# US tax question and dual citizenship



## magnetite (Apr 17, 2011)

Hi,

I have a Canadian/US citizenship. I haven't lived in Houston since 1984. Moved to Canada in 1989. Recently I've discovered that I have to owe money to the IRS or the US government for taxes. 

However, I am on AISH, which stands for Assured Income for the Severely Handicapped. Basically, I'm disabled for life. AISH is sort of a government pension I get every month to live on. Anyone who is over 18 and has proof that their disability is serious enough can qualify for this.

Anyways, so since I just found out about paying the IRS taxes back in 2010 (someone told me about it, the IRS didn't phone me) what would be the best way to go about this? 

Since I haven't lived in the US since 1984 (I was only two at the time), obviously at that age, I wouldn't be paying any taxes. I also haven't applied for a Social Security Number since I've never worked in the US. Only was there a year as a baby.

Basically, I want to either find a way to renounce my citizenship or figure out what I need to do to keep it. 

I also read somewhere that the US also taxes on worldwide income, and down the road, I will be inheriting my parent's estate and investments when they pass, so I'm not sure if Uncle Sam would want a piece of that. 

I'm not sure if there are any special provisions for someone who only makes $1200 a month and is on disability for life. I mean $1200 is just enough to live off of, so I don't know how I would be able to pay those taxes. 

Could I get some expert advice on how to handle this?

Thanks


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## Bevdeforges (Nov 16, 2007)

magnetite said:


> Hi,
> Basically, I want to either find a way to renounce my citizenship or figure out what I need to do to keep it.
> 
> I also read somewhere that the US also taxes on worldwide income, and down the road, I will be inheriting my parent's estate and investments when they pass, so I'm not sure if Uncle Sam would want a piece of that.


Renouncing your US citizenship isn't easy - especially if they know or suspect that you're doing it "for tax reasons." 

First of all, this "someone" who told you that you owe US taxes - what exactly did they tell you? If it's just the general thing about having to file US income taxes because you're a citizen, you may not actually owe anything at all. If all (or most) of your income has been from earnings from a job (so-called "earned" income), then it may all fall under the earned income exclusion, in which case you only need to file a few years of back returns to be off the hook.

If you're living on your handicapped allowance, chances are the actual taxes due on the benefit are next to nothing. (And there is a tax treaty that is supposed to prevent your paying double taxes.) Again, filing a few years of back returns to "prove" this to the IRS may be sufficient.

Of course, you'll be expected to file returns going forward - but that's a minor inconvenience.

As far as what you inherit from your parents down the line - those taxes fall generally on the estate itself, so it's more relevant where your parents are living and what their nationalities are.

You may want to contact the IRS office in Canada (probably at one of the Consulates) and ask for advice regarding what to do. The "foreign" offices of the IRS tend to be considerably more helpful and easy to deal with than the IRS offices in the US. They can explain the procedure for obtaining a US SS number and then filing the necessary number of back returns. They may even be able to point you to a VITA (Volunteers in Tax Assistance) service that can help you through the forms.
Cheers,
Bev


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## magnetite (Apr 17, 2011)

Well if I do owe anything, I'd like to pay it off, then renounce the citizenship if possible. I'm not dirt poor, but I do make $1200 a month, plus roughly $300 or so in employment income. 

The person who told me about paying US taxes if you live in Canada was a nurse who I see regularly. If I remember, she said that if I was living here in Canada, I would have to pay US taxes or file a return annually. That's pretty much it. 

She didn't mention anything about estate taxes. My dad brought that up, as well as how you are taxed on your worldwide income, no matter where you live. 

My parents are both Canadian. Their estates are both Canadian as well, since they currently both live in Calgary, and my dad has a condo in Ontatio that he uses for the summer. My dad was from Sudbury Ontario, and my mom was from Calgary Alberta. Other than my dad moving to Calgary in 1980 or so, he's pretty much stayed here. 

I'll get my dad or mom to give the IRS a call.


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## Bevdeforges (Nov 16, 2007)

Basically, you are supposed to file a return every year - but you're far from the first person to have found out about that requirement late in the game. Chances are you owe the IRS nothing but a few back tax filings.

As far as the estate is concerned, as long as your parents didn't take US citizenship, there's no involvement of the US tax people at all. The estate would be handled under Canadian tax law, and any taxes due come out of the estate before it's settled. Inheritances aren't considered income, so aren't reportable on your US tax returns as such. 

After you took possession of any inherited assets or bank accounts, you might have to report them to the US for any income you received from them (i.e. interest income or whatever), but again, thanks to the tax treaties you should wind up paying double taxes on that income either.

I'd be wary of renouncing your US citizenship simply from the tax point of view. If you were to want to travel to the US at some point, it could cause problems for you if they notice you were born in the US (which is, I'm assuming, how you got your citizenship in the first place).
Cheers,
Bev


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## magnetite (Apr 17, 2011)

When my parents were down in Houston around 1982-1984, I guess my dad might have applied for a green card, because he was just working there for that sort period of time. I'll ask him when I see him today. I'm pretty sure he didn't take citizenship himself because my mom would have had to as well.



> After you took possession of any inherited assets or bank accounts, you might have to report them to the US for any income you received from them (i.e. interest income or whatever), but again, thanks to the tax treaties you should wind up paying double taxes on that income either.


