we get some? Seriously, different deductions allowed on the US return? Did you deduct your mortgage interest?


I figured it by doing a deduction for my kids (need to get a ITNN number for them), then the educational tuition credit, stock loses within my RRSP, childcare expenses, the list goes on and on on the 1040.


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## Vangrrl

But that's just how much more your taxes are living in Canada compared to filing only in the US. You can't be refunded taxes you never paid.

Maybe we're supposed to look at that difference and say "Damn, why aren't we living in the good ol' US of A?"


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## TO_andrew

Vangrrl said:


> But that's just how much more your taxes are living in Canada compared to filing only in the US. You can't be refunded taxes you never paid.
> 
> Maybe we're supposed to look at that difference and say "Damn, why aren't we living in the good ol' US of A?"


I found the rules on the tax forms to be quite vague. So if you fill out the right sequence of forms, you should be able to get a refund.


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## Peg

When completing form 1040, does a RRSP withdrawal, which on the Canadian return is "RRSP Income" go on Line 21 Other Income or 15A for IRA Distributions?

It is not an IRA but is the same idea.


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## Peg

Peg said:


> When completing form 1040, does a RRSP withdrawal, which on the Canadian return is "RRSP Income" go on Line 21 Other Income or 15A for IRA Distributions?
> 
> It is not an IRA but is the same idea.


Wish I could delete this question as figured out the answer - on Form 8891 it includes info about RRSP withdrawals - record on the 8891 and then on the 1040.


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## AmTaker

TO_andrew said:


> I found the rules on the tax forms to be quite vague. So if you fill out the right sequence of forms, you should be able to get a refund.


I think you get 1K per year credit for kid, then $800 for 2010 for Making Work pay credit. Not sure if you can get more than that.


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## AmTaker

And to add to my previous message, you need to file Schedule M as well to get the "Making Work Pay" credit and form 8812 for additional child tax credit. So if you're getting a significant chunk of money back without filling these forms, there could be a mistake on your form 2555.


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## Vangrrl

You are making sure to exclude the tax you paid on your "excluded income" right?

I noticed that my accountant only included what was needed to bring my income to zero. I had provided my mortgage interest, but he didn't include it. 

In any case if you get a big refund from the US, you'd have to report it as income on your Cdn tax return.


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## Bevdeforges

Vangrrl said:


> You are making sure to exclude the tax you paid on your "excluded income" right?
> 
> I noticed that my accountant only included what was needed to bring my income to zero. I had provided my mortgage interest, but he didn't include it.
> 
> In any case if you get a big refund from the US, you'd have to report it as income on your Cdn tax return.


If you're taking the 2555 exclusion, you have to apportion any and all deductions (like mortgage interest) between your excluded income and what's left. There is no point in bothering with that calculation if you can bring your tax liability down to 0 through other, easier means.
Cheers,
Bev


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## Nursiegirl

TO_andrew said:


> Think getting US expats abroad to comply is not the smartest thing for the IRS. I did my 2010 taxes using all the forms, etc and ended up with the IRS owing me $4594 in a refund. Multiply that for the six years, is over $27,000 in refunds owing.
> 
> Now do that for every middle income expat and the IRS just dug a bigger hole for the US Government to dig itself out of.


I didnt get that big of refund, but I got back 300. I think its hilarious!


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## Vangrrl

Bevdeforges said:


> If you're taking the 2555 exclusion, you have to apportion any and all deductions (like mortgage interest) between your excluded income and what's left. There is no point in bothering with that calculation if you can bring your tax liability down to 0 through other, easier means.
> Cheers,
> Bev


I think I get what you are saying - basically you can't just exclude $90,000 (or whatever is eligible for the exclusion) and then pile on all of your deductions against whatever income is leftover? 

My accountant applied 2555 to my salary income and then used the foreign tax credit for everything else. I'll assume he knows what he's doing. 

I've never had my taxes professionally done before - are the returns longer when they are done by an accountant? I figured filing my taxes would be straightforward and that once I had him file the first couple, I could do the rest going forward. But each return is 38 pages long! Is that about right?


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## Peg

This _*was*_ making sense but not any longer. 

In 2006, 07 and 08 my total income is less than $25k but it includes earned income, RRSP withdrawals and self-employment.

I've read to use either 2555 or 1116 but I have both earned income and the RRSP income so which one is applicable? or both?

I am doing the 1040 and the 8891 too.


