I just found out I may be applicable to paying U.S tax.
Citizenship
-born in U.S
-only went back for a few days after birth
-no green card, never worked in U.S, didn't sign anything american
-might still have a poorly written U.S birth certificate from before 1980
-official Canadian citizenship as of around year 2000 (they claimed I wasn't canadian randomly. I said no, I am, then I had to do the whole procedure)
-Canadian passport, but it shows my U.S birth city
-I would like to believe my U.S citizenship is renounced, but it probably isn't based on the drama I read in the newspaper
Now
-many decades later
-house, family, rrsp, tfsa
Why didn't I file
-absolutely no idea this is a real thing
-never contacted
Here I am now, after reading the drama in the newspapers, where it looks like I'm screwed for a random birth by my Mother visiting the U.S on vacation :(
Just looking at the above, how much do you think I owe?
a) less than $5k
b) around $50k
c) more than $100k ?
We're looking at around 10-15 years worth of work at a medium salary, sometimes spiking over 100k a year. This, after paying for family and house leaves me with not much in the bank, so I'd rather not deal with this, but if I had to, how much damage am I looking at?
I looked up renouncing citizenship and it looks absolutely brutal, way more expensive than complying. Its like they are encouraging people to hide and not talk, but eventually I guess we'll all be figured out especially after the 2015 filings.
Just found out - am I bankrupt now?
Moderator: Mark T Serbinski CA CPA
Just found out - am I bankrupt now?
mmmm bacon...
I wonder if this applies to me:
"At the same time, there are important exceptions to the exit tax. For example, people who have been dual citizens from birth can be exempt. For more information, see the instructions to IRS Form 8854."
http://www.wsj.com/articles/SB100014241 ... 2169287210
My mom may have been fully Canadian at time of birth, making me default Canadian. At the very least, she was holding citizenship of another country other than U.S, and so was my Father.
"At the same time, there are important exceptions to the exit tax. For example, people who have been dual citizens from birth can be exempt. For more information, see the instructions to IRS Form 8854."
http://www.wsj.com/articles/SB100014241 ... 2169287210
My mom may have been fully Canadian at time of birth, making me default Canadian. At the very least, she was holding citizenship of another country other than U.S, and so was my Father.
mmmm bacon...
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CdnAmerican
- Posts: 245
- Joined: Tue Aug 30, 2011 12:15 am
Hi Mr Bacon - This is easiest to say than do, but Don't Panic. There are lots of folks on this board in a similar situation. It's good to look all through the posts of people in similar situations. There are few situations (none? nelsona can clarify) where someone has lost all their money at the hands of the US govt because of not filing. In fact, I don't really know of any where people have lost even a substantial amount.
The IRS certainly puts out draconian documentation and threats in their forms and instructions, but it seems that these are mainly threats for intentional cheats rather than minnows.
That said, yeah, you probably should have been filing, by the letter of the law. BUT the US presumably does not know you are a citizen, especially if you don't have a US passport. If they were worried, they probably would have contacted you. COuld they contact you in the future? Yeah, anything is possible - and that's hard to live with that kind of ambiguity, of course.
Remember as well that Canada is not helping the IRS with collecting penalties of US expats. For many people, they have to file in the US but don't pay any tax, due to the Foreign Tax Credit and the higher taxes you typically pay in Canada vs. the US anyway.
If you wanted to get into compliance, note the amnesty that the IRS has provided over the last year or so:
http://www.irs.gov/Individuals/Internat ... -Taxpayers
The idea, if this is to be believed, is simply to bring US citizens back into compliance without the terror that had been associated with doing so (which you seem to be currently experiencing). There may or may not be taxes associated with filing (depending on your circumstance), but the penalties seem to be waived. Again, there is a huge deduction (Form 2555) of roughly US$100,000 for each wage-earner, which in your case would probably drop your taxable income to near zero. And hence, no tax.
