# 1040 and 1040NR in year of relinquishment of



## taxpoor

Hello Bev

You seem to be the go-to person on this forum with respect to tax questions. I posted a while back but I think i have most of it figured out and wondered if I could run my thoughts by you on this matter (?)

I was going to pM you on this, but could not find the button(s).

Born in USA

Reside in Canada as a Canadian citizen

Relinquished US citizenship status on Dec 12th 2012.

I am filing a 1040 and 1040NR for 2012. and have gone to an Accountant firm for this filing.

In reviewing, I just want to make sure that they got this one right as I have had trouble with other accounting firms in the past

Here is what I have ....my 1040 beginning and ending tax dates on page 1 of my 1040 are tabulated as Jan 01 to December 12th 2012.

My 1040NR does not have any typed in specific dates, therefore it reads as "for tax year beginning Jan 01 and ending Dec 31st 2012.

All my source income is from Canada, with zero income or investments in the USA...therefore all lines on the 1040 nr are blank. with the exception of line 40 the 3800 dollar personal exemption.

Does this seem to follow proper IRS protocol to you? in other words did my Accountant fill these forms out correctly (at least the beginning and end dates) properly?

Another forum suggested that he should have placed all world income on the 1040NR before Dec 12th.... the instructions on 1040NR clearly state to only include income effectively connected with US trade/business.

??


----------



## dann

Came here with the exact same question....


----------



## Bevdeforges

That sounds a bit odd to me - have never heard of filing two forms like that for the same year. (Normally, you status for the year is based on your status as of December 31st - however in the case of relinquishment it may be different.)

In any event, whenever you file a 1040NR it should only include US source income. But I believe there is a special form for those who have relinquished their US citizenship - form 8854. Take a look here for the instructions for that form: Instructions for Form 8854 (2012)
Cheers,
Bev


----------



## taxpoor

Hello Bev, Yes...i have filled out form 8854 and also included this in my package 

here are two options when filing your final return in the US...you can file a complete 1040 for the entire year, or a 1040 up to the point of no longer being a citizen, then a 1040nr after that.

If you decide to file a 1040 for the entire year I believe you have to ask for a treaty election thru form 8833 (or something like that).

I am not sure why my Accountant went this route, due to the fact that it seems easier to file one form instead of two...probably because more money to the firm...regardless my question still stands;

I just want to ensure that these forms are filled in properly. As i ceased being a US citizen on Dec 12th, i would therefore be treated as a NRA (non resident alien).

I also noticed on the top of my 1040 the firm wrote "Dual Status Statement" and on the top of the 1040ne 'Dual Status Return".

with this information maybe they are not supposed to put specific beginning and end dates on either form as the 1040nr is supposedly for the 'entire' year' and the 1040 is the income statement (?)

Hopefully i can resolve this before mailing....my Firm has there money and is reluctant to help me in this matter...or more exactly reluctant to get back to me on a timely basis.


----------



## quincy

taxpoor said:


> Hello Bev, Yes...i have filled out form 8854 and also included this in my package
> 
> here are two options when filing your final return in the US...you can file a complete 1040 for the entire year, or a 1040 up to the point of no longer being a citizen, then a 1040nr after that.
> 
> If you decide to file a 1040 for the entire year I believe you have to ask for a treaty election thru form 8833 (or something like that).
> 
> I am not sure why my Accountant went this route, due to the fact that it seems easier to file one form instead of two...probably because more money to the firm...regardless my question still stands;
> 
> I just want to ensure that these forms are filled in properly. As i ceased being a US citizen on Dec 12th, i would therefore be treated as a NRA (non resident alien).
> 
> I also noticed on the top of my 1040 the firm wrote "Dual Status Statement" and on the top of the 1040ne 'Dual Status Return".
> 
> with this information maybe they are not supposed to put specific beginning and end dates on either form as the 1040nr is supposedly for the 'entire' year' and the 1040 is the income statement (?)
> 
> Hopefully i can resolve this before mailing....my Firm has there money and is reluctant to help me in this matter...or more exactly reluctant to get back to me on a timely basis.


My understanding is that the 1040 acts as a "schedule" for the 1040 NR in the dual status year.


