# Canadian tuition credit for US tax return?



## HJX (Feb 9, 2018)

I have lived in Canada ever since I was little and have graduated university with a good amount of tuition credits. For my Canadian tax return, I won’t owe much to CRA due to my tuition credit. Does the US recognize this tuition credit as well?


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## Nononymous (Jul 12, 2011)

More to the point, if you've been in Canada since you were a child and are presumably now a dual citizen, why on earth would you want to file US tax returns? Bad idea. Big mistake. Don't do it. Stay out of the system.

That being said, I think the tuition credits available to US taxpayers are quite limited, and since you could exclude the first US$100k of earned income under the FEIE, likely something you don't need.

But more importantly, US tax compliance is a dumb thing to do if you have Canadian citizenship and are not planning on moving to the US any time soon.


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## Bevdeforges (Nov 16, 2007)

Tax credits or other advantages in the Canadian system are unique to that system and don't carry over to the US tax system. 
Cheers,
Bev


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## HJX (Feb 9, 2018)

Thank you.


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## Nononymous (Jul 12, 2011)

HJX said:


> Thank you.


Heed my advice. Unless you are planning a move to the US, stay out of the US tax system. There is nothing to be gained by filing US tax returns, and potentially quite a lot to lose. If you are a Canadian citizen, you cannot be penalized in any way, so there is no reason to fear the IRS. Any losses and restrictions you will face due to US taxation (no exemption for TFSAs etc.) will be voluntarily self-inflicted. 

Take your time and educate yourself, refer to the Isaac Brock Society web site. If you've been filing already it's possible to simply stop.


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## HJX (Feb 9, 2018)

Nononymous said:


> Heed my advice. Unless you are planning a move to the US, stay out of the US tax system. There is nothing to be gained by filing US tax returns, and potentially quite a lot to lose. If you are a Canadian citizen, you cannot be penalized in any way, so there is no reason to fear the IRS. Any losses and restrictions you will face due to US taxation (no exemption for TFSAs etc.) will be voluntarily self-inflicted.
> 
> Take your time and educate yourself, refer to the Isaac Brock Society web site. If you've been filing already it's possible to simply stop.


are you serious?


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## Nononymous (Jul 12, 2011)

d


HJX said:


> are you serious?


Absolutely 100 percent serious. I'm glad I caught your attention - I might have saved you a lot of grief in years to come!

What US law states - all citizens must file tax returns - and what the IRS does and actually can do are very different things. If you are a Canadian citizen with no US financial ties, you quite literally, under the terms of the tax treaty, cannot be penalized in any way. If your bank does not know that you are a US citizen, they won't report you under FATCA and you will easily stay off the radar. (All you need to do is answer "no" if they ask - they won't check for place of birth.)

If you are not currently filing, do not start. Spend some time doing research, look at the Isaac Brock Society site as a starting point. 

If you have filed already, it's not a huge deal to simply stop. There is nothing to be gained by filing, and plenty to lose - look at the potential impact of the "transition" or "repatriation" tax on US citizens who own their own small businesses, or have incorporated. 

Rather than write more I'll let you do some research. If you aren't planning a move to the US or to a country where banking conditions are bad for the US-born (e.g. Switzerland) you might want to consider renouncing, but for Canadians the better strategy is to simply stay hidden.


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## Nononymous (Jul 12, 2011)

Some additional reading from recent threads here:

http://www.expatforum.com/expats/expat-tax/1392089-renouncing-easiest-way.html#post13942721

http://www.expatforum.com/expats/ex...ing-abroad-american-company.html#post13935138


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## Bevdeforges (Nov 16, 2007)

Nononymous said:


> d
> 
> 
> If you are not currently filing, do not start. <snip>
> ...


Just a note here. How you decide to comply (or not) with the US tax laws is a highly personal decision and can depend quite a bit on your specific circumstances. It is also possible (particularly while resident outside the US) to "comply" in a nominal manner - anywhere along a whole range of possibilities. The IRS enforcement capabilities outside the US can be minimal to non-existent. But what counts for any individual is your particular risk profile, which includes such things as your potential for wanting someday to go to live and work in the US, your possible investment possibilities and a variety of other things.

