Giving up US citizenship --
the xxxxxxxx Family wrote:
Hi
David,
Hope you are keeping well. I just
had a quick question regarding US taxes.
My husband (US citizen) and I (Canadian) bought a condo in
Oahu, Hawaii last April. We are just starting
to file US tax returns and have produced the American tax department last three
years of our returns for them. We have been collecting the GET tax and
accommodation tax as we have been renting out the condo, so we have paid those
once in January 2009 and will pay them again in June when we
visit.
We are 41 and 44 and plan to
vacation in Hawaii for 4-5 months every year in our winter
when we retire. My question is we have two children 3 and 6 and thought
they would automatically be US citizens but have been told otherwise since they
weren’t born in the US (born
in Edmonton). Is there any reason my husband
should keep his US citizen status? We can’t see us
living there for any reason only when we retire for the 4-5 months each year in
15-20 years.
Thanks for all your valuable
information.
Regards,
XXXXXX XXXXXXXX
-----------------------------------------
david ingram replies:
I
hope you have good help with your return.
3 years is not enough - you
should file back six years to be sure and on June 20, 2007 Representatives of
the IRS and the Department of the Treasury accentuated the fact that you must
file back SIX years of form TDF 90 to report your Canadian Financial accounts,
RRSP's, etc.to the Department of the Treasury in Detroit. They also made
it clear that I, as a practitioner, can be fined if I participate in the failure
to file. Indeed, Jerome Schneider, a Vancouver based consultant was fined
$100,000 and spent 6 months in a US jail when he was arrested in San Francisco
on Vacation for helping his clients avoid the filing.
With regard to
citizenship, children born to US parents in Canada are US citizens of: your
children ARE US citizens if your husband lived in the US for five years of which
2 were after age 14 BEFORE the children were born.
If he was
born in Canada and never lived in the US, the children are not automatic US
citizens.
If your intention is to give up his US citizenship to
avoid tax liabilities in the future, be advised, that he would still have
to file US returns for an extra ten years AND would no longer be allowed in to
the US as the following shows from my 1996 newsletter on the subject.
ILLEGAL
IMMIGRANT AND LEGAL IMMIGRANT RESPONSIBILITY ACT OF
1996
On Sept 30, 1996, President Clinton signed
the above bill into law. It is about 240 pages long and a "must" read for
professionals in the business. The following points are only the
highlights but they are important:
david
ingram
Immigration and Visa Consultation +1-604-980-0321 |
1.
Overstay your visa more than 180 days and you ARE banned from the U.S.
for three years. Overstay your visa by more than 1 year and you ARE banned from
the U.S. for 10 years. (Section 301 - effective April 1, 1997)
2.
If you give up your existing US citizenship to avoid U.S. Income, Gift,
or Estate taxes, you are banned from the U.S. for life. You
cannot go to the U.S. for a wedding, a holiday, business, or even a
funeral. If you do go, your car or other transportation can
be seized. (Section 352 - effective Sept 30, 1996).
-------------------------------------
Read
more of the above at www.centa.com - click on Entering the USA in the
second box down on the right hand side or go directly to http://www.centa.com/articles/entering_the_united_states.htm
.
As a US citizen, he does have to do US tax returns but he also retains
the ability to sponsor the children (and maybe even you) for green cards in the
future.
-----------------
The following contains a chart on US citizenship
and when and how it is derived and following that will be a newsletter on filing
the DF 90-22.1 forms for six years.
QUESTION:
my mother was american born and raise and educated in
the united states but married an american. she paid taxes for years at the
consultate in toronto ontario and then became a canadian citizen at which time
her social security no. changed. i ahave the american one and am looking for a
lawyer to find out about tax years that she paid but without the social security
no. from the states i can not go to IRS. cAN YOU HELP ME AS SHE IS DECEASED NOW
AND I WANT TO LIVE WITH HER RELATIVES WHO ARE IN THE
STATES
----------------------------------------
david ingram replies:
I think you mean she married a
Canadian??? and I will proceed on that assumption.
She would also
not have changed her social security number (SSN). That is so rare that
she would have had to be in the witness protection program or have had someone
use her number in a STOLEN identity, MIXED identity or SCRAMBLED SSN manner.
Stolen is self evident. A Mixed identity is when someone gets
hold of a number (sometimes given to them by a payroll clerk for instance) and
uses the number unwittingly until the situation is resolved.