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## Bevdeforges

Peg said:


> This _*was*_ making sense but not any longer.
> 
> In 2006, 07 and 08 my total income is less than $25k but it includes earned income, RRSP withdrawals and self-employment.
> 
> I've read to use either 2555 or 1116 but I have both earned income and the RRSP income so which one is applicable? or both?
> 
> I am doing the 1040 and the 8891 too.


The 2555 applies only to earned income (which includes the self-employment income). The 1116 can be used to take credit for any taxes you paid on the RRSP withdrawals.
Cheers,
Bev


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## Peg

Thanks Bev! The 1116 was confusing me because I couldn't figure out how to classify the RRSP income and then I realized as long as I declare it the IRS can figure out how to classify it...

I feel better after using the free H&R Block program for 2010 and seeing that I definitely paid more in taxes in Canada - only used the personal deduction and nothing else. I love Canada.


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## 416

Cayo's latest column (Google "Bleak options, uncertainty face Canadian residents targeted by the IRS") is worth a look, but confirms my impression that there are Canadian tax lawyers and accountants who are way scarier than the IRS. 

Ellen Roseman's column in the Star is much calmer and more in line with this forum: (Google "Roseman: 1M Americans here face tax clampdown")


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## Peg

Ironically, the one year that I needed to use more deductions to get my US tax to zero was one of my lowest income years - before I used my Education Tuition credit I would have actually owed US taxes.

I met a fellow today who paid $6,000 for 3 years of tax returns and FBARs. He is a small business owner who is incorporated. Since I am filing 5 years on my own I'm going to say I'm making a very good wage right now! :clap2:


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## Picho

*Investing in Canadian funs*



I'm a US person who bought Central Fund of Canada ( Amex CEF A ) shares in 2009 in a taxable US brokerasge account.CEF is a PFIC closed end mutual fund , and doesn't pay ordinary earnings or net capital gains,dividends are nil ( $0.01).I did not sell any stocks in 2009 or 2010.These shares went up in both years.

No actual income to report.
I omitted these shares in F1040 and schedules B & D and TD F90-22.1 timely filed.
The questions are :
1) should I file F8621 ? for both years?
2)If I didin't get any distribution or gain, can I enter Part III lines 5-6-7 and ignore Part IV ?

"A tax liability under the excess distribution rules arise only when an actual distribution is made by the PFIC, or when the US investor disposes of his investment in the PFIC"

Any help would be greatly appreciated.


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## kstate

*US taxes? What?*

I was born in the US, but have lived in Canada since the age of 7. I just found out that I am supposed to be filing tax returns in the US! It seems so absurd - I have never worked in the US, and haven't lived there since childhood. And ignorant person that I am, I only just found out that the US expects all citizens, not just residents, to file tax returns. How they justify this is beyond me, but that's a separate topic. My question is, what do I do now? I don't even know where to begin. If I file, will I be fined, prosecuted, what?


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## Peg

kstate said:


> I was born in the US, but have lived in Canada since the age of 7. I just found out that I am supposed to be filing tax returns in the US! It seems so absurd - I have never worked in the US, and haven't lived there since childhood. And ignorant person that I am, I only just found out that the US expects all citizens, not just residents, to file tax returns. How they justify this is beyond me, but that's a separate topic. My question is, what do I do now? I don't even know where to begin. If I file, will I be fined, prosecuted, what?


Welcome to stage 1 of the IRS news - Shock, closely followed by Anger and/or Frustration. I've hit acceptance on the basis that I want to visit the USA without wondering if I will have problems.

The best info I found online was on this forum in this thread plus the Dual Citizens thread here. It took hours but I read through every post in these two threads and then figured out how to do the taxes myself. I kept copying relevant comments into Word documents until I pieced together what I needed to do - as well as asking for help here a few times and looking like this: :ranger:

What are your sources of income? If it is only Earned Income and under $90k or so then it is pretty basic. I had to do more forms because I had self-employment, earned income and also RRSP withdrawals. All of the forms are online at the IRS website. I do not owe taxes for any of the 5 years since I have always paid my Cdn taxes.

Personally, I am doing 5 years of tax returns and the FBARs and then I will book an appointment with the US Consulate to renounce my US Citizenship. Many are filing their returns and FBARs and keeping their citizenship - there are pros and cons both ways of course. Depends on your situation.

No, I do not like sharing my information with the US government but I also want to be able to visit the USA without any problems. 

