I am a dual citizen, born in canada. I was naturalized in the US when I was 8, returned to canada when I was 30. I have lived and worked in canada for the past 33 years, although retired about 8 years ago. I discovered I have a tax problem last summer, and waited for the new regs. My accountant jumped on the streamline process, and after three months told me that I do not qualify because of passive income and the huge capital losee carryforward from the market crash in 2008. I live off of my investments in the stock market (income from reits, pipelines, trusts, cap gains). Anyway, he said that it would look like I owed more than $1500 per year in taxes for the past three years or at least it increases my "risk" and they could take a closer look. What if I file four years, even though only three years are required, to show the capital losses in 2008?
I also do not understand passive income. In many places I read the stock dividends in canada are not passive, in other places I read it is "portfolio" income.
I also red that banks don't hae to comply with the fatca regulations for people who are retired. Is this true?
Finally, I am thinking about a reasonable cause process. Is this wise? I have not hidden anything and paid my canadian taxes as required, and I really had no idea I was supposed to file US tax returns all these years.
Does it make any difference that I was born in canada? What if I am fined a ridiculous amount and don't choose to pay. I have been told "they will come after me", they would proceed without me and find me to be a criminal. They scared the crap out of me. I find this process to be unbelievably stressful
Any help wold be appreciated
Canadian born dual citizen, streamline and passive income
Moderator: Mark T Serbinski CA CPA
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gerrymeyers
- Posts: 4
- Joined: Tue Aug 23, 2011 6:09 pm
Hi gerrymeyers,
I was in a similar situation, I was born in Canada as well, didn't know I had to file, then hired an accountant to fix my problem almost 2 years ago. My accountant back filed 6 years of FBARs and tax returns for me - this was before the streamlined process.
For your case - having big losses in 2008 is not surprising. I would strongly recommend back filing to 2008 to be able to carry forward your losses. The only caveat I have for you, is the loss carry forward mechanism is different in US taxes compared to Canadian taxes. In US taxes, there is no option not to use carry forward, and up to $1500 of losses carried forward will get used to offset other types of income (interest, dividents, wages, etc). What I'm trying to say, is you might end up using up your US return capital losses faster than your Cdn capital losses. This affected a retired friend of mine. Still, if you had big losses in 2008 - it's worth getting credit for them.
Regarding dividends, my understanding is that they are always passive.
RE: Fatca not applying to retired people. I haven't heard this.
For peace of mind, I received feedback from an accountant who has handled >100 cases of backfiling with "I didn't know I needed to file" as the reasonable cause - and he reported that no one has been fined. This was my experience as well.
Being born in Canada has no official significance. However, if you travel to the US on your Canadian passport (your not supposed to, by the way), they have no way of knowing your US citizen ship, since your Cdn passport shows a Cdn birthplace. If you hadn't lived in the US, being born in Canada would help your reasonable cause case.
Get some feedback from others. I have no financial or tax training whatsoever.
Best Regards.
I was in a similar situation, I was born in Canada as well, didn't know I had to file, then hired an accountant to fix my problem almost 2 years ago. My accountant back filed 6 years of FBARs and tax returns for me - this was before the streamlined process.
For your case - having big losses in 2008 is not surprising. I would strongly recommend back filing to 2008 to be able to carry forward your losses. The only caveat I have for you, is the loss carry forward mechanism is different in US taxes compared to Canadian taxes. In US taxes, there is no option not to use carry forward, and up to $1500 of losses carried forward will get used to offset other types of income (interest, dividents, wages, etc). What I'm trying to say, is you might end up using up your US return capital losses faster than your Cdn capital losses. This affected a retired friend of mine. Still, if you had big losses in 2008 - it's worth getting credit for them.
Regarding dividends, my understanding is that they are always passive.
RE: Fatca not applying to retired people. I haven't heard this.
For peace of mind, I received feedback from an accountant who has handled >100 cases of backfiling with "I didn't know I needed to file" as the reasonable cause - and he reported that no one has been fined. This was my experience as well.
Being born in Canada has no official significance. However, if you travel to the US on your Canadian passport (your not supposed to, by the way), they have no way of knowing your US citizen ship, since your Cdn passport shows a Cdn birthplace. If you hadn't lived in the US, being born in Canada would help your reasonable cause case.
Get some feedback from others. I have no financial or tax training whatsoever.
Best Regards.
Hi Gerry,
The only way the IRS can come after you is if you have assets in the US or money coming from the US. The CRA collects for them in Canada but will NOT collect on a Canadian citizen if the liability occurred while you were a Canadian.
Personally, if I had a Canadian birth certificate, I wouldn't do anything. Should you get asked your citizenship at the bank. Also, your Canadian passport shows you're born in Canada. I doubt you will ever get hassled at the border.
Check out the Isaac Brock Society on the web. There are a whole bunch of us over there in similar situations.
The only way the IRS can come after you is if you have assets in the US or money coming from the US. The CRA collects for them in Canada but will NOT collect on a Canadian citizen if the liability occurred while you were a Canadian.
Personally, if I had a Canadian birth certificate, I wouldn't do anything. Should you get asked your citizenship at the bank. Also, your Canadian passport shows you're born in Canada. I doubt you will ever get hassled at the border.
Check out the Isaac Brock Society on the web. There are a whole bunch of us over there in similar situations.