# Canadian / US Dual Citizen Filing US taxes



## UnknownXV

Hi,

I've been doing research online to determine the best way to file my taxes in my situation, and it's been quite frustrating. If possible, I want to avoid having to use snail mail to file because it could get lost (and take forever to know this was the case) and it's much slower in general, and costs money. Not to mention no guidance on what kind of pen to use, if computer print is acceptable, what type of envelope to use, etc.. I get obsessed over the details and I almost never use normal mail so I am fairly clueless when it comes to it. (I'm 22 so I never really need to)

So far I've been trying out different programs from the IRS site that list acceptance for foreign addresses, but none have worked so far. Every time I try to report my income, there's no option to state that it's from a T4 form, as it's a Canadian employer. I cannot file a W-2 since I do not have an EIN.

Is there no way to file my taxes online, reporting Canadian earned income from a Canadian employee? It does say that any US citizen can file online, is this a lie? I know you can report your bank accounts online easily enough via the BSA site for the FBAR. 

Note that I've been living in Canada for almost 3 years now without leaving, in the same Province. I'm a full citizen of both countries. 

Thank you.


----------



## Bevdeforges

It's tricky filing online for US taxes. I would try TaxAct - it's certainly the one I got the farthest with. (Ignore the restrictions noted on the IRS Free File site - TaxAct has apparently dropped most of those.) And if all else fails, you can print off the forms you've prepared from their site and mail those in.

For your "foreign" salary - you need to find the option under "Wages and Salary" for "wages from a foreign employer - not reported on a W-2." There's a special form you have to fill in that substitutes for a W-2 (the IRS will not recognize your Canadian T4, so no need to send it in). That will put your salary on the proper line and bring up the questions for the form 2555 to formally exclude your foreign earned income for tax purposes.

If you're not married, filing separately, the TaxAct site should allow you to e-file. It actually allowed me to e-file, but then the IRS system rejected my filing, so I printed out the forms and mailed them in. (Regular mail, don't waste your money on registered or express mail.)
Cheers,
Bev


----------



## UnknownXV

Well, trying that site out I got further than anywhere else, very well laid out and simple to use. However, upon finishing everything and reviewing my return, I tried to e-file, and got this message:

"
This return does not qualify for electronic filing.
To qualify for electronic filing your tax return must have at least one of the following included on the return. Taxable Income, Adjustments to Income, Tax Liability, Credits, Other Taxes, or Tax Payments.

You may wish to review your entries by repeating the Q&A, starting with the Basic Information tab. If after reviewing your entries, your return still does not qualify, you may wish to review the filing requirements in the IRS instructions for Form 1040 to verify that you need to file a tax return for 2012."

I honestly do not understand why this is so hard. My return is very simple and clear. 

16,002.48 reported as wages, salaries and tips. This is shown in the Federal tab - sub-tab "income".

Everything else is 0$, besides "other income" which displays -16,002.48 (as I claimed the Foreign earned income exclusion). 

I'm filing for myself, am single, 22 years old, put in all my basic information, employer info, addresses, etc.. everything I can think of. Am I missing something obvious? 

In the Federal Summary part, it shows my income as 0$, I'm guessing this is taxable income (none left after the FEIE). Besides that I have the basic deductions claimed of $5,950, not that I need them. 

Is this really not letting me e-file because I have no taxable income after the FEIC?

Oh and thank you for the quick response already, sorry if I seem a bit agitated in my post. Dealing with this is frustrating, especially since I already went through the stress of filing my Canadian taxes.


----------



## Bevdeforges

Believe me, I feel your pain. It has been something like 20 years since the IRS introduced e-filing and although you would think the overseas taxpayers would be the FIRST to be able to do this, it's still next to impossible to e-file from overseas, between the restrictions on the tax filing service sites and the limitations of the IRS system.

Are you using the TaxAct free file site? Cause I got all the way through to actually submitting my filing to the IRS - and it was the IRS that rejected it. And I had much the same profile as you - salary income, all excluded thanks to the 2555, then a little bit of interest income that is quickly swallowed up by the personal allowances and standard deduction.

The only difference I can see is that I had some interest income. Try sticking in $100 of interest income, which will show up as "taxable interest income" and maybe that will let you file. (Your taxes due will still be $0.)

