DUAL - for Nelsona

fitzer21 · Post by **fitzer21** » Mon Aug 08, 2011 5:58 pm

Good evening. question for Nelsona if I may.
This may have been covered in a previous thread but there may be a wrinkle in my case. I am hoping for the 'simple, quiet' solution of submitting past 3 years tax filings will suffice (as opposed to OVDI)

Long story short - here goes.

- wife is a New Zealand citizen, Canadian permanent resident;
- I was born in the New York city and moved to Canada with my mother when I was approx. 2 year old;
- I became a Canadian in 1981 when I was approx 17 years old;
- I have worked in Canada and paid Canadian taxes my whole life;
- I did apply for and receive a social insurance number and US passport when I accepted a "Full-Time" job in Austin a couple years back (~ 1996-1997);
- I moved to Austin, received a 5000 bonus (which was taxed) and worked for ~ 3 months. The company completely messed up the legal aspects of trying to get my wife and two small children into the US. I decided to forget about the Austin job and I returned to Canada.
- I did not file any US tax return as I assumed no monies were owing (actually I probably had a refund coming to me)

- I was totally unaware of any tax filing obligations ... I incorrectly assumed taxed was based on residency, Canada and the US had a tax treaty and that were are taxed higher here.

- I was totally unaware that FBAR even existed and if I had read the Toronto sun and not the financial post, I would be blissfully unaware.

- I have an RRSP ~ 95K ( but maybe less after this week), at one point I RESP for 16,000 and a mortgage for a house in Mississauga

- after returning from Austin and not finding job, I created my own software development company (Ontario based corporation since ~1998) where I have had clients from Bermuda and Canada, never the US. I have controlling interest in the small company in which I wife is a director as well.

-I never really considered myself as American ... I have tried to save a bit of money in the RRSP and RESP. My twin girls are off to university in Sept. The most important thing for me is to help them get off on the right foot and after that I don't care really;

I am fully tax compliant here... I have never earner over 90 K I don't even have a bloody speeding ticket.

Q. OVDI or not. The answers on the IRS's OVDI FAQ #52, paragraph 3 has me confused as to what I should do.

Q. If no OVDI, 3 years or 6. Maybe 6 because if the US does not give me credit for my RRSP contribution, then there may be a small window of tax owing.

Q. FBAR and the RESP, RRPS. Need to file? I have never taken from my RRSP and we have closed the RESP as the kids are off soon and well, 16,000 is not that much sadly;

Q. My company.... reporting? Ug.

Q. Is this something I can do myself? after spending days researching, I still cannot confirm if an RRSP account is an FBAR reporting exception or not.

Believe it or not, I have received 2 quotes to do an OVDI - one was 8000 + HST, the other 20,000 + HST (not kidding). I am really worried at this point. If I had known when I got my passport the tax filing obligations, I really might have renounced to make my life simpler.

many, many thanks in advance

tsanaha · Post by **tsanaha** » Mon Aug 08, 2011 9:07 pm

if you ask lawyers/CPA, they will tell you do it with OVDI -- in part they feel this is for sure to be done with certainty in terms of penalty. in part it bring them business.

now, since you are non-resident, likely owe no tax to IRS, I do not see any reason for you to join OVDI.

Yes, you may have to file FBAR -- as a US citizen even living offshore, your financial accounts in your residence country (Canada) is still "offshore". It is because FBAR that may give IRS the power to give your trouble.

So if I were you, I would just go ahead to file (back to 6 years) FBAR... and since you have not filed return in the past, you should file return -- also back to 6 years..

As for your RRSP, I am not sure if you should file f8891 because you are non-resident.

Nelsona should know much more and will tell you what you should do.

nelsona · Post by **nelsona** » Tue Aug 09, 2011 9:47 am

You are not an OVDI candidate.

You should be filing last 3 years return, as all cross-border specialists ahave been saying for the last 20 years.

for the past 10 years there have only been about 4-6 PRIME cross border specialists in the field. Now that one has died, and that IRS has been advertising OVDI, we are seeing all kinds of CPAs that are suddenty "cross-border tax specialists", pretty much only because they say they are.

They have no experience with 'normal' IRS compliance, and by just reading the same OVDI propaganda that IRS has been advertizing so heavily, they see a gravy train. They know nothing about the 1000's of people over the years that have simpy filed 'catch-up" returns, and moved on without issue.

So, you need to do this -- and it will cost you, but not with OVDI. So find a cdn expert that is familar with catch up (use the term) IRS filings, and that has been doing this for many MANY years. if you want, have themn do your most complicated year, and then do the rest yourself (although anyone with a business should be prepared to pay a CPA in any event -- that is business).

tsanaha · Post by **tsanaha** » Tue Aug 09, 2011 10:05 am

Nelsona,

"for the past 10 years there have only been about 4-6 PRIME cross border specialists in the field."

were you talking about david ingram ?

