Dual citizen living in the US and FATCA

[travy]

I originally moved to the US to work, not knowing whether I was staying there. I have an investment account and RRSP established for several years prior to moving to the US. I stayed and became a US citizen in 2001. I have no bought or sold any holdings ever in those accounts and the accounts had been inactive. I reported the interests paid to the bank and paid NR withholding in Canada and reported the income in the US. I did not know I am to report ALL the accounts information to the IRS. The accountants in the US are often not familiar with cross border taxation. I am retiring and thinking of moving back to Canada ( Toronto?) because I still have family there. Once I retired, I am no further income and will be just living off savings ( IRA and RRIF at 70?) and Social Security when I am 66 ( I am 64) and a small CPP. I just read in the news about the latest FATCA act. I do not know what to do now because I had not filed 8938 forms previously. How do I remedy the situation? Am I liable to a 27.5% penalty for the total asset in the accounts if I had not reported the existence of those inactive accounts previously? Do I do the disclosure in the US now or after I moved back to Canada in the next couple of months? There seems to be more cross border accountants who know the rules in Canada then in the US ( unless you are in a large US city and that is not where I am).

[travy]

Clarification: I have not bought or sold holdings ( mutual funds ) in my investment account shortly after I opened it. It is inactive, but through the years had grown to $200000 with about $80000 from long term capital gain.

[nelsona]

RRSP penalties are separate issue from FATCA. You have all the 8891/3520 issues to deal with as well as FBAR, which are MUCH more pressing. You are basically on the hook for penalties that will equal your RRSP holdings.

No one actually GOES to an accountant anymore. They use fax/e-mail, etc. Living in a small town is not much of an excuse. This site has been up for 15 years, for example.

So, 8891, FBAR, FACTA, in that order, are what you need to fix.

[travy]

nelsona, I only come upon the site today. I know it is not an excuse.

Are you saying I am in more trouble with my RRSP or my investment accounts ( or both?) for not having filed the 8891 and FBAR? Am I going to be penalized (27.5%) on both accounts ?

[nelsona]

Sure. In other words. You need to fix everything.

You had an RRSP since you moved to US. Did you not think at some point of looking to find how the ywere viewed by IRS?

also, if you reported only your Cdn investment an interst on a Cdn tax return, and did not say that you were non-resident of Canada, then you have Cdn tax problems to deal with as well.

[travy]

I was ruled as a NR of Canada by Revenue Canada, so it withheld 25% on whatever distribution from the mutual fund account and I paid tax in the US on those income, just did not realize there is 8891 and FBAR to be filed on RRSP and an inactive mutual fund until the FATCA passage hit the news in Jan just when I am retiring and thinking of moving back to Canada.

[nelsona]

Be careful in your wording: Why would sellinga mutaul fund (outside of nan RRSP) bring CDn tax: Non-residents are not taxed on capital gains from canada.

Sounds more like you collapsed or withdrew funds from an RRSP, which is the only income that would be taxed at 25% in Canada.

[travy]

I have not made any transaction in any of the accounts for almost 20 years. Those withholding were income distributed from the mutual funds. I do not know if they were interest, short term capital gain or what, and the income amounted to about $ 500 a year.

[nelsona]

Again, why would such distributions be taxed at 25%?

Sounds like your broker does not know that you are a US resident.

[travy]

I am working on enrolling in the OVDP, and file amended forms and tax returns ( gulp, for 8 years) and . I am resigned to the fact that I will be penalized and will also incur big bills in accountants/lawyers fee. Do I not also have to keep the mutual fund account and RRSP untouched until the whole disclosure had been completed, which may take 2 or 3 years, I was told?

[nelsona]

No, why would you need to do this?

[primo]

Travy,
You should check out the Isaac Brock Society before you consider OVDP. There are a few people there that have been through it there and will likely have some advice for you.