# Are these the only forms I need to fill out?



## USinCanada

US citizen living in Canada as a PR. 

Have not filed US taxes since I came to Canada six years ago.

*Do I need to fill out any other forms than the 1040, 2555, and 1116 for the years I plan to file?* From the forms I've read I think this is about it. 

I do not have a TFSA. I only make 20k a year. I have no children. I am not married, but living common law with a Canadian citizen who has no ties to the U.S. 

Also, after skimming through Pub 54 and Pub 17, I did not earn enough money during my first 3 years in Canada to meet the minimum amount required for filing purposes. So, I just don't file? Immigration purposes prohibited me from working the first 2 1/2 years. I have been employed the last 3 1/2. 

Do I have to be able to prove to the IRS that I did not make enough money in those first 3 years? 

Thanks in advance for any help, it is appreciated. :tea: If you need more details to answer any question I will gladly provide that.


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## quincy

USinCanada said:


> US citizen living in Canada as a PR.
> 
> Have not filed US taxes since I came to Canada six years ago.
> 
> *Do I need to fill out any other forms than the 1040, 2555, and 1116 for the years I plan to file?* From the forms I've read I think this is about it.
> 
> I do not have a TFSA. I only make 20k a year. I have no children. I am not married, but living common law with a Canadian citizen who has no ties to the U.S.
> 
> Also, after skimming through Pub 54 and Pub 17, I did not earn enough money during my first 3 years in Canada to meet the minimum amount required for filing purposes. So, I just don't file? Immigration purposes prohibited me from working the first 2 1/2 years. I have been employed the last 3 1/2.
> 
> Do I have to be able to prove to the IRS that I did not make enough money in those first 3 years?
> 
> Thanks in advance for any help, it is appreciated. :tea: If you need more details to answer any question I will gladly provide that.


Just figured this out myself so this is far from professional!
You might need schedule B if you have interest income or if you have an aggregate balance of $10,000 in the bank(even if you are joint with your partner) you would have to file an FBAR. If you have just earned income from a T4, you shouldn't need 1116, the 2555 and standard deductions should bring your taxable income to zero. You can probably do the 2555EZ as well. If you have other types of income, self-employment, or capital gains, rental etc. there are more forms.

I don't know about your other question for the years you didn't work, maybe someone else will help.


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## USinCanada

quincy said:


> Just figured this out myself so this is far from professional!
> You might need schedule B if you have interest income or if you have an aggregate balance of $10,000 in the bank(even if you are joint with your partner) you would have to file an FBAR. If you have just earned income from a T4, you shouldn't need 1116, the 2555 and standard deductions should bring your taxable income to zero. You can probably do the 2555EZ as well. If you have other types of income, self-employment, or capital gains, rental etc. there are more forms.
> 
> I don't know about your other question for the years you didn't work, maybe someone else will help.


Thanks for the reply. Our bank accounts are below 10,000 so I'm good there. I don't have any earned income here outside what is on my T4 so thanks for the 1116 tip. 

I forgot to mention that I do have some mutual funds in the US. I'm not sure what forms I'd need for that...the interest earned on that is minimal. I'm sure they'll want to know about it and I don't want to hide it obviously, but, I'm not sure what do there.

Maybe I can get some more input from others. I appreciate your help.


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## Bevdeforges

USinCanada said:


> Thanks for the reply. Our bank accounts are below 10,000 so I'm good there. I don't have any earned income here outside what is on my T4 so thanks for the 1116 tip.
> 
> I forgot to mention that I do have some mutual funds in the US. I'm not sure what forms I'd need for that...the interest earned on that is minimal. I'm sure they'll want to know about it and I don't want to hide it obviously, but, I'm not sure what do there.
> 
> Maybe I can get some more input from others. I appreciate your help.


Sounds like you're on the right track. You don't need to bother filing for those years that your gross income was below the threshold levels.

Report the mutual fund interest along with any other interest you have (just total it up on the appropriate line on the 1040 form). The 2555 should "exclude" all your salary income, leaving only your interest income. You then take your personal exemption and standard deduction against this - and that should bring your taxable income down to 0. 

Do be careful what you report as salary income, though. Not sure about Canada, but many countries allow you to deduct social insurances from your salary before you figure your taxes. The US really wants your gross salary - before any and all social insurance or retirement fund deductions are taken. You sometimes have to back into this number from the tax documents your home country provides.
Cheers,
Bev


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## USinCanada

Bevdeforges said:


> Sounds like you're on the right track. You don't need to bother filing for those years that your gross income was below the threshold levels.
> 
> Report the mutual fund interest along with any other interest you have (just total it up on the appropriate line on the 1040 form). The 2555 should "exclude" all your salary income, leaving only your interest income. You then take your personal exemption and standard deduction against this - and that should bring your taxable income down to 0.
> 
> Do be careful what you report as salary income, though. Not sure about Canada, but many countries allow you to deduct social insurances from your salary before you figure your taxes. The US really wants your gross salary - before any and all social insurance or retirement fund deductions are taken. You sometimes have to back into this number from the tax documents your home country provides.
> Cheers,
> Bev


Thanks for the reply. 

So, if I'm not filing for specific years do I need to explain to them why? For some reason I just have this picture of someone sitting in an office looking over my forms and noticing that I haven't filed in years, then, digging into it further and inquiring as to why. I have nothing to hide, but, just curious how that all works out. 

One thing is for sure, once I get all this squared out I won't be letting it slip again! 

Cheers for the help.


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## Bevdeforges

There are plenty of folks who have legitimate reasons for not filing in a year when their income was below the filing threshold. If you were "suddenly" filing with $250,000 in salary income and you're 47 years old, then yeah, they might ask why you haven't been filing before. But in your case, it sounds like there isn't much for them to worry about, and honestly, they don't devote an awful lot of time to each individual return as it is filed.
Cheers,
Bev


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## quincy

USinCanada said:


> Thanks for the reply. Our bank accounts are below 10,000 so I'm good there. I don't have any earned income here outside what is on my T4 so thanks for the 1116 tip.
> 
> I forgot to mention that I do have some mutual funds in the US. I'm not sure what forms I'd need for that...the interest earned on that is minimal. I'm sure they'll want to know about it and I don't want to hide it obviously, but, I'm not sure what do there.
> 
> Maybe I can get some more input from others. I appreciate your help.



