# Unique Dual Citizen Tax Situation



## Ryan_Z

This is an awesome forum. Thanks to everyone who helps to make it a great place. 

I have looked all over, and haven't found an answer to my unique situation 

I was born in the USA, but my parents moved to the Canada when I was 5 months old. I have lived most of my life in Canada, and am a Citizen. I am also a citizen of the USA. 

About 8 years ago worked temporarily in the US, with the plan of returning to Canada. I filed US taxes on the money that I earned in the US, as well as on my Canadian Taxes. I continued to do this for several years, while spending part of my time in Canada, and part of my time in the US. For the past five years, I have spend almost all of my time in the US. I have continued to file US taxes on the income I have made in the US, as well Canadian taxes, declaring my US income.

I have about 30,000 dollars of savings in a Canadian bank account. I make about 150 dollars of interest on this every year. I have declared this amount on my Canadian taxes, but not on my US taxes, as I was unaware that I was required to so.

I also have not filed FBAR just learning about it last fall. 

So, what to do? It is very frightening looking at the penalties for not filing FBAR, especially when the amount of interest I am making is so very low. 

The streamlined filing compliance looks nice, but I don't think I am eligible for it. 

I would like to be in compliance, but am unsure what would be the best steps to take. I have declared all of my income, but obviously not correctly to the IRS.

Thanks for any suggestions


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## Nononymous

Ryan_Z said:


> About 8 years ago worked temporarily in the US, with the plan of returning to Canada. I filed US taxes on the money that I earned in the US, as well as on my Canadian Taxes. I continued to do this for several years, while spending part of my time in Canada, and part of my time in the US. For the past five years, I have spend almost all of my time in the US. I have continued to file US taxes on the income I have made in the US, as well Canadian taxes, declaring my US income.


This isn't entirely clear. Which of the following scenarios is true?

1. You file US taxes based on your US income only; you file Canadian taxes based on your Canadian income only.

2. You file US taxes based on your US income only; you file Canadian taxes based on both your US and Canadian income.

3. You file US taxes based on both your US and Canadian income; you file Canadian taxes based on your Canadian income only.

4. You file US taxes based on both your US and Canadian income; you file Canadian taxes based on both your US and Canadian income.

The US requires that you declare worldwide income, so you need to file US taxes based on both US and Canadian income, including interest from your savings account in Canada. What you do on your Canadian taxes depends on whether you can call yourself non-resident or not - if you qualify as non-resident, you don't have to file at all. (In this respect Canada is vastly superior to the US!) Since you spend most of your time in the US, you should qualify for non-resident status. (And even if not, the tax treaty in theory prevents dual taxation.)

FBAR is a separate issue. You will need to declare that Canadian account. The penalties appear ridiculous but there's no evidence they're actually being imposed. Dual citizens in Canada can choose to ignore all this nonsense (like I do!) but if you are living and working in the US then you don't really have that option.


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## Ryan_Z

Thank you for the quick response. 

Sorry for the confusion. Scenario number 2 is what I have been, as it seems incorrectly doing.

I realize that I can qualify as a non-resident Canadian, and will do so this year. I have been planning on moving back to the Canada each year, and that is why I kept filing my Canadian taxes. As that is now not going to happen for a few years, there is no need for me to continue to file my Canadian taxes.

However, there now remains that sticky 150 dollars a year of interest that I haven't declared to the IRS. I figure that including penalities the most I could owe would be about 50 dollars a year in back taxes. That's not really a problem for me, I just don't want to incur the FBAR penalities. 

So, should I just amend my last three years of taxes, as well as filing FBAR for the past six? Or should I just start correctly filing from 2013 onward? 

I am hoping that since we are talkign such a small amount of money the IRA won't really care much about me.


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## Nononymous

FBAR and taxes are entirely separate (though related) issues. The potential penalties are not connected.

