Another ‘accidental American’ fears for her Canadian family

I received the following e-mail from “Jane” (name changed for her protection). Not only is Jane an ‘accidental American’ in the truest sense (having renounced her citizenship in the ’70s when she became Canadian, but having failed to obtain a certificate to prove it), but so is her mentally disabled son. Now she fears that her American heritage is putting her son’s future wellbeing at risk.

Interestingly, I had gotten advice and signed my contract with cross-border accountants well before I applied for and received my U.S. Passport. All of my travels to the States had previously been on my Canadian passport – I believed I was only a Canadian citizen, no longer a U.S. citizen. I came to Canada in 1969 / became a Canadian citizen in 1972 – and I am sure relinquished my U.S. citizenship when I took the oath for Canadian citizenship, although I have no proof of that.

About the same time as I was getting advice and making arrangements to have back U.S. taxes prepared, I was told by a U.S. border person that I had to enter the U.S. on a U.S. passport, another significant reason to do that. This is the point at which I should have gotten proper legal advice, rather than tax advice from an accounting firm who subsequently made a pretty penny on my ignorance.

I was advised by an immigration lawyer yesterday that I absolutely would have relinquished my U.S. citizenship with my oath for Canadian citizenship in 1972 or 1973. Unfortunately, I was previously told by my daughter that I had to do U.S. taxes. She was told by the U.S. Consulate when she was applying for her U.S. passport (to be able to work in the States) that her parents would still be U.S. citizen, that they could not have lost their citizenship. She was the person who clued me into having to do U.S. taxes when she moved back to Canada to again be embraced by the Canadian medical system after a bad car accident in Seattle. Applying for and getting my U.S. passport brought me back into the clutches of the U.S.

I do receive a small amount of U.S. social security, having worked in the States for a little over seven years / it supplements what I receive from CPP. My then-husband and I came to Canada because his brother had married a Canadian young woman and was living in Cranbrook, B.C. They convinced us to come to Canada when the company that we were working for (Boeing in Seattle) laid off in excess of 20,000 people with the cancellation of a large government contract. Although we arrived in Canada at the time of those coming because of the U.S. draft, my husband had served four years in the Marines. He has since passed away, but we had divorced in 1984.

Our children were born in Canada, 1972 and 1974. I was a single mom for the remainder of my children`s growing up years and it took many years to receive back child support through Maintenance Enforcement.

My adult son is developmentally delayed, has attention deficit disorder and has just been diagnosed with hemochromatosis. He receives Assured Income for Severely Handicapped (AISH) and Persons with Developmental Disabilities (PDD) services and is waiting for a placement in the Venturers Society program. I have an Registered Disability Savings Plan (RDSP) set up for him, to which is contributed $125 per month so the RDSP qualifies for government bond and grant. My son is an “accidental American” by virtue of being born in Canada to parents born in the U.S., but who became Canadian citizens before he was born. It looks as if my son cannot renounce his U.S. citizenship because of his developmental disability and I cannot do so for him. I presume I am subject to taxes to the U.S. on the Grants and Bonds each year for my son’s RDSP, which negates any benefit for him. I have a testamentary trust set up for my son.

My adult daughter did get her U.S. passport and worked in Seattle for about eight years before returning to Calgary. She had had a car accident there, with some resulting brain injury and was eventually paying medical bills on her credit card over and above what was covered by her work medical insurance.

My present husband is also a U.S. citizen by virtue of his father being born in North Dakota. He is a musician and had decided to get a U.S. passport to be able to work in the States. He never did work in the States. Soon after getting a U.S. passport, he met me and we then married in 2005 and now reside in Calgary. He will be 72 this month (I am 68).

It is most stressful and expensive (at least for me) to gather all of the information slips and then, usually, revised information slips, Canadian and U.S., for my investments in time to get Canadian returns done, followed by getting our U.S. return done based on the Canadian returns, and mailed for the April 15th U.S. deadline. Although I know we could get an extension. Cost to have our 2010 income taxes, both Canadian and U.S., prepared was $3,386.25 by a CA versed in both Canadian and U.S. taxes (and recommended by my financial advisor).

