Catch Up US tax returns Refundable Child Tax Credit

Dear David.   Born in Canada but because both parents were originally from USA I have dual citizenship . I only pursued this and got my passport  and social security card 13 years ago . I have lived and worked only in Canada all of my life, I understand that I need to file taxes in USA, married wife is Canuck. How much to file simple no business or rentals and  when can I get an appointment. Regards   ----------------------------------------------------------------------------------
david ingram replies:

Please phone 604-980-0321 Monday to Friday between 10:30 AM and 4 PM and get Gillian Bryan to set up an appointment time.

As described, you are likely looking at $150.00 to $200 per year depending upon how many financial and RRSP accounts you have.

Being a US citizen is wondeful if you are going to use the citizenship for a purpose  If you were working for a multi-national company who wanted you to work on both sides of the border or if you were a performer or actor or if you were a long haul truck driver going south or an airline captain or even a taxi driver in Niagara Falls or White Rock, being a dual citizen can have a tremendous economical advantage because you get to work on both sides of the border with no restrictions.

However, as you have found, it also involves the reponsibility of filing a US return each and every year.  In fact, most people in your position have a larger responsibility to file a US return than a Canadian return.

Let me explain using 2006 Tax rates for both the US and Canada and ignoring any exchange difference between the two countries since there is little or none for 2007.

If you were a single person with a 15 year old son and an 11 year old daughter as dependents and no other deductions and you earned exactly $100,000 a year (let's forget about exchange) and your employer deducted (for 2006) $1,910.70 CPP, $729.30 EI and $26,505 income tax, you would NOT need to file a Canadian Income Tax return because you have a refund coming of $517.06 if you lived in BC.  However, because of different provincial tax rates, you would OWE $3,429.95 if you lived in Manitoba unless you bought a $10,000 RRSP in which case you would have a $910.05.00 refund)

If you bought the $10,000 RRSP in BC, you would .have a refund of $4,546.28.

Becasue you have a refund coming, under Canadian Law, you would not 'have to' file a tax retrurn unless you wanted your refund OR unless the CRA specifically wrote you and demanded a tax return be filed by you.

However, as a US citizen living in Canada (or any other country), you are in big trouble if you do not file your return.

1.   You owe the IRS $15,251 in tax because you have not filed a tax return to claim the foreign tax credits which would cancel the US tax.

2.    You are subject to a minimum penalty of $10,000 and a maximum penalty of $500,000 plus 5 years in jail for not reporting your RRSP and any bank accounts or other accounts you have signing authority over (maybe your mother's or father's or the kid's or even an account at work).

3.    A penalty of 35% of the principal plus 5% of the balance for every year you do not report the RRSP  (a foreign trust) and its internal earnings to the IRS.  If you use form 8891, you can exempt the income but the penalty is as above for not reporting it.

And if you happened to be the owner of 10% or more of a Canadian (or French or German or Indonesian or any other country) corporation, a fine of $10,000 for the first 90 days and $10,000 for every 30 days after to a max of $50,000 per corporation per shareholder per year.

As you can see, there is far far far more responsibility to file a US tax return than a Canadian return.

Another good reason.  In the example above, the US citizen single parent with two children and $100,000 of income in Canada is entitled to a $750.00 US REFUND becaus eof the US refundable Child Tax Credit which applies no matter where you live.  If your income was only $50,000, there would be a $2,000 refund.  What a good reason for filing your US returns. 

Catch up returns usually cost between $150 with no investment statements to $500 per year when there are rental houses and a lot of stock market trades and RRSP and bank account reporting.

Our quote for 2005 and 2006 for new US / Canada returns to be filed 'fresh' was $800 to $2,800.  For 2007, we are raising that to $1,000 to $3,000 because the foreign bank reporting and RRSP reporting has become so time consuming.

Catch up returns have also become more time consuming since June 20, 2007 whn we were told by the IRS that they wanted six back years pl;us the current year for people such as yourself and they wanted all the bank account reporting TDF 90 forms filed for each year as well. Up until that datre, it was our practice to just file TDF 90 forms for the last year involved.

The following disclaimer contains a more detailed set of parameters.

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