Each year I help over 500 clients file their Canadian and US tax returns as well as plan for both their Canadian and US investment accounts. I also regularly help new US clients plan for their move to Canada.
Dear Mr Hogan,
I am a volunteer providing free advice to marginalized and impoverished communities.
I would really appreciate your help, if you are willing, in securing a quick bit of off-the-cuff advice for clients who are elderly Canadian citizens living in Vancouver. I am of course not qualified to give this advice.
My clients, husband and wife, are retired. He has modest income (pension and a part time job, total around $16,000 CAD), she has none. Many years ago they lived briefly in the USA and obtained citizenship. They last filed US tax returns before 2006 (they don’t remember the exact year). In 2014-17, however, they went back to school and obtained student loans in the USA. The loans were paid to Canada and took their account balances temporarily over 10,000 USD.
I believe based on my inadequate, layman’s knowledge that:
1. They should have filed US tax returns every year, as they are US citizens (they would not owe any tax, ever).
2. In the years that they had those student loans, because their account balances exceeded $10,000 USD, they should have filed FBARs
3. They could file the missing US tax returns; and
4. They could use the streamlined no-fault procedure to file the missing FBARs.
At a legal level, I think that’s about the size of it – they should do the work and file all the missing returns and FBARs. At a practical level, however, I wonder if the best advice is to do that, given the potential cost of getting assistance with all the returns and forms. The US isn’t bothering them, isn’t going to arrest or extradite them, and if they are fined they won’t be able to pay. I’m very tempted to suggest that they consider doing absolutely nothing – I can’t advise them to do that but they could make the decision.
I can’t offer to pay for this advice but wonder if it’s a simple enough question that you could provide guidance without spending an unseemly amount of time on it?
Thanks for the message. I’ll do my best to give you some guidance on the information below.
Yes, you are correct on the items below. As US citizens they are required to file both Canadian and US income tax returns each year. However, in most cases they won’t owe any additional US tax.
In any year their Canadian accounts exceeded $10,000 USD they would also be required to file FBAR forms. The penalties are quite high for late FBAR filings, but as you mentioned below the IRS streamline tax filing program for expats would be a good option for the couple.
There could also be additional forms required, see the list on this article:
I never advise clients to “do nothing” as the risk of not filing greatly exceeds the cost to file the streamline, although it can get expensive to file these returns.
Considering how much information the IRS has gathered over the last few years on expats it’s very possible they’ll start sending out compliance letters to those that have yet to file their US returns.
Hope that helps.