# Canadian/US dual citizen US tax help needed please



## Sydeburnz

Hi, I've just recently found out that I was supposed to be filing my US taxes even though I've never lived in the US. I've done a little research into it and it seems that I can't afford the help of a tax professional. I've been told it would cost me upwards of $500 per tax year to file, and from what I know I have to file for the last three years, and don't have $1500 to spare. So to start here's my situation. I'd lived in Canada my entire life, I don't have any financial interests or assets so I won't have to file that FACTA and FBAR stuff, I live with my parents and make my $30-40K per year, as far as I can tell the only forms I have to file are the 1040 and the 2555-EZ. I've read up on everything I could on the IRS website but I'm still really confused. I plan on moving to the US as soon as possible so I want to get this taken care of.

So a few questions to start. My employer's main office is located in US, but I work on site in Canada, so would it count as a Canadian business or a US business? 

Do I use the annual exchange rate when calculating income from Canadian to US?

Does CPP count as a foriegn pension? Or is there some kind of treaty where it's omitted? Do I have to fill out anything on the 1040 for CPP? (Canada pension plan)

I am unionized, and therefore pay union dues, is there anything I have to do with that on the forms?

I was on employment insurance for some of the year on one of the tax years I have to file for, would I fill that out in line 19 on the 1040 where it says unemployment compensation?

It says to attach a W2, as far as I know that basically the same thing as a T4, where US has a W2 and Canada had a T4, so wherever it says W2 can I just assume that it means T4 for my situation?

Those are the first few questions I have. I'm sure I'll have more as I continue to fill the forms out. Any help would be greatly appreciated. I think I have a very simple tax situation so if anybody could suggest a tax expert to go to that wouldn't cost a fortune that would be extremely helpful too. Thanks in advance for any help or tips.


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## TheMadChatter

Download a copy of Turbo Tax software from online.


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## BBCWatcher

TaxACT is another option. You can complete a free tax year 2012 form and then use that as a roadmap for completing prior years. On to your questions:

1. Why are you curious? If you were hired in Canada, spent all your working hours in Canada, and resided full time in Canada then whether your employer has a head office in the U.S. or not shouldn't matter.

2. The IRS does not require using a particular exchange rate, but you must be able to defend the exchange rate(s) you use. For example, some people check historical exchange rates at Web sites such as Oanda.com for particular days -- if you get paid monthly you could use the exchange rates on those 12 different pay dates, for example. Or if you routinely bought U.S. dollars (sending money to a relative via wire transfer, for example) then the exchange rate reflected on your receipt could be used to value Canadian dollars received as income at about the same time. It must be a reasonable and defensible calculation method, though -- and your method must be used consistently. You can't use Oanda.com's rate for one paycheck and the IRS rate for another....

....Or you can just use the IRS's annual rate since it probably isn't going to matter in your case. You're unlikely to owe any tax.

3. The Canadian Pension Plan is equivalent to U.S. Social Security. It's foreign (non-U.S.) and a pension (says so in the title), so it's a foreign pension. Why do you ask?

4. You can deduct union dues on Schedule A of your Form 1040, but I probably wouldn't bother. Such dues would need to be at least 2% of your adjusted income to count, and all your earned income is going to be excluded anyway with the foreign earned income exclusion. You are not required to deduct union dues.

5. Yes.

6. No. The IRS means what they say: a W-2, which is a U.S. tax form. You don't have a W-2, so you don't attach anything. Keep your Canadian T-4 along with your other tax records.


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## Bevdeforges

Pretty much what BBCWatcher said, with a couple of "further comments."

1. Your "employer" is the office you work for. Just put that address on the form 2555 under "employer's foreign address" and write in "n/a" for "employer's US address."

2. Easiest to use is normally the IRS' average rate for the year. Yearly Average Currency Exchange Rates The rates for 2012 haven't been posted yet, but they should be posted shortly (say, mid February or so).

3. If CPP is the government pension plan, then you have nothing to report about it. (Just don't deduct any contributions you have made to the plan from your "gross income.")

4. Again, nothing to do about your union dues, but don't deduct them from your salary. For salary income, you report the full, gross amount.

5. Yes, you report unemployment as unemployment income. It shouldn't generate any tax liability, though.

6. No, you don't use a T4 or any other form in place of a W-2. Just put your gross income (before any deductions for social insurances or any form of tax) on line 7 of the 1040. This should be the same number you put on the 2555 form where they ask you for the number on line 7 of your 1040. You should be able to exclude the whole amount, no problem.