There are a lot of people ignoring it but I'd rather come clean now and not worry aobut it.


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## Peg

To renounce my US citizenship I know I have to file 5 years of tax returns. How many FBAR forms?


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## Peg

Peg said:


> To renounce my US citizenship I know I have to file 5 years of tax returns. How many FBAR forms?


Anyone know how many years of FBAR forms I need to file before I can renounce my US citizenship?

I am filing 5 years of tax returns.

Thanks...


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## Ladyhawk

Peg said:


> Anyone know how many years of FBAR forms I need to file before I can renounce my US citizenship?
> 
> I am filing 5 years of tax returns.
> 
> Thanks...


I am not sure, but how about 5 years? If you cannot get the records that far back because your bank doesn't keep them, say so in a cover letter.
On the other thread about filing US taxes, one person planning to renounce said they sent in 5 years of 1040s and just one FBAR. I have no idea why.


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## Peg

Thank you LadyHawk.

Since I had to gather the data for the 8891s for 5 years I got it for the FBAR for those years too.

I can't believe I am almost done! Now to get an appointment in Calgary to renounce.


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## Ladyhawk

Peg said:


> Thank you LadyHawk.
> 
> Since I had to gather the data for the 8891s for 5 years I got it for the FBAR for those years too.
> 
> I can't believe I am almost done! Now to get an appointment in Calgary to renounce.


Peg, I am always sorry to see people who want to renounce, but I sure cannot blame you after all of this has been coming down on us. I grew up in Minnesota, and I have lived my entire adult life in Canada but have never even considered giving up my US citizenship. It was always something I valued greatly and I keep up with what is going on down there.
I would never have believed that America, of all places, would turn on US citizens in this manner, and treat innocent people so shabbily. It is -- well -- positively un-American! It goes against everything we were taught about the principles the US stands for - justice, and liberty, and Innocent till proven guilty. 
Somehow I must communicate to someone down there - maybe a Congressman from Minnesota - about what is being done to US citizens by the IRS. Surely there are people in Washington who would be outraged by this treatment of US citizens.
But then again, maybe they wouldn't feel any sympathy for people who have not been filing their 1040s every year....

Anyway, good luck with your plans, and keep us informed about how things turn out!


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## Mona Lisa76

Ladyhawk said:


> Peg, I am always sorry to see people who want to renounce, but I sure cannot blame you after all of this has been coming down on us. I grew up in Minnesota, and I have lived my entire adult life in Canada but have never even considered giving up my US citizenship. It was always something I valued greatly and I keep up with what is going on down there.
> I would never have believed that America, of all places, would turn on US citizens in this manner, and treat innocent people so shabbily. It is -- well -- positively un-American! It goes against everything we were taught about the principles the US stands for - justice, and liberty, and Innocent till proven guilty.
> Somehow I must communicate to someone down there - maybe a Congressman from Minnesota - about what is being done to US citizens by the IRS. Surely there are people in Washington who would be outraged by this treatment of US citizens.
> But then again, maybe they wouldn't feel any sympathy for people who have not been filing their 1040s every year....
> 
> Anyway, good luck with your plans, and keep us informed about how things turn out!


I feel like you do too. I am outright dismayed but suppose that they are unsympathetic since we haven't been fully compliant. The US also has similar attitudes towards recreational drug users.

I also feel that America is on a longterm decline so has lost its ideals.

I recently had a long talk with my mother about all this and she said she'd not blame me if I chose to renounce due to all my problems about compliance going forward. It stinks that I may have to budget several thousand pounds a year for my US filing fees due to onerous reporting forms for foreign trusts (which my personal pension probably is considered to be), plus the ridiculously detailed 8938 form which will have to be filed with every 1040 from 2011 forward.

I wish now that I had never gone for a pension plan because it will essentially be a wasted investment because it could well end up costing me more in related compliance fees than what I can actually pay into it each year. It's such a burden of worry.

But I screwed up so it's just one of those things, like if someone gets cancer due to smoking, they're suffering the consequences. It's all so harsh though.


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## Peg

It saddens me as well since I still have family and friends in the USA. I've been disappointed with the USA for years though and have not had a desire to live there in a very long time. 

I just finished the FBARs and it really makes me sick to my stomach that I have to share all of that information which "my country" of Canada knows about and has already taxed me on. It's not like I'm hiding anything so I feel insulted to read stories about the "Tax Cheats".