Just to be clear, the total of all your bank accounts combined, not just individual accounts, has to be below $10,000 at all times throughout the year, not just at year end.


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## USinCanada

Thanks Bev, and Quincy. I feel a lot better now and will move ahead to getting those forms filled out and sent in. 

Quincy, the total of all accounts has been less than 10. I appreciate that bit of info. I'm paying off school loans so most of our spare money goes to those! D'oh! 

Thanks again. Cheers.


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## johnmillsbro

*Dependents*

Really informative posts here. I was curious if there is any benefit to claiming dependents (my two kids) if my taxable income is zero after 2555EZ? I prefer to include the minimum information? Related question because my canadian income is a scholarship (25K CDN), in theory, I probably only need to declare part of this. But again is there any point if Im already at zero income??? 

Just say I feel relieved. I just got back from a meeting with a lawyer/CPA and they were talking 3K for my tax returns...


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## BBCWatcher

You may be very lucky. Did you know you might do better than zero, i.e. get money from the IRS? That's because there are some refundable tax credits that can sometimes apply to U.S. expatriates in certain circumstances. In your case you should look into the Earned Income Tax Credit (EITC), the Additional Child Tax Credit, and the American Opportunity Tax Credit in particular.

For example, I think you can get some EITC dollars from the IRS if you have some earned income (such as part time work you're doing while attending university), if your income is not too high, if you can claim your two children as dependents, and if you do not take the foreign earned income/foreign housing exclusions (or if you take only what you need). The AOTC may apply if, in particular, you are attending an educational institution recognized by the U.S. Department of Education. (Many Canadian and other non-U.S. institutions are.)

So, to answer your question, yes, it could be highly advantageous to claim your children as dependents. The EITC is not available to U.S. expatriates without dependent children. And yes, you will want to deduct educational expenses to the extent possible in these circumstances.


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## Bevdeforges

Personally, once the tax liability gets to 0 I wouldn't mess with trying to claim anything back. There are darned few tax credits in the US that are paid out to those who owe no taxes or who have no taxable income.

Take a look through Publication 54 (for US taxpayers living abroad) to check, but I'm fairly certain that the EITC isn't available for those taking the FEIE. (Just checked and to claim the EITC, the dependent must have lived with the taxpayer IN THE US for at least half the year.) If married, you also must be filing jointly. 
Cheers,
Bev


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## johnmillsbro

Bevdeforges said:


> Personally, once the tax liability gets to 0 I wouldn't mess with trying to claim anything back. There are darned few tax credits in the US that are paid out to those who owe no taxes or who have no taxable income.
> 
> Take a look through Publication 54 (for US taxpayers living abroad) to check, but I'm fairly certain that the EITC isn't available for those taking the FEIE. (Just checked and to claim the EITC, the dependent must have lived with the taxpayer IN THE US for at least half the year.) If married, you also must be filing jointly.
> Cheers,
> Bev


You two are awesome!


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## BBCWatcher

Bev, you're quite correct about the U.S. residency requirement for the child(ren) to qualify for the EITC. Mea culpa.

The other refundable tax credits (AOTC and ACTC) may still apply, however. I disagree about settling for zero if there's a better legal outcome available. If General Electric can pay a negative effective tax rate (i.e. get paid by the IRS for existing), then there should be no problem whatsoever if an individual of modest means can also get some money from the IRS. Millions of Americans have a negative personal income tax rate, and if a U.S. expatriate or three also gets that benefit, that's wonderful.

On edit: The maximum possible AOTC refundable benefit available to a U.S. expatriate is $1,000. The maximum possible ACTC benefit is $1,000 per child, although the calculation is a bit complicated. Thus as much as $3,000 is at stake. That's not a small amount of money to someone earning about $25,000 per year, so we shouldn't so quickly dismiss it IMHO.

On second edit: Here's a good article summarizing the refundable tax credits available to certain U.S. expatriates.


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## johnmillsbro

I believe I am ineligible if I fill married/separately. I dont want to report my wives income and thus prefer to fill separately. Again she being a NRA


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## johnmillsbro

3000$ is no small sum regardless of your income! Thanks for the link. To clarify, I am doing back taxes. Do I forfeit any tax refund?

Also. I was a graduate student therefore "Caveat #2: graduate students do not qualify for this credit. The Tax Relief and Job Creation Act of 2010 extends the AOTC for two additional years until Dec. 31, 2012" applies I assume!"


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## BBCWatcher

OK, so that leaves the ACTC as a possibility. I hope it works for you.


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## BBCWatcher

As a follow up, you could try running your taxes both with and without the foreign exclusions and see how that works. (You'd use the foreign tax credit instead.) Canada is a relatively high tax country, so that may work for you depending on your income sources and their taxability. Using the FTC would also keep the ACTC available if you qualify. Note that excess foreign tax credits can be carried backward and forward to other tax years to some degree, and that might be useful.

That article I linked to implies that it's possible to exclude only part of your foreign earned income, even if you earn below the exclusion limit and even if you are a 100% expatriate (full time outside the U.S.) I'm not exactly sure how they do that, but it's an intriguing idea. Before you even explore that, see if the FTC path works since it's much more conventional.

I hope I'm making sense. This stuff can be confusing.


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## johnmillsbro

Thanks BBCWatcher...

Any insight what they are referring to here @ thetaxesforexpats site " Additional Child Tax Credit – has the same requirement that regular child tax credit. The caveat: If your salary is fully excluded through the foreign earned income exclusion, you will not receive the refund. Expert tax preparers (read: us) know how to adjust the amount of excluded income in order to keep the taxpayer below the taxable level while making him qualified for the additional child tax credit."