Another approach is to go to a tax accountant who REALLY KNOWS cross-border issues. Lots will say they do, it seems, and there are numerous accounts on this site of people getting very bad advice and getting into trouble afterwards. You can look around on this site for ideas for such an accountant, noting one who hosts a forum for cross-border issues might know a bit more than the guy down the street.
But I'll come back to Don't Panic, and let others weigh in ...
The IRS certainly puts out draconian documentation and threats in their forms and instructions, but it seems that these are mainly threats for intentional cheats rather than minnows.
That said, yeah, you probably should have been filing, by the letter of the law. BUT the US presumably does not know you are a citizen, especially if you don't have a US passport. If they were worried, they probably would have contacted you. COuld they contact you in the future? Yeah, anything is possible - and that's hard to live with that kind of ambiguity, of course.
Remember as well that Canada is not helping the IRS with collecting penalties of US expats. For many people, they have to file in the US but don't pay any tax, due to the Foreign Tax Credit and the higher taxes you typically pay in Canada vs. the US anyway.
If you wanted to get into compliance, note the amnesty that the IRS has provided over the last year or so:
http://www.irs.gov/Individuals/Internat ... -Taxpayers
The idea, if this is to be believed, is simply to bring US citizens back into compliance without the terror that had been associated with doing so (which you seem to be currently experiencing). There may or may not be taxes associated with filing (depending on your circumstance), but the penalties seem to be waived. Again, there is a huge deduction (Form 2555) of roughly US$100,000 for each wage-earner, which in your case would probably drop your taxable income to near zero. And hence, no tax.
Another approach is to go to a tax accountant who REALLY KNOWS cross-border issues. Lots will say they do, it seems, and there are numerous accounts on this site of people getting very bad advice and getting into trouble afterwards. You can look around on this site for ideas for such an accountant, noting one who hosts a forum for cross-border issues might know a bit more than the guy down the street.
But I'll come back to Don't Panic, and let others weigh in ...
Not a professional opinion.
Thank you for the information. I used it and scoured this forum for info. I could find a few posts that were relevant and eased some fears. Though it is very hard to search, with all the other chatter, so I had to use some very specific keywords.
Let me know if there are any specific keywords you think would have better search results.
As you mentioned, it is very scary to read the IRS and Canadian media at face value. There are threats right and left. Some of them claiming even a 50-100% loss bracket.
Even losing 5% of my net worth to a country I don't really visit, would be hard to swallow.
Let me know if there are any specific keywords you think would have better search results.
As you mentioned, it is very scary to read the IRS and Canadian media at face value. There are threats right and left. Some of them claiming even a 50-100% loss bracket.
Even losing 5% of my net worth to a country I don't really visit, would be hard to swallow.
mmmm bacon...
"there is a huge deduction (Form 2555) of roughly US$100,000 for each wage-earner"
I vaguely understood that might be applicable. I will read more into it.
If we were to use the USD value to CAD right now, then no I never made more than $100k USD.
But, some years I made up to $120-125k CAD.
If I lose that 20k x 3 = 60k, I'm in quite a bit of trouble, as in Canada we get taxed so heavily on that we're left with not much of it. So we throw everything into RRSPs to break it down. This is a great salary for 1 person, but not for a family combined (I'm the sole worker).
I hope I can use the US $100,000 writeoff per year. If its total over last 3 years, I hope they don't hit my cash accounts, TFSA, RRSPs.
Also, I unfortunately just bought USD and Mutual Funds in my TFSA and RRSP. I feel like I should sell them and shut them down right now, but according to your link that would look suspicious and put me high risk.
Then again, maybe making over $100k CAD in a year will automatically put me as high risk and I'll get hit hard anyway.
I vaguely understood that might be applicable. I will read more into it.
If we were to use the USD value to CAD right now, then no I never made more than $100k USD.
But, some years I made up to $120-125k CAD.
