US outland applicants' thread :)

[computergeek]

Only for the years when you hit the $10k threshold. You might never never need to, you might just once, you might have to periodically, and some will have to file every year. If you're a mere mortal, maybe just when you buy a car or a house. If you earn more, it'll be every year. Deadlines are end of June, you can file online. There are periodically amnesties if you were required to file but didn't. Just Google FBAR.

Note also that the rules also require anyone who is a signatory on someone else's account to file an FBAR. With that said, they have postponed this provision a couple of times but it means that if you have a business in Canada, or you are a signatory on the bank account of a business (or trust, estate, etc.) then you must also file an FBAR.

Plus, don't forget that the FBAR includes retirement accounts (for example). It's not difficult for someone to accumulate $10k in a retirement account. The worst part of FBAR is that the penalties are draconian - $10k per year, per account types of penalties.

Beginning in 2014, the FBAR can be filed electronically (you fill out an online PDF and then submit it).

Note that is a hard deadline: there are no extensions, and its due date is independent of your tax return due date.

Don't worry: there are lots of other interesting pitfalls (like the 3520 and 3520-a forms one must file for a TFSA, again with draconian penalties). I've always been a big fan of the 5471 (which is filed for every corporation outside the US that you control or of which you are a director). The US will then assess personal tax liability on you for profits of the corporation (though I cannot see how that doesn't violate the non-discrimination clause of the Canada/US tax treaty, as it leads to unequal treatment of entities between the two countries).

Plenty of fun things like this. For example, my life insurance company required a W8BEN form for my spouse when I changed beneficiaries. That let me to many hours of fun reading about the obscure and special rules of US estate tax treatment for foreign spouses (as a general rule, the estate cannot be passed to the foreign spouse tax free - but the Canada/US tax treaty establishes there is a special "tax credit" exactly equal to the amount of estate tax due...)

Hell hath no fury like an IRS scorned...

 

[IvanP]

Hell hath no fury like an IRS scorned...

Here's a quick demonstration of how you can wind up tripped up by this:

It's payday, and it's one of those months when it comes just a few days after you've just paid your $1200 rent, so your checking account - which was on the borderline of being overdrawn - isn't empty (yay!). Together, you and your spouse got $3k net from your biweekly pay which went into your joint checking account. You're not rich, so you haven't thought about separate accounts to avoid things like FBAR.

Since 2009 you've put $500 a year in each of your two kids' RESP (education savings) accounts, and Canada matched 20%, so you've actually got $3k in each, and the assets have appreciated 15%, for $6,900 total. You've got signing authority on those, so they count towards your aggregate total.

Whoops, you just hit $10k! And you're thinking - WTF? I just got paid $3k and I have $6600 in the RESPs - that's not $10k! But your landlord didn't deposit your rent check yet because he's with his sick mother in Abitibi-Témiscamingue, so you're at $10,800.

Your last hope, of course, is the weak looney, and indeed, $10,800 Canadian is not currently worth $10k American. But on some days, it is, and you can get tripped up by exchange rates, too.

The point of this fun little exercise is a) to point out how easy it is to find yourself subject to these rules and b) how nonsensical the $10k threshold is as a policy matter. The US has created a burdensome and intrusive reporting requirement that is not widely known about, has draconian penalties, and affects people doing very normal things who are exceedingly unlikely to be engaging in the activity (financial crimes) the rules are trying to catch or prevent.

I know there are lots of young couples doing the immigrating, and $10k seems like quite a lot when you're younger (unless you've been on the receiving end of a $10k tuition bill in the US - then you're like, why so low?), but once you're just a tiny bit more established, with both of you working, you can find yourself at $10k pretty quickly, and the $10k is at any given moment in time during the year... even if it's just because your landlord deposited the rent check late...

 

[rhcohen2014]

Here's a quick demonstration of how you can wind up tripped up by this:


I know there are lots of young couples doing the immigrating, and $10k seems like quite a lot when you're younger (unless you've been on the receiving end of a $10k tuition bill in the US - then you're like, why so low?), but once you're just a tiny bit more established, with both of you working, you can find yourself at $10k pretty quickly, and the $10k is at any given moment in time during the year... even if it's just because your landlord deposited the rent check late...

so then, wouldn't it be smart to cash certain amounts of paychecks to avoid this type of thing and not choose direct deposit?

 

[IvanP]

so then, wouldn't it be smart to cash certain amounts of paychecks to avoid this type of thing and not choose direct deposit?