If you haven't filed before with the US, I'd tend to advise you to continue on in blissful ignorance until and unless you find a "reason" that filing will benefit you. But even if you have, dropping off the radar shouldn't cause you any real problems - unless you "suddenly" come into lots of money, particularly US-source money or have your wealth and good fortune played up in the press, along with the fact of your US citizenship (like Boris Johnson). But the choice is yours.
Cheers,
Bev


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## Nononymous (Jul 12, 2011)

True, without knowing anything further about the OP's circumstances, we can't provide overly specific advice.

My opinion on this has hardened recently. When the new Congress only succeeded in making things worse (the transition/repatriation tax as applied to individuals who've incorporated) I've come to the view that compliance is more dangerous than non-compliance. Then factor in what we know about IRS lack of interest and lack of ability to hunt down non-resident US citizens with no US financial ties.


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## HJX (Feb 9, 2018)

Thank you Nononymous and Bevdeforges. This information is all new to me and general sites I have encountered always implicit fear on me. 

I would greatly appreciate any perspective on the risks for not filing on my case: 
-I have a US birthplace (living only a few months after being born, last vacation to US was 2015 and used my Canadian passport with US birthplace for entry)
-Have an SSN
-Have a US passport that was renewed in Canada back in 2009
-Filed to IRS once last year through accountant. Income was 20kUSD.

Furthermore, how many years of filing would it still be ok to simply stop? Considering I may head to the US in 5-10 years, I just wonder what could be the potential consequence if I stop filing for now and resume once I move to the US ?


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## Nononymous (Jul 12, 2011)

So, you are a Canadian citizen from birth, only lived in the US as an infant? You have no business filing. The reason you did so was probably a combination of scare tactics and/or misinformation and/or some jackass accountant telling you that you had to.

If you filed one year only for the paltry student income of $20k - presumably you claimed FEIE and paid nothing - then I would just stop now. It's not ideal that you filed once, but not the worst thing either, given the income was so small. And it looks perfectly legit from an IRS perspective - maybe you went back to grad school and your income fell below $4k or whatever the limit is under which you don't need to file. Or you died. Or something. Whatever. They won't come looking for you.

What I would recommend is this:

1. Do not file any further US tax returns.

2. Make damn sure your banks don't know that you are a US citizen. If they ask, say no. They won't ask where you born. (If they do, say Canada - they won't ask for documentary proof.) This ensures no FATCA reporting. (Not that it's a big deal

Filing US returns now is probably painless for you, but in future if you start using TFSAs to save, or buy mutual funds outside of an RRSP, or god forbid start a business or incorporate as a consultant and keep retained earnings in the corporation, or buy a house that appreciates by more than $250k even if it's your primary residence - all of these things mean huge paperwork and/or owing Uncle Sam money if you try to be fully compliant. So just don't.

If you move to the US in 5-10 years, start filing then. Once south of the border, be sure to file FBARs for Canadian accounts so they don't burn you on that, and report any Canadian-source income, so that you don't get in trouble. 

But for now, do nothing is my recommendation. Stay the hell away.


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## Bevdeforges (Nov 16, 2007)

Given that you have plans to move to the US in 5 or 10 years, I'd consider your options carefully. Figure that, when you get to the US - or maybe even shortly before - you'll probably need to do some sort of Streamlined Filing thing to "settle" the back years where you didn't file. The IRS keeps threatening to close out this process, but practically speaking, they probably can't do this. However, if there is the "confession" required (i.e. explain why you haven't been filing), you'll want to consider at the time just how to word it. 

Being in the US does increase your risk of audit by a considerable amount - though it still depends on what your income level is at that time.

Another option would be to file "nominally" (i.e. only those items that are most obvious, and easily verified and subject to fairly easy adjustment so as to not generate any tax) up until the point where you move to the US. There is still the matter of the FBARs, but those in and of themselves don't generate any taxes.
Cheers,
Bev


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## Nononymous (Jul 12, 2011)

If the OP is certain of a move to the US in 5-10 years, and will have relatively simple financial affairs until then, one can make a case for continuing to file. If the move is just an idea, a future possibility, then perhaps better not to.

One thing to consider, the OP might be advised not to use the "didn't know" excuse with streamlined because he/she has already filed once, last year.