If I lose that 20k x 3 = 60k, I'm in quite a bit of trouble, as in Canada we get taxed so heavily on that we're left with not much of it. So we throw everything into RRSPs to break it down. This is a great salary for 1 person, but not for a family combined (I'm the sole worker).
I hope I can use the US $100,000 writeoff per year. If its total over last 3 years, I hope they don't hit my cash accounts, TFSA, RRSPs.
Also, I unfortunately just bought USD and Mutual Funds in my TFSA and RRSP. I feel like I should sell them and shut them down right now, but according to your link that would look suspicious and put me high risk.
Then again, maybe making over $100k CAD in a year will automatically put me as high risk and I'll get hit hard anyway.
mmmm bacon...
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CdnAmerican
- Posts: 245
- Joined: Tue Aug 30, 2011 12:15 am
Glad to hear you found some good stuff when peeking around this forum. A couple of quick notes:
- The 2555 only applies to earned income - that is, basically, your salary. You can't use it for other investment income. RRSP's aren't included as investment income, but any other vehicle probably is.
- That said, you can also use the standard deduction and exemptions to knock out another $15K ish - or maybe more depending on how many exemptions (kids) you have. That helps too.
- Any passive (investment) income that you've paid tax on in Canada can be counted against your US tax via Form 1116. That doesn't help with a TFSA, of course.
- Coming into compliance may help your sleep, but it's a real pain. Judging by what you are describing, I think you'd need to file for the past 3 years forms 1040 (everyone does that), 8891 (for each RRSP for each year), 3520/3520A (for each TFSA for each year), 8621 (for each mutual fund account, for each year) and FIN-CEN (for each year, for all accounts). That's a guess and I'm not at all a tax professional in any way, just a dual citizen who is in kind of a similar spot. You'd want professional advice if you really want to dive into this, of course.
I'm not sure of the keywords that would help here; maybe words like 'coming into compliance' or 'USC' (that's US Citizen)?
- The 2555 only applies to earned income - that is, basically, your salary. You can't use it for other investment income. RRSP's aren't included as investment income, but any other vehicle probably is.
- That said, you can also use the standard deduction and exemptions to knock out another $15K ish - or maybe more depending on how many exemptions (kids) you have. That helps too.
- Any passive (investment) income that you've paid tax on in Canada can be counted against your US tax via Form 1116. That doesn't help with a TFSA, of course.
- Coming into compliance may help your sleep, but it's a real pain. Judging by what you are describing, I think you'd need to file for the past 3 years forms 1040 (everyone does that), 8891 (for each RRSP for each year), 3520/3520A (for each TFSA for each year), 8621 (for each mutual fund account, for each year) and FIN-CEN (for each year, for all accounts). That's a guess and I'm not at all a tax professional in any way, just a dual citizen who is in kind of a similar spot. You'd want professional advice if you really want to dive into this, of course.
I'm not sure of the keywords that would help here; maybe words like 'coming into compliance' or 'USC' (that's US Citizen)?
Not a professional opinion.
Hardly any US citizen living in Canada has to actually pay income tax in US, that is not the worry here. Anyone can figure out the 1040 to not pay tax, using 1116 and 2555.
However its is the foreign reporting of your foreign accounts that is the MUCH BIGGER problem, leading to penalties .
However its is the foreign reporting of your foreign accounts that is the MUCH BIGGER problem, leading to penalties .
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
The vibe I get from the media or even looking at the penalty percentages out there, I get the vibe that they can be like :
"Oh that's a nice TFSA, let me take it"
However, the TFSA was funded by the salary I had, and did not grow much on its own at all. I barely made any "tax-free" or "sheltered" profit at all. It consists of 90%+ original funds.
Same with my RRSP. I was poor at investing and went "Safe" during the market crash with just regular 1-2% interest.
