# Filing For Final Year - Questions



## biglemoncoke (Aug 25, 2011)

Hello All,

Would like to get some help in filing my final year of taxes as a us citizen; relinquished and notified the embassy last year - received my CLN as well.

The date that I went to the embassy to relinquish my citizenship was March 6th 2014

Questions:
1) On the 2555 ez form that I file for my partial year return of my 1040 return, what dates do I enter for the bona fide residency, physical presence, and tax home test? Bit confused as to what dates I should enter, should I enter the full year? or the date up to March 6th, 2014?

2) On the 1040NR, what should I file my status as? To date, I have always filed "Married, filing separately" on all my previous tax returns and hence, left my Canadian citizen spouse out of the US tax picture (I have only used single person deductions).

3) For FBARS, do I file for the amount on my accounts on the date of my notification of relinquishment? or as it says in the document end of the year of 2014?


Thanks in advance for the help!


----------



## BBCWatcher (Dec 28, 2012)

I can answer your second question. If you're a resident of Canada, and assuming you haven't divorced your spouse, you would check Box 3 for Filing Status. Then, as the form indicates, you'd fill out the information in the boxes concerning your spouse's name. As the instructions for form 1040NR indicate if your spouse does not have a SSN or ITIN, and if your spouse is not required to have one, then enter "NRA" in the space for your spouse's identifying number. In that case you cannot claim your spouse as an exemption.

This is the same information you were/are required to supply on IRS Form 1040, in the same way, when you are Married Filing Separately.

Regarding your #3, neither. There's absolutely no harm in "over reporting" on FinCEN Form 114. I would answer that form exactly as it directs, namely to report the highest balance at any moment in time during the entire year (2014) for each and every reportable account. FinCEN Form 114 does not ask you to report year end balances -- I'm not sure what you're referring to. It asks you to report "high water mark" balances.


----------



## biglemoncoke (Aug 25, 2011)

Thanks BBC,

Do you happen to know how I should complete the 2555? or would you think I would need to file 1116 in this case?


----------



## BBCWatcher (Dec 28, 2012)

Well, since a dual status year is an "interesting" year, I think I'd run the calculation both ways. You could try the Foreign Tax Credit-only path (IRS Form 1116), or you could try the FEIE plus FTC path (IRS Forms 2555 and 1116 -- 2555EZ may be available in lieu of 2555). Then you can choose which path is more tax favorable.

The first path is likely to be more favorable if your foreign (Canadian, I assume) income tax is higher than your hypothetical tax in the U.S. and assuming you don't have much U.S. source income. That's fairly likely, but of course your mileage may vary.

As far as how to handle the dates on Form 2555, I think I'd answer the questions as asked. Though I would also check IRS Publication 519, particularly the discussion in that publication about the "dual status" tax year, to see if there are any instructions to the contrary. Probably not.

Another interesting question is whether you have the option in this particular dual status tax year to file a full year resident tax return. I don't think so -- I think renunciation is a special case that specifically requires the 1040/1040NR combo. But if you have extra time to take a spin through tax preparation software to run that simulation, and if you like the result, do some more investigation to see if you can file that way (as a full year resident/citizen in your final year).

As an aside, if you have U.S. source income in 2015 and beyond you'll still likely need to file IRS Form 1040NR for the full year going forward. It's just the dual status year when you have the 1040/1040NR combo.


----------



## Bevdeforges (Nov 16, 2007)

On the 2555, I believe you should enter only the dates up to your date of expatriation (or whatever they call it). That means that, instead of the full $97,000 exclusion, you'll get only a pro-rata portion for the period you're dealing with. Check the instructions to be sure, but that is my understanding of how it's supposed to work.
Cheers,
Bev


----------



## maz57 (Apr 17, 2012)

Logically for FinCEN 114 the "high water mark" balance for the period from January 1 to March 5, 2014 would be the amount to report. This is because from March 6 until December 31 the OP was no longer a US citizen and had no obligation to report anything to the US government. However its rather a moot point because reporting the existence of the account is what really matters; the actual balance reported is not that important. Any reasonable number should do the trick.

I read somewhere that under the US/Canada treaty a Canadian always has the right to just file a full year 1040, even in a dual-status year. You would just report the income up to the date of loss of citizenship. I'll be darned if I can remember where I read that but the treaty should cover it if you have the patience to research it. If this is correct it simplifies that final filing.


----------



## BBCWatcher (Dec 28, 2012)

While legally it might be possible to report the "high water mark" only for the U.S. personhood interval, this is one case where you just ought to keep it simple. There's absolutely no harm in reporting the annual year's high water mark -- no tax implications, no nothing. If there's no upside in doing something "clever," and there isn't, then I'd keep it simple. Who wants to even bother with a postage stamp answering a letter of inquiry (if one comes) and sending a photocopy of your CLN?

It gets a little more interesting if you opened a new account after March 6, 2014. If you have something really weird and far-fetched, like you opened an account in Havana on March 15, then maybe you do a little more research to figure out if you don't have to report that post-renunciation account.


----------