My next steps are to book the appointment at the Consulate in Calgary - my husband and I will make an anniversary trip out of it - and to find out what I need to do to opt out of the OVDI. Then I will mail everything off - one year per envelope and no staples!


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## Mona Lisa76

Peg said:


> It saddens me as well since I still have family and friends in the USA. I've been disappointed with the USA for years though and have not had a desire to live there in a very long time.
> 
> I just finished the FBARs and it really makes me sick to my stomach that I have to share all of that information which "my country" of Canada knows about and has already taxed me on. It's not like I'm hiding anything so I feel insulted to read stories about the "Tax Cheats".
> 
> My next steps are to book the appointment at the Consulate in Calgary - my husband and I will make an anniversary trip out of it - and to find out what I need to do to opt out of the OVDI. Then I will mail everything off - one year per envelope and no staples!


I wish good luck. To be honest, I think that the bulk of us will be fine though. It won't be in America's interest to spark a major diplomatic row over this. I still believe they will ultimately back off. It's been distorted by the media as well as the attorneys who are rubbing their hands with glee...

My financial planner attended a reception hosted by the tax attache at the US embassy in London where they were reassured that the IRS are not trying to clobber the little fish, that they are mainly after the big cheats and getting the little people into compliance rather than to deter them with huge fines...


----------



## Peg

Mona Lisa76 said:


> My financial planner attended a reception hosted by the tax attache at the US embassy in London where they were reassured that the IRS are not trying to clobber the little fish, that they are mainly after the big cheats and getting the little people into compliance rather than to deter them with huge fines...


That is good to know!

When doing our estate planning my lawyer said that I would have to watch the Estate Tax closely in case I needed to do estate planning to avoid it. Given that and that I am currently under the Exit Tax limits I just want to renounce now. One day we might want to be snow-birds but I don't see moving to the USA permanently.

The next few days I have the onerous task of double checking all of my numbers, exchange rate calculations and the forms. Must keep reminding myself that I'm saving thousands doing it myself!


----------



## Mona Lisa76

Peg said:


> That is good to know!
> 
> When doing our estate planning my lawyer said that I would have to watch the Estate Tax closely in case I needed to do estate planning to avoid it. Given that and that I am currently under the Exit Tax limits I just want to renounce now. One day we might want to be snow-birds but I don't see moving to the USA permanently.
> 
> The next few days I have the onerous task of double checking all of my numbers, exchange rate calculations and the forms. Must keep reminding myself that I'm saving thousands doing it myself!


I wish you well with it but was too scared to self-prepare, especially due to the complex pfic calculations....i needed to make an honest disclosure. As I don't have children, I'm not so concerned if my estate gets hit with death duties since they come in at a lower level in the uk anyway. My spouse is a lot older than me too. I thus see no urgent need to renounce though understand why you want to.


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## Peg

Mona Lisa76 said:


> I wish you well with it but was too scared to self-prepare, especially due to the complex pfic calculations....i needed to make an honest disclosure.


My philosophy is that I am including all of the information to the best of my ability and given that my income is low doubt that they will want to bother with me regardless.


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## Peg

For RESP Mutual Funds where I need to calculate income for a year:
Plan: record it as a gain/loss (always less than $1,000 when split with my spouse)

Question: when do you do the conversion to US dollars? For example, one year, the RESP gained 12% but the Canadian dollar strengthened over the year so that the "gain" was 31% if using US exchange rate at Dec 31 year 1 and then weaker US exchange rate at year 2. 

Part of me wants to do it in the worst light for me so they cannot say I was trying to 'evade' taxes but it doesn't sit well with me.

Yes, I know professional advice would be ideal but don't want to unless I have to! We're not talking huge dollars but they are MY dollars.


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## Mona Lisa76

It depends on how complicated it would be to determine your tax liability (if any). In my case, I concluded I would need specialized help but if your assets are more or less just straightforward savings accounts then you could probably do it yourself. It looks more official if you use someone though


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## Bevdeforges

Peg said:


> For RESP Mutual Funds where I need to calculate income for a year:
> Plan: record it as a gain/loss (always less than $1,000 when split with my spouse)
> 
> Question: when do you do the conversion to US dollars? For example, one year, the RESP gained 12% but the Canadian dollar strengthened over the year so that the "gain" was 31% if using US exchange rate at Dec 31 year 1 and then weaker US exchange rate at year 2.
> 
> Part of me wants to do it in the worst light for me so they cannot say I was trying to 'evade' taxes but it doesn't sit well with me.
> 
> Yes, I know professional advice would be ideal but don't want to unless I have to! We're not talking huge dollars but they are MY dollars.