Scrambled is when two or more people are using
the same number and the IRS can NOT determine who owns the number. In this
case the IRS assigns IRSN (Internal Revenue Security Number) 's to everyone
involved and there is a serious likelihood of lost benefits.
You can see a recent IRS warning on Identity theft involving
Non-resident and foreign accounts (affects 10,000 o5r so of my readers) at: http://www.irs.gov/businesses/international/article/0,,id=121498,00.html
If
you go to www.irs.gov and search on the key word identity
theft you will find much more.
If your mother was a US citizen and
you are 52 or younger, you are likely a US citizen.
I am assuming
this because you said your mother was educated in the US. If she came to
Canada after age 19 and you are under 52, you are a US citizen.
The rules
are that if you were born after Dec 24, 1952 and your mother lived in the US
for 10 years, five of which were after age 14, you are a US
citizen.
So if your mother lived there until age 20, you are a US
citizen.
If you were born after November 14, 1986 and your mother
lived in the US for five years with only '2' years after age 14, it ,means that
you are a US citizen if she came to Canada at age 17 or older.
If you
were born prior to Dec 24, 1952, you may still be a US citizen if you spent time
in the US going to University, etc.
If you think you are a citizen, apply
for a US passport. Be prepared to prove your mother's situation which may
mean that you have to find school records, doctor's records, dentist's records,
etc.
Even if you are over 52 and did not live in the US as required, note
4 at the end of the chart points out that you are likely entitled to an
exemption and area US citizen.
If you are a US citizen, which is likely
if you are under 55, you can just go to the USA to live.
Your
citizenship has nothing to do with whether your mother filed her returns in the
US although she should have filed up until the date of her death and if she has
an estate, an estate 706 tax return should be filed.
The following chart
will show you if you are a US citizen. The bad news is that if you find
yourself to be a citizen and claim that citizenship, you will have to file 6
years of back US taxes. That is where I come in. We would be glad to
help.
www.centa.com
NATURALIZATION CHART
For determining whether LEGITIMATE CHILDREN BORN OUTSIDE
The U.S.
acquired U.S. citizenship at birth.
PERIOD
| PARENTS | RESIDENCE REQUIRED
OF:
STEP
1
|STEP
2
|STEP
3
| STEP
4
Select
|
Select
| Measure citizen parent's
residence
| Determine whether child
period
in
| applicable |
against the requirements for
the
| has since lost U.S.
which
| parentage |
period in which child was
born.
| citizenship. (The child
child
was
|
| (The child acquired U.S.
citizen-
| lost on the date it became
born.
|
| ship at birth if, at time of
the
| impossible to meet the
|
| child's birth, citizen parent
had
| necessary requirements,
|
| met applicable
residence
| never before age 26.)
|
|
requirements.)
|
Prior
to
| one parent | Citizen
parent had resided in
the
| None.
05/24/34
| US citizen |
U.S. (Originally only fathers
could
|
|
| transmit: mothers added
Oct.94)
| (see note
(5))
On/after
| Both are
| One had resided in the
U.S.
| None.
05/24/34
|
citizens
|
|
& prior
to |
One citizen | Citizen had resided in the
U.S.
| 5 year's residence in the
01/13/41
| one alien
|
| U.S. or its outlying
|
parent.
|
| possessions between ages
of
On/after
| One citizen | Citizen had resided
in U.S. or
its
| 13 and 21. OR. 2 years'
01/13/41
| one alien
| outlying possessions 10 years,
at
| continuous presence in
and
prior
|
parent.
| least 5 of which were after
age
| U.S. between ages 14 and
to
|
| 16, or if citizen parent
served
| 28. (NONE, if at time
12/24/52
|
| honorably in U.S. Armed
Forces:
| of child's birth, citizen
|
|(1) between 12/07/41 and
12/31/46
| parent was employed
|
|(5 of the required years
may
| by a specified U.S.
|
| have been after age 12); or note
(2)
| organization. This
|
| between 12/31/46 and
12/24/52,
| exemption is not applicable
|
| parent needed 10 years
physical
| if parent transmitted
|
| presence, at least 5 of
which
| under *(1) or *(2) opposite.)
|
| were after age
14.
| Notes (1). (2). and (4).
| Both are
| One had resided in the U.S. or
its
| None.
| US citizens |outlying
possessions.
|
On/after
| Both are
| One had resided in the U.S. or
its
| None.
12/24/52
|
citizen
| outlying possessions note
(3).
|
& prior
to |
One citizen | Citizen has
been physically present in
| None.