The way I am currently thinking of filing my income would be zero because its well below the 92K federal earned income exclusion......

Thanks again


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## BBCWatcher

That's what I was referring to.

Try the Foreign Tax Credit instead of the FEIE and see how that goes.


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## johnmillsbro

Am I obliged to use the FEIE? or the Tax Credit? If I don't as far as I can tell my taxes would be under 1000$ meaning that I could in theory get a refund with the ACTC


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## Bevdeforges

johnmillsbro said:


> Am I obliged to use the FEIE? or the Tax Credit? If I don't as far as I can tell my taxes would be under 1000$ meaning that I could in theory get a refund with the ACTC


You aren't obligated to use the FEIE - but filing as married filing separately generally knocks you out of the running for a whole bunch of credits and benefits. I think there's a list of them in Pub 501 that BBCWatcher mentioned elsewhere.
Cheers,
Bev


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## BBCWatcher

My guess is you're better off with the FTC (in part for the ACTC), so try running your taxes that way. Moreover, if you have excess FTC, you may be able to carry it backward one year and forward up to ten. That might be useful.


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## johnmillsbro

Ok. If i have this right I would get a significant refund (I might have this wrong). I'll run this past you real quick if you have the time awesome, if not, I totally understand. 

This is a 2011 1040 Im referencing.

My only income is a scholarship in Canada. 

I'm filing married, separately

Married to a NRA

I have two children (2 and 5 yrs old) dual citizens (US/CaNADA) who have SS #s

Therefore I am claiming 3 on *Line 6d*
My scholarship was 21,000$ converted to USDs from CDs (*line 7*)
I have no other income therefore my total income is 21,000$ (*line 22*) 
I have zero adjustments to my Gross income so * Lines 37 and 38*= 21000


*Line 40* Im using standard deduction (married/separate) of 5,800
*Line 41* then = (21000- 5800 =15,200)
*Line 42* exemptions = 3700$ x 3 = $11,100
*Line 43* = 15200-11100= 4100$ = Taxable Income
*Line 44* = Tax Chart for 4100$ and Married/Separate = 423$ Tax 
*Line 51* = Child Tax Credit = 423$ based on Child Tax Credit worksheet with two kids and income of 21,000$
*Line 54* = Total credits = 423$
*Line 55 * = 0 ( Line 54 - Line 46 = 423$-423$)
*Line 61 * = total tax = 0
*Line 65 (Payments)* filled form 8812 Additional child tax credit (ACTC) = 1577$

*Line 72* = total payments = 1577$
*Line 73 * = REFUND = 1577$-0 = 1577$



Im assuming I messed something up otherwise there is going to be some love going out to Bev and BBCWatcher!


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## BBCWatcher

That could well be correct, but here are a couple things to check:

1. Are you treating your scholarship as earned income or not? I think generally scholarships are not earned income, so just pay attention to that when you figure the Child Tax Credit (which seems to fuss a bit over whether the income was earned or not).

2. You may be able to do even better, up to the $2000 maximum theoretical refund for the ACTC. If you paid income tax to Canada on your scholarship, take a look at the Foreign Tax Credit and see if that's helpful. Since you incurred educational expenses, take a look to see if you can pull those out using the various educational tax credits if you qualify.

A provisional congratulations, though, assuming everything checks out. Another $1500+ in pocket ain't bad.


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## johnmillsbro

I will check but I believe its earned income.

Canada does not tax my scholarship.

How far back does the IRS give refunds on back taxes?


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## BBCWatcher

Here's what the IRS says: "Generally, to claim a refund, Form 1040X must be filed within 3 years from the date of your original return or within 2 years from the date you paid the tax, whichever is later. Returns filed before the due date (without regard to extensions) are considered filed on the due date."

That's assuming you filed previously, and you're filing an amended return to claim the credit(s) you forgot. If you missed your filing and you were supposed to file then I would check out the IRS's new "streamlined" compliance program for expatriates and follow those instructions.

Yes, I think it's a good idea to go back in time and recover those refundable tax credits if you can. That'd be a nice windfall.

Regarding the question of earned v. non-earned income, let's try this another way. There's an Earned Income Worksheet that's part of the Child Tax Credit instructions. Are you properly reflecting your scholarship on line 4a of that worksheet? (I'm looking at the 2012 instructions, but hopefully 2011 is similar.) As long as you're doing that, I see no problem with that issue....

Regarding what I mentioned about subtracting educational expenses, I was referring to (2012) IRS Form 1040 line 34, but I see you cannot put anything on that line if you're married filing separately -- too bad. Is there anything else in lines 23 to 35 that might apply? For example, did you pay student loan interest (line 33)?

....Ah, I found it! It's not line 34. Here's what the 2012 IRS Form 1040 instructions say about what should be included on line 7: "....Scholarship and fellowship grants not reported on Form W-2. Also, enter 'SCH' and the amount on the dotted line next to line 7. However, if you were a degree candidate, include on line 7 only the amounts you used for expenses other than tuition and course-related expenses. For example, amounts used for room, board, and travel must be reported on line 7."

Were you a degree candidate? That may be very, very helpful to you since it could pull your line 7 down by quite a lot if you qualify. And I think that should help you pull your refundable child tax credit up to the full $2000 (for two children). But do the math and read the instructions carefully, as always.

On edit: Another "dumb" question: Are you converting these Canadian dollar amounts to U.S. dollars properly? I assume the $21000 scholarship figure you cited is in Canadian dollars. Granted, in 2011 the Canadian and U.S. dollar were roughly on par, but you need to make that adjustment throughout -- everything on a U.S. tax return is reported in U.S. dollars. And that adjustment should help a bit. You can use the IRS rate for 2011 (1.029) if you don't know what else to use. That is, you would take the Canadian dollar amount and divide by 1.029 to report the U.S. dollar amount. (That rate seems exactly backwards to me, but I wouldn't complain to the IRS about getting a couple percentage points of benefit there.) On second edit: Never mind -- the IRS rate is a good one. The actual exchange rate bounced around more than I thought in 2011, and the IRS rate is reflecting that reality pretty well.