How are your gains reported to you? Do you get a document that says something like "Gains: $x" (Canadian dollars, I assume) or do you have to generate the gains amount yourself by comparing year end balances?

In any event, what usually flies is to simply take the Canadian dollar amount for gains for the year and apply the average exchange rate for the year. This figure is usually available through the US Consulate or on the IRS website. If you can't find this figure, feel free to use either the year-end exchange rate - or take the average between beginning of the year and end of the year. If they have questions about your calculations, they'll be in touch - but usually accept anything vaguely logical, especially from small account holders. (And $1000 in interest is definitely small potatoes for the IRS.)
Cheers,
Bev


----------



## AmTaker

Peg said:


> For RESP Mutual Funds where I need to calculate income for a year:
> Plan: record it as a gain/loss (always less than $1,000 when split with my spouse)
> 
> Question: when do you do the conversion to US dollars? For example, one year, the RESP gained 12% but the Canadian dollar strengthened over the year so that the "gain" was 31% if using US exchange rate at Dec 31 year 1 and then weaker US exchange rate at year 2.
> 
> Part of me wants to do it in the worst light for me so they cannot say I was trying to 'evade' taxes but it doesn't sit well with me.
> 
> Yes, I know professional advice would be ideal but don't want to unless I have to! We're not talking huge dollars but they are MY dollars.


I normally use the 'average' exchange rate on oanda.com for conversions. That works for small amounts like $1K. As long as you use it consistently for all years, so you can't be said to be gaming the system by picking a different method/provider each year. 

However, if you are doing something like MTM for PFICs, you should use the exchange rate on that day (start and finish of year). For FBARs, they want rate at end of year, even if max balance was at a different rate.


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## Peg

AmTaker said:


> I normally use the 'average' exchange rate on oanda.com for conversions. That works for small amounts like $1K. As long as you use it consistently for all years, so you can't be said to be gaming the system by picking a different method/provider each year.
> 
> However, if you are doing something like MTM for PFICs, you should use the exchange rate on that day (start and finish of year). For FBARs, they want rate at end of year, even if max balance was at a different rate.


FBARs want the end of year rate?!? Arrrgggh! I used the rate for the date that was the highest during the year which meant some years were different.


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## Peg

Bevdeforges said:


> How are your gains reported to you? Do you get a document that says something like "Gains: $x" (Canadian dollars, I assume) or do you have to generate the gains amount yourself by comparing year end balances?
> 
> In any event, what usually flies is to simply take the Canadian dollar amount for gains for the year and apply the average exchange rate for the year. This figure is usually available through the US Consulate or on the IRS website. If you can't find this figure, feel free to use either the year-end exchange rate - or take the average between beginning of the year and end of the year. If they have questions about your calculations, they'll be in touch - but usually accept anything vaguely logical, especially from small account holders. (And $1000 in interest is definitely small potatoes for the IRS.)
> Cheers,
> Bev


My account statement shows the balance at the close of each quarter and the change either up or down. I have other accounts that are much more detailed but not this RESP. I have to manually calculate the annual gain. 

I am definitely small potatoes for them but still want to do it right so I can be done with it...

(RESPs are Registered Education Savings Plans and are not taxed until withdrawal; in Canada we do not yet report any income on the RESP.)


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## Peg

Mona Lisa76 said:


> It depends on how complicated it would be to determine your tax liability (if any). In my case, I concluded I would need specialized help but if your assets are more or less just straightforward savings accounts then you could probably do it yourself. It looks more official if you use someone though


Somewhere on the IRS site, I read that when the accounts are publicly traded units I could use the change in unit price for the year to calculate my gain/loss. Thankfully this RESP only has two funds in it.

All of my other investments are RRSPs (Registered Retirement Savings Plans) and I am asking for the deferral of income which is the same as it is done in Canada.


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## Peg

AmTaker said:


> I normally use the 'average' exchange rate on oanda.com for conversions. That works for small amounts like $1K. As long as you use it consistently for all years, so you can't be said to be gaming the system by picking a different method/provider each year. ...


Thank you for mentioning oanda.com http://www.oanda.com/currency/historical-rates/ - used that for 2005. The IRS site had the averages for 2006-2010 Yearly Average Currency Exchange Rates The historical "Ask" average rate at oanda in 2006 was very close to the IRS rate so I used the Ask average rate for 2005.

