[BackinCanada]

My husband died in May, 2010. He had dual Canadian/US citizenship. We lived and worked in the U.S. for about 27 years. I am Canadian and still hold a U.S. green card.

When we returned to Canada at the beginning of 2008, we didn't file taxes in the U.S. Last week, my deceased husband received a letter from the IRS asking for the 2008 tax return. I am assuming that a payout from his 401K (he withheld an additional 13% to cover the taxes) triggered the letter. I called the IRS and they said I had to fill out joint tax returns for 2008 and 2009 and I guess for myself forever, especially since I'll be receiving U.S. Social Security in about 6 1/2 years.

I was told to fill out the 1040 as well as forms 2555 and 1116 to see which one gives me a better outcome.

Except for the one 401K payout, the only income was from paychecks. There was no property, etc. My husband died without a will and left me with a very small amount of money.

I am now living in Canada and have never filled out an American tax return. I am afraid that the U.S. government will make me pay back taxes, interest and penalties for my deceased husband. He earned good money in 2008 while I earned about $30,000. Can the IRS do this?

How do I find a (cheap) accountant to do the U.S. taxes for me since I'm living in Canada?

Thank you for any advice you can give me.

[MukatA]

You should file 2008 tax return of your husband. File 2009 return also if his worldwide income was more than filing requirement. Then you will also file 2010 tax return with "deceased on...." on the top of the return.
With foreign tax credit Form 1116 or foreign earned income exclusion, you may not owe any tax.
You can contact [email protected] for professional help.

[AtlantaTaxExpert]

I am the tax consultant that MukatA refers to, and I CAN help you file your U.S. returns.

Yes, the IRS can come after you for the taxes due. They can and will enlist help from the Canadian tax authorities to collect the tax.

Email me at [email protected] with income details so I can estimate your tax liability.

[BackinCanada]

My husband's income in 2009 was Canadian unemployment only and he earned under $20,000 (about $19 thousand something) I earned just under $40,000. What is the filing requirement limit that is earned to submit US taxes? In 2010, my husband earned under $5,000 before he passed away. I will have earned again just under $40,0000.

Taxexpert, what information should I send you to estimate my tax liability. How much will this cost me?

[ebaines]

Just to add one other bit of advice - remember that it is your husband's estate that may owe these taxes, not you. So be sure that whatever you pay on his behalf is funded by the assets of his estate, not your personal assets. If your husband's estate has insufficient assets to pay these taxes, that does not mean that YOU have to pay them (unless you file jointly). Of course I don't know what your husband's estate consists of - I offer this only because it's easy for a widow to fall into the trap of automatically assuming the husband's debts even when it may not be necessary to do so.

[MukatA]

A U.S. citizen or resident must file the tax return if the worldwide income exceeds the filing requirement. Another filing requirement is Form TD F 90-22.1. Your U.S. Tax Return: U.S. Citizen or Resident with Foreign Income

[BackinCanada]

The IRS agent told me that I'd be better off filing jointly because if we filed separately, more would be owed. He left NO estate. He owned nothing and his possessions aren't worth anything. I'm worried about collecting social security and doing anything the IRS might consider "wrong" such as filing separately so that no money would be owed by my husband. Can the IRS go after his social security money?

What is the worldwide income amount?

I was given a gift of the downpayment for a condo which I am in the process of buying. In Canada, the interest paid on the house is not a deduction but it is in the United States. In the future, even if I earn less than the worldwide income amount, can I file a U.S. tax return and use this deduction?

[AtlantaTaxExpert]

Yes, you CAN claim mortgage interest on a home in an overseas location.

Based on your posting, your world-wide income would be about $60,000, of which all but the 401K payout would be excluded under Form 2555 or offset by the Foreign Tax Credit under Form 1116.

You would need to email me what you earned in 2008, what your husband earned and received in unemployment benefits in 2008, and the 401K payout, which should be detailed on Form 1099-R. Email this information to [email protected].

The initial estimate will cost you NOTHING, and I will email you a fee quote when I do the initial estimate.