----------



## quincy

taxpoor said:


> Hello Bev
> 
> You seem to be the go-to person on this forum with respect to tax questions. I posted a while back but I think i have most of it figured out and wondered if I could run my thoughts by you on this matter (?)
> 
> I was going to pM you on this, but could not find the button(s).
> 
> Born in USA
> 
> Reside in Canada as a Canadian citizen
> 
> Relinquished US citizenship status on Dec 12th 2012.
> 
> I am filing a 1040 and 1040NR for 2012. and have gone to an Accountant firm for this filing.
> 
> In reviewing, I just want to make sure that they got this one right as I have had trouble with other accounting firms in the past
> 
> Here is what I have ....my 1040 beginning and ending tax dates on page 1 of my 1040 are tabulated as Jan 01 to December 12th 2012.
> 
> My 1040NR does not have any typed in specific dates, therefore it reads as "for tax year beginning Jan 01 and ending Dec 31st 2012.
> 
> All my source income is from Canada, with zero income or investments in the USA...therefore all lines on the 1040 nr are blank. with the exception of line 40 the 3800 dollar personal exemption.
> 
> Does this seem to follow proper IRS protocol to you? in other words did my Accountant fill these forms out correctly (at least the beginning and end dates) properly?
> 
> Another forum suggested that he should have placed all world income on the 1040NR before Dec 12th.... the instructions on 1040NR clearly state to only include income effectively connected with US trade/business.
> 
> ??


I think at that other forum, they are assuming that you have US income on your 1040 and it would need to be transferred over to the 1040NR. Your worldwide income doesn't go on the 1040NR, just the US income. Seems to me that your accountant has it right.


----------



## Rev Susi

Can I ask another question re: 1040NR? I retain US source income in my SS retirement income and Civil Service Retirement income. Both of these payments are covered by Treaty, and because I am resident in the UK, SS is taxable here, and because I am a UK national (by definition in the treaty), my CSR is taxable in the UK, not in the US. This is the exception to the general rule that government pensions are taxable in the US, not the source country. I can see that I need to report that income on the final year dual filing, but do I then forever after have to report it on the 1040NR and complete the form claiming a treaty exemption? Just so I'm prepared...


----------



## taxpoor

@Quincy & Bev

Thank you both for your replies...i think i am finally figuring this think out and I don't believe there was ever a problem other than me looking at effective tax dates for the 1040 and the 1040nr...as you Quincy has pointed out, the 1040 act as a schedule for the 1040nr.

My problem is that i was always under the assumption that you file 2 returns for your departure year...one (1040) up until the day of relinquishment, and the other (1040NR) for the remaining days of the year.

I know now this is incorrect....if my status on December 31st of 2012 was a non-resident -alien (as i am now considered having relinquished my US citiesnship)...then one would file a 1040NR for the entire year.

The 1040 is nothing more than a statement or a schedule as Quincy pointed out and therefore no typed in tax dates need to be placed on either the 1040 or the 1040nr.

Do I have this correct now?

I am still confused about the (other forum) on transposing income onto the 1040nr...i believe you are right Quincy that they assume i have us source income

I hope so....i love it when the light bulb comes on!


----------



## taxpoor

@Quincy

They seem to be quite sure on the other forum that worldwide income goes on the 1040nr...i have read the instructions and looked at the forum and cannot find anywhere that income (other than us source) goes on this forum!

Others have posted threads in the past about this forum tabulated as all '0's...but for some reason this one moderator is leading me in this direction??


----------



## quincy

taxpoor said:


> @Quincy
> 
> They seem to be quite sure on the other forum that worldwide income goes on the 1040nr...i have read the instructions and looked at the forum and cannot find anywhere that income (other than us source) goes on this forum!
> 
> Others have posted threads in the past about this forum tabulated as all '0's...but for some reason this one moderator is leading me in this direction??


Taxpoor,
Trust me, I'm no expert on this! I didn't transfer any income over from the 1040 to the 1040NR. I also had no US income so I only had Zeros on the 1040NR. I was equally confused about all of this but I took my best shot and that's what I did. My return was processed over a year ago and I haven't heard back. Guess the IRS was able to figure out what I meant! My SSN has been canceled so I'm assuming I'm out of the system. Hope you figure it out. Sure is hard to get clear instructions.


