Goodbye to IRS

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

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nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Makes you wonder what else is in accurate in it.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
exPenn
Posts: 106
Joined: Tue Aug 20, 2013 3:06 pm
Location: GTA

Post by exPenn »

Yes, "the total WEP reduction is limited to one-half of the pension based on the earnings that were not covered by Social Security", but it matters in what order the WEP is applied. The top of the webpage you reference clearly states that "The Windfall Elimination Provision (WEP) reduces your Eligibility Year benefit amount BEFORE it is increased due to delayed retirement credits." Read the equation:
SS(70) = (SS(66) - WEP) X 1.32 = SS(66)X1.32 - WEPX1.32.
With no WEP, SS(70) = SS(66)X1.32.
Compare this to the previous equation and you will see that the application of WEP will reduce your SS benefit at age 70 by WEP X 1.32. Therefore, while the WEP itself is limited to 1/2 CPP, the net reduction in the age 70 benefit is 32% greater than 1/2 CPP.
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Yes, that is how the calculator works. Thanks for figuring that out.

However, every WEP chart and even the calculator page warns that regardless of the calculations, WEP cannot penalize you monthly benefit by more than 50% of what you are getting.
If you wish, look at it this way.

1. Run the no wep calc.
2. Detremine half your foreign pension and subtract it from No-WEP.
3. Run the wep calc.
You get the greater of 2 or 3.
Look on keats, there are those collect SSand CPP now who are being cut EXACTLY 50% of CPP, because that is the limit.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

The order that you talk about IS important, and is the way it is applied as you described it. However it really applies to those being only "slightly" penalized by WEP, say 10% of CPP (like those with,say 26-29 years of substantial earnings).

it this case, yes, the WEP has a greater impact on those who wait. But for those who work in US for 10-20 years and will be subject to 50% WEP-effect in any event, the order doesn't really matter.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
patti
Posts: 66
Joined: Sun Apr 24, 2011 7:28 pm

Post by patti »

Nelsona & ExPenn - This discussion has been extremely helpful. I'm still a bit confused by the SSA's math and baffled by their inability to create a useful calculator but, nevertheless, I think I have a much better understanding of WEP and potential impact on retirement income. Thank you.
cyclelady012354
Posts: 4
Joined: Thu Dec 18, 2014 7:48 pm
Location: GTA

Post by cyclelady012354 »

exPenn - How long of a process was it for your wife to renounce her U.S. citizenship?
exPenn
Posts: 106
Joined: Tue Aug 20, 2013 3:06 pm
Location: GTA

Post by exPenn »

She applied to the local US consulate (Toronto) for an appointment to renounce in Aug. 2013, and got an appointment in Sept. 2013. I have heard reports that it can now take up to a year just to get an appointment. She filled out all her paperwork and paid her $450 fee (now $2,350) in one visit to the consulate. She then had to wait almost a year (Sept 2014) until she received her CLN (Certificate of Loss of Nationality) approved by the State Dept. in Washington. I've no idea how long that takes now. Note that this was after we had brought all her tax filings up to date. No point renouncing if you haven't filed. There is lot of information on the web. Just Google "renouncing US citizenship".
The State Sept. is supposed to publish a quarterly 'name & shame' list of those who have renounced. Her name, and many others, never appeared. The US government seems to be doing all it can to discourage and to hide the tide of renounciations, particularly since the start of FATCA.
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