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## johnmillsbro

Thanks for that. I will be able to reduce my income by the amount of my tuition (3K or so). What proof do I give? I dont have a W2? How do they even know my income is foreign (canadian)? Or is this irrelevant assuming i dont file for a foreign exclusion or tax credit?


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## johnmillsbro

how much does this matter? I was going to just use 1.00? Seemed half the year of 2011 was around 0.975 and half at 1.025...


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## BBCWatcher

Excellent -- that ~$3K reduction on line 7 should work well for you. Course-related fees includes textbooks, so if you've got something like a credit card statement, cancelled check, or book store receipt available then you can calculate that amount and pull it out of line 7 as well. But start with the tuition and see where you end up.

Just keep a copy of your tuition bill, scholarship award statement or letter, degree program documentation, etc. in your personal files along with your tax records -- whatever is reasonable and that you can reasonably collect in the circumstances. No, you wouldn't have a W-2 since you're receiving the scholarship from a Canadian grantor. That's not a problem.

You are not required to take the FEIE or FTC, and that's the whole point in your case because of that very attractive refundable Child Tax Credit. But just keep sufficient records to defend what you're reporting if the IRS decides to ask further questions.

Again, provisionally, congratulations.


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## johnmillsbro

Its not clear what my obligations are for the streamlined process prior to 2009. That procedure seems to be only for 2009 onward.


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## BBCWatcher

johnmillsbro said:


> how much does this matter? I was going to just use 1.00? Seemed half the year of 2011 was around 0.975 and half at 1.025...


Well, let's take your scholarship as an example. Let's assume it was C$21,000 total in tax year 2011, and you received it monthly.

In that case the IRS says you can use their published exchange rate for tax year 2011 which is 1.029. That means C$21,000.00 translates to US$20,408.16. If you use an exchange rate of 1 then C$21K equals US$21K, so you're reporting a higher income than necessary. (Note I haven't included the $3K tuition subtraction, but the same principle applies.)

Anyway, there's a few bucks of tax on US$592 of income. So sure, take the exchange rate benefit the IRS is giving you. Why not?


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## johnmillsbro

Here is a good one for you! As part of my tuition I had to pay for mandatory health coverage which was charge in my tuition. It was basically an international health coverage plan required b y the university. Would this fall under qualified expenses (i.e. fees) or under itemized deductions? No clear what "fees" are....


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## BBCWatcher

Let's not get greedy.  Start with the portion that's pure tuition and see what the math shows when you pull that out of line 7. (On edit: Also make the exchange rate adjustments.) If you hit the $2000 maximum refundable credit (2 children), just triple check everything and you're done (for that tax year anyway).

Actually, what you should be doing is using the instructions and worksheet(s) in Publication 970. Apparently the IRS hasn't posted the 2012 version of that publication yet, but in your case you'll want to use the 2011 version anyway (for tax year 2011). Publication 970 will guide you through determining what is and is not taxable for your scholarship/fellowship.

This brings back memories of my time at my university. I just couldn't remember how you handled it, but all this is coming back to me now.


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## johnmillsbro

Glad to be done with. Not easy with kids!!

Where did you find the IRS currency rates. I'll need to repeat the exercise for 2009, 2010 at least it seems


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## BBCWatcher

A couple follow ups:

1. There's a reference to student medical fees in Publication 970. It's in the "wrong" section of that publication for your purposes, but I think you would follow the same rule. According to that other section, student medical fees, even if required for enrollment, are not qualified educational expenses. So, as I read it, you cannot subtract your student medical fee(s) from line 7. (If you had lots of medical/dental expenses then you might be able to deduct them on Form 1040 Schedule A, but only if the medical/dental expenses are over 7.5% of your Adjusted Gross Income. But I doubt that's true in your case, so don't worry about it.)

2. Check to see whether your Canadian university is on the U.S. Department of Education's list of accredited institutions. If it is, fantastic, no problem. If it isn't then I don't think it's a problem, but some more investigation is required.

3. I don't think it applies to you (since evidently your scholarship/fellowship came from a Canadian grantor, and you didn't get a W-2), but perhaps for others it's worth noting that the taxable part of a scholarship/fellowship qualifies as IRA income if it's reported on Box 1 of a W-2 form. That is, incredibly, you can make an IRA contribution (such as a Roth IRA contribution) out of scholarship income in certain cases. That could apply to U.S. expatriates who receive scholarships/fellowships from U.S. grantors. I didn't know that, but now I do -- very interesting.

Why do I feel like Mitt Romney's tax accountant right now? 

On edit: The IRS's foreign exchange rates are here. Do read the instructions carefully, as always. You get even more exchange rate help in tax years 2009 and 2010.

On second edit: Just to editorialize a bit, it's sometimes fashionable to complain about the U.S. requiring its expatriate citizens (and green card holders) to file U.S. tax returns in most cases, and sometimes to pay tax. However, in your case it appears you can get up to US$2000 per year solely because you and your children are U.S. citizens, even though you are not physically residing in the U.S. That's pretty awesome.


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## johnmillsbro

well Im at 1850 now...still short of the 2000K


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## johnmillsbro

I wish my tax return was as interesting as his...... 

there are no non-US universities on that accreditation list......


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## johnmillsbro

For the record I believe if your school is listed here then its eligible re: form 970

Home - FAFSA on the Web-Federal Student Aid

which mine is....


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## BBCWatcher

That's odd. Maybe that's the wrong U.S. Department of Education list.

However, in looking further at Publication 970, I think you're OK. To treat part of your scholarship as nontaxable (i.e. pulled out of line 7), you must have been a student in a degree program, and the university must be an "eligible educational institution," which (in the scholarships section) is defined as "one whose primary function is the presentation of formal instruction and that normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities." In other sections of Publication 970 (such as the Lifetime Learning Credit section) there's a different definition which is more narrow, requiring that the institution be on the DOE's list of Federal Student Aid (FSA) eligible institutions.