In the case I gave, the easiest approach would be to have the Canadian spouse be the only one with signing authority on the kids' college accounts, and as a second or additional step you could also have separate checking accounts.

The FBAR really isn't the hardest thing in the world to file (until you have lots of accounts, or signing authority on business accounts), so it's not even close to the end of the world if you have to file it. Better to live your life normally and file it when you have to than to start structuring your paycheck receipt method around avoiding it. The point is to be aware of it so you don't find yourself unexpectedly facing stiff penalties for leading a normal life. And also that the US has some pretty stupid rules for US citizens living abroad...

 

[rhcohen2014]

In the case I gave, the easiest approach would be to have the Canadian spouse be the only one with signing authority on the kids' college accounts, and as a second or additional step you could also have separate checking accounts.

The FBAR really isn't the hardest thing in the world to file (until you have lots of accounts, or signing authority on business accounts), so it's not even close to the end of the world if you have to file it. Better to live your life normally and file it when you have to than to start structuring your paycheck receipt method around avoiding it. The point is to be aware of it so you don't find yourself unexpectedly facing stiff penalties for leading a normal life. And also that the US has some pretty stupid rules for US citizens living abroad...

makes sense. already have separate checking accounts because i wanted to avoid tax issues with a canadian spouse. i've already put a feeler out about not being on a mortgage. we only have a very small savings account together. guess i'll have to wait and see how it all works out at some point!

 

[fizban]

Hey US applicants! I am sponsoring my common-law spouse from the US and recently got SA. Does anyone know how long it usually takes from SA until the Ottawa VO updates ECAS to "In Progress"? Of course we are eagerly awaiting next steps.

Regarding the FATCA and FBAR stuff -- This only applies when the US half of the couple starts to accumulate assets in Canada, right?

 

[rhcohen2014]

Hey US applicants! I am sponsoring my common-law spouse from the US and recently got SA. Does anyone know how long it usually takes from SA until the Ottawa VO updates ECAS to "In Progress"? Of course we are eagerly awaiting next steps.

Regarding the FATCA and FBAR stuff -- This only applies when the US half of the couple starts to accumulate assets in Canada, right?

it is best to expect months of silence. at this point, us applicants are being approved in 6 months total time, which means there could be 2-4 months after SA that you hear absolutely nothing. this doesn't mean anything is wrong, just that your file hasn't been opened yet. the best way to judge what the current "trend" is for "in process" would be to check out the ottawa visa office spreadsheet, which can be found in my signature below.

as mentioned by Ivan in numerous recent posts, FATCA and FBAR come into play anytime a US citizen accumulates assets or is a signing authority on any accounts that equal $10,000. this is cumulative, so if you have 3 bank accounts that equal $10,000 on any day of the year, even for just 1 day, then you are required to file. If you are a signatory for business accounts and child savings accounts, those are also included as needing to be reported if they cumulatively add up to $10,000 or more on any given day in a year.

 

[fizban]

it is best to expect months of silence. at this point, us applicants are being approved in 6 months total time, which means there could be 2-3 months after SA that you hear absolutely nothing. this doesn't mean anything is wrong, just that your file hasn't been opened yet.

Thanks, so we'll prepare ourselves for 2-3 months of silence. It was the same for SA -- we prepared ourselves for 1.5 months of silence and only after that elapsed that we started to watch the email inbox like hawks for the SA.

as mentioned by Ivan in numerous recent posts, FATCA and FBAR come into play anytime a US citizen accumulates assets or is a signing authority on any accounts that equal $10,000. this is cumulative, so if you have 3 bank accounts that equal $10,000 on any day of the year, even for just 1 day, then you are required to file. If you are a signatory for business accounts and child savings accounts, those are also included as needing to be reported if they cumulatively add up to $10,000 or more on any given day in a year.

Right -- I am only asking if that $10,000 value is for assets outside the US? At this point my spouse only has assets in the US, no Canadian accounts yet. So my guess is we don't have to worry about this till 2015 when we expect her to land in Canada.

 

[rhcohen2014]

Right -- I am only asking if that $10,000 value is for assets outside the US? At this point my spouse only has assets in the US, no Canadian accounts yet. So my guess is we don't have to worry about this till 2015 when we expect her to land in Canada.

yes, i belive it's only for when the assets are outside of US. i'm sure Ivan will confirm or deny.

of course, i wouldn't put it past the irs if they decided to combine ALL assests, no matter where they are!

