US Taxes - FBAR requirements

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US Taxes - FBAR requirements


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Old 29th June 2011, 10:09 PM
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Default US Taxes - FBAR requirements

I moved to Canada when I was 20 years old (1989) on student visa and did not know I had to file US Tax Returns or an FBAR report.

I am married to a Canadian citizen and have three kids (all born in Canada).

For taxes: do I just file for the last two or three years to get up to date? How do you claim child care costs if the kids are not US citizen or have SSN?

The FBAR report is confusing. Some accounts you have to report, some are exempt and the IRS website doesn't specify what is exempt.

I have RRSP, a company pension play, RESP (family plan jointly with spouse), TFSA and an investment account. The only accounts that are over the limit are the first three. The IRS website states some jointly held accounts and registered retirement accounts are exempt.

Any help or direction to resources would be greatly appreciated.

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Old 30th June 2011, 12:36 AM
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OK, to get straight on your US income taxes, you normally only have to file three years back - which for you should be 2010, 2009 and 2008. You should be claiming the overseas earned income exclusion (i.e. file form 2555) to formally exclude your earned income (i.e. salary) from taxes.

You cannot claim anything for your children unless they have social security numbers, but they are indeed US citizens, given that you are a US citizen and lived in the US for more than enough years after age 14 to pass on your US citizenship. You should go register them with the US consulate in Canada, and they can help you apply for their social security numbers.

OTOH, it's doubtful you need or would want to take childcare credit for them, assuming that you exclude your earned income. You should download IRS publication 54 from the IRS website, which will explain the tricks of filing from overseas. You need to declare all your worldwide income to the IRS. If you've paid taxes on it to the Canadian government and it's not already excluded on the form 2555, then take the foreign tax credit (form 1116).

On the FBAR forms, you must declare all foreign accounts if your foreign accounts in total exceeded $10,000 at any time during the year you're filing for. If any one of your accounts exceeds $10,000 then you are supposed to declare all of them. They try to scare you into believing that they'll fine you outrageous sums if you haven't filed your FBAR forms but I'd start out with just filing the current year (i.e. 2010) form and see if they come back to you with anything. You're supposed to file it by June 30th, but unless you have huge accounts that suggest that you're escaping US taxation in some manner, I seriously doubt they are going to harass you. The 2010 forms require far more detail than the prior year forms did, so just report the accounts you have (all of them) and assume in good faith that you've done your duty.

I don't know the Canadian retirement accounts well enough to tell you what's exempt and what's not - but if you report something that isn't required, they'll pretty much just ignore it and afterwards they can't say you were withholding something.
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Old 30th June 2011, 11:44 AM
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Thanks for the update. The FBAR website and a recent article in the Toronto Globe and Mail made it sound like the Treasury will come and take up to half of your account, etc if you don't file the the forms.

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Old 16th October 2011, 06:11 PM
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Default some info from FBAR official

I found writing to FBAR officials is very helpful in understanding the process. Their email is [email protected]

So far, I got some info from them that you may find useful:

FBARs have a six-year statute of limitations from the June 30th due date of the form. Currently, years 2005-2010 have open statutes.

an insurance policy with a cash value (such as a whole life insurance policy) are reportable.

RRSPs, TFSAs are reportable.

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Old 16th October 2011, 07:06 PM
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Disclaimer: I have not had any tax advice from a professional. I am solely working from my research talking to others and reading this forum and others. This post is helping me to sort out what forms I have completed... Strongly recommend taking the hours to read through all of the threads in this forum as that brought many items to my attention. I did all of these forms/schedules myself but it has taken a lot of time and although I’m good with numbers, Excel spreadsheets and Canadian tax returns the IRS returns were extremely confusing… If I had spare cash I would have gladly paid somebody to complete them. I also had to do mine twice due to mistakes with exchange rate and treatment of RESP. Will be putting each year in it’s own envelope (no staples) and then putting all of the envelopes into one package to FedEx to the IRS and the FBARs to wherever they go.

I do not like doing this but need to be able to travel to the USA stress-free. In November, I will be renouncing my US citizenship.

IRS wants the average exchange rate used - Yearly Average Currency Exchange Rates whereas the FBAR want the highest balance in the year (used my quarterly statements) but the exchange rate at the end of the year but the link provided in their instructions is not working for me.

Most of these forms can be saved as PDF files. I have also backed them up since there is a lot of work on them! I started by having a paper party with the family to sort all of the financial accounts into their own pile and into chronological order. My spouse also had a spreadsheet with the quarterly data.

Link to IRS site with
Prior Year Forms, Instructions and Publications

Personally, I had earned income, RRSP withdrawal, EI income, self-employment income, tuition for myself, interest income and phantom capital gains. In the 5 years, I never owed any income tax to the IRS – only Self-Employment Tax because I never paid CPP on my piddly self-employment earnings (it was a hobby that had income).

Forms and Schedules I used:

1040 – Individual Income Tax Return
For Employment Insurance – I read that I could deduct my payments for the year from the income received.

Schedule B - for nominal investment income but at the bottom you tick it to say you have off-shore Financial accounts. (yes, Canada is "off-shore")

8891 - declares RRSPs to be tax deferred; do each year; one for each RRSP.

Schedule D - Capital gains - used for phantom RESP gains since the US gov does not recognize the Canadian tax-deferral of RESPs. I included the Cdn contribution to the RESP as part of the gain.

