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

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

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. 

Dave,

This kept being rejected by centa.com 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
(http://www.irs.gov/pub/irs-pdf/i1040sa.pdf 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
more.) 
 
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.
 
Examples:
 
http://bankrate.com:
 
"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." 

http://www.rpifs.com/AICPA/form1040b.htm:
 
"...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? 
 
Regards,
 
Fxxxxxxx


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david ingram replies:

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]>

David,
 
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
year"?  
 
Schedule B, part III instructions are here: 
 
http://www.irs.gov/pub/irs-pdf/i1040sa.pdf 
 

-----------------------------------
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.