US Tax Returns for US citizen in since 1985 - 

QUESTION:

I am considering a job offer in the US.  My wife is a dual citizen and has not completed a US return since 1985 (She was attending university from 82 to 85 in the States).  She has never made more than 40K CDN in a year.  If we move to Florida will she be required to complete US returns for all the intervening years?  Is she legally required to anyway?

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david ingram replies:

I hate answering this particular question because I always sound like a worry wort.

A US citizen living in Canada has more reason to file a US return than a Canadian return if he or she is an employee.

If an employee making $100,000 (forget about exchange for the moment) has the proper tax deducted, he or she will get a $400 top $600 refund when they file their Canadian return.  There is NO legal obligation to file a Canadian return that year unless they want their refund or unless the CRA specifically writes and demands a return.

At the same time, the US citizen is taxable on their world income.  Assuming they are married filing separately, with no special deductions or exemptions, their US tax payable would be $19,759.00.  They have a BIG liability to file their US tax return to claim earned income exemptions or foreign tax credits and owe no US tax.  However, if the US IRS comes along and wants retroactive tax returns,  foreign tax credits can expire if the return is not filed within two years.

If he or she had an RRSP for $20,000, they could be liable for a $10,000 fine plus 35% of the money in the RRSP plus 5% for every year it was not reported for failure to file forms TDF 90-22.12 and 8891.

At $40,000 the tax is only $4,083 a year but the penalties for an RRSP (a foreign trust as far as the US is concerned) are the same.

The answer is that your wife should file her US returns.

She is legally required to do so and could end up with a problem anytime but particularly if she crosses the border.

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This is not intended to be definitive but in general I am quoting $900 to $3,000 for a dual country tax return.

$900 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only (but were filing both countries) - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
 
$1,200 would be the same with one rental
 
$1,300 would be the same with one business no rental
 
$1,300 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
 
$1,600 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,700 would be for two people with income from two countries

$3,000 would be all of the above and you moved in and out of the country.
 
This is just a guideline for US / Canadian returns
 
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $200.00 up. However, if you have a stack of 1099, or T3 or T4A or T5 or K1 reporting forms, expect to pay an average of $10.00 each with up to $50.00 for a K1 or T5013 or T5008 or T101 --- Income trusts with amounts in box 42 are an even larger problem and will be more expensive. - i.e. 20 information slips will be at least $350.00
 
With a Rental for $400, two or three rentals for $550 to $700 (i.e. $150 per rental) First year Rental - plus $250.
 
A Business for $400 - Rental and business likely $550 to $700
 
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
 
Moving in or out of the country or part year earnings in the US will ALWAYS be $900 and up.
 
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
 
8891 forms are generally $50.00 to $100.00 each.
 
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
 
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.

Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable.  In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years.  We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund. 

Email and Faxed information is convenient for the sender but very time consuming and hard to keep track of when they come in multiple files.  As of May 1, 2008, we will charge or be charging a surcharge for information that comes in more than two files.  It can take us a valuable hour or more  to try and put together the file when someone sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and emails for instance. 

This is a guideline not etched in stone.  If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully.
 







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