Filing US Taxes for First Time

[musicfan24 2]

Hello all,

 

I was wondering if someone might be able to help me out with a tax question. I am a USC. I have lived in Canada all my life. I plan to move to the US shortly and just got my SSN a couple weeks ago. I got my US passport in 2018 through my dad and this was my first confirmation of US citizenship.

 

How far back do I need to file my taxes and is it 6 years for the FBAR?

 

Also if anyone knows about foreign investments such as RESPs and Tax Free Savings accounts. Should I be putting down the interest I made on the TFSA even though it is not taxable here? Do I pay tax on RESPs? 

 

Thank you for any help!

[mam521 2,103]

Unfortunately, you're going to have to hire a cross border tax accountant.  Things sound a bit to complicated for people to answer accurately without knowing the intimate details of your returns.  

[Chancy 6,241]

*** Moved from US Citizenship General Discussion to Tax & Finances forum ***

 

[Wuozopo 4,293]

@musicfan24

 

This is a good starter page for you from the IRS. It answers many common questions about international subjects like how far back, etc. 

https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-about-international-individual-tax-matters

 

And this is specifically to help Canadians know what the US/Canada tax treaty allows. There are IRS rules of what is taxable  but a specific treaty may allow exceptions or different rules if it’s written in the treaty. 
https://www.irs.gov/pub/irs-pdf/p597.pdf

 

And the very basics—- If you didn’t earn any income, perhaps you were in school and had no job, then you have nothing to file for that year. You need an income before you have an income tax. 
 

And there is a threshold you have to earn before you have to file. It is broken down by single or married and the threshold can change each year.  The IRS website has past year instructions available. You can find each year and see what the threshold is. Toward the front of each instruction book, there is a chart similar to below for 2021. If you know you earned well over $12k every year and were single,  then don’t bother because that is the general threshold with possible small variation. You would need to file. But there are ways mentioned in that FAQ link about foreign income exclusions or  credits for taxes paid to Canada. You could end up filing a US return that is more informational than actually assessing you tax on money earned in Canada. You just have to work through it. It you got current tax software and did 2021, you could probably use that as a template for knowing how to do previous years. 

[musicfan24 2]

 

On 3/16/2022 at 10:44 AM, mam521 said:

Unfortunately, you're going to have to hire a cross border tax accountant.  Things sound a bit to complicated for people to answer accurately without knowing the intimate details of your returns.  

 You are right and they are quite costly. One quoted me $699 per year and $250 for FBAR. Thanks for the reply. 

[musicfan24 2]

1 hour ago, Wuozopo said:

@musicfan24

 

This is a good starter page for you from the IRS. It answers many common questions about international subjects like how far back, etc. 

https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-about-international-individual-tax-matters

 

And this is specifically to help Canadians know what the US/Canada tax treaty allows. There are IRS rules of what is taxable  but a specific treaty may allow exceptions or different rules if it’s written in the treaty. 
https://www.irs.gov/pub/irs-pdf/p597.pdf

 

And the very basics—- If you didn’t earn any income, perhaps you were in school and had no job, then you have nothing to file for that year. You need an income before you have an income tax. 
 

And there is a threshold you have to earn before you have to file. It is broken down by single or married and the threshold can change each year.  The IRS website has past year instructions available. You can find each year and see what the threshold is. Toward the front of each instruction book, there is a chart similar to below for 2021. If you know you earned well over $12k every year and were single,  then don’t bother because that is the general threshold with possible small variation. You would need to file. But there are ways mentioned in that FAQ link about foreign income exclusions or  credits for taxes paid to Canada. You could end up filing a US return that is more informational than actually assessing you tax on money earned in Canada. You just have to work through it. It you got current tax software and did 2021, you could probably use that as a template for knowing how to do previous years. 

Thank you for all this. I did work and will need to file. Figured out how many years now just learned I can include rent and utilities so gathering all that. Also trying to figure out how TFSAs work. An accountant told me they are a very bad idea for dual citizens. Hope mine doesn’t complicate things too much. 

[Wuozopo 4,293]

19 minutes ago, musicfan24 said:

now just learned I can include rent and utilities so gathering all that.

I don’t thinks so. That would be more like if you maintained a home in the US and were sent to work in Canada, where you had to rent a place to live so were paying for two complete homes for yourself or one for your American wife and kids to live in while you had a work assignment abroad. Read the instructions for the Form 2555 fully before you go to all that bother of rent and utilities. 

 

19 minutes ago, musicfan24 said:

Also trying to figure out how TFSAs work.

Not being Canadian, I don’t even know what that is. Typically one pays tax on the yearly earnings of  an investment account. But the tax treaty could give those special treatment. 
 

There are Canadians about. Maybe start a new thread with CANADA in the title to catch their attention. Canadian TFSAs and the IRS. Or type that in Google and see what you hit. 

 

Edited March 19, 2022 by Wuozopo

[musicfan24 2]

10 minutes ago, Wuozopo said:

I don’t thinks so. That would be more like if you maintained a home in the US and were sent to work in Canada, where you had to rent a place to live so were paying for two complete homes for yourself or one for your American wife and kids to live in while you had a work assignment abroad. Read the instructions for the Form 2555 fully before you go to all that bother of rent and utilities. 

