Need some advice for an American in Canada
Moderator: Mark T Serbinski CA CPA
qweryt,
I looked into this further today and I believe I found the reference in pub 54 that you were referring to: the tip at the bottom of page 6 and question 12 under General tax questions at the end of pub 54. Both make reference to filing HOH with an NRA however, it also says that other tests must be met and to refer to pub 501.
These are the tests from Pub 501:
Considered Unmarried
To qualify for head of household status, you must be either unmarried or considered unmarried on the last day of the year. You are considered unmarried on the last day of the tax year if you meet all the following tests.
1. You file a separate return (defined earlier under Joint Return After Separate Returns ).
2. You paid more than half the cost of keeping up your home for the tax year.
3. Your spouse did not live in your home during the last 6 months of the tax year. Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances. See Temporary absences , later.
4. Your home was the main home of your child, stepchild, or foster child for more than half the year. (See Home of qualifying person , later, for rules applying to a child's birth, death, or temporary absence during the year.)
5. You must be able to claim an exemption for the child.....
If you were considered married for part of the year and lived in a community property state (listed earlier under Married Filing Separately), special rules may apply in determining your income and expenses. See Publication 555 for more information.
Nonresident alien spouse. You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year and you do not choose to treat your nonresident spouse as a resident alien. However, your spouse is not a qualifying person for head of household purposes. You must have another qualifying person and meet the other tests to be eligible to file as a head of household.
Earned income credit. Even if you are considered unmarried for head of household purposes because you are married to a nonresident alien, you are still considered married for purposes of the earned income credit (unless you meet the five tests listed earlier under Considered Unmarried ). You are not entitled to the credit unless you file a joint return with your spouse and meet other qualifications
So, it looks like under test 3 my wife would not qualify to file as HOH because even though I am NRA I live in the house year round. I believe this is what nelsona was referring to.
I though I should look into it but alas, it won't work unless I am missing something else....looks like she will have to try for the additional child tax credit by filing as MFS which may reduce the amount of credit from the $1000. Some is better than none!
I looked into this further today and I believe I found the reference in pub 54 that you were referring to: the tip at the bottom of page 6 and question 12 under General tax questions at the end of pub 54. Both make reference to filing HOH with an NRA however, it also says that other tests must be met and to refer to pub 501.
These are the tests from Pub 501:
Considered Unmarried
To qualify for head of household status, you must be either unmarried or considered unmarried on the last day of the year. You are considered unmarried on the last day of the tax year if you meet all the following tests.
1. You file a separate return (defined earlier under Joint Return After Separate Returns ).
2. You paid more than half the cost of keeping up your home for the tax year.
3. Your spouse did not live in your home during the last 6 months of the tax year. Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances. See Temporary absences , later.
4. Your home was the main home of your child, stepchild, or foster child for more than half the year. (See Home of qualifying person , later, for rules applying to a child's birth, death, or temporary absence during the year.)
5. You must be able to claim an exemption for the child.....
If you were considered married for part of the year and lived in a community property state (listed earlier under Married Filing Separately), special rules may apply in determining your income and expenses. See Publication 555 for more information.
Nonresident alien spouse. You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year and you do not choose to treat your nonresident spouse as a resident alien. However, your spouse is not a qualifying person for head of household purposes. You must have another qualifying person and meet the other tests to be eligible to file as a head of household.
Earned income credit. Even if you are considered unmarried for head of household purposes because you are married to a nonresident alien, you are still considered married for purposes of the earned income credit (unless you meet the five tests listed earlier under Considered Unmarried ). You are not entitled to the credit unless you file a joint return with your spouse and meet other qualifications
So, it looks like under test 3 my wife would not qualify to file as HOH because even though I am NRA I live in the house year round. I believe this is what nelsona was referring to.
I though I should look into it but alas, it won't work unless I am missing something else....looks like she will have to try for the additional child tax credit by filing as MFS which may reduce the amount of credit from the $1000. Some is better than none!
qwerty is correct.
However there is rarely any value in such a status, since eithr you are not taxable in US, or you are taxable in US and canada and lowering US tax merly increases Cdn.
