Accidental US/Canadian Citizen received Cdn inheritance

minxapple · Post by **minxapple** » Thu Oct 20, 2011 2:00 pm

I was unfortunately born in the US but I have lived in Canadian since I was 6 months old. I have never worked there. I have a Canadian passport and file Canadian taxes. I married a Canadian who died and received $25000 life insurance paid to me and another $120000 that went to his estate (had no will) which came to me.

I am scared with this American tax grab. I thought I would just file the tax forms, I make very little money ($20000 to $35000 a year with one child) but will the inheritance I received be taxable? I've searched and searched but can't find answers on the internet. I have a bank account with $100000 in it which I understand the Americans now consider an illegal offshore account. This is awful, I feel trapped and oppressed by a country I want nothing to do with. Had I known about this I would've renounced citizenship when I turned 18.

Any advice would be appreciated.

nelsona · Post by **nelsona** » Thu Oct 20, 2011 2:12 pm

US citizens do not pay tax on inheritance. The DECEASED (if they are US citizen, or hold US proprty) are liable for US estate tax. So, no US estate or income tax is due on this inheritance.

As a citizen however, you do need to file 1040 every year, and, in this case, because you recieved over $100K from a foreign source, you will need to file form 3520 (only to report -- no tax due).

The account is only illegal if you fail to report it, as is your failure to report you income.

minxapple · Post by **minxapple** » Thu Oct 20, 2011 2:19 pm

That is fantastic news. I was really nervous. I would like to just file my tax forms for the last few years and then renounce but I don't want to pay any money to the US.

Thank you for your response, I appreciate that.

nelsona · Post by **nelsona** » Thu Oct 20, 2011 3:06 pm

It is very rare for a US citizen living in canada to owe tax in US, unless one is heavily invested in US stocks or property (in which case even a non-US citezen Cdn would pay US tax).

minxapple · Post by **minxapple** » Thu Oct 20, 2011 4:45 pm

I'm more worried about getting in trouble for my "illegal offshore bank accounts" (my chequing and savings accounts). You're supposed to declare them and there are penalties for not. I have a balance of about $100000 in one and a few thousand in another.

nelsona · Post by **nelsona** » Thu Oct 20, 2011 5:01 pm

FBAR forms are easy to fill out. As long as you do not owe tax, failure to file FBAR will be forgiven -- as long as you file 1040/FBAR before IRS asks you to.

minxapple · Post by **minxapple** » Thu Oct 20, 2011 5:21 pm

Okay, so I guess I will woman up and do it.

Thank you for your help. I know so little about the US tax system.

Merci!