Double trouble.. US citizens in Canada

[oldgringo]

my wife has now applied for her SSN and for the years that the tax preparer has done my wife does not owe any back taxes.... sorry but i have a couple more questions.

1. for FBAR filings the tax preparer want me to do 6 years..i have read here that only 1 year is required...so should i only send 1 year in?

2. i have read here two methods of reporting TSFA income...a. report it as you would regular income or dividends ...or b. report it using form 3520...which is right?

3. when reporting a RRSP on form 8891 ...my thought is that you check box 6c.. when my wife starts to make withdrawals in the future she will be taxed in Canada so the likelihood of her paying a lot of tax in the U.S. are slim....is this right?

4. my wife has power of attorney and is the executor of her father's estate..her father is in a nursing home with dementia... her father was a U.S. citizen and has never filed tax in the U.S. since moving to Canada in 1963.. he became a Canadian approximately in 1981... a. should we back file 3 years taxes and 1 year FBAR for him? or b. do you think he lost his U.S. citizenship in 1981?

again i want to say thank you! for all the help i have recieved here..it has been a light in a very dark tunnel...

[rlb]

I hope nelsona will answer most of these questions. But I thought I would point out that if your mother has power of attorney for her father, she needs to include all of his accounts on her FBAR filing, even while he is alive. (We made that mistake with my wife and her mother, and refiled to correct it.)

[oldgringo]

thank you..it's my wife and her father...yes we knew that she had to include her fathers accounts on her FBAR....

[nelsona]

1. FBAR only staes 1 year because there is NO PROVISION for back-filling. Its late. period. However, treasury is usually lenient if you back file to match your missed returns.
2.
You should report it a s regular income, and use 3520 or 3520-A to report its existence.
3. Correct. That is the point of the election.

[irs_trouble]

Hi Nelsona

I'm trying to understand the basis for the following:

"Yeah, ask her why she picked five years. The rule is 3 unless you owe tax, then it becomes six."

After reading the OVDI FAQ, calling the OVDI hotline and talking to a tax lawyer I was under the impression that US citizens living in Canada did not have any special exemptions from OVDI and were only eligible for the reduced 5% penalty.

Can you point me to the rule that states that Canadian's can submit a quiet disclosure if they don't owe any tax?

Thanks

[irs_trouble]

woops...wrong thread...let me fix

[irs_trouble]

Actually..probably ok to leave here...Nelsona...any thoughts.

Thanks again

[nelsona]

It is common PRACTICE, for those who have never filed a US return because they were unaware (or for expats who have never filed since leaving), that they simply file 3 or 6 years.

OVDI is for tax evaders, and under-reporters.

I have never heard of any US citizen living in Canada being penalized if they simply back-file without prompting from IRS.

[irs_trouble]

Nelsona

Thanks for the quick reply. I understand that US Citizens in Canada have traditionally filed late tax returns without incurring penalties, however doesn't the new OVDI program change the game a little?

The tax lawyer told me that there is a high likelihood that the IRS will pull some of the quiet disclosures from Canada and assess penalties.

There doesn't seem to be any mention of quiet filing for Canadians in the FAQ.

[dual_neverfile_notaxowing]

Of course there isn't. However with Canada presumably the IRS does have a source for **reliable** income information - CRA (Revenue Canada) - because Canada tracks income, e.g. T-slips very closely, at least for the typical Canadian case. That may not be true for some other countries. So having a long history of CRA assessments might be something to factor into the mix with your decision.

[irs_trouble]

Hi

I understand the theory behind treating Canadians differently, especially given the fact that most won't owe US tax because of high Canadian taxes, however I worry that the IRS has not given ANY guidance to this in their OVDI materials.

It seems like they would be within their rights to apply penalties to Canadian non-filers.

[dual_neverfile_notaxowing]

There could be hundreds of thousands of Canadamericans (Globe and Mail said up to 1 million) in this situation, so given that very few of them have heard of any of this stuff at this point, how can OVDI 2011, which closes in 5 weeks, be the last program for dealing with them?

What is actually driving this is FACTA (Canadian banks have to send lists of citizens to the US) in 2013+. What is going to happen to say 100,000 blissfully ignorant dual citizens at that point? They either have to lie about where they were born, or face what? being bankrupted?

It isn't just the current process where Canadian non-filers haven't been given guidance -- it's the entire multi-year process that hasn't been spelled out - partly because Canada and the Canadian banks are still in the process of objecting to the whole thing on the grounds of Canada not being a tax haven (Min of Finance in Globe and Mail mid-June) asking for a Canadian exemption to the entire thing - so far the answer was no - possibly with an RRSP exemption - see article in Globe and Mail from last week. Thoughts?

[dual_neverfile_notaxowing]

Is there another wrinkle here pointing to the 5% expat exemption NOT applying to most Canada-US duals who are never-filed-no-tax-owing (NFNTO):?

FAQ 52(3) states:
" .....This exception only applies if the income tax returns filed with the foreign tax authority included the offshore-related taxable income that was not reported on the U.S. tax return"

The offshore related taxable income that they are talking about is the income in the accounts, e.g. interest.

A Canadian who has registered accounts would not have included the "interest" related to these accounts on Canadian tax returns because that was what he was supposed to do in Canada - including not just RRSP but also registered pension plans including Direct Contribution Pension Plans which are controlled by the taxpayer.

So the Canada-US dual citizen NFNTO situation really does seem to be without guidance. As such, I can see why nelsona keeps saying to trust the existing process.

[dual_neverfile_notaxowing]

TFSA and RESP same thing...

[alphie]

[quote="oldgringo"] 1. I became a Canadian in 1971 and at the time i thought i lost my US citizenship because there was no such thing as a dual citizen at the time... does anybody know if that is true and if it is true am i exempt from having to file a tax return?[/quote]

Have you established this as true?

Canada may not have allowed dual citizenship, but did that automatically renounce US citizenship?

I'm in that situation and haven't found anything verifying the loss of US citizenship status.