 

Not being Canadian, I don’t even know what that is. Typically one pays tax on the yearly earnings of  an investment account. But the tax treaty could give those special treatment. 
 

There are Canadians about. Maybe start a new thread with CANADA in the title to catch their attention. Canadian TFSAs and the IRS. Or type that in Google and see what you hit. 

 

Oh really? This made it sound like its just an extra thing to help off set any amount owing as long as you live outside the US for at least 330 days of the year.

 

https://www.greenbacktaxservices.com/blog/foreign-housing-exclusion-expat-guide/

 

TFSAs are tax free saving accounts here but they aren’t recognized as such in the US. I will try asking in the Canada forum maybe someone is familiar. 
 

[mam521 2,103]

18 hours ago, musicfan24 said:

 

 You are right and they are quite costly. One quoted me $699 per year and $250 for FBAR. Thanks for the reply. 

You can easily do FBAR yourself. 
 

I was told to get rid of and TFSA and RESP’s before leaving because they are taxable in the US. 

[Wuozopo 4,293]

22 hours ago, musicfan24 said:

Oh really? This made it sound like its just an extra thing to help off set any amount owing as long as you live outside the US for at least 330 days of the year.

 

https://www.greenbacktaxservices.com/blog/foreign-housing-exclusion-expat-guide/

Maybe so. Read Pub 54 from the IRS and see what it tells you. Then work through Form 2555 while getting help with specifics from Pub 54 line by line info. All your income will be excluded.  Investment interest and dividends are taxable (unless there is something special in the tax treaty, which I’m not going to look up).

 

So let’s say you make 

$75,000 wages

 $10,000 in interest and dividends. Don’t count money an IRA type account earns- retirement savings

$85,000 income (gross)

 

$85,000 income

(75,000) excluded income

$10,000 Total income

Take off $12,550 the standard deduction each taxpayer gets and you end up with 

$0 taxable Income (you can’t go lower than zero) 

 

It depends on your investment income for the year. The standard deduction for 2021 will wipe out $12,550 from being subject to tax. If you have more interest, dividends earned than that, then you need to learn of it is all taxable.

Anyway, that would be a basic return for an employed person with minimal investment income. If you are self-employed, own a farm, have rental properties, won Jeopardy etc, etc, your return could have other stuff to add.

 

 

Edited March 20, 2022 by Wuozopo

[Lil bear 4,252]

4 hours ago, mam521 said:

You can easily do FBAR yourself. 
 

I was told to get rid of and TFSA and RESP’s before leaving because they are taxable in the US. 

We faced the same situation. Disbursements out of our Aus superannuation funds would be tax free in Aust but considered taxable income in US. For this reason we liquidated ALL assets before we entered on our IR5 visas.. house, possessions we weren't bringing, cars, superannuation funds and investments .. all in cash in our savings account when we immigrated.  Not necessarily the best financially but the cleanest and simplest 

[musicfan24 2]

23 minutes ago, Wuozopo said:

Maybe so. Read Pub 54 from the IRS and see what it tells you. Then work through Form 2555 while getting help with specifics from Pub 54 line by line info. All your income will be excluded.  Investment interest and dividends are taxable (unless there is something special in the tax treaty, which I’m not going to look up).

 

So let’s say you make 

$75,000 wages

 $10,000 in interest and dividends. Don’t count money an IRA type account earns- retirement savings

$85,000 income (gross)

 

$85,000 income

(75,000) excluded income

$10,000 Total income

Take off $12,550 the standard deduction each taxpayer gets and you end up with 

$0 taxable Income (you can’t go lower than zero) 

 

It depends on your investment income for the year. The standard deduction for 2021 will wipe out $12,550 from being subject to tax. If you have more interest, dividends earned than that, then you need to learn of it is all taxable.

Anyway, that would be a basic return for an employed person with minimal investment income. If you are self-employed, own a farm, have rental properties, won Jeopardy etc, etc, your return could have other stuff to add.

 

 

Thank you this is all very helpful.

 

I was told for this TFSA I was mentioning before, its considered a foreign trust not just a regular investment account. So trying to see what that means exactly. I have to do 4 years of returns so in 2018 for instance I made $500 in interest. So you are saying my employment income is zeroed out and then I can minus that $500 from the $12,000 that was the standard deduction from that year? Thus making me owe nothing. 

[Wuozopo 4,293]

1 hour ago, musicfan24 said:

Thus making me owe nothing. 

Bingo!

 

Most average blokes working  abroad owe zero on their required US tax return.  Even if you earned $13k investment income in 2018 leaving $1k taxable.  You would owe maybe $100. It’ll cost you more than that to pay somebody to  prepare your tax return.  Anyway taxes vary so much by the individual it is difficult to say anything for sure, but you see the concept. 
 

FBAR is a doddle once you work through one and figure out what all the words mean. It is just an informational report to the US treasury saying where you have money—-name of bank, addresses, etc. Zero tax implications.