Post # 1
- Wedding: October 2014 - Church
So my SO is a complete dual citizen (father was American, mother living in the States but born in Canada, lived the first few years down there of his life but otherwise lived up here) and was one of those cases where he didn’t have to choose to get citizenship. With the obvious issues with the economy the government has decided to go after citizens that have not lived in the States and not filed income taxes (this is something he had never done – and, honestly, until recently, had not made enough money to even pay taxes, though I’m not sure about the inheritence that he had received from after his father passed away or ir that is actually true). This would probably cost a lot of money, so he thought maybe he would denounce his American citizenship as he never really lived there (though he has a lot of family in Hawaii and whatnot), but I guess the government thought about that and he would have to file six years of back taxes (probably paying a tonne of money in the process) and then go through a ceremony denouncing his citizenship. So same dilemma. He files and pays taxes every year here, so it is not as though he hasn’t been paying some government.
Neither of us have any idea how the tax system works (all we know is that there are a lot of different forms) and are worried that it would bankrupt us in the late fees and just the sheer amount that we would have to pay. Also if we want to visit his family or go on a trip there that, well, maybe he could be arrested. He would also like the option of having the ability to work down there and would like to clear it all up so he wouldn’t have a problem with anything down there. Is there anyone who has personal experience with this? If so what is the cheapest way to deal with this? Thanks!
Post # 3
Ya welcome to the world under a poor economy.
Once upon a time if you were a US Citizen (or a Canadian) living abroad there was a “gentleman’s agreement” that you paid taxes to the country you lived in, and filed in the other, and none to relatively little was paid to your home country.
In recent years, both the US and Canada has decided that THEY BOTH want more of the pie… so the guy in the middle, the guy making the money, actually is the one who is suffering. (Just had a GF go thru this with her Husband’s US Company’s Survivor Pension and her living here in Canada… both the US & Canada, took their slice… and then some !!)
I cannot really advise you… I think only an Accountant or Tax Lawyer should do that (Yellow Pages)… but I can tell you it will hurt. It will hurt if you pay or don’t pay.
If you choose not to pay the USA, in so much as you live on this side of the Border… as you’ve noted you can FORGET ABOUT ever travelling to the US again… and I wouldn’t even risk for example flying anywhere near the USA either (including the Caribbean)… cause if you are on a plane that has to diverted and land in the US, you’ll be arrested sitting on the tarmack.
I agree the whole mess sucks, but it is what it is. He chose to keep his dual citizenship / ties with America. America is now in hard times economically so they are calling in all their markers. It is within their rights to do so.
Sorry… (( HUGS ))
Post # 4
- Wedding: October 2014 - Church
@This Time Round: Funny thing is he wasn’t given the option for either – he was just automatically made a citizen of both countries (whereas most people are asked when they turn the age of majority) and has lived here since he was the age of four so was not aware of the rules until, well, more recently (so it was not done on purpose). He doesn’t even have the option of renouncing without it hurting (he originally didn’t do that because it is a part of his family). I was just looking at trying to find something that would make it easy for us to get through it all and not bankrupt us at the same time.
Post # 5
@laceydoilies: You need to be speaking with a lawyer or accountant in Ontario who specializes in American taxes. Asking for help from strangers over the Internet could lead you to nothing but trouble. You can meet with most lawyers for one free session just to get an idea where you stand.
Post # 6
@laceydoilies: I agree with PP, he needs an attorney. You don’t wanna mess with the IRS
Post # 7
Most ex-pats (which is technically what he is) can deduct a fair bit of their foreign income, to the point where they do not have any tax due, but they still must file a tax return. Get an accountant, either in the US or Canada, that specializes in ex-pat taxes and file the back years of returns. You do not need a lawyer at this point; you need an accountant.
Also if he’s trying to denounce his itizenship just to avoid paying taxes, that wil never be approved. Once he’s got his back taxes in order, he can try again to denounce his citizenship on the basis of being unwilling to participate in a draft for the US (not that they will ever have a draft again, but if you’re not willing to defend the nation, you’ll get the citizenship stripped).
Post # 8
@laceydoilies: Chances are you guys won’t owe much! Taxes in Canada tend to be higher and you aren’t completely doubled taxed.
Unlike RRSPs, TFSAs are not recognized by the US government , so his TFSAs would be one area he could take a hit, especially if he did well with those investments.
I agree with PPs – get an accountant who is familar with US taxes! They are much more complicated than Canadian ones and hopefully the acountant would save you two money.
Post # 9
@laceydoilies: Here’s a blogpost about someone who went through something similar, hopefully it helps you feel a bit better about the whole thing!
Post # 10
This has become one of my big pet peeves as a US citizen living overseas. There’s an exclusion so you’re not double taxed. I don’t know what it was this year, but it’s probably around $97k or something like that. What this means is every dollar made under the exclusion is tax free since you’re paying tax in the country you’re living in.
So if your DH never made, or had savings, that went over the exclusion the chances of having anything to pay is slim. However, you guys do need to get an accountant that specializes in US taxes for expats to help you out and make sure that back filing and whatnot is done properly.
On tha note, I just want to express how freakin much I hate that citizens living in a foreign country has to do a full filing every year. Aside from killing trees (there’s no e-filing if you’re married), this year I had to pay almost 7 euro just to mail the freakin forms to the US. o-O Aside from the inconvienance and cost to me, I KNOW the IRS is wasting money going over my forms.
On top of that, I also know that the US is losing money going after latent citizens like your DH. I’m guessing for every 50k they bring in they’re probably spending a few hundred thousand to investigate and start the process. It’s entirely different than going after people who are knowingly avoiding taxation and putting their money into tax havens.