in Canada overlooks reporting requirements
I am an American citizen married to a Canadian. I
have lived and worked in Canada for the last 20 years as a permanent
resident. I have been filing my 1040 with the foreign income tax
exclusion attached for the last 14 years, but after having talked
to an IRS rep at the U.S. Consulate this year, I found out that
I have to fill out a special form for my RRSP, or Registed Retirement
Savings Plan, savings as well as reporting dividends on my bank
accounts in Canada. I decided to find someone professional to figure
all this out. While researching info on the Web, I just came across
information about FBAR reporting.
I know this is a separate thing from tax-filing obligations, but
I am worried since I have been living here for so long and only
now realize that I need to report this. Am I in for any real problems
ahead? -- Kathy
FBAR is an annual foreign bank account report
required by the U.S. Treasury for all citizens with financial interest
or signature authority over foreign bank account(s) that exceed
$10,000 during the year. Since, as you observe, Canada is a foreign
country, this requirement would apply to your bank accounts, including
any joint accounts with your husband. You would use Form
TD 90-22.1 to report the ownership of these accounts and file
the form by June 30 of the following year. You should also attach
B to your annual Form 1040 and check box 7a as "yes."
Since I had a meeting with an IRS agent today on a
similar topic, I asked him what his advice would be. He said that
there is a six-year statute of limitations on filing the form so
that the Treasury Department could have you go back and file for
six years. This would mean that to get everything correct, you would
need to go back and file from 1998 by June 30, 2005.
Although there are steep nonfiling penalties, the
Treasury Department does not automatically generate penalties when
you file late forms. Penalties would only be assessed if you were
contacted to file the forms when, in fact, you had not filed previously.
I was also told that the IRS recently became aware of U.S. citizens
with brokerage accounts in foreign countries including Canada. Under
disclosure rules, these affected taxpayers have a chance to
come forward prior to being contacted by IRS and risking greater
penalties in addition to income tax and interest and possible criminal
As far as your earnings on these foreign accounts,
they should have been reported on your Schedule B. Since you are
claiming the foreign-earned income exclusion, you have your personal
exemption and standard deduction available to offset the income
on these accounts. You may want to consider filing amended returns
to include these amounts and pay any additional tax you may owe.
I recommend you continue working with your tax professional to determine
the proper course of action.