Hi,
I am a naturalized US citizen since 1994 (born in Ireland) lived in the US from 1989-1994 and living in Canada full time since. I filed all taxes while resident in the US and until 2003 while living in Canada(1040/2555). I have a Canadian citizenship since 2001. I never filed a FBAR because neither myself or my accountant knew about it. I stopped filing because I never owed any taxes and life got kind of busy.
I am fully tax compliant in Canada but am an employee of my own Canadian corporation and have a Canadian family trust(empty for now) since 2009.
I also have two rental properties bought in 2003 and 2005 held with my Canadian citizen wife.
I have earned up to $200000CDN in previous years as salary and have an RRSP with over $200000CDN. Does this put me in the "fat cat" sin bin?
I read about the IRS new aggressive stance in the paper 2 days ago and wonder if it's ok to file 3 years returns, 3 FBARS and an 8861 by quiet disclosure. I would like to keep my US citizenship if possible and not too expensive. Thanks in advance for any advice you may have.
quiet disclosure ok?
Moderator: Mark T Serbinski CA CPA
This is a part of Tax Note Today (TNT 186-4)
"How to deal with RRSPs is on the IRS's radar, but it has not yet issued a consistent policy. As recently as a month ago, IRS staffers on the OVDI hotline said that account balances in RRSPs would be excluded from the base amount on which the miscellaneous offshore penalty is assessed if the taxpayer filed a timely Form 8891 or requested section 9100 relief for a late Form 8891. But the week of the original OVDI deadline (August 31), the message from hotline staffers apparently changed. They told callers that Forms 8891 filed with a request for section 9100 relief would not be enough to exclude the high RRSP account balance from the base for the offshore penalty but that it would be effective in deferring recognition of the investments in the account."
In the past, either QD for RRSP or Private letter rulings (PLRs) for RRSP all were fine..
However, in OVDI, the tone has changed recently as shown on the this TNT...
If IRS indeed imposes FBAR penalty on RRSP, how are they going to let QD a free pass ? Unless it is sort of techincal error -- the QD goes through without their notice.
"How to deal with RRSPs is on the IRS's radar, but it has not yet issued a consistent policy. As recently as a month ago, IRS staffers on the OVDI hotline said that account balances in RRSPs would be excluded from the base amount on which the miscellaneous offshore penalty is assessed if the taxpayer filed a timely Form 8891 or requested section 9100 relief for a late Form 8891. But the week of the original OVDI deadline (August 31), the message from hotline staffers apparently changed. They told callers that Forms 8891 filed with a request for section 9100 relief would not be enough to exclude the high RRSP account balance from the base for the offshore penalty but that it would be effective in deferring recognition of the investments in the account."
In the past, either QD for RRSP or Private letter rulings (PLRs) for RRSP all were fine..
However, in OVDI, the tone has changed recently as shown on the this TNT...
If IRS indeed imposes FBAR penalty on RRSP, how are they going to let QD a free pass ? Unless it is sort of techincal error -- the QD goes through without their notice.
you have three optoins.
A. do nothing -- wait to see
B. VD (that means you have to contact IRS to make such a noise)
C. QD
It really depends how much you owe IRS in tax (after all the deduction). if no tax owed. You may try to choose A and C , even if IRS finds you missing some files, you are not likely facing criminal prosecution.
Otherwise, I would take B if I were you.
Even if you do not want to keep your US citizen, you may have to file returns and get clean with IRS. Since you want to keep your US citizenship, it is better to be clean with IRS.
A. do nothing -- wait to see
B. VD (that means you have to contact IRS to make such a noise)
C. QD
It really depends how much you owe IRS in tax (after all the deduction). if no tax owed. You may try to choose A and C , even if IRS finds you missing some files, you are not likely facing criminal prosecution.
Otherwise, I would take B if I were you.
Even if you do not want to keep your US citizen, you may have to file returns and get clean with IRS. Since you want to keep your US citizenship, it is better to be clean with IRS.
QD is better than do noting if you have no tax due...
Unless IRS takes action on you - I don't how would they try to do as you are not in US ? Would they ask CRA to enforce FBAR penalty on you. I don't see CRA will do that. So, you keep do it and just wait for 6 years the FBAR statute limitaion expires.. Basically you become compliance.