"1000's of people over the years that have simpy filed 'catch-up" returns, and moved on without issue"

Where those 1000s folks ? so far, I have not seen one person on this board to share his/her story.

nelsona · Post by **nelsona** » Tue Aug 09, 2011 11:41 am

People don't share on this board. They ask a question and move on. They report back if they have a problem. They are not typivcally obsessed with their taxes

You have been here for 2 months. Feel free to rad the older posts, and ingram's if they are still on centa.com

OVDI quite simply does not apply to USC's living in a high tax treaty country who have never filed a US return.

Shame on CPAs scaremongering!

fitzer21 · Post by **fitzer21** » Tue Aug 09, 2011 11:42 am

"catch up (use the term) IRS filings"

Agreed and thank you.

It feels like a hurricane is approaching and the price of simple plywood has gone up by 100x! I am glad I sat down and looked at this myself and was lucky enough to come across this forum which has been supremely helpful.

Thanks again very much indeed.

nelsona · Post by **nelsona** » Tue Aug 09, 2011 11:46 am

"It feels like a hurricane is approaching and the price of simple plywood has gone up by 100x"

Great analogy. Add to this that department stores are now trying to sell the plywood to compete with the hardware stores.

tsanaha · Post by **tsanaha** » Tue Aug 09, 2011 11:53 am

thanks for being a guardian angel preventing folks from being rip off by CPA/lawyers as well as making mistakes on tax filing and getting in trouble with IRS.

I will share full story -- that might help others too..

oldgringo · Post by **oldgringo** » Thu Aug 11, 2011 4:42 pm

oldgringo here from the double trouble post...our 3 years of back taxes are almost completed and we will send them in to the IRS and we are also sending in 3 years of FBAR to the treasury dept.... i will post here the results if we hear back from either of them...which would be bad news...if a year from now we have not heard anything I'll post again ....people should know the results of this very traumatic issue.
a question for nelsona if you don't mind?...our tax preparer has said a letter of explanation to the IRS is not needed... but we should send in one for FBAR... my gut tells me the IRS as well as the treasury dept. should know the reason we have never filed a tax return... do you have an opinion?
thank you again for the help we have received here....oldgringo

tsanaha · Post by **tsanaha** » Thu Aug 11, 2011 5:23 pm

my understanding is that if you do it "quiet disclosure", that means, your amending (f1040x) back tax go to the system without any attention from IRS --- that is all done with machine. Your FBAR does not go to IRS anyway..

if you send a letter to IRS, that means you ask for attention, that may let them ask you go to OVDI if not full audit your past returns.

just my 2cents.

qweryt · Post by **qweryt** » Thu Aug 11, 2011 10:26 pm

If IRS or Treasure dep. need an explanation, they will send you a letter asking for one. So, just file the tax return/FBAR forms and be done with it.

Jyrki21 · Post by **Jyrki21** » Fri Aug 19, 2011 2:48 pm

If you want a story of someone who has filed catch-up returns without incident -- here is one.

I filed years 2004-2009 last year all at once, as well as FBARs, and have not heard anything. When I filed this year I also applied for an ITIN for my daughter and received one, so (I hope!) this is a sign that my returns are being processed without incident.

tsanaha · Post by **tsanaha** » Fri Aug 19, 2011 3:31 pm

certainly good news, here my cents..

for IRS go after you for doing QD, it will be a lot effort/time. it would not be cost effective if you are a small fish -- with little or none under report income.

although IRS warns taxpayers not to try QD because they will pick up some for audit --and then may impose civil penalty. You may be just be lucky -- not big (profit) enough for them to go after.

canuckfan1 · Post by **canuckfan1** » Fri Aug 19, 2011 3:49 pm

I am in a very similar situation to many of the other who I have read about here in that I have been a Green card holder since 2001 but have never declared my rrsp and never knew about the reporting rquirement until reading about it last week. I have never made a withdrawal from my rrsp nor have I contributed to it since I filed my exit return with canada in 2001.
My understanding is I am not an ovdi candidate, I should file six years fbar, 8891's and 1040x's as well as a letter of explanation with the fbar only. Is this correct? Also one other wrinkle is that my rrsp is quite large. (over 1,000,000). The gain came between 2001 and 2005 and balance now is actually lower than it was in 2005. Does this matter or change anything in how I should proceed?

nelsona · Post by **nelsona** » Fri Aug 19, 2011 4:14 pm

Nope. You are going to elect to defer taxation in any event. Even a losing portfolio has income from year to year. best to jsut defer.

So many have done this over the years, that ovdi doesn't apply to more than 2 or 3 people visting this site; those who "forgot" to report Cdn income on their US returns whil;e living in US.