the xxxxxxxx Family wrote:
Hi David,
Hope you are keeping well. I just had a quick question regarding US taxes.
My husband (US citizen) and I (Canadian) bought a condo in Oahu, Hawaii last April. We are just starting to file US tax returns and have produced the American tax department last three years of our returns for them. We have been collecting the GET tax and accommodation tax as we have been renting out the condo, so we have paid those once in January 2009 and will pay them again in June when we visit.
We are 41 and 44 and plan to vacation in Hawaii for 4-5 months every year in our winter when we retire. My question is we have two children 3 and 6 and thought they would automatically be US citizens but have been told otherwise since they weren't born in the US (born in Edmonton). Is there any reason my husband should keep his US citizen status? We can't see us living there for any reason only when we retire for the 4-5 months each year in 15-20 years.
Thanks for all your valuable information.
Regards,
XXXXXX XXXXXXXX
-----------------------------------------
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:
david ingram
Immigration and Visa
Consultation
+1-604-980-0321
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).
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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.
QUESTION:
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
----------------------------------------
david ingram replies:
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.
Stolen is self evident. A Mixed identity is when someone gets hold of a number (sometimes given to them by a payroll clerk for instance) and uses the number unwittingly until the situation is resolved.
Scrambled is when two or more people are using the same number and the IRS can NOT determine who owns the number. In this case the IRS assigns IRSN (Internal Revenue Security Number) 's to everyone involved and there is a serious likelihood of lost benefits.
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.
www.centa.com
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 taxman at centa.com).
------------------------------------
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?
--------------------------------------------------------------------------
david ingram replies:
You have discovered that you should have been filling in forms TDF 90-22.1 for both accounts and form 8891 for the RRSP.
You do NOT need to file retroactively. Thankfully the 8891 form has a place to start now. Send it in with a 1040X.
The TDF 90-22.1 forms go separately to Detroit.
-------------------
This older Q & A will likely help
Sent: Sunday, February 11, 2007 4:51 PM
To: Centapede-questions
Subject: RRSP
Can you handle one more question about Canadians residing in the US who hold RRSPs??
Thanks to your info, I have been filing form TDF 90-22.1 and 8891 since 2002. On form 8891, I made the election to defer income in 2002 and have been declaring the current December 31 year-end value on that form every year since 2002. I thought I had it figured out but now I'm reading all the other questions from your other readers and I guess it's tax time so I have to freak out just a little. My RRSPs have gained value since I've been here, but I thought as long as the earnings stay within the RRSP and I am not withdrawing any, all I need to do is declare the year-end value on the 8891 and the TDF 90-22.1 ??
Just double-checking. Thanks. One day I will have to think about how to report and take some of that money as income, but not this year!
Thank you.
------------------------------------------------
david ingram replies:
The internal undistributed earnings of the RRSP must be reported on the 8891 on line 10 - a - b - c - d - and e
However, the form is poorly written and tells you to put the income on Schedule B. If you stop there, you end up paying tax on the money because the form does not tell you how to take it off. What you do is put it on and deduct it immediately (per line 6 form 8891).
In the last couple of years, the gain has been mostly from exchange rates.
I put the difference between Dec 31 of last year and Dec 31st of the current year on line 10 with the following statement written in the explanation space, "A combination of internal earnings and changes in exchange rates have resulted in a paper profit (or loss) of $XXX,XX
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.
--------------------------------------------------------------------
SUGGESTED PRICE GUIDELINES - Aug 5, 2008
david ingram's US / Canada Services
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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.
email to taxman at centa.com
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pert US Canada Canadian American Mexican Income Tax service and help.
David Ingram gives expert income tax service & immigration help to non-resident Americans & Canadians from New York to California to Mexico family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
Phone consultations are $450 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada. ($472.50 with GST for in person or if you are on the telephone in Canada) expert US Canada Canadian American Mexican Income Tax service and help.
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.--
-Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation in connection with personal or business affairs such as at www.centa.com or www.garygauvin.com. If you forward this message, this disclaimer must be included." -
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