If all else fails, just print off the forms as they turn out and mail them in. The format they print them in from those sites is supposed to be "easy" for the IRS to scan (though why we should make things easy for them when they make it so difficult for us is anyone's guess!).
Cheers,
Bev


----------



## UnknownXV

BBCWatcher said:


> I'm amazed you're 22 and have never used postal mail, but perhaps these are the times we live in.
> 
> Canada Post has a service to the USA called Tracked Packet. It'll cost you CAD15.30 to send your tax forms to the IRS using that service. You'll get a tracking number, and you can tell exactly when it arrived.
> 
> Alternatively you can send it via regular mail, wait 90 days, then go visit the IRS's Web site to request an online tax transcript. The tax transcript is free of charge, and it'll show you if your tax form has been received and processed.
> 
> For a couple centuries human kind has been sending and receiving papers in the mail. It works, especially within and between developed countries.


I've used regular mail twice in my life, but only for within Canada. I'm sure it's simple enough, I just have less faith in it, and I'm cheap enough that having to pay to file my second batch of taxes doesn't sit too well with me. Also, I don't have a printer, so just printing it out would be a challenge. I suppose there's probably a place around here I could do that on. Maybe at the library? I'll look into it. All that said, at least there is a way to make sure it's properly delivered. That's something. Thanks for that info.



Bevdeforges said:


> Believe me, I feel your pain. It has been something like 20 years since the IRS introduced e-filing and although you would think the overseas taxpayers would be the FIRST to be able to do this, it's still next to impossible to e-file from overseas, between the restrictions on the tax filing service sites and the limitations of the IRS system.
> 
> Are you using the TaxAct free file site? Cause I got all the way through to actually submitting my filing to the IRS - and it was the IRS that rejected it. And I had much the same profile as you - salary income, all excluded thanks to the 2555, then a little bit of interest income that is quickly swallowed up by the personal allowances and standard deduction.
> 
> The only difference I can see is that I had some interest income. Try sticking in $100 of interest income, which will show up as "taxable interest income" and maybe that will let you file. (Your taxes due will still be $0.)
> 
> If all else fails, just print off the forms as they turn out and mail them in. The format they print them in from those sites is supposed to be "easy" for the IRS to scan (though why we should make things easy for them when they make it so difficult for us is anyone's guess!).
> Cheers,
> Bev


Thanks for the idea. Maybe that will do the trick, but again I'm not sure how to add interest income. I tried, but it asks me to add Payer information, including their federal identification number. How did you add interest income from a foreign bank? I actually do have $30 worth of interest income so I guess I may as well report that too if it will let me enter it.

It really is strange that the US would tax based on citizenship, but not provide the proper pools for the digital age to do so. Makes no sense at all. If they've had the option to file electronically since the dawn of the internet itself.. you'd think they would have made it easier by now. Oh well, I guess that's government for you eh?


----------



## maz57

Welcome to bizarre world of non-resident US tax reporting. Citizenship-based taxation is a 150 year old relic left over from the civil war. It has no place in the modern world but there you are, it's a reality that we all have to live with. In order to wrap your head around this, just think of the IRS as a dinosaur--a huge animal with a brain so small that the head has no idea what the other end of the body is doing. 

The US government (Congress), the bureaucracy (IRS), and the US public at large cannot imagine that someone would actually live anywhere in the world besides the US. The result is that a tax system that barely works inside the US is totally disfunctional outside of the US. Basically you are being asked to file a tax return in spite of the government's best efforts to prevent you from doing so. You are required to undergo this annual exercise in futility even though in the end there is no tax owing. If you don't, you are deemed to be a criminal who may wind up owing penalties based on not filing, not because you owe tax. Are you following me so far? If you do actually successfully file a return, The IRS will receive your $0 balance owing 1040 and have to process it by hand because you will have found after a dozen attempts that efiling is impossible. This plugs up their system so badly that they have no staff available to work on domestic tax fraud which is really their number one problem. (They would get better results chasing after people who do owe money rather than people who don't owe money, but for some reason this simple fact is lost on whoever is running the show.) Don't worry about sending your return in by snail mail; the posties are no more likely to lose your return than the IRS itself.