If your only Canadian income over these past years was the small amount of interest, then it's probably no big deal and you could possibly file correctly going forward and be done with it, or amend the last few. (That's just a guess on my part, as a non-professional random internet non-expert.) 

If you also had Canadian salary income during this period, it might be a problem (see example below). At this point I would offer no advice beyond the following: talk to a professional. 

Really obvious example:

If you make 20k in Canada and 30k in the US and file taxes in each country without telling one about the other (i.e. scenario 1) then you get a lower effective tax rates in each, and lower total taxes, than if you filed taxes in either based on your total income of 50k. Ergo one or both would not be too happy with you.


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## Ryan_Z

Thanks.

Nope the the 150 dollars of interest per year. Declared on my Canadian taxes.


I realize the FBAR is separate, but it sounds like if you owe money, no matter how much then it is larger deal.


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## Nononymous

If the only unreported foreign (from US perspective) income is $150 in interest, you're probably not going to be in trouble. As mentioned, not much evidence of "ordinary" folks (as opposed to tax evaders with millions stashed in Switzerland) being hit with FBAR fines.


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## BBCWatcher

OK, for FBAR just go to the electronic filing site, file 2013 plus 6 years before that, mark the 6 years (2007 to 2012) that you didn't know you were supposed to file (as the drop-down box reason you filed late -- I assume that's truthful), and you're done. Sleep well.

For your ~$150 in unreported (to the U.S.) Canadian bank interest, I assume you reported that on Line 121 in Canada. Did you pay any Canadian tax on that interest income? If so, did you already report that Canadian tax paid in your U.S. tax filing (as a Foreign Tax Credit or Deduction)?


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## Ryan_Z

Thanks so much for the great responses. 

I declared my 150 dollars on my Canadian taxes under interest earned. My income is low enough that after I declare my us tax credits as part of the tax treaty...I. didn't owe any additional taxes.


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## BBCWatcher

OK, so what you could do is file amended U.S. tax returns, probably for tax years 2010 through 2012, then file your 2013 return per normal. Report that bank interest. If you missed anything else -- the 2010 Making Work Pay Tax Credit if you missed it, for example -- then correct that, too. And you might owe a bit of tax and penalty. (If you also missed a tax credit or two, maybe not.) But on that amount of income it'll be small, and you can always try attaching a cover letter asking the IRS for a waiver of the penalties.

In any event, you'll be fine. Just get it cleaned up before April 15th and (also) sleep well.


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## Bevdeforges

In practice, I've found that they may not pay that "Making work pay" thing based on an amended return, so don't hold your breath on that one.

If the only thing you didn't report on your prior returns is that $150 in interest, I'd just correct the situation going forward and forget about trying to amend. In fact, if the amendment doesn't actually result in any taxes due, there is also a possibility they won't accept the amendment.

I tend to say the same thing regarding the FBARs given the relatively small amount in question here. Also, with these new FATCA controls going in this year, in most of the "agreements" being struck with the various foreign governments, they specifically exempt the banks from reporting those accounts opened prior to January 1, 2014 or so. Just file your FBAR for 2013 on time (i.e. by June 30th) and you should be fine.

They really aren't looking to punish people with small accounts (most certainly under $50,000 - and practically speaking those with less than $1 million or so). I wouldn't withhold the information going forward, but I don't think you're in any real danger of being selected for willful evasion of your responsibilities. 
Cheers,
Bev


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## Ryan_Z

Thanks for the suggstions. This is a great board.

So, I guess I have to decide if I want to just start filing going forward, to try to go back and fix things. I tend to agree that they probably don't really care much about the amounts of money I am talking about. I just don't want to end up with a big fine, for something preventable.

Thanks again everyone.


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## BBCWatcher

If you want to get tax compliant, then go ahead.