If you're curious you can check that FSA list here. But I don't think that matters for your purposes, as mentioned. (If your Canadian university is on the FSA-eligible list, you're completely fine in that respect.)

Up to US$1850 now? Fantastic. Dig through those textbook and other eligible receipts.  The exchange rate will help you some more in 2009 and 2010.

On edit: OK, good that it's on the FSA-eligible list. That doesn't seem to be a requirement for scholarship/fellowship nontaxability and line 7, but it doesn't hurt.


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## johnmillsbro

Thanks a million...err,,, 1864$ so far


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## BBCWatcher

You should also take a look at the Making Work Pay Credit for tax years 2009 and 2010. That was a "blue light special" just for those tax years. The MWPC could be worth another US$400 per year if you qualify. Look for IRS Schedule M and its instructions for those two tax years. You can find all the 2010 forms here and all the 2009 forms here.

At very quick glance it looks like you would qualify for the MWPC if your situation was similar to 2011. You'd probably get another US$400 per year if you decide to file jointly with your non-resident alien wife, but that's a big step for US$400.

Also note that your youngest child will probably drop off the ACTC the farther back you go since he/she wouldn't have been born. You can include your child in tax years when he/she was outside the womb, even if he/she arrived into this world at 11:59 p.m. on December 31.

Another thing is that I have no idea what the impact (if any) these U.S. refundable tax credits will have on your Canadian tax liabilities. I guess that means reading the U.S.-Canada Tax Treaty and Canadian tax publications, but I'm sure you know more about that than I do. Chances are it'll have no impact, but it's obviously worth checking. And it's still a happy problem to have.


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## BBCWatcher

Oh and another thing... Because all your returns are likely to show that you're owed refunds (refundable tax credits), there's no late filing fee owed. I would still follow the IRS's streamlined compliance program just in case you have a FBAR filing that you missed, and also because it can't hurt. But you're in really good shape on the compliance front if your tax returns legitimately end up with minus signs at the bottom.

On the other hand, the IRS won't be sending you interest on the refundable tax credits you didn't collect unless, once you send in your forms, they take an inordinate amount of time to process them.

....So, as a rough tally, you'll probably get about $1400 for tax year 2009, $2400 for tax year 2010, $1864 for tax year 2011, and let's say another $1800 for tax year 2012. That's assuming you had pretty much the same situation in all those tax years, and your 2 year old entered the world sometime in 2010. So the IRS could be sending you a check for about $7500 if you got all this stuff right.

Keep us posted, of course. That'd be great. Spend it and save it wisely.


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## Bevdeforges

johnmillsbro said:


> Its not clear what my obligations are for the streamlined process prior to 2009. That procedure seems to be only for 2009 onward.


As I understand it, the "streamlined procedure" only asks you to file 3 years back taxes to be declared up to date. They really have no interest in your filings before 2009 because that predates the publication of this "new" process. 
Cheers,
Bev


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## johnmillsbro

Question in terms of setting up direct deposit for a back tax refund.

In the instructions for 1040 (2011). The following is stated
Reasons Your Direct 
Deposit Request May Be 
Rejected
If any of the following apply, your direct 
deposit request will be rejected and a 
check will be sent instead.
• Your financial institution(s) will not 
allow a joint refund to be deposited to an 
individual account. The IRS is not 
responsible if a financial institution 
rejects a direct deposit.
• You request a deposit of your refund to 
an account that is not in your name 
(such as your tax preparer’s own 
account).
• *You file your 2011 return after 
December 31, 2012.*


Im assuming this means you can't request a direct deposit for back taxes???


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## Bevdeforges

johnmillsbro said:


> Im assuming this means you can't request a direct deposit for back taxes???


Sure sounds like it. I was going to suggest that you check the requirements of the various refunds/tax credits you're going for. Very often on these sorts of things, one of the requirements buried in with the rest is that any paid credit must be claimed "on a timely filed return."
Cheers,
Bev


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## johnmillsbro

Thanks Bev,


Because I may be moving in the next 6 months is it reasonable to use my domicile address for my taxes (my parents home) rather than my foreign address? To avoid any refund getting lost in a postal mistake etc.


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## johnmillsbro

I dont see any time limitations on form 8812 instructions. I believe there is a 3 year statue on getting refunds from the IRS?


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## johnmillsbro

Looks like I can't claim the ACTC. In the 8812 worksheet in line 4a it states basically I can't use a scholarship or fellowship that doesn't appear on a w2 form...thus exempting me


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## BBCWatcher

That goes way back to my earlier question: are you treating your scholarship correctly on line 4a of the worksheet?

I think the MWPC operates the same way, but check that as well.

You mentioned elsewhere you are on a work permit now. How much of your income, if any, in tax years 2009, 2010, 2011, and 2012 is attributable to work? Also, is part of your "scholarship" actually a salary or wages for being a teaching or research assistant, for example? (Sometimes a financial aid "package" will include a grant element and a non-grant element, with the latter a remuneration for your work at the university. If that's true, and if that's documented, you should be fine.) You do need _some_ earned income for the ACTC, unless you plan on having or adopting a third child.


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## Bevdeforges

BBCWatcher said:


> That goes way back to my earlier question: are you treating your scholarship correctly on line 4a of the worksheet?
> 
> I think the MWPC operates the same way, but check that as well.
> 
> You mentioned elsewhere you are on a work permit now. How much of your income, if any, in tax years 2009, 2010, 2011, and 2012 is attributable to work? Also, is part of your "scholarship" actually a salary or wages for being a teaching or research assistant, for example? (Sometimes a financial aid "package" will include a grant element and a non-grant element, with the latter a remuneration for your work at the university. If that's true, and if that's documented, you should be fine.) You do need _some_ earned income for the ACTC, unless you plan on having or adopting a third child.