----------



## taxpoor

Thanks Quincy

I was so confused this afternoon after this discussion (on that other fourm) that I called a reputable Accounting firm in Vancouver and had a 30 minute (paid) consultation on this matter.

It appears that the other forum poster was correct, and numbers do have to be tabulated on the 1040nr...after they have been calculated on the 1040.

anyway, this individual i talked to said it is a gray area, and that most individuals file the way you (and i) did, and they are processed no problem because all the information is there.

however for the life of me it does not make sense why you would place values on a form (1040nr) that explicitly tell you not to unless it is US source income...however all things being equal i am sending it all in tomorrow...what a day!

anyway...if i may be so bold to run by you what i am doing and just check and see if i am missing anything:

I am sending in a 1040 completed up to the relinquishement date and a 1040nr with all fields blank (except the personal info).

I have digressed and taken my original accountants advice and put effective beginning and end tax dates on the 1040 which will be Jan01 to dec 11th and on the 1040nr it will be from dec 12 to the 31st.

(I actually asked the other Vancouver Accountant about the dates, and he said it didn't really matter, they did not need to go on and will probably just ignore them).

I have attached my 8938 and 8891 forms to my 1040

I have attached my 8854 expat form to my 1040nr

does this somewhat follow what you did..

Also i am going to send an additional 8854 to the philly office...can you confirm that there is only the one mailing address to this office, as i have seen a couple listed...but they may be old websites.

thank you for your help


----------



## quincy

Hi Taxpoor,
I sent my copy of 8854 by expresspost to:
2970 Market St Philadelphia, PA 19104, United States
I phoned the office to make sure, because I also saw a few different addresses. I was able to get a signature online at Canada Post.com.

I had everything else all stapled together with the 1040NR on top. I only signed the 1040NR but I got a letter back right away asking for me to sign the 1040. I would just sign it even if other things say you don't have to. Can't hurt. 

Well, even if I did it wrong, I would feel very uncomfortable putting my Canadian income down on the 1040NR since it says US source income. I guess from what that accountant told you, it explains why mine appears to have been accepted. The forms are so ridiculously stupid. Makes the Canadian tax system look like a walk in the park. 

You can call the IRS in about 8 weeks and confirm that it was all processed and nothing owing. That's what I did. It was nice to know.

Good luck.


----------



## taxpoor

Thanks Quincy.

it is definitley confusing that is for sure. I find it even funnier that they sent you a letter back asking you to sign the 1040! what a system for sure.

I think i will do the same as you and express mail my 8854 copy as opposed to regualar mail.


----------



## taxpoor

where did you find that express post address?


----------



## quincy

I phoned the philadelphia IRS office to get the address to send courier mail.

"The IRS Office in Philadelphia provides international tax assistance. This office is open Monday through Friday from 6:00 a.m. to 11:00 p.m. EST and can be contacted by:

Phone: 1 (267) 941-1000 (not toll-free)"


----------



## taxpoor

Again, Thank you Quincy for your insight.

After yesterday a moment of calm came over me after you posted your experience and that I must be doing this the correct way....or at least a way that would be accepted by the IRS.

I mailed my 1040/1040nr/8891/8938/8854 package today to Austin TxX and mailed the form 8854 (via Xpresspost) to the 2970 market street address.

Now just have to mail the FBAR before the end of June (i always FedEx it for the signature) and i should be done.

Again, it is nice to connect with someone that has gone thru the process of filing a final return. 

I still for the life of me cannot understand how anyone could get the idea, (after reading Phil Hodgens Blog, the IRS pubs, individuals actual tabulations like yourself, or otherwise) where income other than a US source would go on the 1040 nr??

It baffles me, and I am now starting to think maybe the moderator on the 'other' forum was intentionally steering me in the wrong direction, as I had some friction with this individual some time ago. 

I only say this because everyone else who has posted and outlined there procedure for the final tax filing on this same forum did it the exact same way you and I did and no one was ever never questioned or ridiculed about leaving the 1040nr blank. ,,,except for me. For some reason when it comes to me, it is different.

One more thing...how did you check to see if your SSN was cancelled?