There were no taxes payable to Canada because I had during the year gotten a Disability Tax Credit from Canada (for complications from many surgeries for Crohn’s Disease and resulting increased maintenance of my ileostomy). However, the Disability Tax Credit is not recognized by the U.S. so I owed taxes of $1,303.00 (a lesser amount of tax than if I had not claimed the Disability Tax Credit for my Canadian taxes). I had to pay the U.S. upfront for next year, $1,296.00. All other years – 2005, 2006, 2007, 2008, 2009 – there was nothing owing to the U.S., just the accountant fees, between $3,000 and $4,000 for each year for both Canadian and U.S. returns. The U.S. returns are too detailed for me to accurately prepare / the accountant that had done my Canadian taxes for many years did not want to touch this new scenario. Interestingly, both Canadian accountants that I used previous to doing my U.S. taxes knew that I came from the U.S. but I was never advised that I had to also do U.S. taxes.

FBAR’s are time-consuming, let alone intrusive, and don’t reflect accurately when having to report the highest balance in each account as funds were sometimes moved from one account to another for my investments during the year. Also, as trustee for financial matters for my son, I hold one account in my name for his AISH and paying all of his expenses. I also hold an RDSP (Registered Disability Savings Account) for him – he will be the beneficiary when time comes for him to receive disbursements from that (in lieu of an RRSP for him).

I hate and resent the idea of the U.S. getting money from my estate that should go to my kids if I were not a U.S. citizen. I resent giving the U.S. the information I am required to each year with the FBAR and an additional IRS form, 8938, that will be required to be filed with 1040’s going forward. The substantial annual maintenance fees for my U.S, citizenship is and will continue to be a big part of my annual expenses in retirement. If I were able to submit a copy of my Canadian income tax return with a simple IRS document to accompany it, I could deal with that. They could do the calculations they are concerned with. Whatever tax I would have to pay would likely be minimal. Too much paperwork. Too much chance of making some mistake and being assessed outrageous penalties from the U.S. I’m not confident that things will not get more onerous in the coming years regarding taxes for U.S. citizens in other countries. I do not want to spend my retirement years with additional worry on top of that that my Canadian earned savings may not be sufficient. I don’t want dealing with the IRS to be a problem for executors when I am gone. I do not want my U.S. citizenship to affect any inheritance for my children. I really don’t see any benefit to me in retaining my U.S. citizenship.

I need to determine if I fall into a category whereby I could renounce my U.S. citizenship, and if my kids could. My husband has not made up his mind on renouncing his U.S. citizenship at this time as we do have that small property in the U.S. I need to find out how to proceed and possible consequences for each of us.

I am definitely a Canadian. It was a stroke of luck that I moved here, had my kids here. Besides Canada being a wonderful place to raise my children, I am eternally grateful that we fell under the Canadian medical system and with that help I could continue to be a contributing member of society, rather than a welfare mom in the U.S.A. I do, though, have twinges of patriotic feelings for the U.S., having grown up there, but it is not the same country that I left. Unfortunately, I feel my only recourse is to renounce my U.S. citizenship. What people are now being put through, in my opinion, is immoral. I don’t want to spend my retirement years with this stress, administrative cost and fear of IRS penalties for some small mistake.

I am now trying to get an appointment for expert tax advice before my next step, which I want to be renunciation of my U.S. citizenship.

I feel sorry for my and my family’s plight but I will deal with it eventually one way or another. I cannot tell you the compassion and outrage I have for the other “little people” not yet at the place I am with all this. Again, I think the whole thing is immoral on many levels. I am proud to be a Canadian. I am not proud to be an American.

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One Response to Another ‘accidental American’ fears for her Canadian family

  1. Some were practical, of course, but others were psychological and emotional.

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