Here is my situation. I’d appreciate some help.
I am a dual citizen, born in the US in 1984. I became a citizen of Canada in 1991, I currently live and work in Montreal, Quebec. Other than being born in the US, I have no affiliation to the United States; I don’t even have a social security number. I recently had to renew my US passport because I needed to travel to the US.
I have a broker’s account (Interactive Brokers) where I have been actively trading stocks for the past three years. I hold both Canadian and US securities. All in all, I have about 20k invested in US/Canadian stocks and ETFs (about a 50/50 split). I don’t really keep track of my PnL, I can say that in total my account has grown by about 2000$ in the past three years which is very small (about 10% return over three years…).
I pay income tax to Canada every year (I’ve been employed two years) and have been declaring taxes for the past 6 years (even when I was a student). I now want to start at least declaring my revenue to the US… I just wonder if I owe the US government anything and generally speaking, how do I calculate what I could potentially owe in the future. I have never declared income tax related to my stock trading activity because of simple negligence, I didn’t know what to do/declare and simply forgot about it. I was never worried because like I mentioned before, the amounts in play are almost negligiblel…
On the other hand, I believe I have opened my trading account as a “Foreign entity†(as a Canadian resident and citizen) which is wrong because I’ve recently noticed that it does not apply to US citizens even if they reside in another country. I don’t know if this constitutes fraud or not… I have nothing to hide and know that I potentially owe peanuts in taxes, but want to be on the right side of the law. Do you think I could contact my broker and declare I am a US Citizen (change the “status†of my account)? Would that have some negative repercussions?
Any advice would be welcome. What should I do to correct my situation? Do I owe the US government anything?
Thank you in advance.
Dual Citizenship and Stock Trading
Moderator: Mark T Serbinski CA CPA
Cdn residents are not allowed to have non-retirement brokerage accounts in the US, as this violates the regs of their provincial securities board. Technically, it is the US broker that is violating the laws, but you would be complicit. I'm not sure hwtaher the broker is in US, but it sould like it is.
The simple thing to do is to transfer all the assrts to a Cdn brokerage, selling off those that cannot be traded in canada (which would mostly be mutual funds).
From a tax perspective, you likely owe no US tax. However you can only determine this by actaully filing and claiming all the deductions. credits and exemptions you are entitled to. This has nothing to do with the US brokerage: all your world income is reportable in US regardless.
The simple thing to do is to transfer all the assrts to a Cdn brokerage, selling off those that cannot be traded in canada (which would mostly be mutual funds).
From a tax perspective, you likely owe no US tax. However you can only determine this by actaully filing and claiming all the deductions. credits and exemptions you are entitled to. This has nothing to do with the US brokerage: all your world income is reportable in US regardless.
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
Thank you for your reply.
I think I did not explain myself clearly enough.
I am with a Canadian Subsidiary of a very large US broker... So I don't think the broker or myself are violating any laws (when it comes to that).
I'm worried about the fact that the broker asks its customers to identify themselves as US or non US persons (probably for tax purposes). I now have the "obligation to re-certify your status as a non-US person through the W-8 as required by the U.S Treasury and Internal Revenue Service every three years.".
When I opened my account three years ago, I identified myself as a Canadian Citizen when in fact I am a US citizen... US citizens fill out a different form and need to provide a US Social Security Number which I do not have....
What do you think I should do? I appreciate your help.
I think I did not explain myself clearly enough.
I am with a Canadian Subsidiary of a very large US broker... So I don't think the broker or myself are violating any laws (when it comes to that).
I'm worried about the fact that the broker asks its customers to identify themselves as US or non US persons (probably for tax purposes). I now have the "obligation to re-certify your status as a non-US person through the W-8 as required by the U.S Treasury and Internal Revenue Service every three years.".
When I opened my account three years ago, I identified myself as a Canadian Citizen when in fact I am a US citizen... US citizens fill out a different form and need to provide a US Social Security Number which I do not have....
What do you think I should do? I appreciate your help.
From a Cdn regulatory point of view, you are fine, since you are dealing with a QC-licensed broker. Thank you for clarifying.
Yes, you are supposed to identify yourself to the broker as a US person. You complete a W-9 for them to keep on file.
Yes, you are supposed to identify yourself to the broker as a US person. You complete a W-9 for them to keep on file.
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
What prompted me to ask these questions is that my broker asked me to fill a W-8 form to re-certify that I am a non-US person, in that case a Canadian... So the first time around, when I opened this account, I identified myself as a Canadian by mistake and I wonder if that constitutes some type of "fraud". If I suddenly call my broker and tell them "guess what, I'm American" would that be a problem on the legal side? I'm just worried because I just noticed this unintentional mistake I made three years ago!
I'm now asked to re-sign a W-8 or a trade restriction will be placed on my account because a failure to sign the W-8 implies a withholding tax will be applied to my account.
On another note, how do I calculate how much tax I owe the US government (if any)?
I'm now asked to re-sign a W-8 or a trade restriction will be placed on my account because a failure to sign the W-8 implies a withholding tax will be applied to my account.
On another note, how do I calculate how much tax I owe the US government (if any)?
By supplying a W-9, you will be in compliance. You are worrying overmuch.
You determine how much tax by filing an 1040, reporting world income, and then taking all the available deductions exemptions and credits especially foreign tax credits, and foreign earned income exclusion.
You best get used to this.
You determine how much tax by filing an 1040, reporting world income, and then taking all the available deductions exemptions and credits especially foreign tax credits, and foreign earned income exclusion.
You best get used to this.
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