Its an exercise, but not one that pays off.
However there is rarely any value in such a status, since eithr you are not taxable in US, or you are taxable in US and canada and lowering US tax merly increases Cdn.
Its an exercise, but not one that pays off.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Interesting, thanks! I didn't realize that pub. 54 overrules pub. 501 in this regard.
nelsona, you are right, my wife is not taxable in the US due to income strictly from Canada and application of FTC.
I did a quick pencil and eraser exercise using the work sheets for the regular child tax credit (line 51, 1040) from the 1040 instructions and obviously she does not qualify for this one because all US tax from line 44 will be zeroed out from FTC on line 47.
Continuing with the directions it takes me to form 8812 - additional child tax credit, and because her earned income from line 7, 1040 is around $34,000USD, she is under the $55,000 max threshold for filing MFS and as a result, it appears that she is eligible for the full $1000 for additional child tax credit.
If her income were to be above that $55,000 and she filed MFS then the credit would be reduced based on the calculations from the work sheet. When her income goes above that MFS limit, filing HOH would then raise the cap to $75,000 and once again resetting the credit to $1000 provided she remains under 75k and files HOH.
So until then (55k) filing MFS should work out fine and still maximize the credit - at least thats the way I understand it up to this point!
Thanks again!
nelsona, you are right, my wife is not taxable in the US due to income strictly from Canada and application of FTC.
I did a quick pencil and eraser exercise using the work sheets for the regular child tax credit (line 51, 1040) from the 1040 instructions and obviously she does not qualify for this one because all US tax from line 44 will be zeroed out from FTC on line 47.
Continuing with the directions it takes me to form 8812 - additional child tax credit, and because her earned income from line 7, 1040 is around $34,000USD, she is under the $55,000 max threshold for filing MFS and as a result, it appears that she is eligible for the full $1000 for additional child tax credit.
If her income were to be above that $55,000 and she filed MFS then the credit would be reduced based on the calculations from the work sheet. When her income goes above that MFS limit, filing HOH would then raise the cap to $75,000 and once again resetting the credit to $1000 provided she remains under 75k and files HOH.
So until then (55k) filing MFS should work out fine and still maximize the credit - at least thats the way I understand it up to this point!
Thanks again!
Hello all, new to the board...
About Frankd1 back-filing 1040X, 8891, and FBARS, won't he have to pay the penalties (for the FBAR I read it's something like 27.5% of the highest balance for each year and each account, or 12.5% if the value was less than $75,000 at all times during those years)?
But then, I got this from the IRS website: "If you learn you were required to file FBARs for earlier years, you should file the delinquent FBAR reports and attach a statement explaining why the reports are filed late. No penalty will be asserted if the IRS determines that the late filings were due to reasonable cause." Apparently they take into account one's inexperience and filing before one gets caught.
Or, would getting a PLR save you from those penalties? I keep reading that you need a PLR to file late 8891s, but I see you say it's not necessary, nelsona?
I've always done our taxes on TurboTax, and only this year realized I needed to be filing 8891s and FBARs since my husband became a US resident in 2007 (oops), so I'm just trying to figure out how to proceed.
Thanks in advance for any advice.
About Frankd1 back-filing 1040X, 8891, and FBARS, won't he have to pay the penalties (for the FBAR I read it's something like 27.5% of the highest balance for each year and each account, or 12.5% if the value was less than $75,000 at all times during those years)?
But then, I got this from the IRS website: "If you learn you were required to file FBARs for earlier years, you should file the delinquent FBAR reports and attach a statement explaining why the reports are filed late. No penalty will be asserted if the IRS determines that the late filings were due to reasonable cause." Apparently they take into account one's inexperience and filing before one gets caught.
Or, would getting a PLR save you from those penalties? I keep reading that you need a PLR to file late 8891s, but I see you say it's not necessary, nelsona?
I've always done our taxes on TurboTax, and only this year realized I needed to be filing 8891s and FBARs since my husband became a US resident in 2007 (oops), so I'm just trying to figure out how to proceed.
Thanks in advance for any advice.