"Oh that's a nice TFSA, let me take it"
However, the TFSA was funded by the salary I had, and did not grow much on its own at all. I barely made any "tax-free" or "sheltered" profit at all. It consists of 90%+ original funds.
Same with my RRSP. I was poor at investing and went "Safe" during the market crash with just regular 1-2% interest.
mmmm bacon...
do you mean this:
http://travel.state.gov/content/travel/ ... icies.html
http://travel.state.gov/content/travel/ ... icies.html
http://hamilton.usconsulate.gov/loss_of ... nship.html
"A person who is a national of the United States whether by birth or naturalization, shall lose his nationality by voluntarily performing any of the following acts with the intention of relinquishing United States nationality—
(2) taking an oath or making an affirmation or other formal declaration of allegiance to a foreign state or a political subdivision thereof, after having attained the age of eighteen years; or"
I will have to see if my papers say 18 years old. I had heard through TV interviews that this is not applicable. But, that is TV, and this is law. :)
I will look into this.
But, still curious how much I will get destroyed for trying to maintain my citizenship, if I currently have a TFSA / Mutual Funds for years.
http://travel.state.gov/content/travel/ ... icies.html
http://travel.state.gov/content/travel/ ... icies.html
http://hamilton.usconsulate.gov/loss_of ... nship.html
"A person who is a national of the United States whether by birth or naturalization, shall lose his nationality by voluntarily performing any of the following acts with the intention of relinquishing United States nationality—
(2) taking an oath or making an affirmation or other formal declaration of allegiance to a foreign state or a political subdivision thereof, after having attained the age of eighteen years; or"
I will have to see if my papers say 18 years old. I had heard through TV interviews that this is not applicable. But, that is TV, and this is law. :)
I will look into this.
But, still curious how much I will get destroyed for trying to maintain my citizenship, if I currently have a TFSA / Mutual Funds for years.
mmmm bacon...
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CdnAmerican
- Posts: 245
- Joined: Tue Aug 30, 2011 12:15 am
I don't have any real info at all about the citizenship piece, so I'll leave that to others.
I am curious about the penalties; my thought is that with the voluntary disclosure under the new IRS' guidelines, mrbacon would be OK, if he discloses before they ask him. Nelsona, would you agree, or am I missing something? The risks I see mainly involve the 3520/3520A and FINCEN penalties.
I am curious about the penalties; my thought is that with the voluntary disclosure under the new IRS' guidelines, mrbacon would be OK, if he discloses before they ask him. Nelsona, would you agree, or am I missing something? The risks I see mainly involve the 3520/3520A and FINCEN penalties.
Not a professional opinion.
The full extent of FINCEN penalties would wipe me out as they are $5000 per day you failed to comply:
http://www.fincen.gov/financial_institu ... ies_A.html
http://www.fincen.gov/financial_institu ... ies_A.html
mmmm bacon...
yes, it seems you have found the references to relinquishment, which may help your situation. Being up to date and compliant with the CRA should really help too.
Since there are a lot of rules, tax code, etc. around all of this, you might consider getting professional help to assess your situation, status and risk.
Since there are a lot of rules, tax code, etc. around all of this, you might consider getting professional help to assess your situation, status and risk.
no-pro
mrbacon said:
The full extent of FINCEN penalties would wipe me out as they are $5000 per day you failed to comply:
http://www.fincen.gov/financial_institu ... ies_A.html
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mrbacon: I believe you have stumbled upon the penalties applied to a money services business who fails to register with FinCEN; these are not the penalties for an individual's failure to file FBAR reports. For those penalties, read the FBAR instructions.
The full extent of FINCEN penalties would wipe me out as they are $5000 per day you failed to comply:
http://www.fincen.gov/financial_institu ... ies_A.html
----------------------------------------
mrbacon: I believe you have stumbled upon the penalties applied to a money services business who fails to register with FinCEN; these are not the penalties for an individual's failure to file FBAR reports. For those penalties, read the FBAR instructions.