US Tax Liabilities for US Citizen Living in Australia

I have been looking over you site and would like to ask the following
question, and perhaps utilize your services depending on your answers
to the below:
my wife is American citizen, but lived in Australia with me 1985-
1997 and in Canada 1997-present. During this time she has not filed a
US return (last return was 1990). In Australia she was either unemployed or
in low-salary short-term positions, so total earned income was
minimal, no investments or real estate ownership. In Canada, she has
earned between $0-76,000 CAD per annum,
with small RRSP and we have a mortgage on a home. She filed every
year in Australia / Canada, and we have good Canadian tax records on file
from 1997-, but only one year's records (1997) from Australia.
1: would you recommend that we catch up on her US filing obligations?
What are the risks if we do, or do not?
2: would your office be willing to help us meet these obligations?
3: can it be done for the years in Australia if we did not keep our returns
from prior to 1997? Is it important if she had minimal earnings?
4: given that we probably have no US tax to pay for any year, what
will be the likely cost of this exercise to us (your fees, plus any
Looking forward to your answers,
david ingram replies:
Your wife should bring 6 years of US tax returns up to date - (2004. 2003,
2002, 2001, 2000, and 1999).
Penalties can be severe in years she had earnings.  Nothing to speak of if
she had no earnings or less than $5,000 US.
We would be glad to look after them for you.
She needs to file forms T DF-90.22 to report her offshore accounts and she
needs to file her internal earnings in the RRSP - the IRS considers them
foreign trusts -.  The penalties for failing to file the T DF-90 forms where
there she has total monies of over $10,000 at any one time (for instance,
when you transferred the money to buy the house) are up to $500,000 PLUS 5
years in jail.  The record in this office was a 105 year old lady with a
$10,000 fine for having $38,000 in the Royal Bank of Canada at the Edgemont
village Branch in North Vancouver.
Another associate had a 68 year old client who received a $60,000 fine and 1
day in jail in Phoenix so age and sex is no bar.
We can catch them up quite handily.  We need a list of all bank, credit
union, or trust company accounts that your wife has in Canada or Australia
with the highest balance for each in the year.  The house account would be
$200,000 or $300,000 that year for instance.
I also need the Dec 31 2001, Dec 31 2002, Dec 31 2003 and Dec 31 2004 year
end balances for each RRSP account she has in Canada and if she has a
retirement account left in Australia, the same information.
I doubt that there would be any tax or fines if you come forward
voluntarily.  Non-voluntarily could be significant taxes and fines of up to
$20,000 a year for a $76,000 earnings year because the USA does NOT have to
allow foreign tax credits or foreign earnings exemptions after two years
where the IRS catches the taxpayer for non-filing.
It is hard to understand, but your wife has a GREATER responsibility to file
her US tax returns than the Canadian returns because she would usually have
a refund coming in Canada but would owe tax in the USA if she does not file
in time.
To date, the only time one of these catch-up returns has been fined in this
office is when the IRS has been looking for someone for a particular year
and because of moves, etc., has not been able to find them.  Even then, the
penalties were far less because of the voluntary disclosure of the other
Our fee would range for $100 a year to $300 a year as I understand the
situation.  Likely $150 for 99, 2000, 2001 and $200 for 2002 and 2003
(heavier RRSP reporting) and $300 for the 2004.  Just a guess.
david ingram
copied to George Arora, CPA, MBA, MST
David Ingram's US/Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321 Fax (604) 980-0325
Email to taxman at <mailto:taxman at> <>
Disclaimer:  This question has been answered without detailed information or
consultation and is to be regarded only as general comment.   Nothing in
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