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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 non-U.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.


If you would like more information on this topic, please contact a member of the EPR Maple Ridge Langley team by filling out the contact form below.

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. EPR Maple Ridge Langley, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.


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