11/14/86
| one alien
| US or outlying possessions 10
years,
|
|
parent.
| at least 5 which are after age 14 note
(3).
|
On/after
| Both are
| One had resided in the U.S. or
its
| None.
11/14/86
|
citizen
| outlying
possessions
|
| One citizen | Citizen has been
physically present in I None.
|
| one alien
| US or outlying possessions 5
years,
|
|
parent.
| at least 2 which are after age 14 note
(3).
|
1. Absence of less than 60 days in the
aggregate (total) will not break continuity of physical presence for this
purpose. Honorable service in US armed forces counts as residence or physical
presence.
2. No specific period of residence is
required if alien parent naturalized before child reaches 18 years and child
begins to reside permanently in U.S. prior to 18th
birthday.
3. Physical presence abroad of dependent
unmarried son or daughter as member of household of a person serving honorably
in U.S. Armed Forces or employed by U.S. government or international
organization may be counted as physical presence.
4. The retention requirement was repealed
by Act of 10/10/78. Persons who had on
10/10/78 failed to retain are relieved from having to do
so. Those who have previously lost citizenship by a failure to satisfy retention
requirements of the Acts of 1934, 1940, and 1952 may NOT be
reinstated.
5. Until Oct 20, 94,
only father could transmit. Changed with President Clinton signing the Technical
Corrections Bill giving citizenship to children of US citizen
mothers.
(Aug 16, 2003 recreated from official US
documentation for the CEN-TA-PEDE. newsletter of
the CEN-TA GROUP,
4466 Prospect Road, North
Vancouver, BC, CANADA V7N 3L7 www.centa.com PH (604) 980-0321 [email protected]).
------------------------------------
The
following deals with filing the TDF 90-22.1 forms and 8891 for the
RRSP
-------------------------
This is not the result of a question
but is the result of an IRS Tele-conference on June 20, 2007.
The
subject was the reporting of foreign bank on form T D F 90-22.1.
In
particular, the tele-conference made the point that June 30th "IS"
the deadline and that fines are being increased and in particular, there are /
will be severe penalties for non-compliance.
It would seem that there is
NOW a $10,000 penalty for failure to file the form although that is in the
regulations and not on the form.
I know from other sources that some
1,000 clients of former advisor Jerome Schneider are in the process of
being fined as I write this.
I also admit that I have not worried much
about the June 30th filing date in the past.
However, the teleconference made the point that practitioners
are subject to fine for not following up on these
filings.
As I write this Terry or Phyllis ?? is making
it very clear that RRSP accounts must be reported but that the Company Pension
does not have to be reported.
So--- if you have not being reporting your
foreign accounts - report now.
AND, they also made the point that
everyone with foreign accounts MUST file schedule B, even if there is no
earnings form the accounts.
AND, they also made the closing remark
that if they have NOT been filed in the past, taxpayers should file back
SIX years.
.
david ingram
QUESTION:
I left Canada in 1993 and took up permanent residency in the US. I left behind an RRSP that I have not contributed to or removed assets from since then. I assumed that I would retire to Canada and then just use the RRSP after age 65. Now I am thinking of returning to Canada in next 5 years to continue to work until age 65 (I am 49 now).
Reading your website I seem to have made a major blunder in not filing with the IRS anything with respect to the RRSP. What to do now?
Regards,
Daniel.
------------------------------------
david ingram replies:
You
should do catch up TDF 90-22.1 forms for the past 6 years and 8891 forms for
three years.
The following older question deals with the TDF
90-22.1 form and filing requirements
This is not the result
of a question but is the result of an IRS Tele-conference on June 20,
2007.
The subject was the reporting of foreign bank on form T
D F 90-22.1.
In particular, the tele-conference made the point that
June 30th "IS" the deadline and that fines are being increased and in
particular, there are / will be severe penalties for non-compliance.
It
would seem that there is NOW a $10,000 penalty for failure to file the form
although that is in the regulations or policy and not on the form.
I know
from other sources that some 1,000 clients of former advisor Jerome Schneider
are in the process of being fined as I write this.
I also admit
that I have not worried much about the June 30th filing date in the past.
However, the teleconference made the point that practitioners are
subject to fine for not following up on these filings.
As I write this
Terry or Phyllis ?? is making it very clear that RRSP accounts must be reported
but that the Company Pension does not have to be reported.
So--- if you
have not being reporting your foreign accounts - report now.
