Dual citizen US/Canada daughter denouncing US citizenship
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Posted on: 01-09-17 10:13:57
follow up for others - we thought we knew what was up and found appointments through the US state.gov site above, but it seems that wasn't the right way to go, and we ended up getting the third degree about our choices from the jerk at the desk (who was dual citizen and doesn't seem to even understand the rules as he claimed TFSA was under tax treaty while everything I'm reading says things like TFSA/RESP are not! Correct me if I'm wrong please).
So seems this guy who friggin works for them could be in for an awakening himself one day and he he was attacking us about our decision. It was ridiculous - he was going on about well, what if she graduates from university and is offered a job in the US? Reply, well, 1, she wouldn't be looking for a job in the US, 2, if she really wanted it, she would just get an H1B or whatever applicable visa....his response...well, yes, i suppose...but but but 'insert next rant here'.
It was all very offensive. Anyhow, he said we screwed up process entirely, so for any others looking, you need to go through the CA site - send an email as outlined and they send instructions. For the Vancouver office, they do 2 a day at 2pm only. There is a $2350 US processing fee as well... https://ca.usembassy.gov/u-s-citizen-services/loss-of-nationality/
Good luck!
Renouncing the US citizenship for a person living in Canada and not multi-millionaire is a dumb idea. Likely she will never have to pay any penny to the US government unless she live and earns in the US.
There is an earned income exemption of $101,300 that you don't have to pay taxes on.If that's not enough for her then there is always the Canada/US tax treaty where you get credit from your Canada tax filing for whatever you pay to the US. The treaty, in part, is meant to avoid double taxation. Btw you are not legally required to file US taxes if you don't owe any money to the IRS.
<Long Live Canada>
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I pointed you at the stars and all you saw was the tip of my finger
Quote:
Originally posted by luckysaab
There is an earned income exemption of $101,300 that you don't have to pay taxes on.If that's not enough for her then there is always the Canada/US tax treaty where you get credit from your Canada tax filing for whatever you pay to the US. The treaty, in part, is meant to avoid double taxation. Btw you are not legally required to file US taxes if you don't owe any money to the IRS.
<Long Live Canada>
Can you expand on that? As per a taxation site I have long followed:
Generally, a U.S. citizen living anywhere in the world, must file a return if the minimum income indicated for the filing status below is met in 2016: Single $10,350
That doesn't agree with your statement that you are not legally required to file if you don't owe money - can you show that wording to me somewhere on a government site?
Honestly, if that was the case, she could probably just forget about it, but even if she never owed taxes, the 'having to file' part is the biggest issue so curious your statement above - I am not going to do it for her all her life, she wouldn't have the ability herself, and most tax guys up here cost $1000/year to file US taxes for us.
The biggest issue we foresee though for her is house sales - they tax you on your primary residence sale - where we live, that can be dramatic gains, so that is pretty lame if down the road she has to pay a lump sum of 100k on a 300-400k gain on sale of her own house. Ironically enough, the day they shot us down, the guy on the harbour ferry said his friend was dealing with just that having sold a place in Vancouver.
Thoughts?
Quote:
Originally posted by deewar25
Thoughts?
Renouncing the US citizenship is a big deal - especially for your child who has not graduated and/or entered the workforce yet. Make sure you know the facts, consequences and what you are doing. I would strongly encourage seeking professional advice before taking this step. Clearly, forum like this is not a great way to seek advice for such an important decision.
The $10,350 amount is the standard deduction for everyone but making more than that means you could potentially owe taxes. This is only true for US residents so she don't need to worry. For US citizens living abroad the important amount is the 'earned income' of $101,300 (for 2016).
https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion
There is no such thing as paying a lump sum tax of $100K for a sale of primary residence of $300-$400K gain. The US law says if you owned and lived in the place for two years before the sale, then up to $250K of profit is tax-free and if you are family the tax-free amount is $500K. And then there is the whole estate exemption thing of 5 million + if the house was gifted or inherited.
As for filing requirement the general rule of IRS is that if you don't owe money you don't have to file taxes. You can still file for whatever reason, like needing a proof of income or applying for a student loan but you are not required. IRS has an interactive calculator that tells you if you need to file taxes.
https://www.irs.gov/help/ita/do-i-need-to-file-a-tax-return
This one is tailored for US residents. I don't believe there is one for US citizens living abroad but you get the picture. IRS don't care much about average US citizens living abroad.
Not sure about your daughter's financial situation but the bottom line is you only worry about US taxation if you are multi-millionaire. In that case you seek professional help.
<Long Live Canada>
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I pointed you at the stars and all you saw was the tip of my finger
Generally speaking taxes are lower in the USA. So in case when the returned is filed for Both in Canada and USA, it turns out that you have to pay extra to the Canadian Government. Just a ball park number, but on an Income of say US$100,000, after filing return and paying something to Uncle Sam, the Canadian Government would ask for another $5,000.
So according to me, it is better to Keep the citizenship now and just file a return in both countries. It keeps the options open.
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A Proud Indian Canadian
Quote:
Originally posted by luckysaab
As for filing requirement the general rule of IRS is that if you don't owe money you don't have to file taxes. You can still file for whatever reason, like needing a proof of income or applying for a student loan but you are not required. IRS has an interactive calculator that tells you if you need to file taxes.
https://www.irs.gov/help/ita/do-i-need-to-file-a-tax-return
This one is tailored for US residents. I don't believe there is one for US citizens living abroad but you get the picture. IRS don't care much about average US citizens living abroad.
<Long Live Canada>
Thank you for your information luckysaab - helpful and I'm of the belief that she likely wouldn't owe money, but I refer to this article and it seems to reject your claim that you don't need to file if you don't owe anything.
Myth #2: I don’t owe U.S. taxes, so I don't have file a U.S. tax return.
In order to prevent the double taxation of income earned by U.S. citizens living abroad (i.e., tax imposed by the U.S. and the country of residence), the U.S. tax code contains provisions that can reduce or eliminate an expat’s obligation to pay U.S. taxes. For instance, the foreign earned income exclusion (FEIE) allows expats to exclude a certain amount of income earned abroad ($100,800 for 2015). Expats are also generally allowed to use foreign taxes paid as a credit against their U.S. tax obligation.
Even if these provisions eliminate your U.S. tax obligation, however, they do not eliminate your obligation to file a U.S. income tax return on an annual basis. This is because in order to claim the FEIE or foreign tax credit, you must file certain forms with a tax return. In some cases, a late filing of these forms can bar you from making these claims. If your late filing is allowed, you may not suffer penalties that are calculated as a percentage of tax due, but you may suffer penalties that are imposed as a fixed dollar amount. For example, a $10,000 penalty may imposed for not timely filing Form 8938 (Statement of Specified Foreign Financial Assets) with your tax return.
http://time.com/money/4298634/expat-expatriate-taxes-us-myths/
The need to file one way or another is the key issue for me at this point.
Thoughts? This is specifically related to her situation so seems more likely than the scenario for US residents you mention with the link above.
