U.S. Citizenship and Tax Implications

Tax Question:

Who is a U.S. citizen and what are the tax filing implications for a non-resident?

Facts:

If you don’t reside in the U.S., you may still be a U.S. citizen even if you have never claimed citizenship status and never registered as one. As a non-resident U.S. citizen, you have tax filing requirements each year.

Discussion:

Under U.S. immigration rules, you are a U.S. citizen if any of these conditions apply:

• You were born in the U.S. • You were born outside the U.S. but both of your parents are U.S. citizens.

• You were born outside the U.S. after November 14, 1986 and one of your parents is a

U.S. citizen who resided in the U.S. for five years (two of which were after that parent’s 14th birthday).

• You were born outside the U.S. before November 14, 1986 and one of your parents is a U.S. citizen who resided in the U.S. for ten years (five of which were after that parent’s 14th birthday).

As a non-resident U.S. citizen, you have tax filing requirements to report your non-u.s. investments and holdings. These tax filing requirements include:

• Form 114 Report of Foreign Bank and Financial Accounts (FBAR) - to report combined non-u.s. bank account balances in excess of $10,000. • Form 3520 Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain

Foreign Gifts - required to report your interest in a nonu.s. Trust.

• Form 5471 Information Return of U.S. Persons With Respect to Certain Foreign Corporations - required to report your ownership of a non-u.s. private corporation.

• Form 8865 Information Return of U.S. Persons With Respect to Certain Foreign Partnerships - required to report ownership of a non-u.s. partnership.

• Form 8621 Information Return by a Shareholder of a Passive Foreign Investment - required to report ownership of non-u.s. mutual funds. Failure to comply with these tax filings may result in penalties of $10,000 per year per form. There are delinquent filing submission procedures available to become compliant

with late filings.

Dawn Loeffler, BA (Hons), CPA, CA

Manager, Gilmour Group CPA’S

Email: faqs@gilmour.ca

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