 

[IvanP]

Hey US applicants! I am sponsoring my common-law spouse from the US and recently got SA. Does anyone know how long it usually takes from SA until the Ottawa VO updates ECAS to "In Progress"? Of course we are eagerly awaiting next steps.

Regarding the FATCA and FBAR stuff -- This only applies when the US half of the couple starts to accumulate assets in Canada, right?

Just financial assets (not a house or a car, for example), and anywhere in the world other than the US. And also, it's not just when the US spouse accumulates the assets him-/herself, but when the US spouse has signing authority on his/her spouse's account (the Canadian spouse is the account holder and the US spouse just has a debit card - the $$$ in the account is considered belonging to the US spouse for FBAR purposes). When you have signing authority on any account that isn't yours, in fact.

The take-away is really not that you have to avoid it at all costs, but that you should keep the filing obligation tucked away in the back of you head as something to watch out for and do when you start accumulating enough assets.

As a matter of good marital relations, I don't think it's sensible to put all the financial eggs in the Canadian spouse's basket. You don't really want to be the half of the relationship that has $2k in your account while the Canadian half has $50k or $100k, all in the name of not filing a stupid form. All of our relationships are going to succeed... except for the ones that will fail, and you don't want to be the spouse leaving (or left) when you've got close to zero and the other person has everything. You might get your half eventually, through the courts, but a relationship gone sour is not a quick and easy place to start negotiating to have half the assets in your name.

Of course, you could put the house and car in your name and the retirement savings in the name of the other spouse, but then you'd miss out on the tax benefits of pension and retirement plans.

 

[IvanP]

yes, i belive it's only for when the assets are outside of canada. i'm sure Ivan will confirm or deny.

of course, i wouldn't put it past the irs if they decided to combine ALL assests, no matter where they are!

The US is interested in your foreign financial assets (these can include US dollar accounts in foreign countries, incidentally, not just foreign-denominated assets) anywhere in the world. So, you add the amounts in your Canadian accounts with the amounts in your Cayman Island accounts (and the kids' trust fund in the Bermudas if you've got signing authority), and that's how you get your total. The Treasury Department doesn't care if your assets are outside of Canada, just if they are outside of the US.

 

[rhcohen2014]

The US is interested in your foreign financial assets (these can include US dollar accounts in foreign countries, incidentally, not just foreign-denominated assets) anywhere in the world. So, you add the amounts in your Canadian accounts with the amounts in your Cayman Island accounts (and the kids' trust fund in the Bermudas if you've got signing authority), and that's how you get your total. The Treasury Department doesn't care if your assets are outside of Canada, just if they are outside of the US.

haha - yeah i meant outside US. it's still early. on thanksgiving. after driving from ottawa to CT last night, which was really stressful with the weather conditions.

i will edit.

 

[fizban]

Just financial assets (not a house or a car, for example), and anywhere in the world other than the US. And also, it's not just when the US spouse accumulates the assets him-/herself, but when the US spouse has signing authority on his/her spouse's account (the Canadian spouse is the account holder and the US spouse just has a debit card - the $$$ in the account is considered belonging to the US spouse for FBAR purposes). When you have signing authority on any account that isn't yours, in fact.

Of course. All that makes sense.

So my takeaway (and as I suspected) is that my spouse doesn't have to worry about it until she lands in Canada sometime next summer, since she doesn't have any assets outside the US nor any signing authority on funds outside of the US as we don't have a joint account yet.

That means at least we have several months to find a competent tax person for her for some proper advice, as her current tax preparer doesn't have the necessary knowledge of expat stuff.

 

[michminn]

So it would be wise to have my own account and put the vast majority of the money in my wife's account? On that note, would having a joint account with say "Over" 30K steadily in it be wise? I do not want to have to report this account; I'd think that because it was a joint account they wouldn't need to know, correct? She is Canadian I am American why would "Her" income matter? I am confused. FK'n Uncle Sam :-\

 

[IvanP]

Of course. All that makes sense.

So my takeaway (and as I suspected) is that my spouse doesn't have to worry about it until she lands in Canada sometime next summer, since she doesn't have any assets outside the US nor any signing authority on funds outside of the US as we don't have a joint account yet.

That means at least we have several months to find a competent tax person for her for some proper advice, as her current tax preparer doesn't have the necessary knowledge of expat stuff.

Right, and she can keep her US bank accounts if she wants - there's really no need to move everything. It can be handy to have a US checking account...