US Tax Return for American in Canada with SS Benefits

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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.

Feel free to reach out via email at phil@philhogan.com or by phone or text here 250-661-9417.




Answer

Hi XXXXX

Thanks for the email. Given the length of your email I won’t be able to address all the issues below, however I’ll do my best to summarize some thoughts below:

  • Software for US citizens living in Canada doesn’t really exist. Those that try to file their own US tax returns often use something like Turbo Tax. You can take a look here for some guidance on filing.
  • The fact that you didn’t file US returns for some time while you were a resident of Canada is quite concerning.
  • Based on your concerned about the 2018 and 2019 1040 it’s likely worth taking a look in case these need to get amended.
  • Yes, you are correct, the RRSP needs to be included when calculating the FBAR balance threshold.
  • I know it’s tempting to try and prepare and file your own cross-border tax returns, however it’s very unlikely that these will be filed correctly. Same reason I don’t work on my own car…

I might have capacity next year to help, however before then I would advise paying someone to take a look at the prior year returns.

Give me a call at 250-661-9417 are we can setup a time to chat.

Cheers

Phil

Question

Dear Mr. Hogan,

I visited your website, watched your helpful video, and discovered your email address and offer of help, so here I go.

My name is XXXXXX. My wife and I live in XXXXXXX. I turn 71 on XXXXX. My wife is a Canadian-only citizen.

We have already filed our Canadian tax returns, using Turbotax.  Unfortunately, there is no similar tax software for US citizens living permanently in Canada who want to file a tax return to the IRS. If there were, I’d buy it in a second.

So that you might understand my situation better, please let me give you a brief personal history.

I was born in 1950 to US parents while they lived in Quebec. This accident of birth is how I acquired my dual-citizen status.  In 1953, when I was 3, we moved back to the US state of Maine, where I was raised.  I continued to live and work in the northeastern US until 1987 (at which point I was 37), at which point I discovered for the first time that I was indeed a Canadian citizen and I then permanently moved to Canada — at first in Calgary, then in Grande Cache, AB until 1999 where my wife and I retired and moved to Edmonton.  Luckily, we continue to reside in Edmonton.

Because I no longer worked in the US after 1987, I did not file a US tax return after I moved to Canada until I was approximately 66 years old.  I started filing at that point because when I was about 63 years old, a childhood friend of mine still living in my hometown in Maine contacted me and told me that I might still be eligible to receive Social Security benefits, even though I had not worked in the US since 1987.  He was in a similar situation to mine, years-of-work-wise in the US, but he had qualified for SS benefits, so he strongly suggested that I investigate that possibility, too, which I did.

In short, I did indeed qualify for SS benefits and, not only that, my wife did, too (spousal benefit), even though she is a Canadian citizen who never worked in the US. It was at this point in history that I first found out that I had to submit tax returns to the IRS, even though I had not worked in, or had any income from, the US since 1987. Quite an awakening.

Regardless, it was only because I applied for SS benefits that I decided that it would be a good idea to start submitting annual US tax returns to the IRS. (For all US authorities knew, I could have died in 1987 and that’s why I had stopped submitting annual tax returns. But at the point I first inquired about SS benefits, they at least theoretically knew that I was indeed alive, hence my decision to start filing.)

The year I started receiving SS benefits — 2016 — was the year I started filing tax returns to the IRS.  I did that through H&R Block, but that 2016 return was problematic, to say the least, mostly because I did not realize the extent of what had to be reported.

The H&R Block 2017 return was much better with the required FBAR FinCEN rigamarole.

I did the 2018 return myself, including the FBAR, etc. via computer, but I think I failed to mention in it the RRSP.

The 2019 return was even worse, without FBAR, because the total of our joint bank accounts was under $10,000, but I didn’t realize that the RRSP was to be included, and with that included, the $10,000 limit was exceeded and I should have filed the FBAR FinCEN 114.

Because in 2020 I withdrew a significant sum of money from my RRSP, I have decided that I need at least some help with at least my 2020 return (possibly the others I’ve mentioned) and that is why I’m seeking assistance. I’d like to submit my own return, but at this point I do not know the exact forms that have to be filled out, and how to use tax treaties between the US and Canada to reduce taxes to the minimum. I’m using the 2017 H&R return as a guide, but I stall can’t figure out what form comes first —  the chicken or the egg, if you get my drift.

I believe I have a very simple situation, income and tax-wise.  After I retired in 1999, I had practically no income but some savings and a modest RRSP and and even more modest LIF. My wife was a retired teacher, so we basically lived on her income. I took Canada Pension ($2,453 total in 2020) as soon as I could in my early 60s.  Then OAS at 65 in 2005 ($4,970 total in 2020).  Again, then came US SS in 2016.

Thanks very much for any help you may wish to provide to me.  If you don’t wish to do that, please feel free not to reply to this message.  I won’t take any offense because writing this message has given me the opportunity to really get all this information down on “paper”, so it’ll be available to me to use in the future.

Have a very good one, Mr. Hogan.

What follows below my signature is my income/investment/banking information.

Sincerely,

My 2020 income is as follows:

US SS      $9,276 USD

OAS        $4,970.79 CAD

CPP        $2,453.04 CAD

(I already have what I believe is the correct form 8833 and treaty section XVIII(5) information which states that OAS and CPP are exempt from US taxation and US SS is taxable only in the country of residence.)

RRSP and RLIF income in 2020

Questrade self-managed RRSP was $32,217.65 on Dec. 31, 2019 (had never been touched since its inception in 2012); was $1,607.40 on Dec. 31, 2020 because I made a withdrawal of $36,549.61 (=$25,578.43 USD @ 1.4002 exchange rate, because RRSP was in physical gold 1-oz. bars which had to be sold in USD) mid year, and paid $10,962.18 (= $7,829.01 USD at 1.4002 xch rate) in tax. This CAD information is on my T4RSP slip.

Questrade RLIF had value of $7,123.77 on Dec. 31, 2020. My T4RIF slip indicates that I received $637.26 CAD income from that account in 2020.

Value of bank accounts in which I have signing authority and some small interest income:

A Servus Credit Union joint checking account never above $7,000 during 2020. My wife (primary account holder) and I have a T5 tax slip that indicates that we received  $355.48 in “interest from Canadian sources”. My wife took the entire amount as income, but because it’s a joint account, maybe I have to report at least half of that to the IRS as my own.

Royal bank of Canada joint saving account of approximately $201 (has been about this amount for at least 5 years) We did not get a T5, probably because the amount of interest, if any, was so low.

That’s it.

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