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## DavidMcKeegan

Your biggest concern right now, and what you should do first, is get the FBAR's filed (last six years). The risk of penalty is much larger on those, and if "caught", would be a huge hassle. However, we have found the Treasury to be very lenient for those that come forward voluntarily, and haven't seen a single penalty for those who legitimately had no clue.

Once the FBAR's are sorted out, if you want more peace of mind, then amend the last few years. 

Better safe than sorry is the approach I usually take, so I personally would amend.

Good luck!


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## NMAEF

*Switzerland....*



Nononymous said:


> If the only unreported foreign (from US perspective) income is in interest, you're probably not going to be in trouble. As mentioned, not much evidence of "ordinary" folks (as opposed to tax evaders with millions stashed in Switzerland) being hit with FBAR fines.


But then there are the ordinary Americans living in Switzerland who do not have millions and have to deal with local Swiss banks denying us basic banking services....

"


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## Bevdeforges

NMAEF said:


> But then there are the ordinary Americans living in Switzerland who do not have millions and have to deal with local Swiss banks denying us basic banking services....
> 
> "


Say, as long as we've got you here - are you being denied all banking services? (I.e. regular checking and savings accounts?) Or just "investment" type accounts?

I've had varying reports on this - and apparently it only comes up in a few countries.
Cheers,
Bev


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## NMAEF

Bevdeforges said:


> Say, as long as we've got you here - are you being denied all banking services? (I.e. regular checking and savings accounts?) Or just "investment" type accounts?
> 
> I've had varying reports on this - and apparently it only comes up in a few countries.
> Cheers,
> Bev


It is very complicated and catch22esque but *the short version is yes I am being denied basic banking services* by that bank and I know others in the same case. We are all “running around Switzerland” to find banks that will accept Americans.
Many Swiss banks just do not accept Americans, even if they are bona fide Swiss residents and the few who do require past FBARS or evidence of OVDP. And as I commented somewhere, OVDP is for “tax cheats”.

You know how “international” the ***** IRS personnel can be. It really appears looks like we, with Swiss accounts are regarded extremely suspiciously. 

Actually, one should probably technically not say “foreign” accounts but “local” accounts. My account may appear very “foreign” to the IRS but it’s very “local” to me.


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## BBCWatcher

NMAEF said:


> ....and the few who do require past FBARS or evidence of OVDP. And as I commented somewhere, OVDP is for “tax cheats”.


In this case, no, OVDP is simply a form of alternative evidence of FBAR filing. You could simplify that by saying "past timely (or at least late filed) FBARs."

Is this a particularly onerous requirement (FBARs)? It doesn't sound like it. What you're reporting is that banks require their prospective customers to provide them with a copy of a report that they're legally required to file anyway.

....This is a problem how?


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## Nononymous

NMAEF was, in another thread, claiming that his/her bank in Switzerland wanted him/her to enter OVDP due to FBARs not having being filed. As opposed to showing copies of late-filed FBARs or whatever. Seems a bit much given FATCA but I can understand Swiss banks being a little gun-shy these days.


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## BBCWatcher

I would just nod my head and take offer #1 (FBARs). The bank stated what seems to be a reasonable requirement very precisely from what I can gather. The OVDP is the only non-FBAR substitute format for FBARs as far as I know, so "FBAR or OVDP" is spot on, I'd say.

But set aside FBARs for a moment, and set aside U.S. citizenship for a moment. I'm not running into very many banks these days that don't have some sort of "know your customer" rules they follow. In Singapore, for example, you have to open an account in person, large cash transactions incur special reports (including at account opening), and (oddly enough) non-citizens cannot show only Singapore-issued IDs but must also show their non-Singaporean passports. I think some of the banks are starting to take fingerprints and photos if I'm not mistaken. There's a bit of work involved for everyone in getting an account opened, and this is in Asia's Switzerland.

I'm not a huge fan of Citibank, but I must say around this time of year I appreciate the fact their foreign subsidiaries know how to cut 1099s. Does Citibank offer retail banking in Switzerland?


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