----------



## maz57

Wow, Taxpoor and Quincy; 

I have been following this thread with great interest because I am in a similar situation (became a Canadian citizen December 2012 and simultaneously relinquished US citizenship same day). My plan was to get those five years of back returns filed and then a file a final 2012 1040 and 8854 to exit the US system once and for all. I've been working on this for the last few years since I first became aware of these bizarre US obligations. Now I discover that they have made it virtually impossible.

My plan has gone off the rails because the Vancouver consulate refuses to even allow me to book an appointment to officially notify US Department of State of my relinquishment and get that CLN. It seems ridiculous to me to be forced to waste my time and money to go all the way to Calgary to do what could be accomplished at an office 30 miles away from where I live in ten minutes. Whether or not one can even go through the exit procedure without a CLN in hand is an unanswered question. 

I do know that the more I learn about this situation the madder I get. After downloading Form 8938, Form 1040NR, and Form 8854 along with the instructions I have realised that we are dealing with a totally disfunctional government. I can only conclude they don't want compliance because if they did they would make it easy, not hard. I have decided I will never file an 8938 or 8854 because I see no reason I should voluntarily give the IRS all the information they need to later attempt to confiscate my totally legal Canadian assets. They have turned me into a sixty-eight year old militant! And as for registering with the "Financial Crimes Enforcement Network" for future FBAR electronic filing I can safely say it's never going to happen. I'm not a criminal and I haven't committed any crime. 

I will file one more FBAR for 2012 because I was a US citizen for most of the year. I'm not filing a 1040 because being retired, my income is below the filing threshold. It's mostly CPP and OAS and therefore not taxable in the US. I do receive a small amount of US Social Security (also not taxable in the US) because of work in the US more than forty years ago. I they decide to cut me off, so be it; it'll be a small price to pay to be free of the monster. 

Going forward, I'm not filing anything with the IRS...ever again. I'm a Canadian living in Canada and I'm unilaterally declaring that I have no further obligation to the US. Sometimes it's necessary to stand up to the bully the same as I did over forty years ago when I moved to Canada in the Vietnam era. They can take their broken system, their endless wars, and their massive debt and shove it!


----------



## quincy

That's great, Taxpoor! Try and rest easy.

I know the forum and who you are talking about. Don't take it personally. I've read many replies from him where he seems to be deliberately vague and extremely rude to people. He definitely enjoys his little power trip. Hope he never finds himself in a vulnerable situation and needing the expertise of others. Karma might bite him!

I was lucky and had some good help from people I "met" on here. Maybe we have all done it technically wrong, but if it works, who cares? I think the problem with doing an exit tax/final return is that the forms weren't designed for people in our situation. Up to recently, there were probably only a few hundred a year received by the IRS. 

After i backfiled my 5 years, I learned that there was an IRS site called "Where's my Refund". If you put in $1 as the amount you expected to get back (even though I was expecting $0) It would say if my return was processed or not. After the final return, my SSN wouldn't work anymore on that site. I had to call the IRS to see if it was processed and was told it was and that my SSN appeared to be invalid now. I never officially checked with SSA. Suppose I should.

Be proud of yourself for getting through all of this in one piece! Take care!


----------



## Bevdeforges

Honestly, maz, I think you have a valid tax "stance" here. Keep us posted if you should have any contact from the IRS - but I'm betting you won't.
Cheers,
Bev


----------



## quincy

You go, Maz!!!
What a frustrating experience with Vancouver. I've heard about them on another forum. Such an abuse of power! I take it you are waiting for a second appt. I was able to do it all in one appt. in Toronto so I guess I was lucky. I did do all of the exit tax stuff prior to getting my CLN in the mail. I didn't see any reason why I shouldn't get it. 

It is ridiculous how hard this all has to be. I'm so glad to be rid of it. I spent so much time last year worrying that I often feel weird now not having something to worry about! 
Whether you get the CLN or not, at least you know Canada has your back now that you're Canadian!


----------



## maz57

@ bev;

I'm betting I won't either!

@ Quincy;

I can't even get a first appointment which, of course, should be all it takes. I asked 'em if I should mail them my US passport; they said no because they'd only send it back. I haven't used it since I relinquished and I will travel only as a Canadian because I am only Canadian.


