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Pension Splitting - Have to file Schedule B and answer question 7 if you have a foreign account - Canadian--Global tax help -

Ron wrote:
Below is the result of your feedback form.  It was submitted by
Ron ([email protected]) on Wednesday, June 17, 2009 at 19:56:13

My_question_is: Both

question: I will start receiving a US pension in two years.  
Is it possible to split the pension with my wife for income tax purposes on our Canada tax form?  
She will be earning less.
Also, from what I understood I did not have to file a US tax form because my income was
basically nil, last 4 years. Reading your forum makes me wonder if I should have?
My income was less than 100 bucks but I was paying $5600 property taxes on the house ..
Does my wifes Canadian income ever come into play on my US tax forms? Okay, I had a few questions . thanks ---------------------------------------------------------------------------
david ingram replies

I just do not have time to give this question the attention it deserves.

BUT, it cries out to me.

1.  If your $100.00 of income was interest from a Canadian Financial Institution (Bank, Trust co, 
Credit Union, etc.)then the minimum penalty they can impose is $10,000 for failure to file
Schedule B on the 1040 which must be filed by every US citizen with a foreign bank account. End of story. Question 7 asks if you have a foreign account. If you have less than $10,000
combined in the accounts, you say NO. but, but, but YOU STILL HAVE TO FILE THE FORM TO SAY NO.
Failure to file the form can result in a $10,000 fine although I have never seen anyone fined in this case.

However, if you have more than $10,000 in all of the accounts you have signing authority on, you must say yes and file form TDF-90 for each one of the accounts you have signing authority over even if there s nothing in them.  I have seen dozens of $10,000 fines and one $100,000 fine and one $60,000 fine for failure to file form TDF 90-22.1.  The $100,000 fine also resulted in a a six month jail sentence. 

If you have an RRSP, you also have to file form 8891.  failure to file this form results in a penalty of 35% of the RRSP plus 5% for every year not reported.

In both cases, I have never seen someone fined for filing catch up returns to report these items.

The good news is that you can split the pension with your wife.  You both have to file form 1032 with your return.

Remember, the rule above referred to 'signing authority'.  It does not have to be your money,  So, if you are the signing person for a church account or a boy scout account or on your wife's account or your parent's accounts and the totals are over $10,000 US, you have to report them all.

We can catch them up for you if necessary.

These older comments will help


This kept being rejected by when I sent it
from my account , so I asked a
friend to send it from his account.  

Here it is:

Yes, the general requirements for a person to use
Schedule B are listed at the top of the instructions,
but, as with most tax rules, there are exceptions.
This exception is shown at the BOTTOM of the
instruction page
( below the
final TIP box) and it says to answer NO to the
question of whether the filer has a foreign bank
account if "the combined value of the accounts was
$10,000 or less during the whole year."
I think what you have written is that, in effect, a
person who has only $10 in a Canadian bank would have
to file Form B and answer yes to question 7a, but that
is contrary to the IRS instructions. 
The H&R Block "Tax Cut" program does not select
Schedule B or check the YES box unless the $10,000
threshold is reached. (I tried it out to see, by
answering YES to foreign account, but NO to $10,000 or
Doing a Google search on "SCHEDULE B" "FOREIGN
ACCOUNT" "7a", I find many articles stating that 7a
only applies to accounts of $10,000 or more.
"Line 7a is straightforward. Basically, if you had a
foreign account, check "Yes" here. Even if you did
have such an account, the IRS says you can check "No"
if the average balance in the account was less than
$10,000 during the whole year."
"...the answer to question 7a only applies where the
total of all foreign accounts exceeds $10,000 at any
time in the taxable year."
Do you still say that ALL persons who have to file
U.S. taxes and have a Canadian account have to file
Schedule B and check YES to question 7a? 

david ingram replies:

I challenge you to show me where I said that a person with 'any' foreign account had to check off yes to question 7a.  You only have to say yes to 7(a) if the combined totals of all foreign financial accounts was over $10,000 US at ANY ONE TIME in 2007.  Because of the change in the exchange rate in 2007, if you had $9,500 Canadian in the account at the end of 2007 when the rate was 1.10 Cdn to a US dollar, you would have to say yes. even if the rate dropped back to 99 cents.

What I said and still say is that you have to file Schedule B if you have a foreign account whether it is in England, Spain, Iraq or Switzerland.   In other words, if you have foreign accounts and they were always less than a total of $10,000 US in 2007, you have to answer "NO" to question 7a on Schedule B but YOU HAVE TO FILE SCHEDULE B..

Of course, if you have $10.00, 100, 1,000, 10,000 or 100,000 in an RRSP, you have to answer "yes" to question 8 and fill in the 8891. 
And, if you had $10,000 in an RRSP, you would also be answering yes to 7(a).

And, if you are the contributor to a child's RESP, that adds to the amount for $10,000 and requires the filing of a 3520 because RESP accounts are NOT covered by the form 8891.

If you did not have 'any' other accounts but had put $1,000 into a grandson's RESP which you were the signing authority over, you would check NO to question 7a, leave 7b blank and say yes to question 8 and then fill in form 3520.

Your own question answers your own question. 

The top says file the form if you have a foreign account or were the grantor of a foreign trust - the bottom says answer no if the total is less than  $10,000.  Tell me where it says you do not have to file the form if the answer is 'no'.  You have missed the point that the IRS WANT S the 'no' answer in writing IF you have a foreign account.  I was also told by the Treasury rep that there is a  penalty for not filing Schedule B if you have a foreign account  by the way but I do not know where it is or how much it is and don't care.

For those who don't have schedule B handy, you can find it at:


The older bit is here.

Date: Mon, 11 Feb 2008 00:44:49 -0800
From: [email protected]
Subject: Schedule B if you have a foreign account
To: fxxxxxxxxxxxxxxx

XXXXXXX wrote: 

[email protected]>

In case you find this amongst the spam, I have a
comment about reporting interest on Schedule B. 
You state: 

"AND, they also made the point that everyone with
foreign accounts MUST file schedule B, even if there
is no earnings form the accounts."

But...the Schedule B instructions state that it is not
necessary to answer YES on Schedule B if an account is
less than $10,000.  So, when you tell people to file
Schedule B, shouldn't you add "if any of your accounts
have been worth at least $10,000 anytime during the
Schedule B, part III instructions are here: 

david ingram replies:

The instructions for who must file a Schedule B (top
right hand side of page B-1) that you sent clearly
state that Schedule B must be filed if you have a
foreign account.

• You had over $1,500 of taxable interest.
• Any of the Special Rules listed in the instructions
for line 1 apply to you.
• You are claiming the exclusion of interest from
series EE or I U.S. savings bonds issued after 1989.
• You had over $1,500 of ordinary dividends. 
• You received ordinary dividends as a nominee.
• You had a foreign account or you received a
distribution from, or were a grantor of, or transferor
to, a foreign trust. 
   Part III of the schedule has questions about
foreign accounts and trusts. 

david ingram's US / Canada Services
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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.

IRS Circular 230 Disclosure:  To ensure compliance with requirements imposed by the IRS, please be advised that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used or relied upon, and cannot be used or relied upon, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

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