There are a number of free tax prep sites you can use, though you're limited to only a few if you have a foreign address. Take a look at the IRS free file program: Free File: Do Your Federal Taxes for Free Worst comes to worst, you can use one of the free file sites to prepare your return (for this year, at least) and then copy the information onto paper returns to mail in. 
Cheers,
Bev


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## Sydeburnz

Thanks for the replies, and sorry for taking a while to respond, I currently don't have access to a computer so I can only get on here once in a while. I guess I should have also mentioned one more thing in my main post.

I was reading up on something about a "streamlined" way of filing my taxes for dual citizens who haven't filed on the IRS website. As far as I can tell I'm eligable for this "streamlined" way of filing. One of the requirements is to fill out and submit a questionnaire along with my tax forms. One of the questions asks if I have a retirement account located in my country of residence, followed up by A. "if yes, are earnings from the retirement account non-taxable in the U.S. under curren treaty provisions?" And B. "if yes, is the retirement account located on Canada and are you filing a delinquent Form 8891 for each year?" So that's why I was asking about the CPP because I'm not sure if that counts as a retirement account.

Also there is a question that asks "do you have a treaty-based tax position for your country of residence that reduces U.S. tax liability?" I'm assuming the answer would be yes for Canada correct? And one more question that asks "were you employed by a U.S. company or entity during any of the above-listed tax years?" Which is why I was asking if my employer would count as a US company. 

And one more question that is somewhat related to taxes, I also need to get my US passport to move to the US as far as I know, is it possible to apply for it before my taxes are up to date? Or will they reject it due to me not being tax compliant yet? I just need to get these taxes done and get my US passport then I plan on moving to the US as soon as that is done and I'd like to get them done as soon as possible so I'd like to apply for my passport ASAP, but I'm just worried it would cause problems if I haven't filed my taxes yet. Thanks again for the replies and any future replies.


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## Bevdeforges

OK, now you're getting into the subtleties of filing - and to some extent it depends on you just how you want to do things.

But for the easy question, go ahead and get your US passport. They ask for your social security number, which freaks people out, but as far as I have heard, no one has been held up for getting their passport while the IRS pursues back tax issues. For all the IRS knows, you didn't have sufficient income to have to file for those years. They just make a note of your SS number and that seems to be the end of it.



> One of the questions asks if I have a retirement account located in my country of residence, followed up by A. "if yes, are earnings from the retirement account non-taxable in the U.S. under curren treaty provisions?" And B. "if yes, is the retirement account located on Canada and are you filing a delinquent Form 8891 for each year?" So that's why I was asking about the CPP because I'm not sure if that counts as a retirement account.


I don't know enough about the CPP to help you here. But there are a number of Canadians floating around who should be able to help.



> Also there is a question that asks "do you have a treaty-based tax position for your country of residence that reduces U.S. tax liability?" I'm assuming the answer would be yes for Canada correct?


I wouldn't answer this one in the affirmative unless you have actually read the treaty and are asserting that something is or isn't taxable in the US based on your reading of the treaty. (There is a separate form you have to file if you are asserting a "treaty-based tax position" that is best left to the pros to mess with.) If you're just doing things according to the published IRS instructions, that's not considered a "treaty-position."


> And one more question that asks "were you employed by a U.S. company or entity during any of the above-listed tax years?" Which is why I was asking if my employer would count as a US company.


As long as you are working for and being paid out of the Canadian branch of your employer, I would say no - you're actually employed by a Canadian entity. Let the IRS handle the tricky corporate stuff with your employer.
Cheers,
Bev


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## Nononymous

The passport form has changed, no longer does it ask that you be up to date on your taxes. You only need to give your SSN, if you have one. So I'd say go ahead and apply for the US passport, if indeed you intend to move to the US.

If you don't intend to move to the US, and don't have a US birthplace, I'd just ignore this and stay off the radar.

If you do move to the US, you can always start filing taxes once you are there, and if/when they ask where your previous returns are, say "I was in Canada" and that's probably the end of it. That worked fine for me 22 years ago. If they really want the old returns, deal with it then.


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## graubart

CPP is Canadian social security, not a pension, as far as the IRS is concerned.

An 8891 is not required for CPP. Form 8891s are required for deferring US tax on RRSP contributions. Not required if you have no RRSPs.


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