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Discussion Starter · #1 ·
Hi all,
Just wanted some feedback about my situation. I have been living overseas, unemployed and haven't filed taxes in the last 3 years thinking that putting all 0s of foreign income earned is more suspicious then not filling as I don't think I have a legal obligation to. I'm 40 and expect to return to work in the future. My nra spouse and I have 2 joint accounts neither of which are interest yielding. Other then that we have 2 properties which operate at a loss. I understand I am liable for completing fbars for the accounts as the balance is above 10, 000. Do you think I can just efile those this year or should I do the whole irs and fbar back filing thing. As many others I've been sick with this dilemma.
Cheers,
Jason
 

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If your "worldwide income" is below the threshold for married filing separately (which is, I believe, somewhere around $3500) then you don't owe income tax filings at all. You should file your FBARs, but you're far from the only person who files only an FBAR and no tax return. The properties don't figure on the FBARs at all.

Technically speaking, you should be taking into account the revenue generated by the properties, not just the net result. But under the circumstances, I don't think the IRS is going to bother you about not filing.
Cheers,
Bev
 

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Discussion Starter · #4 ·
Hi Bev,
That last statement has me a bit concerned. Revenues recieved rather then net. If that is the consideration then I am delinquant in not filling. The property may earn $10000 after fees and mortgage its usually a net return of -2000 which the Canadian government returns to us in taxes. So I should be working on the basis of earned and file that amount? That would certainly change my position. As it's a joint property do I declare half the earnings or the whole amount? Any advice is greatly appreciated.
Cheers,
Jason
 

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Honestly, that's kind of why I said that not reporting it probably won't draw any attention from the IRS. I'm not sure how they would expect you to declare jointly held property like that, and it seems kind of a waste to have to itemize all the expenses and such when the net result is just going to be $0 taxes.

Frankly, if you're filing married filing separately, you can maintain that your spouse declares the full amount (which is true), even if your spouse isn't subject to US taxes at all.

They aren't going to come after you for something that nets no taxes payable, and frankly, I'd just let sleeping dogs lie. (Others may have other advice for you, but the thing with US taxes is that you have options.)
Cheers,
Bev
 

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Discussion Starter · #6 ·
Thanks. I looked at the 2555ez and there is nowhere to report it anyhow. The 2555 has a vague option to list as other income.
Cheers,
Jason
 

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No, neither of the 2555 forms (EZ or regular) would have anyplace for rental income. It's considered "passive" income and thus not subject to the FEIE. You would have to report it on a 1040 - possibly running it through a Schedule C first (i.e. to account for the expenses and allowable deductions against the revenue).
Cheers,
Bev
 

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One reason you might want to do things correctly is for the future U.S. tax exemption on up to a rather large capital gain when you sell the property. I think the losses can help offset future gains, at least to some degree, and they'll also help make sure the IRS doesn't claw some/all of that exemption back. If you really are taking losses that's not at all a bad thing to get into the tax records.
 
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