Giving up US citizenship --
Hi
David,
Hope you are keeping well. I just
had a quick question regarding US taxes.
My husband (
We are 41 and 44 and plan to
vacation in
Thanks for all your valuable
information.
Regards,
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:
|
Immigration and Visa |
|
|
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.
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
----------------------------------------
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.
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.
NATURALIZATION CHART
For determining whether LEGITIMATE CHILDREN BORN OUTSIDE
The U.S.
acquired U.S. citizenship at birth.
PERIOD
| PARENTS | RESIDENCE REQUIRED
OF:
|
|
PARENT
or
|
CHILD
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?
--------------------------------------------------------------------------
You have discovered that you should have been filling in forms TDF 90-22.1 for both accounts and form 8891 for the RRSP.
This older Q & A will likely help
To: Centapede-questions
Subject: RRSP
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.
--------------------------------------------------------------------
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
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.
$1,700 would be for two people with income from two countries
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.
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