Don't forget to file an FBAR as well if you happen to have so called foreign accounts which total $10,000 at any time during the year. (Which wouldn't be surprising because you live in Canada, not in the US.) Don't ask how you calculate this; no one really knows, least of all the IRS. (Which you won't find out if you try to phone one of their 800 numbers because the numbers don't work if you don't live in the US.) If you are really unlucky you may qualify for the dreaded Form 8938 which no one knows how to fill out either. The FBAR is sent to a different address and has a different due date than a tax return. The 8938 has the same information as the FBAR but has different thresholds and is sent in with your tax return. So basically the FBAR gives them the same information you just gave them 2 weeks ago. 

If this makes absolutely no sense to you then I have explained it properly because it truly doesn't make any sense at all. No one knows (least of all the US government) how many US citizens live outside of the US but some estimates are around 7 million. Out of that 7 million, only about 1 million file tax returns. Of course some of those will be below the income threshold but no one knows that either. The last year for which figures were available, about 780,000 FBARs were filed. Many people have never heard of the FBAR because it is a closely guarded secret; many more don't even know they are supposed to file US tax returns. When they do find out they don't believe the person who told them about it because it is, well, unbelievable.

You've got until June 15 to figure all this out. I wish you the best of luck.


----------



## Bevdeforges

UnknownXV said:


> Thanks for the idea. Maybe that will do the trick, but again I'm not sure how to add interest income. I tried, but it asks me to add Payer information, including their federal identification number. How did you add interest income from a foreign bank? I actually do have $30 worth of interest income so I guess I may as well report that too if it will let me enter it.


In yet another of the oddities of US taxes, you have to enter your salary information on a separate form (i.e. NOT the W-2) if you are outside the US, there's no problem entering most forms of 1099 income (including bank interest) on the e-file forms like you had a 1099 in front of you. Just put in the name of the bank, nothing else (no "identification number" and not even the bank address). 

The reasoning is that the IRS actually does run the W-2 information provided against its file of W-2s received from employers in the US. So they had to invent a FEC record (Foreign Employer Compensation) to avoid trying to match up foreign wages and salaries with non-existent W-2 forms. They don't match up most forms of 1099s against what they receive from banks, etc. so you can use the "fake" 1099 form provided in most of the tax preparation software. (The big exception seems to be for 1099s related to retirement accounts, where they do seem to compare with their records.)

In any event, just putting in the bank name and amount of interest paid worked for me (in Tax Act). Try it and see what happens. (And let us know if you do manage to e-file. You would be the first overseas filer I know to have successfully done so.)
Cheers,
Bev


----------



## UnknownXV

Well all be damned, I managed to e-file the return! 

With the added interest income, it let me go through all the steps. One thing that was odd, was the final step, the alert process, kept forcing me to enter information into the US employer address fields, even though I had marked it as foreign in the state area. So I just put NA in the other address fields, and 31313 for the Zip code.

I hope it doesn't reject it because of that, everything else is in order. I guess we'll just wait and see. 

Thanks for the help, and the venting against this absolutely terrible system. Seriously, a monkey could design a better tax code. 

One last thing, about the FBAR form, I only have to file that this year, if last year in 2012 I had over $10,000 in a bank account, yes? I'm on the verge of hitting that much in one of my accounts this month, but that will be for 2013 right? So I'll only have to file a FBAR next year?


----------



## Bevdeforges

Congratulations! I left the US address part blank and had no problem with that - but who knows with these things? The IRS system is supposed to come back within 24 hours, but it comes back real quick if it has some reason to reject your filing.

On the FBAR form, you have to file if the TOTAL of all your overseas (i.e. non-US) accounts is over $10,000 - not just a single account. But you're correct, it's on a strict year by year basis. You are supposed to report the high balance in each account you report. 
Cheers,
Bev


----------



## MAMertz

Can I ask you a question? on the 16K in salary what was the amount of Canadian taxes paid on that tax return?


----------



## UnknownXV

Just an update, the return was not even sent by taxact, they reviewed and rejected it due to the address and zip code I entered. I have contacted support however, to see if there's a way around this. It just seems to be the mailing address anyways, so I might be able to just put in a family members address instead or something. Thankfully I have family in the states. I'll update again when I get a response from them.

