Serbinski Accounting Firms

No one knows? Impossible!

Hello everyone, My parents are going through the IRS Streamlined filing procedures. They are Americans living in Canada, citizens of both countries. Everything is straightforward so far (1040x, TD F 90-22.1, FBARs, 8891s, etc). But they also hold non-registered revokable variable rate annuities. I c...

I think I've answered my own question on this one... Insofar as reimbursement for travel expenses would be considered a 'Fringe Benefit' by the IRS (http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf), it would/should normally be included in a W2 with wages. As this amount would be included in ...

Hello again Nelsona, I have a 2010 update / question to this topic. In relation to my government service, I received compensation for travel expenses (eg. flights home for leave). Do you think this would be included in the treaty exclusion? Should I include it in my treaty-based declaration? "R...

No ideas?

Hello, A beginner's question on RRSPs and form 8891. I have US and Cdn citizenship and I'm resident in Canada. I've been filing an 8891 and a TD F 90-22.1 every year, as required, for my foreign accounts. I have not made an election onder Art XVIII(&) to defer taxes on my RRSP. In deciding when ...

Hello, I'm a Canadian and American, living in Canada. I have 'Government Service' earned income I'll declare and exclude from my 1040 using a Form 8833 Treaty Disclosure. I'm trying to put together my Form 1116 for non-US dividend and interest income, but I'm not sure what to include in the calcuati...

Nice! Thanks for this. I honestly don't know how you could possibly know all of this, but I'm happy!

I'll pay the Federal tax and either the QC Tax or Federal Surcharge Tax. Got it. But do I really have to ask MRQ to make a determination? I would like to self-assess if possible. Also, intent does appear to matter is past interpretations of residency: http://www2.publicationsduquebec.gouv.qc.ca/dyna...

Hi, I'm a Federal Public Servant posted abroad. I last lived in Canada in 2009, and my last province of residence was Quebec. In 2009 I filed as a factual resident of Quebec. I intended to return to Quebec. In 2010, I wish to file as a Deemed Resident of Canada (not Quebec). I no longer intend to re...

Hello, - I'm a Canadian federal government employee living outside of Canada. - I don't have residency in any other country, as I have diplomatic status. - I'd like to be considered a deemed resident of Canada (i.e. no province) in 2010; I last filed as a Quebec resident. - I will also be returning ...

Criminally fraudulent indeed! There is actually a $1000 fine for NOT filing a 8833... Thank you very much for your responses Nelsona; you did indeed provide the right answer the first time, and I won't bother with the 'Ask a Bureaucrat' feature of the IRS website again. I had a moment of panic after...

And regarding the so-called 'saving clause', Government Service is still covered by the Treaty: Saving Clause: 2. [color=red]Except as provided in paragraph 3, nothing in the Convention shall be construed as preventing a Contracting State from taxing its residents (as determined under Article IV (Re...

I'm not sure I understand what you mean by "YOUR" government. I'm a Canadian citizen working for the Canadian government in Canada. I also happen to be an American citizen. Here is the Article that would apply from the treaty -- it would appear to apply. What do you think? Article XIX Gove...

Help!

So I sent this question to the IRS using their online question form at the same time as posting it here. Here is the response I got.

I assume a US Citizen living abroad can still make a treaty-based position, but the IRS disagrees.

Is the IRS out to lunch, or am I?



Your Question Was:
Hello, I am both a US citizen and a Canadian citizen. I am a resident of Canada. I work for the Canadian federal government in Canada and receive a salary of $XXX and benefits of $XXX, both exclusively from the Government of Canada. I believe this salary and benefits are taxable only in Canada, under Article XIX (Government Service) of the United State - Canada Tax Convention. When filing my 1040, do I need to make a treaty-based claim on form 8833? If so, what do I put on Line 2 the Internal Revenue Code provision(s) overruled or modified by the treaty-based return position. Thanks!!


The Answer To Your Question Is:
Thank you for your inquiry of March 29, 2009, regarding your claiming a treaty-based position.

We apologize for the delay of our response.

The Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), applies to a foreign person, not United States (U.S.) citizens, you will not need to attach this form to your return.

