[Omater]

I am lost. My husband listed me as a shareholder in his business before I knew about the double tax issues in the USA. I was just getting a salary but the accountant switched us over to receive dividends for the first time in 2011. My husband insists that the USA has no business knowing anything about his company and does not want me to share his information with them, but I have to claim the money that was credited to me in Canada. I am truly between a rock and a hard place. What forms am I supposed to file to claim income for this company? Can I do it without laying out all this Canadian company information? What is the minimal thing I can do, yet be tax compliant? I don't suppose I can claim the FEIE anymore because this is no longer earned income. Do I get any income or tax credits besides the standard exemptions now??

Just when I got the previous years figured out, I'm lost again. Any advice would be greatly appreciated.

 

[Bevdeforges]

As with all things tax related, "it depends."

First of all, you only have to file those FATCA forms detailing stuff about the company if your total overseas investments (including your interest in the company) are greater than $200,000.

If you are actually working for the company, you may be able to claim that this is not a "financial investment" and thus not subject to the FATCA reporting nonsense. It does depend, however, on what your share in the company is worth and any other investments you hold.

To be tax compliant, you need to declare the dividends you were paid and offset the taxes with any Canadian tax paid on them.

It is up to you what to do about filing all the other forms for your interest in the company. Read the instructions carefully to see if there is any definitional loophole you can claim. (It would be easier if you were being paid salary rather than dividends.) And as far as I know, you are hardly the only foreigner spouse who simply refuses to disclose information about a family owned company. You have to consider what the likelihood is of the company turning up on the IRS radar. If they don't do business with the US, don't have any facilities in the US and are not subject to IRS scrutiny for anything else, you may want to base your decision on those factors.
Cheers,
Bev

 

[Omater]

Thanks as always, Bev...

I guess I have to report the company as "signing" authority as far as FATCA is concerned, but I am not going to jump through the hoops to list it as an asset. My personal assets are under the $200k range but they go way over when I list our joint accounts.

I am trying to be honest about having received this dividend, but I am at a loss as to where to show the income (Schedule B?) and where to declare the taxes paid in Canada (1116?). I am worried that I will end up owing US tax because they do not have the same tax credits available to me that they do in Canada and it is an entirely different way of filing.

I have always done our taxes with no problems but it is overwhelming now. Reading the instructions is sometimes like reading a foreign language because of all the double meanings and double talk. I guess I am asking for confirmation that I am reporting on the correct form as I try to do the right thing.

I will talk to the accountant about us going back on salary, but that will cause us to pay a lot more taxes in Canada. This is so frustrating!!

 

[Bevdeforges]

Signing authority is the FBAR form, not the FATCA forms. And if you read the instructions for the FBAR forms, in the case where you have signature authority over your employer's funds, you only need to give the name of the company, not all the other details about the account (i.e. like the account number and balances).

US tax laws are always subject to interpretation. There simply isn't one right answer for any given situation. Establish a position you can live with, and then IF the IRS ever questions or audits your submissions, just explain what you did and how you understood the instructions.
Cheers,
Bev