It's so annoying, because I am so close, to be stopped because of an address? This is so silly. 

And on the 16k in income, I had $400 in Federal taxes deducted, and $225 in provincial, plus a bunch of other stuff not classified directly as taxes, like federal and provincial retirement funds, employment insurance, etc.. in total I had about $2,000 deducted over the year from my pay, and I'm getting back $1,600 (but I contributed 2k to an RRSP which lets me shield it from taxable income).


----------



## swisspinoy

UnknownXV said:


> Just an update, the return was not even sent by taxact, they reviewed and rejected it due to the address and zip code I entered. I have contacted support however, to see if there's a way around this. It just seems to be the mailing address anyways, so I might be able to just put in a family members address instead or something. Thankfully I have family in the states. I'll update again when I get a response from them.
> 
> It's so annoying, because I am so close, to be stopped because of an address? This is so silly.
> 
> And on the 16k in income, I had $400 in Federal taxes deducted, and $225 in provincial, plus a bunch of other stuff not classified directly as taxes, like federal and provincial retirement funds, employment insurance, etc.. in total I had about $2,000 deducted over the year from my pay, and I'm getting back $1,600 (but I contributed 2k to an RRSP which lets me shield it from taxable income).


I didn't file every time that I ran into a problem like this. This resulted in me filing about once every 3 years or so whenever the system didn't reject my return for some stupid reason. If I were you, I'd call the IRS and explain to them that they will get the return once they fix the problem. If they threaten you, then just renounce. American citizenship isn't worth such madness.


----------



## Bevdeforges

swisspinoy said:


> I didn't file every time that I ran into a problem like this. This resulted in me filing about once every 3 years or so whenever the system didn't reject my return for some stupid reason. If I were you, I'd call the IRS and explain to them that they will get the return once they fix the problem. If they threaten you, then just renounce. American citizenship isn't worth such madness.


The problem appears to be with the TaxAct system, since the OP says he couldn't get to the point of submitting things to the IRS system.

While I agree that it's really annoying that the IRS system can't get its, um, "stuff" together, mailing in a paper return where you owe nothing in taxes is still a cheap fix. 

Despite the "truth in advertising" issue, it is simply not true that "everyone" can e-file their US returns. Even the pros (who must e-file whenever possible) have to send in some returns by post.

Renunciation is an option, if someone wishes to be shed of the filing requirement altogether, but it, too, carries certain consequences. Make sure you understand the repercussions of renunciation in your individual circumstances before making the decision. (Renunciation also is not free. You can mail in lots of returns, even via courier service, for what it will cost you to renounce.)
Cheers,
Bev


----------



## MAMertz

not worth it to repatriate and let your US passport go unless you have the proper amount of income to make it worthwhile. Sending a paper return is quite easy if the electronic side does not work for you. It is true that professionals also have to file some paper returns but less and less these days. But the return can always be sent paper copy if the taxpayer chooses this method. 

No to make this more complicated but you really do not have to use the 2555 at all and the expat exclusion. You can let the tax calculate on the return as if you are still in the US and pay the resulting US tax bill with the foreign tax paid in the other country IF there is a tax treaty with that country, and there usually is for most countries. 

under both of these scenarios you owe "0" tax. But under the scenario i just described if your US tax bill is less than what you have already paid in Canada then that excess is carried forward for 10 years on Form 1116 in your return and can be used in any tax year to pay the income tax on any "earned income" that you have. 

So that is usually the better option if both result in zero tax due.


----------



## Bevdeforges

Let me add one caveat about choosing the foreign tax credit over the FEIE. If you have made use of the FEIE in the past, and then switch to using the foreign tax credit, you may be deemed to have "revoked" the FEIE option, and that could mean that you will not be able to use the FEIE for at least 5 more years. 

There are ifs, ands and buts to the situation, but if you're into the KISS (keep it simple, stupid) approach, you want to think through the consequences of which election you make. 