If the requirements say that the scholarship or fellowship has to be reported on a W-2 that's a sneaky way of saying that foreign scholarships or fellowships don't count, no matter what they're called. Nearly all the tax credits of that nature (i.e. that pay out if you have no tax liability) are like that.
Cheers,
Bev


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## johnmillsbro

BBCWatcher said:


> That goes way back to my earlier question: are you treating your scholarship correctly on line 4a of the worksheet?
> 
> I think the MWPC operates the same way, but check that as well.
> 
> You mentioned elsewhere you are on a work permit now. How much of your income, if any, in tax years 2009, 2010, 2011, and 2012 is attributable to work? Also, is part of your "scholarship" actually a salary or wages for being a teaching or research assistant, for example? (Sometimes a financial aid "package" will include a grant element and a non-grant element, with the latter a remuneration for your work at the university. If that's true, and if that's documented, you should be fine.) You do need _some_ earned income for the ACTC, unless you plan on having or adopting a third child.



I'll look into that. For the new tax years I should be ok as my income was partially non-scholarship


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## johnmillsbro

Curious. What if the official term is called a "stipend"? In some years where a student doesn't receive any fellowship or scholarship their supervisor is responsible for covering a minimum amount funding to the student. I wonder if this would work?


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## BBCWatcher

A "stipend" generally would not count.

Back up a couple steps here. While you were at university, did you perform any work separate from your academic pursuits? Did you work as a teaching assistant, research assistant, librarian, etc? Start with that threshold question.

If the answer is "Yes, I worked," then was that work voluntary, or did you receive compensation for it? If you're not sure, another way to look at that question is "What would have happened if I didn't work?" Would your "scholarship" have been reduced? By what amount? Is there any documentation to that effect?

I'm going to disagree a little with Bev here. There's plenty of qualifying earned income that workers receive that's not reported on W-2s, even in the U.S. For example, a domestic helper (maid, babysitter, house sitter, etc.) paid less than $1,700 per year would not receive a W-2 but would be receiving perfectly fine IRS-recognized earned income. When I delivered newspapers (a long time ago) I received a bit of income for that work and never got a W-2, as another example.

When I received a graduate fellowship, the terms of that fellowship specifically prohibited me from taking _compensated_ work. While I did work (alternately as a research assistant and a teaching assistant), and that work was encouraged but not strictly required, if I had not worked my fellowship (scholarship) would have been exactly the same. And I could not accept compensation for that work, even though some other RAs and TAs did. So in that scenario my earned income was zero. Your situation may have been different.


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## johnmillsbro

Seems we are getting into the nitty gritty. 

My fellowship conditions set forth by supervisor was that I would come to the laboratory and do work for 40 hours or more per week. However, this was considered part of graduate studies. If I didn't do this I would not have likely been able to remain in the lab therefore not recieve this fellowship. THe fellowship was under the condition I was "part" of the lab. However again my designation in the lab was "graduate student" not "research assistant".

Ideas?


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## johnmillsbro

Someone mentioned that the reason they mention excluding scholarships not on a w-2 form is because sometimes they are received by students instead on a 1098-T form. This would be income but not taxable. But in my case as Im in canada and of course I dont get a w-2 this should not be interpeted the same way. Therefore i should determine if my scholarship is taxable or not and ignore the instructions earned income chart accompanying the 8812 form... Any sense to this ???

Thanks,

John


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## BBCWatcher

There's some sense to that, and it's a critical issue. You might have to dig into IRS private rulings and such.


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## johnmillsbro

Bear with me here (Bev or BBCWatcher). In form 8812 line 4a you are to put in *earned income*. Now through the various publications it states, in 1040 instructions * "Earned income includes salaries, wages, tips, professional fees, and taxable scholarship and fellowship grants"*, and in publication 54, *Any portion of a scholarship or fellowship grant that is paid to you for teaching, research or other services is considered earned income if you must include it in your gross income. *, in publication 970,* Its only tax-free if it does not represent payment for teaching, research, or other services required as a condition for receiving the scholarship.*

Considering the wording of my fellowship : "Research into Leukemia" and "you are only eligible if the research is performed in Canada"....Can I be confident my fellowship is "earned"?


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## BBCWatcher

I'm warming to that interpretation. But the Form 8812 worksheet for line 4a says you need to take out taxable scholarship and fellowship dollars not reported on a W-2. I would feel much more comfortable if you have a reasonable argument why some of the dollars you received are not "scholarship" or "fellowship" amounts, but they are actually directly attributable to non-study/non-degree related work. Or if you can find something where the IRS says "no, we didn't really mean a W-2 for foreign scholarships and fellowships; what we really meant is the part of the scholarship/fellowship that would have been reported on a W-2 if it had been a U.S. v. Canadian grantor."

This is definitely worth clarifying, though, because it's a rather substantial amount of refundable tax credit at stake. I would keep digging, and you might have to ask the IRS.


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## johnmillsbro

Related link here https://ttlc.intuit.com/questions/1...-do-not-correctly-contribute-to-earned-income

In my case I have to make this interpretation on my own because Canada wouldn't give a w-2 no matter what case; whether my scholarship was for research (services) or for study or for tuition.

In regards to your comments, Lets say I get a scholarship from Harvard. Its 30,000$. If 10,000$ was to cover tuition and the rest was to partake in research activities ($20,000). My w-2 would probably show 20,000 but I would get a 1098-T showing 10,000$.

Therefore, on Line 7 I would show 30,000$ but only 20,000$ would be on my W-2. So for 4a of 8812...they would want to see 30,000$-10,000$= 20,000$ because that is my "earned income" In support of this interpretation in the 1040 instructions for details about line 7 it states I should put w-2 salary as well as scholarships or fellowships not on my W-2. 

ANother instance could be where you get scholarship and then you given an entrance award. Not to actually do research per se but because you were "gifted" or had the top GPA etc. THat wouldn't be listed on a w-2 but would still be taxable (from pub. 970) I would guess but not earned.