So what you're saying is when I receive their money and such that I might not be double taxed by the IRS? I was concerned that if I report this huge sum of money that they're going to look at that and want some of it too.


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## Auld Yin (Mar 10, 2009)

magnetite said:


> Hi,
> 
> I have a Canadian/US citizenship. I haven't lived in Houston since 1984. Moved to Canada in 1989. Recently I've discovered that I have to owe money to the IRS or the US government for taxes.
> 
> ...


If you have never worked in the US and left as a baby it begs the question why do you owe them back taxes? I assume you earned income elsewhere but never filed US tax returns. Is that correct? Did you pay taxes on income earned elsewhere?
Are your parent's assets/investments located in the US? If they are also in Canada then there are no estate taxes in this country.
I doubt renouncing your US citizenship would eliminate any taxes owing.


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## magnetite (Apr 17, 2011)

Auld Yin said:


> If you have never worked in the US and left as a baby it begs the question why do you owe them back taxes? I assume you earned income elsewhere but never filed US tax returns. Is that correct? Did you pay taxes on income earned elsewhere?
> Are your parent's assets/investments located in the US? If they are also in Canada then there are no estate taxes in this country.
> I doubt renouncing your US citizenship would eliminate any taxes owing.


The Canadian government has usually never taken any taxes from me, or at least when I file taxes, I usually get the money back. 

My earned income is Canadian. I don't own anything from the US. His investments are from TD Waterhouse if I remember, which is Canadian. Not sure whether he owns any US investments. 

I guess my dad's just concerned that when he gives me or my brother his nest egg (who is also from Houston, but lives in Canada), that the US government would want some of that. However, I guess from what I'm hearing from you is that since this is all owned in Canada, that we might not have to do anything, except file regular returns. He did tell me that they tax on worldwide income.


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## Auld Yin (Mar 10, 2009)

magnetite said:


> The Canadian government has usually never taken any taxes from me, or at least when I file taxes, I usually get the money back.
> 
> My earned income is Canadian. I don't own anything from the US. His investments are from TD Waterhouse if I remember, which is Canadian. Not sure whether he owns any US investments.
> 
> I guess my dad's just concerned that when he gives me or my brother his nest egg (who is also from Houston, but lives in Canada), that the US government would want some of that. However, I guess from what I'm hearing from you is that since this is all owned in Canada, that we might not have to do anything, except file regular returns. He did tell me that they tax on worldwide income.


TD Waterhouse also operates in the US but if your father has his account with them in Canada then he will pay Canadian taxes on any profits made.
If you owe US taxes but have never earned there then they must be basing their claim on earnings elsewhere. As pointed out earlier there is a treaty between Canada and the USA that basically negates taxes which were paid elsewhere. I assume you've never filed a US tax return so how did they find and assess you? How much are they claiming you owe them?
As your parents live in Canada their estate will pass to you and your brother untaxed. However, if some assets are income earning, income taxes must be filed in both countries by you and the US taxes will most likely be negated by the taxes you pay in Canada. It is my understanding that, as a US citizen, you must file taxes there as you must do in Canada.


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## magnetite (Apr 17, 2011)

They haven't said that I owe them anything because currently they haven't found out that I haven't been filing these returns because I have lived outside the US since 1984.


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## Auld Yin (Mar 10, 2009)

magnetite said:


> They haven't said that I owe them anything because currently they haven't found out that I haven't been filing these returns because I have lived outside the US since 1984.


It seems to me this is a storm in a teacup. While it's true that as a US citizen you're supposed to file annual tax returns, I don't think you have to worry about them coming after you and, if they did, you would have no untaxed income to report. Unless you plan to return ther to live I would forget about it and get on with your life.


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## magnetite (Apr 17, 2011)

Auld Yin said:


> It seems to me this is a storm in a teacup. While it's true that as a US citizen you're supposed to file annual tax returns, I don't think you have to worry about them coming after you and, if they did, you would have no untaxed income to report. Unless you plan to return ther to live I would forget about it and get on with your life.


I was thinking of maybe taking a vacation sometime down to Houston or Seattle, however, I always travel under a Canadian passport.


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## Auld Yin (Mar 10, 2009)

magnetite said:


> I was thinking of maybe taking a vacation sometime down to Houston or Seattle, however, I always travel under a Canadian passport.


I'll doubt very much if you'll experience any problems.


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## Bevdeforges (Nov 16, 2007)

magnetite said:


> I was thinking of maybe taking a vacation sometime down to Houston or Seattle, however, I always travel under a Canadian passport.


To be honest, you're hardly the only person who left the US as a child and who hasn't filed their tax returns. Then, there are all the US citizens born abroad (where one parent was a US citizen) who don't realize they're supposed to be filing.

It's doubtful they'll stop you on entry to the country for failure to file your tax returns, particularly if you don't have a social security number. But, with the new requirements for entry from Canada, they might give you a hard time if they see your place of birth is in the US when you're traveling on a Canadian passport. Depends a bit on your point of entry, but they are starting to crack down on these things lately. Technically, you must enter the US on your US passport if you're a US citizen. (And technically these days, you need a social security number to get a US passport.)

The tax thing is relatively easy to resolve - and I'm willing to bet you won't actually owe anything in back taxes given the income sources you've described. (Actually, it's highly doubtful the IRS would reach out to you in Canada since they're unlikely to have claim on any back taxes.)
Cheers,
Bev


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