You probably should never do anything "just" to allow you to e-file rather than sticking a stamp on it. (My philosophy, anyhow.) But, the choice is yours.
Cheers,
Bev


----------



## MAMertz

you should not use the KISS method if it means you lose out on a USD tax credit you can use for 10 years in the future as your income rises which it should which saves you dollar for dollar tax money.


----------



## swisspinoy

Bevdeforges said:


> The problem appears to be with the TaxAct system, since the OP says he couldn't get to the point of submitting things to the IRS system.


The funny thing about this is that TaxAct is the most friendly tax processor for citizenship-based taxation. Most other online systems are residency-based taxation-only and don't do non-resident filing. So, if the US can't even get TaxAct right, then there is no hope for America's citizenship-based taxation.



> While I agree that it's really annoying that the IRS system can't get its, um, "stuff" together, mailing in a paper return where you owe nothing in taxes is still a cheap fix. Despite the "truth in advertising" issue, it is simply not true that "everyone" can e-file their US returns. Even the pros (who must e-file whenever possible) have to send in some returns by post.


Mailing sensitive data increases the risk of fraud and terrorism. Even the US government highly recommends that one does online-filing, but only makes such possible with FBARs, given that it abandoned the IRS's web portal.



> Renunciation is an option, if someone wishes to be shed of the filing requirement altogether, but it, too, carries certain consequences. Make sure you understand the repercussions of renunciation in your individual circumstances before making the decision. (Renunciation also is not free. You can mail in lots of returns, even via courier service, for what it will cost you to renounce.)
> Cheers,
> Bev


It's usually the 1%, the super rich, who have issues renouncing, but they can usually afford such. For everyone else, it is a matter of accepting that one is an American who cannot live in America (unless US policy changes). I don't think that anyone should renounce or should be pressured to do so, but such is, unfortunately, currently the only means of getting some attention in Washington that it has a serious expat problem.


----------



## Bevdeforges

swisspinoy said:


> The funny thing about this is that TaxAct is the most friendly tax processor for citizenship-based taxation. Most other online systems are residency-based taxation-only and don't do non-resident filing. So, if the US can't even get TaxAct right, then there is no hope for America's citizenship-based taxation.


TaxAct is the product of a private company, part of the alliance of companies that offer free e-filing with the IRS. I still think the OP has entered something incorrectly in the address field to be getting the result he's getting. I had no problem getting TaxAct to accept my returns and get all the way through to actually filing them with the IRS. It was the IRS system that rejected them - for a reason I fully expected (and I'm not going to get into here), but TaxAct actually was set up to allow me to e-file, so I have nothing but kudos for them.



> Mailing sensitive data increases the risk of fraud and terrorism. Even the US government highly recommends that one does online-filing, but only makes such possible with FBARs, given that it abandoned the IRS's web portal.


Perhaps that indicates where the Treasury Dept. priorities lie. I was very put off by the site for e-filing FBARs and prefer to mail them in. But your mileage may vary.



> It's usually the 1%, the super rich, who have issues renouncing, but they can usually afford such. For everyone else, it is a matter of accepting that one is an American who cannot live in America (unless US policy changes). I don't think that anyone should renounce or should be pressured to do so, but such is, unfortunately, currently the only means of getting some attention in Washington that it has a serious expat problem.


I admit to going through the exercise of reconsidering the renunciation option every now and then. Based on my circumstances, it has more disadvantages and potential problems than benefits. But again, your mileage may vary. It's worth going through the exercise of considering, but be sure to take potential future situations into account, including if you are eligible for SS benefits, any deferred pension plans you have in the States, future travel or relocation plans - because you can't reverse the decision you ultimately make.
Cheers,
Bev


----------



## Nononymous

Postage stamps are simple, effective and cheap.


----------



## UnknownXV

Hello again.

So far I've been in contact with taxact customer support, and for what it's worth they've been trying to help me solve this issue so far, but for some reason there's always an address issue that won't go away. For the mailing address, this was correctly solved by inputting my Canadian information as well as leaving the state as foreign (and the zip code blank) but evidently the form 2555 is another story. 

I don't understand why form 2555 seems to demand US employer information, but at least according to the taxact automated process, I have to enter this in or I cannot file. Why would a form meant to apply for FOREIGN INCOME EXEMPTION demand a US EMPLOYER address? It's so stupid it just doesn't make sense.