Here is a link with something similar. 1099-Misc Income Treatment Scenarios

SO should I ask the university to define if my scholarship is defined as "a wage" for a service?


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## johnmillsbro

how does one ask the IRS? whenever I call I get someone who seems poorly trained?


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## BBCWatcher

Actually, scholarship funds used for tuition and course-related expenses are not taxable. It's just the excess that is -- even if used for university housing, etc. (As a bit of historical trivia, that taxability was introduced with the 1986 Tax Reform Act. A large cohort of late 1980s students despised Ronald Reagan because of that particular tax increase. )

Just be careful what you wish for.  If a portion of your "scholarship" is salary or wages -- and that could very well be, based on your description -- how would Canada then treat it for tax purposes?

Here's a thought. Could your Canadian university issue back W-2s? That's remotely possible, depending on how they do things. I get 1099s from foreign affiliates of U.S. banks for what it's worth. A set of W-2s for those years would neatly solve this problem and remove any ambiguity.

This article contains some interesting insight into when students are undertaking employment for taxable compensation, and it also has some advice for reporting.


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## BBCWatcher

Written responses are good, so you could send postal mail here:

Internal Revenue Service
International Accounts
Philadelphia, PA 19255-0725
U.S.A.


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## Bevdeforges

Tax Topics - Topic 421 Scholarship and Fellowship Grants

Publication 970 (2011), Tax Benefits for Education

Direct from the horse's, um, mouth...
Cheers,
Bev


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## Bevdeforges

BBCWatcher said:


> Actually, scholarship funds used for tuition and course-related expenses are not taxable. It's just the excess that is -- even if used for university housing, etc. (As a bit of historical trivia, that taxability was introduced with the 1986 Tax Reform Act. A large cohort of late 1980s students despised Ronald Reagan because of that particular tax increase. )
> 
> Just be careful what you wish for.  If a portion of your "scholarship" is salary or wages -- and that could very well be, based on your description -- how would Canada then treat it for tax purposes?
> 
> Here's a thought. Could your Canadian university issue back W-2s? That's remotely possible, depending on how they do things. I get 1099s from foreign affiliates of U.S. banks for what it's worth. A set of W-2s for those years would neatly solve this problem and remove any ambiguity.
> 
> This article contains some interesting insight into when students are undertaking employment for taxable compensation, and it also has some advice for reporting.


Canadian universities cannot issue W-2's. The only reason you get 1099's from "foreign" banks is because they are owned and operated by a US parent company.
Cheers,
Bev


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## BBCWatcher

Bevdeforges said:


> Canadian universities cannot issue W-2's.


One would think not, but several of them have at least some passing participation in U.S. federal student aid programs, so who knows. Can't hurt to ask.


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## johnmillsbro

I can definitely document I have a "fellowship" that requires me to perform research. I will speak to the university. I guess the question remains on line 4a of 8812 when they say "earned income" are they referring to the general term used throughout various tax forms or in that instance a unique instance of the term "earned income". As far as I can tell, any fellowship that is for teaching or research should be deemed "earned income" and taxable income. Again, this fellowship wasn't a prize or for tuition. It was for research. I just happen to be able to use a portion of it to pay my tuition. 

My biggest worry here is I will claim the ACTC and ask for a refund. They will say "no" and then they will fix my taxes for me, perhaps I might owe money after that happens. If I use the FEIE route then for sure I wont owe any tax and I won't be questioned or audited etc. Also. Will asking for a refund prevent me from using the "streamlined" procedure?

Thanks again


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## BBCWatcher

Aren't you at about zero tax already without the FEIE, with the correct foreign exchange rate, and with removal of the nontaxable tuition/required course expenses from line 7?

I think you've got it backwards, actually, in terms of compliance risk. If the IRS ends up owing you money they're absolutely thrilled you waited this long to file. Heck, they would prefer you _never_ file so they can keep your money. If you're legitimately owed refunds, that puts you in the best position in terms of compliance.


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## johnmillsbro

Im probably zero on all returns or at the very least pretty near zero. I just realized in canada my filer (a friend) put the Universal Child Care Benefit my kids receive on my taxes not on my wives. So I probably have to claim that 2400$ as income.... 
f
I really think the purpose of the instructions for line 4a in form 8812 is for people who get there scholarship/fellowship reported on both a w-2 or that 1099-MISC or 1098-T. Just to make sure they are correctly claiming "earned income"......... but I need some more confidence !


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## Bevdeforges

Per the link I gave you above:



> Qualified scholarship and fellowship grants are treated as tax-free amounts if the following conditions are met:
> 
> You are a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and
> Amounts you receive as a scholarship or fellowship grant are used for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution.
> 
> You must include in gross income amounts used for incidental expenses, such as room and board, travel, and optional equipment, and generally amounts received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant. Also you must include in income any part of the scholarship or fellowship that represents payments for services. Generally when reporting scholarship income on your tax return, you will include the amounts on the same line as “Wages, salaries, tips, etc.” Review the instructions of your tax form to determine how to report any income from scholarships.
> 
> However, you do not need to include in gross income any amounts you receive for services that are required by the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance Program.


Cheers,
Bev


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## johnmillsbro

well I spent 3 hours with IRS getting bumped around by people that weren't sure about my dilemma until I found someone who was sure; sure that without a w-2 you can't get the ACTC! I don't think she was that sure. But she did admit she has no idea why you have to subtract any taxable fellowship NOT on a W2 form... Ugh...can i get a refund on my 3 hours of life wasted?!?!?!


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## BBCWatcher

As mentioned it's a longshot, but if the university can issue W-2s, fabulous.


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## johnmillsbro

Hi BBC... I asked and they don't. Good suggestion though?!?!


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## BBCWatcher

Oh well. It was fun while it lasted.

So, FEIE and streamlined compliance program it is, I guess, for those those older years, then pick up the ACTC (and MWPC if applicable) for the year(s) when you started getting some earned income. Still better than zero, so not bad.


