Quick question (or not depending): I was a US non-resident alien for 2012 & 2013, but a resident alien for 2014, under the terms of my J-2 visa (first two years I am an exempt individual). Given that I technically was non-resident for 2 of the last 3 years, would I use the Streamlined Domestic or Foreign Offshore Procedures for correcting my 2014 filing?
A summary of my tax situation:
2012, 2013: Filed 1040NR, did not report worldwide income as that is not required. FBAR/3520/3520-A are also not required of non-resident aliens.
2014: Filed 1040 without reporting worldwide interest income (mistakenly thought if it was below Schedule B threshold then I didn't have to report it in the 1040 as well), didn't know I had to file FBAR or 3520/3520-A for foreign accts including TFSA, RRSP and whole life insurance policies. (I blame new parent sleep deprivation)
I plan on filing my amended 2014 return and the existing 1040NR returns under the streamlined program, but I'm not sure what to write on top in red (the procedure and penalty is essentially the same). I don't think I should do a "quiet disclosure" because we may end up living in the US for the next 5-10 years and I don't want this coming back to haunt me. The Title 26 penalty is $2.5k but smaller than the possible penalties.
Thanks in advance for any advice!
SDOP or SFOP if you were non-resident for first two years
Moderator: Mark T Serbinski CA CPA
After talking to IRS
I ended up calling the OVDP Hotline at 267-941-0020 and left a message, they returned my call the same day. Just thought I'd post this for anybody else in the same boat.
They clarified that the Foreign Offshore Disclosure eligibility is based on physical presence not tax residency. So I will file under the Domestic program.
They didn't know about the exempt individual regulation for the J visa so I will send a cover letter explaining this and quoting the relevant IRS/Immigration regulation. I just have to file an amended 1040X return for 2014, and file 1040X returns without amendments for two years prior - I only need FBAR/3520/3520-A for 2014, and will explain my residency status for the last 6 years in the cover letter (1-3: not related to US at all; 3-6: subject to J visa regulations).
I didn't realise this but RRSPs are not included in the Title 26 penalty calculation. Life insurance policies, if they fall under the IRS definition, wouldn't be included either, but it is very hard to prove without consulting an insurance/tax consultant (the Canadian provider has no idea either). I think I will just include this in the calculation to be safe (my cash surrender values are under $10k so won't be very much). So my penalty base will be my bank accounts, TFSA and life insurance CSV.
So after a week of worrying it doesn't seem that difficult, thanks to the resources on this forum and lots of Googling. I will be closing down my TFSA this year and making a decision on the life insurance going forward (we don't know where we'll end up in the next 5-10 years so I'd rather keep it for now).
They clarified that the Foreign Offshore Disclosure eligibility is based on physical presence not tax residency. So I will file under the Domestic program.
They didn't know about the exempt individual regulation for the J visa so I will send a cover letter explaining this and quoting the relevant IRS/Immigration regulation. I just have to file an amended 1040X return for 2014, and file 1040X returns without amendments for two years prior - I only need FBAR/3520/3520-A for 2014, and will explain my residency status for the last 6 years in the cover letter (1-3: not related to US at all; 3-6: subject to J visa regulations).
I didn't realise this but RRSPs are not included in the Title 26 penalty calculation. Life insurance policies, if they fall under the IRS definition, wouldn't be included either, but it is very hard to prove without consulting an insurance/tax consultant (the Canadian provider has no idea either). I think I will just include this in the calculation to be safe (my cash surrender values are under $10k so won't be very much). So my penalty base will be my bank accounts, TFSA and life insurance CSV.
So after a week of worrying it doesn't seem that difficult, thanks to the resources on this forum and lots of Googling. I will be closing down my TFSA this year and making a decision on the life insurance going forward (we don't know where we'll end up in the next 5-10 years so I'd rather keep it for now).
It has long been the advice here to NEVER fike simplified US returns. 1040A, 1040EZ and skipping sched B is never a good idea, as you have now found out.
ALWAYS file 1040 and sched B.
ALWAYS file 1040 and sched B.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Hi nelsona, I did file 1040 and Sched B last year, but confused some of the reporting thresholds and didn't know about the TFSA as foreign trust situation. I'll be correcting this for 2014 and filing correctly going forward.
The 1040NR and 1040NREZ are perfectly fine for nonresident aliens however. Depends on the terms of your visa and substantial presence test/exempt individual requirements.
The 1040NR and 1040NREZ are perfectly fine for nonresident aliens however. Depends on the terms of your visa and substantial presence test/exempt individual requirements.