Anyways, I sent customer support another message with the error and hopefully it's just a quirk in their system, they seem helpful enough so I'm still hopeful I'll be able to successfully file this.

I'm truly shocked at how difficult it is to do this, since my return is so incredibly basic.


----------



## swisspinoy

UnknownXV said:


> Hello again.
> 
> So far I've been in contact with taxact customer support, and for what it's worth they've been trying to help me solve this issue so far, but for some reason there's always an address issue that won't go away. For the mailing address, this was correctly solved by inputting my Canadian information as well as leaving the state as foreign (and the zip code blank) but evidently the form 2555 is another story.
> 
> I don't understand why form 2555 seems to demand US employer information, but at least according to the taxact automated process, I have to enter this in or I cannot file. Why would a form meant to apply for FOREIGN INCOME EXEMPTION demand a US EMPLOYER address? It's so stupid it just doesn't make sense.
> 
> Anyways, I sent customer support another message with the error and hopefully it's just a quirk in their system, they seem helpful enough so I'm still hopeful I'll be able to successfully file this.
> 
> I'm truly shocked at how difficult it is to do this, since my return is so incredibly basic.


You and millions of others. The IRS should have focused on these issues instead of getting Americans kicked out of bank accounts due to their nationality.


----------



## maz57

The IRS is way too busy mailing out big refund checks to bogus claimants in Florida to worry about ruining a few lives overseas. If Congress would get rid of citizenship-based taxation maybe the IRS could concentrate on tuning up their system to tackle refund fraud and identity theft. The finances of the country would be far better off.

Will this happen in our lifetimes? Probably not.


----------



## Bevdeforges

That's weird, because I know I left the US EMPLOYER section blank in TaxAct, and as I said, I made it all the way through to submission to the IRS (who promptly rejected my attempted e-filing). 

The 2555 form asks for US employer address for those folks working overseas for a US based company, especially those on an "expat package" who are being paid in the US or have one of a number of "special arrangements" that keep them in the US social security system while they are working abroad. 

Yeah, I gave up being shocked at how difficult this is to do after the first few attempts 15 or 20 years ago. It's actually easier to just print off the forms you have so far (or transfer the information to the pdf forms from the IRS website) and just mail the suckers in.
Cheers,
Bev


----------



## maz57

Yeah, I gave up being shocked as well. I also gave up being a US citizen! In fact, the only reason I hang around these forums is because I have a few residual loose ends to tie up (like CLN and 8854). I keep hoping for some new positive developments which might improve the situation for others, but of course, it never happens.

I count myself among the lucky ones because for me the final resolution is very close. Soon I can get back to my regularly scheduled life!


----------



## Nononymous

You have a couple of easy options here:

Be old-school and mail paper - doubtless you could have done this with substantially less time and grief than screwing around with a non-functioning e-file program.

Do nothing: 5+ million non-filing expats can't be wrong! If you've got dual citizenship, your affairs are simple, you don't plan on returning to the US for any great length of time, staying under the radar is still an option. And now you can renew your US passport without perjuring yourself, since the application form no longer requires you to sign a little oath that your taxes are up to date.


----------



## swisspinoy

Nononymous said:


> You have a couple of easy options here:
> 
> Be old-school and mail paper - doubtless you could have done this with substantially less time and grief than screwing around with a non-functioning e-file program.
> 
> Do nothing: 5+ million non-filing expats can't be wrong! If you've got dual citizenship, your affairs are simple, you don't plan on returning to the US for any great length of time, staying under the radar is still an option. And now you can renew your US passport without perjuring yourself, since the application form no longer requires you to sign a little oath that your taxes are up to date.


If the IRS gets its wish, then all Canadian banks will be required to report the accounts of US persons living in Canada directly to the IRS next year. The IRS may then slap huge fines on those accounts/income which have not been reported. So, it is risky to stay under the radar, risky to report one's income/accounts to the IRS and risky to renounce. maz57 renounced, I renounced, Bevdeforges did not renounce, others are hiding and some choose to seek compliance. Each person has to review their situation to determine what is best for them.


