What we’re talking about here are Canadians who had the legal requirement to annually file US tax returns and FBARs (reports of foreign bank accounts…ie, your bank accounts in Canada which had more than $10,000 (US) in them at any point in the year), but who haven’t filed a US tax return or a FBAR in years (if ever). Which Canadians have the obligation to complete US tax returns? Those Canadians who are also US citizens primarily, or maybe a Canadian who obtained a US green card but did not relinquish the green card upon moving back to Canada.
What Does the Amnesty Provide?
Really, it provides peace of mind. You haven’t been filing your US tax returns (or FBAR’s) for years, you know you have that obligation, and you don’t know how to “come clean”. Under the amnesty program, for those who qualify, the IRS will not impose penalties nor conduct an audit.
What Must You Do To Comply With the Amnesty?
1) File all tax returns with appropriate related information returns required for the past three years (i.,e, 2009, 2010, and 2011);
2) File Foreign Bank Account Reports (FBARs) for the past six years (i.,e, 2006- 2011);
3) Pay any tax and interest if applicable on the unfiled returns (but odds are there probably won’t be any US tax or interest, I will explain…);
4) Complete and sign under penalties of perjury a 20-question questionnaire (we will discuss some of the more interesting questions).
And that’s it. All your worries about years of unfiled tax returns can be over. Go back and forth between the US and Canada free of concern that your unfiled taxes are going to be a problem, and maybe prevent you from visiting the US for a long time.
Let’s Start Looking at Some Specifics in the Amnesty.
The taxpayer is “eligible” for the streamlined procedure if he or she meets certain factors, including the following factors:
1. The taxpayer has not resided in the US since December 31, 2008;
2. The taxpayer has not filed a US tax return since 2008;and
3. The taxpayer does not owe more than $1,499 in any of the tax years beginning in 2009 and ending on 2011.
Only Canadians Who “Reside in Canada” Can Take Advantage of this New Amnesty, What Does that Mean?
To be permitted to use the amnesty, the applicant must permanently reside in Canada, and must not have “resided” in the US prior from 2009 to present. But so many Canadian snowbirds live part-time (for several months a year) in Palm Springs, or La Quinta, or San Diego or Phoenix. So does living in the US just shy of 6 months a year qualify you to take advantage of the new amnesty? My guess is yes, that as long as you’re not a US resident, you do qualify for the new amnesty (basically, if you’re not in the US more than 6 months a year, and for the Canadian in the US between 4 to 6 months each year, that person must be careful to complete the Form 8840 (the closer connection form…closer connection to Canada) each year). So my guess is as long as you’re not a US resident, you do qualify for the new amnesty. That’s just a guess though, as there is no clear guidance on this point yet.
Note the Canadian who has been dutifully completing Canadian tax returns each year is unlikely to owe any (much less $1,500) US taxes for the past few years, due to the credit system between the two countries. We’ll pick up this concept, and look at other factors of the new amnesty program, in Part 2 of this series.