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My wife and I are Canadians living and working in the US. Have been here long enough to be considered resident-aliens (I think, based on this substantial presence test I switched from being NRA to RA in the fall of 2015). Trying to figure out my tax return using online Turbotax software but there are questions about foreign financial accounts that I'm not sure how to answer. Do I need to file this FBAR and if so how do I do it ? Is there any benefit to filing a dual-status return (part of the year NRA and part RA?) [note: I only started working in the US in August 2015] What other considerations do I have to keep in mind? I have more than $10k in Canadian accounts.

  • "I think, based on this substantial presence test I switched from being NRA to RA in the fall of 2015" You generally don't "switch" from one to the other in the middle of the year. If you meet either the Substantial Presence Test for a given year or the Green Card Test for that year, then you are a resident alien for all of that year; if not, then you are a nonresident for all of that year. The exception is if it's the first year you meet a test to be a resident, in which case you will be nonresident for the part of the year before you were present in the US that year. – user102008 Mar 12 '16 at 9:35
  • Well, it is the first year that I meet the test. – shim Mar 12 '16 at 17:13
  • Are you sure you meet the test? If you were only in the US after August 2015 then you don't meet the SPT for 2015. – user102008 Mar 12 '16 at 19:20
  • Only started current job then, but test includes 1/3 of days in 2014 and 1/6 in 2013. Have added up days based on this test and that's what I found. – shim Mar 12 '16 at 20:22
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This is partly a dupe of What is the deadline to file FBAR for a foreigner recently arrived in the US? but I think it's different enough to merit an answer.

If you became (or were) a US resident for tax purposes last year and had during the year a 'financial interest in' (i.e. own or benefit from) more than US$10k in 'financial accounts' in a country or countries other than the US, yes you must file FBAR, Foreign Bank Account Report. (Technically BSA also requires reporting by people who have 'signature authority over' such accounts and no financial interest, but Treasury has continously waived that part.)

You do not file this with the IRS. Although there is detailed information on the IRS website and there is a checkbox on Schedule B to Form 1040 to remind you, FBAR is actually filed with a different part of the Treasury Department called FinCEN through their website. Note that FinCEN collects other information besides FBAR and the rest of their website is largely about CTRs, SARs, and other confusing things; focus on the parts about FBAR.

The deadline is June 30 this year as it has been in the past. However, next year it is scheduled to change to April 15; allegedly this will be more convenient.

There is ALSO Form 8938. This is a separate and more recent law (FATCA) where you do report some foreign assets to the IRS as part of your income tax return. The threshold is higher, only if you have over $100k or $150k for a couple filing jointly (half that if separate or single, higher if living abroad, which you presently aren't), but the scope is broader, including more than just financial accounts. See the IRS comparison and the full instructions (PDF or online) and form. Since this goes on your tax return I expect TurboTax should prompt you for the necessary information and include it, although I've not done so.

Yes this information is partly duplicated which is stupid. Everybody in sight, including the National Taxpayer Advocate, has been arguing for years they should be combined, and some of the very harsh penalties (under FATCA especially) should be relaxed. Nevertheless both reports are legally required. As Mark Twain famously said: "Suppose you are a (US) congressman. And suppose you are an idiot. But I repeat myself ...."

  • On TurboTax when you go to 8938 they say "If any of the income, deductions, or credits reported on your return are from the foreign financial assets you need to report, enter the totals (in US Dollars) in the appropriate field below." and below there are a bunch of fields for interest, dividends etc. But I never saw anything about reporting income on my TurboTax return other than my W2. Would these go into the 1099s? – shim Mar 13 '16 at 4:32
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    (Sorry I was away briefly.) If you get interest or dividends over $10 from a US payer they must report it on 1099 and send you a copy. But even for smaller amount or non-US payer you must still report this income, and usually pay tax (interest on 'municipal' bonds is exempt); I haven't needed this feature in a long time, but my recollection is TT has a question in the income flow after you enter 1099s something like "any other interest/dividend/etc income"? But the foreign allocation of income and deductions/credits matters for foreign tax credit (1116) NOT 8938. ... – dave_thompson_085 Mar 16 '16 at 10:36
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    ... 8938 is to report ASSETS in the specified categories even if there is NO income (or expense). For example, some 'growth' stocks don't pay any dividends, but still count as a reportable financial asset. Sorry I don't have specifics of how TT handles this; maybe someone else can chime in, or there's always Intuit support. Oops, forget notify @shim – dave_thompson_085 Mar 16 '16 at 10:44

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