----------



## Nononymous

swisspinoy said:


> If the IRS gets its wish, then all Canadian banks will be required to report the accounts of US persons living in Canada directly to the IRS next year. The IRS may then slap huge fines on those accounts/income which have not been reported. So, it is risky to stay under the radar, risky to report one's income/accounts to the IRS and risky to renounce. maz57 renounced, I renounced, Bevdeforges did not renounce, others are hiding and some choose to seek compliance. Each person has to review their situation to determine what is best for them.


This is the subject of another thread, but I'd be willing to bet a fair sum of money that in Canada, the IRS won't get its wish, at least not in anything close to the original plan for FATCA. Canadian banks don't keep citizenship information, and I'm pretty sure that there won't be a great deal of voluntary compliance if those questions were ever asked. Our government doesn't seem too interested in cooperating either (e.g. their stated refusal to collect FBAR fines against anyone or, per the treaty, tax penalties against dual citizens).

But I agree that it's a personal decision. In my case (no US assets, but some self-employed income that could possibly be taxed) I figure the best option is to stay under the radar and continue not to file. Now that I can renew my US passport without any tax implications, the damn US birthplace won't be an issue and I can travel freely for another ten years. But for others it makes sense to become compliant, or to renounce.


----------



## expatdiane

Right if last year, 2012 you had over $10,000 in all your bank accounts or financial institutions, then you must file the FBAR, but if it is for 2013 then you will file it next year!


----------



## UnknownXV

Okay well, update again, I re-filled the return this time by simply stating "none" in the state area instead of foreign! Hopefully it goes through this time. 

And yeah, for the FBAR I won't have to file this year, so that's one more good thing. 

Meanwhile my Canadian and provincial returns have already been accepted and processed.


----------



## UnknownXV

Great news guys, I think it actually worked for me. There's hope for foreigners trying to e-file their returns! At least on a simple return like mine, taxact filed it, no rejection, I just checked the status of it and it says the IRS accepted the return too. I'm not sure if it's actually fully processed or how that works, but it looks quite good indeed!

Thanks for the help everyone, glad this is over.

I had one more question I just thought of, in the future I might want to move to the USA but I was wondering how it would work for my interest income. I wouldn't move my money to a US bank, at least not most of it, so I'd be getting interest income from my Canadian bank account. Even if I was living in the US, this would still count as foreign income, correct? The FEIE wouldn't be valid here because I wouldn't be living abroad. Is foreign earned interest income taxed differently if you aren't living abroad too? Or would my basic tax deduction be valid to it?


----------



## maz57

From my (admittedly imperfect) understanding of US returns, you would have to declare the Canadian bank interest on Schedule B (converted to US dollars, of course). It would be taxed as ordinary income. The Foreign Earned Income Exclusion would be a moot point because interest is "passive", not "earned". In Part III of Schedule B you would have to tick the "yes" box, and possibly file an FBAR if over $10,000. 

While the standard deduction might cover the interest paid, I don't believe it would be deductible if you were going with the itemised deduction method. Depending on the size of the account (as well as any other Canadian assets) you might also have to file a Form 8938. The threshhold for 8938 is lower if a US resident. ($50,000 vs. $200,000 for non-residents).


----------



## Bevdeforges

UnknownXV said:


> I had one more question I just thought of, in the future I might want to move to the USA but I was wondering how it would work for my interest income. I wouldn't move my money to a US bank, at least not most of it, so I'd be getting interest income from my Canadian bank account. Even if I was living in the US, this would still count as foreign income, correct? The FEIE wouldn't be valid here because I wouldn't be living abroad. Is foreign earned interest income taxed differently if you aren't living abroad too? Or would my basic tax deduction be valid to it?


If you move to the US, like you say, the FEIE comes off the table anyhow. For interest income, you declare it just like you did when filing from Canada. 

Basically, your interest income (from all sources) just gets added to your salary income and any other income. You then apply your personal exemptions and either the standard deduction or the total of your itemized deductions against that total to get the number that you have to look up on the tax tables to find out how much you owe.

It's all the same whether you file from the US or from overseas. The only difference is your eligibility for the FEIE. And, like mas57 said, you may have to file not only the FBAR but other forms if your foreign financial accounts exceed $50,000.
Cheers,
Bev


----------