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## HJX (Feb 9, 2018)

Nononymous said:


> So, you are a Canadian citizen from birth, only lived in the US as an infant? You have no business filing. The reason you did so was probably a combination of scare tactics and/or misinformation and/or some jackass accountant telling you that you had to.
> 
> If you filed one year only for the paltry student income of $20k - presumably you claimed FEIE and paid nothing - then I would just stop now. It's not ideal that you filed once, but not the worst thing either, given the income was so small. And it looks perfectly legit from an IRS perspective - maybe you went back to grad school and your income fell below $4k or whatever the limit is under which you don't need to file. Or you died. Or something. Whatever. They won't come looking for you.
> 
> ...


Thank you. Just to be clear, I was born in the states and then became a Canadian citizen when I was young. It was also a business filing, I just graduated and worked only a few months for the year. Does that make any difference?


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## HJX (Feb 9, 2018)

Bevdeforges said:


> Given that you have plans to move to the US in 5 or 10 years, I'd consider your options carefully. Figure that, when you get to the US - or maybe even shortly before - you'll probably need to do some sort of Streamlined Filing thing to "settle" the back years where you didn't file. The IRS keeps threatening to close out this process, but practically speaking, they probably can't do this. However, if there is the "confession" required (i.e. explain why you haven't been filing), you'll want to consider at the time just how to word it.
> 
> Being in the US does increase your risk of audit by a considerable amount - though it still depends on what your income level is at that time.
> 
> ...


Thank you.


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## Nononymous (Jul 12, 2011)

HJX said:


> Thank you. Just to be clear, I was born in the states and then became a Canadian citizen when I was young. It was also a business filing, I just graduated and worked only a few months for the year. Does that make any difference?


Being naturalized as a child, rather than being dual from birth, has only one minor disadvantage: duals from birth are exempt from some provision of the exit tax if they renounce. I don't know the details of this, but it's only an issue if you have lots of money. Otherwise, from the moment you acquired Canadian citizenship, you are protected from any IRS attempt to collect penalties or taxes owed (against assets in Canada).

I'm not sure what you mean by a "business filing" so can't answer that question. I assume you paid no US tax last year?


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## HJX (Feb 9, 2018)

Nononymous said:


> Being naturalized as a child, rather than being dual from birth, has only one minor disadvantage: duals from birth are exempt from some provision of the exit tax if they renounce. I don't know the details of this, but it's only an issue if you have lots of money. Otherwise, from the moment you acquired Canadian citizenship, you are protected from any IRS attempt to collect penalties or taxes owed (against assets in Canada).
> 
> I'm not sure what you mean by a "business filing" so can't answer that question. I assume you paid no US tax last year?


Thanks, I mean I worked as a self-employed contractor for a few months. I didn't pay any US tax last year. 

For the streamlined filing, what other reasons do people use other than "didn't know"?


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## Bevdeforges (Nov 16, 2007)

HJX said:


> Thanks, I mean I worked as a self-employed contractor for a few months. I didn't pay any US tax last year.


You didn't pay any US tax last year? Or, you didn't file a US return last year? 



> For the streamlined filing, what other reasons do people use other than "didn't know"?


The program is kind of designed for those who honestly didn't know (or sometimes they'll say they "didn't realize" they were supposed to file). If you have filed in the past, it's normally best to be able to point to some change in circumstances which conceivably could have relieved you of your filing obligation. The typical ones are: moving out of the country (and didn't realize you were still supposed to file), no US sources of income (and didn't realize that you have to declare your worldwide income), or possibly some earth-shattering event where you forgot all about having to file from overseas (bankruptcy, really serious injury or illness, death of main breadwinner in the family - I leave it to your imagination). But it generally pays to use the KISS principle - Keep It Simple, Stupid. (Not intended as a personal remark - that's just was the expression stands for.)
Cheers,
Bev


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## HJX (Feb 9, 2018)

Bevdeforges said:


> You didn't pay any US tax last year? Or, you didn't file a US return last year?
> 
> Cheers,
> Bev


I didn't pay US tax but I filed the return.


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## Nononymous (Jul 12, 2011)

HJX said:


> I didn't pay US tax but I filed the return.


I'll wrap this up by repeating my earlier advice. If you are reasonably certain that you'll move to the US, then maybe continue filing. It won't cost you anything at this point in your life, especially if you do your own taxes. Just be careful to avoid some of the common paperwork traps, mutual funds outside of RRSPs or TFSAs - keep it simple.

If however you doubt you'd make a move, get back off the radar. Don't file again, and be certain never to tell your bank about US birthplace or citizenship so that you aren't subject to FATCA reporting.


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