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## Bevdeforges

Just one caution: Filing from overseas on a return that shows 0 tax due and "pushing the envelope" to claim a refundable credit will put you on the IRS radar, so make sure you check your math and do things strictly by the book.
Cheers,
Bev


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## USinCanada

So I ended up putting off filing for another year but this is it, I must complete it this year for peace of mind. 

I have never actually filled in a 1040 before, or 2555. Until I moved to Canada, my taxes were always done by a family CPA (who has passed on) and while in Canada my fiances mother has always done my Canadian taxes. Soooo, forgive me if my questions are stupid. 

I've made it to line 38 with an AGI of 773.79 (after taking the Foreign Income exclusion and adding my ordinary divs and capital gains).

*Line 40* - Standard deduction. Single, or married filing separately 5,800. 
*Line 41* - Subtract 40 from 38. $773.79 - 5,800 = (-5,026.21) 

*Line 42* - Exemptions = $3,700. I'm assuming I'm taking an exemption for myself, right? Remember..I've never done this before on my own. 

*Line 43* -Taxable Income. Subtract 42 from 41. If 42 is more than 41, enter 0. I should be entering 0 here, correct? 

If I am entering 0 here, I'm pretty much done except for dotting the i's and crossing the t's, no? I have no other credits, or taxes. Just put a bunch of 0's in the rest of the boxes? Sign and mail in...

Should I mail in each year that I'm filing for separately, or just put them all in one envelope? Not sure if that matters or not...

Thanks for any help. I'm sure I'll have more questions, but, I want to get at least one year done and I think the rest should go pretty quickly.


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## Bevdeforges

Sounds to me like you've done it all correctly. File this year's (2012) and then start working on the back forms. I would send them in separately, just to be safe. Each year must be done on its own forms (they change a bit each year - but back forms are available on the IRS website) - and include a cover letter explaining why you are back filing (don't tell them you just "didn't get around to it"). 

Check the instructions on where to file because they changed the address for "overseas" returns a year or two ago. Make sure you send the right return to the proper address.
Cheers,
Bev


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## USinCanada

Thanks Bev. 

Good tip on the cover letter. I wouldn't need one for this year, right? Just the years prior? 

I will look into the addresses. I think I remember reading that they switched from somewhere in Texas, to Philadelphia, PA for overseas returns but I will make sure to double check before finalizing. 

Thanks again.


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## quincy

It is still Austin,TX.
U.S. Citizens and Resident Aliens Abroad

Definitely send them separately. I was told by an IRS agent that they may only process the return on the top if they are all together. Seems stupid to me, but what do I know!


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## USinCanada

Thanks Quincy. I tried to give "thanks" to you an Bev but it said I must spread some reputation around before giving it to you guys again. 

Anyway...*Line 10a* on the 2555 EZ asks ...

*If you filed form 2555 or 2555-EZ after 1981, enter the last year you filed on the form. *

Since I've never filed a form, and am filing back years as well, should I just put 2013 for all the years I'm filing for, or should I put 2011 for my 2012 return, 2010 for my 2011 return, etc, etc. 

Technically I should have filed in those years, but, since I have not, I'm wondering if I should just put 2013. Don't want to make it seem like I'm fudging anything. I could be over thinking things as well. :ranger:


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## quincy

For what it's worth, I backfiled in January 2011. For 2555, I put the tax year for the last year the form was filed rather than the actual year. So for 2007, i wrote 2006 even though everything was being sent in in 2011. Don't know if it was right or not but it never triggered any IRS letters. I called the IRS about 8 weeks after I submitted and all returns were processed with no tax owing.


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## Bevdeforges

quincy said:


> For what it's worth, I backfiled in January 2011. For 2555, I put the tax year for the last year the form was filed rather than the actual year. So for 2007, i wrote 2006 even though everything was being sent in in 2011. Don't know if it was right or not but it never triggered any IRS letters. I called the IRS about 8 weeks after I submitted and all returns were processed with no tax owing.


Sounds like a good approach - I'd go with that.
Cheers,
Bev


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## USinCanada

Thanks again guys, you've been a big help. I've got 3 years completed. Waiting on CRA to send me a code in the mail so I can retrieve one of the years that I don't have my T4 slip. 

I do have a little bit of a problem with my 2010 1040. In that year I rearranged some investments. I sold around 34k in mutual funds, reinvested half of that in new funds and cashed the other half out. 

This amount is not listed anywhere on my 1099 DIV, but, there is a mention of a 1099-B. I'm thinking I need to fill out a Schedule D for this year and these transactions? Does anyone know what % of tax I will pay on those gains for 2010? This is the year I really don't want to mess up on since it is the only year I'm going to owe. I've also read something about like kind exchanges. I believe I remember my broker telling me something about this when I made these changes. Perhaps they fall into that category but this part is over my head.


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## Bevdeforges

USinCanada said:


> Thanks again guys, you've been a big help. I've got 3 years completed. Waiting on CRA to send me a code in the mail so I can retrieve one of the years that I don't have my T4 slip.
> 
> I do have a little bit of a problem with my 2010 1040. In that year I rearranged some investments. I sold around 34k in mutual funds, reinvested half of that in new funds and cashed the other half out.
> 
> This amount is not listed anywhere on my 1099 DIV, but, there is a mention of a 1099-B. I'm thinking I need to fill out a Schedule D for this year and these transactions? Does anyone know what % of tax I will pay on those gains for 2010? This is the year I really don't want to mess up on since it is the only year I'm going to owe. I've also read something about like kind exchanges. I believe I remember my broker telling me something about this when I made these changes. Perhaps they fall into that category but this part is over my head.


Someone with a bit more experience with investments may pop in here, but a 1099-DIV is for reporting dividends paid. If you were selling off funds, what you should have for that is one or more 1099-B forms - which are for broker or barter transactions. Sounds like a Schedule D might be in order here. 

The IRS website has the forms and instructions for the forms.
Cheers,
Bev


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