Do nothing may be not possible as FATCA will expose you anyway.
Unless IRS takes action on you - I don't how would they try to do as you are not in US ? Would they ask CRA to enforce FBAR penalty on you. I don't see CRA will do that. So, you keep do it and just wait for 6 years the FBAR statute limitaion expires.. Basically you become compliance.
Do nothing may be not possible as FATCA will expose you anyway.
Given Canada has higher tax than US, you likely owe nothing to IRS. Now let's face it what the best way to yourself into compliance.
I am not a pro, so, please just consider my suggestion what I would have done in your situation.
If you go to VD, that is to talk to IRS first, and let them to guide you through the process. So it is likely you may face some penalty.
If you just do it "quiet", and let IRS to decide if they want you to go through "noise", or they might just let you go. Say you have 50/50 chance, the worst is still a VD.
The key is that you owe not tax to IRS, and it is morally wrong for IRS to go after expat US citizens for just missing files -- and you are trying to make it up through QD. What is wrong for make it right ?
Just my 2 cents.
Of course, if the rumor is true that IRS does want to impose penalty on RRSP inside OVDI, that shows that they are simply for money (in the name of enforce law to make taxpayers into compliance -- RRSP has no tax issue under tax deferral election. I just do not know what kind action they can take outside OVDI -- for missing paper like FBAR.
I am not a pro, so, please just consider my suggestion what I would have done in your situation.
If you go to VD, that is to talk to IRS first, and let them to guide you through the process. So it is likely you may face some penalty.
If you just do it "quiet", and let IRS to decide if they want you to go through "noise", or they might just let you go. Say you have 50/50 chance, the worst is still a VD.
The key is that you owe not tax to IRS, and it is morally wrong for IRS to go after expat US citizens for just missing files -- and you are trying to make it up through QD. What is wrong for make it right ?
Just my 2 cents.
Of course, if the rumor is true that IRS does want to impose penalty on RRSP inside OVDI, that shows that they are simply for money (in the name of enforce law to make taxpayers into compliance -- RRSP has no tax issue under tax deferral election. I just do not know what kind action they can take outside OVDI -- for missing paper like FBAR.
Fire your accountant. he is a moron for not knowing about FBAR. He should never have doen your uS taxes. Even the most stupid online tax package asks about FBAR.
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
I agree but it wasn't written on his forehead when I first met him. He messed up the filing and charged me $400. IRS sent it back, I fixed it myself and sent it off. Lost heart after that incident.
Can turbotax deal with a Canadian corporation of which I am the sole sharholder and which is also my employer? No dividends distributed. Also have family trust which is empty for the moment.
Should I start with an accountant that deals with expat returns exclusively and try turbotax in the future? Thanks for any advice you might have.
Can turbotax deal with a Canadian corporation of which I am the sole sharholder and which is also my employer? No dividends distributed. Also have family trust which is empty for the moment.
Should I start with an accountant that deals with expat returns exclusively and try turbotax in the future? Thanks for any advice you might have.
OK, makes sense. I'm still responsible for the subsequent years. Nothing stopped me from getting another accountant.
Questions still unanswered:
1.Can turbotax deal with my incorporated Canadian company filing and my family trust filing?
2. Do I file 3 years or 6 years? I'm unlikely to owe them anything.
Questions still unanswered:
1.Can turbotax deal with my incorporated Canadian company filing and my family trust filing?
2. Do I file 3 years or 6 years? I'm unlikely to owe them anything.
Spoke to a tax lawyer yesterday. He says expect an announcement "sooner rather than later" clarifying the IRS filing situation of US citizens in Canada that are CRA compliant. He commented that the large Canadian banks do not have the resources to be FATCA compliant in the near future. He suggested filing 5-6 years by quiet disclosure but waiting a few weeks for an announcement.
You better not only file quietly as you say for the FBAR but don't forget to file form 5471 in respect to your >10% ownership of teh CND corp that you as a USC own. You said you want to file your T2 also but you have to understand that you need to disclose corp info too to the not limited to but including form 5471.
JG