1116 - Foreign Tax Credit (when I had income not included in the Foreign Income exclusion the 1116 was easier for all income)

schedule C-EZ for Self-employment earnings

Schedule SE - Self-Employment tax

8863 - educational credits (tuition)

2555 or 2555-EZ - foreign earned income exclusion (the EZ is shorter if you meet the criteria)

I do not have a TFSA and no idea what needs to be done for those accounts.

separate from IRS:

FBAR : TD F 90-22.1
- once your combined investments exceed $10,000 in any year, you must report ALL financial accounts for that year which for me included RRSP, RESP, bank account, signing authority for volunteer roles (e.g., PTA), personal line of credit (it had a credit balance). For FBAR am proceeding on the basis that ANY account with money in it is reportable.
- most years I had the same accounts so I used the same form each year and just changed the year and the balances and saved a new file.
- I picked the highest quarterly balance for each account even if different quarters then used end of year exchange rate.

If anyone who has already done this sees that I missed something please share!


Last edited by Peg; 16th October 2011 at 07:12 PM.
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Old 16th October 2011, 07:23 PM
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Quote:
Originally Posted by TO_andrew View Post
I am married to a Canadian citizen and have three kids (all born in Canada).

... How do you claim child care costs if the kids are not US citizen or have SSN?
Most years, after using the foreign income exclusion or the foreign tax credit (depended on the year) I only needed part of the standard deductions (line 40 and 42 on the 104) to offset the phantom RESP gain. Otherwise, my Canadian taxes were higher than the US taxes. I never needed the Child care or housing credit. (did have the education credit one year but turned out didn't need it after all)


Your children are likely considered US citizens: Acquisition of U.S. Citizenship by a Child Born Abroad

from that link:
Birth Abroad to One Citizen and One Alien Parent in Wedlock A child born abroad to one U.S. citizen parent and one alien parent acquires U.S. citizenship at birth under Section 301(g) of the INA provided the U.S. citizen parent was physically present in the United States or one of its outlying possessions for the time period required by the law applicable at the time of the child's birth. For birth on or after November 14, 1986, a period of five years physical presence, two after the age of fourteen, is required. For birth between December 24, 1952 and November 13, 1986, a period of ten years, five after the age of fourteen, is required for physical presence in the United States or one of its outlying possessions to transmit U.S. citizenship to the child.) The U.S. citizen parent must be genetically related to the child to transmit U.S. citizenship.

....

If that is the case, many points to consider when deciding whether you/they want to keep US citizenship or not.


Last edited by Peg; 16th October 2011 at 07:27 PM.
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Old 16th October 2011, 07:33 PM
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Quote:
Originally Posted by TO_andrew View Post
Thanks for the update. The FBAR website and a recent article in the Toronto Globe and Mail made it sound like the Treasury will come and take up to half of your account, etc if you don't file the the forms.
My stress level went down considerably when I stopped reading those articles and concentrated on the knowledge in this forum.

In the unlikely chance that the US gov penalizes me for not filing forms I did not know existed, the Canada Revenue Agency will not collect for them (CRA would help collect taxes owing to the IRS). I can choose not to go to the USA because the only other way they can collect is by taking me to court and I don't have enough money to make it worth their while. I am confident (well, today anyway...) that they won't penalize me. And if they do I will complain loudly and everywhere!
Vangrrl and nobledreamer like this.

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Old 16th October 2011, 11:51 PM
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Quote:
Originally Posted by Peg View Post
FBAR : TD F 90-22.1
- once your combined investments exceed $10,000 in any year, you must report ALL financial accounts for that year which for me included RRSP, RESP, bank account, signing authority for volunteer roles (e.g., PTA), personal line of credit (it had a credit balance). For FBAR am proceeding on the basis that ANY account with money in it is reportable.
- most years I had the same accounts so I used the same form each year and just changed the year and the balances and saved a new file.
- I picked the highest quarterly balance for each account even if different quarters then used end of year exchange rate.

If anyone who has already done this sees that I missed something please share!
I just wanted to comment on the bolded. The most recent fbar form (update Mar 2011) clearly states that if you are a US person living outside the US and you are an employee of a corporation located outside the US for which you have signatory authority but no financial interest, then you only report the name/address of your employer.

This got me out of having to report any details of my husband's business (for which I am the bookkeeper and he is Canadian). I would think this would apply also you are the secretary for your condo strata or a volunteer organization that you would NOT be reporting their accounts or balances to the IRS.

I also didn't report any line of credit accounts, only those accounts with positive balances. I didn't see anything specifically about this in the instructions.

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Old 17th October 2011, 12:23 AM
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Originally Posted by Vangrrl View Post
I would think this would apply also you are the secretary for your condo strata or a volunteer organization that you would NOT be reporting their accounts or balances to the IRS.

I also didn't report any line of credit accounts, only those accounts with positive balances. I didn't see anything specifically about this in the instructions.
Thanks for that info - I'll try emailing [email protected] which ebuddy provided.

This appears to answer the line of credit with a positive balance from FAQs Regarding Report of Foreign Bank and Financial Accounts (FBAR) - Financial Accounts
Q. Is an FBAR required if the account generates neither interest nor dividend income?
A. Yes, an FBAR must be filed whether or not the foreign account generates any income.

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Old 17th October 2011, 12:27 AM
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Quote:
Originally Posted by Peg View Post
Thanks for that info - I'll try emailing [email protected] which ebuddy provided.

This appears to answer the line of credit with a positive balance from FAQs Regarding Report of Foreign Bank and Financial Accounts (FBAR) - Financial Accounts
Q. Is an FBAR required if the account generates neither interest nor dividend income?
A. Yes, an FBAR must be filed whether or not the foreign account generates any income.
I WISH it were only accounts that generate interest! I don't think I would have include any of my accounts right now LOL.

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