Unfortunately I am redoing many of my forms because of my convoluted exchange rates used before but now that I understand the process better I hope it will be faster... And I'm double-checking along the way.


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## Guest

Hello Everyone,

I just found this forum and am also planning to renounce. I don't understand though what I need to file to be tax compliant. I have never earned more than 9000 dollars or had an aggregate value in my bank accounts larger than 10,000 dollars, hence my understanding is that the only documents I would need to file is 8854 and W8-CE to complete renunciation. Can I thus claim that I was tax compliant the past five years (Only three of the five were abroad, in intervals).

I have no other assets abroad but do have a large US savings account. I have hesitated to transfer it to where I live due to worrying about having to file an FBAR form. My plan would be to renounce, send the above IRS forms, get the clear or whatever penalty they want and then transfer the money. Is this possible or will they automatically seize the whole of the US account upon renunciation? My total assets are way below the 2 Million mark of course.

I cannot afford a fancy tax person (I make 380 Euros a month as a volunteer and am thus just trying enough to get 450 dollars to renounce) and thus will have to do everything myself.

Kind Regards


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## Expatinca

Peg said:


> Question: when do you do the conversion to US dollars? For example, one year, the RESP gained 12% but the Canadian dollar strengthened over the year so that the "gain" was 31% if using US exchange rate at Dec 31 year 1 and then weaker US exchange rate at year 2.


Firstly, my understanding is that you can defer reporting income on RESPs and RRSPs until you start to withdraw. I'm not an expert by any means, so take that with a grain of salt.

Secondly, you have to do it from the end of year exchange rate as listed on fms.treas.gov/intn.html (the website is frequently down for some reason, but keep trying). 2010 is up there now, but you have to e-mail the people listed to get past years.


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## Peg

Expatinca said:


> Firstly, my understanding is that you can defer reporting income on RESPs and RRSPs until you start to withdraw. I'm not an expert by any means, so take that with a grain of salt.


Form 8891 lets you request a deferral of US income tax on RRSPs.

The US does not recognize RESPs. I am calculating an annual gain and including it in my IRS return - half the gain since the RESP is held jointly with my spouse.


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## jimmo-san

Bevdeforges said:


> Oh, and on the 2555, don't bother trying to recall every trip you made to the US.


Unless you're in the U.S. on business. See my thread titled "a Form 2555 tip". You may disagree with that interpretation, but as I say in that thread, I never argue with the IRS if I can help it (i.e. if not arguing is not going to cost me money).


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## Yelyac

*Transferring RRSP funds*



Peg said:


> Form 8891 lets you request a deferral of US income tax on RRSPs.
> 
> The US does not recognize RESPs. I am calculating an annual gain and including it in my IRS return - half the gain since the RESP is held jointly with my spouse.


Does anyone know if transferring RRSP money from one group of funds to another is treated as a sale by the IRS and therefore will trigger massive paper filing (i.e. Huge accounting fees). My broker wants me to move some money, but I am hesitant to do this until I renounce hopefully sometime in 2012.


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## Mona Lisa76

I also wonder if rolling my personal pen​sion fund into my employer's group pension fund would be treated like a pfic sale.


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## Bevdeforges

Yelyac said:


> Does anyone know if transferring RRSP money from one group of funds to another is treated as a sale by the IRS and therefore will trigger massive paper filing (i.e. Huge accounting fees). My broker wants me to move some money, but I am hesitant to do this until I renounce hopefully sometime in 2012.


If the IRS allows you to treat a pension fund like that as an IRA (the US version of a self-funded pension fund), there's a reasonable chance they might allow you to do a "rollover" as they do in the US when you transfer funds from one deferred savings plan to another, similar plan.

Normally, the way you do these things for the US is to simply assume that your transfer qualifies as a "rollover" and report it that way. 

I did a rollover this year in the US - I think you have to report the "distribution" on the distribution line - and then write in "rollover" next to the amount. Over on the right side of the page (same line) in the space for "taxable amount" you write in -0-

If they have any problem with that treatment, they'll get in touch first to ask for further details, but chances are, they'll let it pass. You've "reported" the event. You're hiding nothing, and you've interpreted the rules in a logical manner.
Cheers,
Bev


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## Guest

If anyone wants the name of my Accountant,just PM me. He is very reasonable and will cost you a fraction of the price for the same amount of work.


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