Assuming you are a United States (U.S.) citizen who has not formally renounced your citizenship you are required to report world wide income based on the requirement to file. Review Publication 54, Tax Guide For U.S. Citizens And Residents Aliens Abroad, “Requirement To Fileâ€￾.

If you have a filing requirement, several income tax benefits might apply if you meet certain requirements while living abroad.

You may be able to exclude up to $86,700 of your foreign earned income in 2008.
You cannot exclude more than the smaller of:
$86,700, or
Your foreign earned income for the tax year minus your foreign housing exclusion.

To claim these benefits, you must file Form 1040, and attach Form 2555, Foreign Earned Income. If you are claiming the foreign earned income exclusion only, you may be able to use the shorter Form 2555-EZ, Foreign Earned Income Exclusion, rather than Form 2555. To claim the foreign earned income exclusion, you must satisfy all three of the following requirements.

1. Your tax home must be in a foreign country. Your tax home is the general area of your main place of business, employment, or post of duty where you are permanently or indefinitely engaged to work. You are not considered to have a tax home in a foreign country for any period during which your abode is in the United States. However, being temporarily present in the United States, or maintaining a dwelling in the United States, does not necessarily mean that your abode is in the United States. For details, see Publication 54.
2. You must have foreign earned income.
3. You must be either:
a. A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
b. A U.S. citizen who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.
For purposes of the foreign earned income exclusion, and the foreign housing exclusion and deduction, foreign earned income does not include any amounts paid by the United States or any of its agencies to its employees.

In addition to the foreign earned income exclusion, you can also claim an exclusion or a deduction from gross income for your housing amount if your tax home is in a foreign country and you qualify under either the bona fide residence test or the physical presence test.
The housing exclusion applies only to amounts considered paid for with employer-provided amounts. The housing deduction applies only to amounts paid for with self-employment earnings.

Your housing amount is the total of your housing expenses for the year minus the base housing amount.
The computation of the base housing amount (line 32 of Form 2555) is tied to the maximum foreign earned income exclusion. The amount is 16% of the exclusion amount (computed on a daily basis), multiplied by the number of days in your qualifying period that fall within your tax year.
For 2008 the maximum foreign earned income exclusion is $87,600 per year; 16% of this amount is $14,016, or $38.30 per day. To figure your base housing amount if you are a calendar-year taxpayer, multiply $38.30 by the number of your qualifying days during 2008. Subtract the result from your total housing expenses (up to the applicable limit) to find your housing amount.
The amount of qualified housing expenses eligible for the housing exclusion and housing deduction is limited. The limit is generally 30% of the maximum foreign earned income exclusion (computed on a daily basis), multiplied by the number of days in your qualifying period that fall within your tax year. For 2008, this is generally $71.80 per day ($26,280 per year). However, the limit will vary depending upon the location of your foreign tax home, and the tax year. Review the instructions to Form 2555, for the 2008, housing exclusion or deductions amount.

If you have foreign sourced income that you cannot exclude, for example, foreign earned income over $87,600, pension, interest, dividends, capital gains etc, in 2008, for which you paid or accrued foreign income taxes, you may be eligible to take either a Foreign Tax Credit or a Foreign Tax Deduction. To take the foreign tax credit, you should complete a Form 1116, Foreign Tax Credit. If you decide not to take the credit and you are able to itemize deductions, you may be eligible to deduct these foreign income taxes on Form 1040 Schedule A, Itemized Deductions. For additional information regarding either the foreign tax credit or the foreign tax deduction, please review Publication 514, Foreign Tax Credit for Individuals.
You must express the amounts you report on your U.S. tax return in U.S. dollars. If you receive all or part of your income or pay some or all of your expenses in foreign currency, you must translate the foreign currency into U.S. dollars. Use the exchange rate prevailing when you receive, pay, or accrue the item. If there is more than one exchange rate, use the one that most properly reflects your income.
You are not required to submit foreign documentation (wage statement) to your U.S. tax return.
Your return should be sent to:
Internal Revenue Service
Austin, TX, 73301-0215

Forms, Publications and Instructions can be found on our website, www.irs.gov.

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