----------



## taxpoor

@Maz57

You wrote:

_I have been following this thread with great interest because I am in a similar situation (became a Canadian citizen December 2012 and simultaneously relinquished US citizenship same day). 
-----------------------------------------------------------------------------------------------------------------
My plan has gone off the rails because the Vancouver consulate refuses to even allow me to book an appointment to officially notify US Department of State of my relinquishment and get that CLN.

Although you feel you have relinquished your US status the same day you became a Canadian Citizen, (i think thats what you mean), the US State department will not recognize your relinquishment until the day you meet with a Consulate Official to inform them as such.This of course has to be done in person, 

Im my situation, I back filed all my taxes from 2005 to 2010 first, then I became a Canadian in November of 2012, then frantically tried to get an appointment in December the Consulate to finalize my relinquishment. If i could not get my appointment in 2012, then my fear was that i would be pushed into 2013 and would have this final tax filing on my back until 2014.

Luckily I received an appointment in December 2012 and could therefore wrap up my final tax filing for 2013.

If, in your situation you have already had a "first" appointment, then you are OK because the relinquishment date will revert back to that first initial meeting.

If you have not had a first appointment yet, then there is no real rush to do this (as long as you get it done before the end of 2013) as your final tax filing will now have to be for 2013, filed in 2014.

I have heard bad things about the Vancouver Consulate...Halifax is great, the people are nice and freindly and you can get an appointment within 10 days, and only one visit.

They basically send you all the paperwork and tell you to fill it all out without signing it, then they call you in a week for an appointment and watch you sign it in person...no questions...no remarks...and very courteous service. and thats it!

My CLN came in the mail less than 2 weeks after my meeting at the Consulate!

Maz57, we all feel your pain here, and we have all felt the frustration. Its like pushing a turtle to get on the otherside of this nightmare._


----------



## Nononymous

quincy said:


> You go, Maz!!!
> What a frustrating experience with Vancouver. I've heard about them on another forum. Such an abuse of power! I take it you are waiting for a second appt. I was able to do it all in one appt. in Toronto so I guess I was lucky. I did do all of the exit tax stuff prior to getting my CLN in the mail. I didn't see any reason why I shouldn't get it.
> 
> It is ridiculous how hard this all has to be. I'm so glad to be rid of it. I spent so much time last year worrying that I often feel weird now not having something to worry about!
> Whether you get the CLN or not, at least you know Canada has your back now that you're Canadian!


The Calgary consulate was pretty cooperative (18 months ago I marched off in a huff, then decided that renouncing was more trouble than it was worth). Easy to get an appointment, you could do it all in one shot. It might be worth a cheap(ish) flight from Vancouver to take care of it here.


----------



## taxpoor

You can make an appointment with just about any Consulate 'online'. Montreal is also quite good...lots of openings.


----------



## taxpoor

@Maz57

you wrote:

_Whether or not one can even go through the exit procedure without a CLN in hand is an unanswered question. _

The answer is yes you can. Once you have submitted your forms and had your interview with the Consulate, you are officially relinquished and that is that. When the CLN comes in, it is nothing more that a stamp on the original document your Consulate Official filled out with his 'seal' and a stamp that has 'state department approval' written on it.

The Consulate Official has all the power here, so if he sends the paperwork in then his word is king.

I have only heard of one case where the IRS sent a letter asking form a copy of the CLN. I actually called them on this and they told me to attach a copy of my CLN to my paperwork for both the 8854 and the 1040/1040nr filing.

Although i had it in hand, i did ask what one would do if they did not have there CLN yet...they just said they may or may not ask for it...but if they do just send it in...even if it takes a year or so for you to get...still mail it in to both offices.


----------



## taxpoor

The process is a pain, but if you jump through the hoops you can get this done. I found the biggest obstacle was interpretation of the IRS pubs....inconsistent or different answers from telephone IRS agents, And finally cross border tax 'professionals' that do not know what they are doing, but are willing to charge you thousands of dollars anyway.

I compare this to roof work. I spent a lot of money on my roof. I live in an area where winds reach tropical force speeds...every year I would hire the expensive professional only to be disappoointed the next year. I finally educated myself, and found good contractors to accomplish this task once and for all.

Cross-border tax is the same. Out of every firm in Canada...i would only recommend one.


----------