AND, they
also made the point that everyone with foreign accounts MUST file schedule B,
even if there is no earnings form the accounts.
AND, they also made the
closing remark that if they have NOT been filed in the past, taxpayers
should file back SIX years.
.david
ingram
----------------------
The following deals with the 8891 question
and the TDF 90-22.1 --- note that it is now incorrect in that I imply that you
only need to do one year of TDF forms. Now you should do six years.
QUESTION: I am a Canadian citizen who has been resident in the US for 7 out of the past 10 years.
I've never filled out a 1040 Schedule B because I've never had taxable interest or taxable dividends totaling more than $1500. However upon recent closer examination of the form, I think I should have because of Part III Foreign Accounts and Trusts.
I have more than $10K in RRSP's (not collapsed) and more than $10K in a non-interest bearing Canadian savings account.
I want to fulfill my reporting obligations to the IRS so do I need to send in an amended tax return for each year I was resident in the US with a Schedule B and Form 8891 attached, or can I simply start the process for the 2006 tax year and all subsequent years?
Similarly, I inadvertently never filled in form TD F 90-22.1 for each year I was resident in the US that I had more than $10K in foreign accounts. If I send in TD F 90-22.1 for the 2006 tax year (by June 30) and all subsequent years, do I need to do anything for the previous years?
--------------------------------------------------------------------------
david ingram replies:
You have discovered that you should have been
filling in forms TDF 90-22.1 for both accounts and form 8891 for the RRSP.
You do NOT need to file retroactively.
Thankfully the 8891 form has a place to start now. Send it in
with a 1040X.
The TDF 90-22.1 forms go separately to
Detroit.
-------------------
This older Q & A will likely help
Sent: Sunday, February 11, 2007 4:51
PM
To: Centapede-questions
Subject:
RRSP
Can you handle one more question about Canadians residing in the US who
hold RRSPs??
Thanks to your info, I have been filing form TDF 90-22.1 and 8891 since
2002. On form 8891, I made the election to defer income in 2002 and have
been declaring the current December 31 year-end value on that form every year
since 2002. I thought I had it figured out but now I'm reading all the
other questions from your other readers and I guess it's tax time so I have to
freak out just a little. My RRSPs have gained value since I've been here,
but I thought as long as the earnings stay within the RRSP and I am not
withdrawing any, all I need to do is declare the year-end value on the 8891 and
the TDF 90-22.1 ??
Just double-checking. Thanks. One day I will have to think
about how to report and take some of that money as income, but not this
year!
Thank you.
------------------------------------------------
david ingram
replies:
The internal
undistributed earnings of the RRSP must be reported on the 8891 on line 10
- a - b - c - d - and e
However, the
form is poorly written and tells you to put the income on Schedule B. If
you stop there, you end up paying tax on the money because the form does not
tell you how to take it off. What you do is put it on and deduct it immediately
(per line 6 form 8891).
In the last
couple of years, the gain has been mostly from exchange
rates.
I put the
difference between Dec 31 of last year and Dec 31st of the current year on line
10 with the following statement written in the explanation space, "A combination
of internal earnings and changes in exchange rates have resulted in a paper
profit (or loss) of $XXX,XX
My Turbotax program is not working properly
for this as well.
Another method is to put the income on the schedule B
and remove it per form 8891 on line 22 of the 1040.
That may be the
better way in the long
run.
--------------------------------------------------------------------
SUGGESTED PRICE GUIDELINES - Aug 5,
2008
david ingram's US / Canada Services
US /
Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada
Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver, BC, CANADA, V7N
3L7
Cell (604) 657-8451 -
(604)
980-0321 Fax (604) 980-0325
Calls welcomed from 10 AM to 9 PM 7 days a week
Vancouver (LA) time - (please do not fax or phone
outside of those hours as this is a home office) expert US Canada Canadian American Mexican Income
Tax service help.
pert US Canada Canadian American
Mexican Income Tax service and
help.
David Ingram gives expert income
tax service & immigration help to non-resident Americans &
Canadians from New York to California to Mexico family,
estate, income trust trusts Cross border, dual citizen - out of
country investments are all handled with competence &
authority.
Phone
consultations are $450 for 15 minutes to 50 minutes (professional hour). Please
note that GST is added if product remains in Canada or is to be returned to
Canada or a phone consultation is in Canada. ($472.50 with GST for in person or
if you are on the telephone in Canada) expert US Canada Canadian American Mexican Income
Tax service and help.
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.