OT: US law regarding foreign bank accounts

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That wouldn't be governed by US law, rather Canadian tax laws. If they go to school in the US and take the money into the US, then US laws would apply.

Actually the US law does govern US citizens having interests in foriegn bank accounts.

The Treasury Department requires that US citizens holding such accounts to claim them on a special line on their US tax returns (Schedule A/B form) if they're under $XXX. I don't remember offhand what the amount is, but it is likely within the range that Ruby has in mind.

If the account is over that amount, there is a different form for notification that has to be done directly to the US Treasury Department.

At least it's easier now with the cutoff amount. It used to be *any* foriegn account, even just a few hundred dollars, would trigger the special filing regulations.

Also I believe that the Canadian government still taxes the interest on such accounts with a Non-Resident Tax that is automatically taken out by the bank. It used to be 15%, but I don't know what the rate is now.

Between the Canadian tax and the US filing regulations, I just got fed up with it and closed both very small accounts I had in Canadian banks. I had set the accounts up for my convenience while traveling, and they, well, made it too danged inconvenient. lol

HTH

Nyssa, who sometimes wonders if the government weenies stay up nights thinking of ways to inconvenience everyone

The answer in that case is, don't tell. I never tell the Canadian tax people what I do or have in the UK, I would be mad to do so. At worst if I want to bring something here, I will pay some taxes if I declare it.

Bad enough a pension gets taxed in the UK and taxed here, but that is completely unavoidable - unfortunately.

I have worked with taxes for several years. I will do a bit of research and get back to you privately!! Someone was right when she talked of a special form. This is a Treasury form, and is on the IRS 1040 Sched B.at the bottom of the page. I have done several returns for people with overseas bank accounts, and the Treasury form was basically a statement.

Off the top of my head I would guess that the monies that go into the account are gifts, The interest accrued is US income.

Now, I have to work out how to do Mike's taxes with a non-resident alien wife, who earned good money from the US in her country, and has no tax number, yet!! I have already taken care of the TIN!!

Moms are great, right??

More later, Ruby!!

Gillian

Stitcher wrote:

I might get more complex than that if the bank requires that you also be an owner of the account. I really don't know how the tax laws of both countries would handle that. It might just be easier if you put the money in an account in your name (make sure proper provisions are placed in your will so they will inherit should anything happen to you). You can pay their tuition directly to the school on their behalf when the time comes. Since they won't "own" the money, they won't have to claim it on any kind of financial aid/scholarship applications so the money you have saved for them won't keep them from getting any desirable grants/scholarships.

I think it depends on how much money we're talking about, i.e., $100 would likely be treated differently from $100,000.

I can tell you that (between US citizens, at least) a person can give US$11,000 each year to any other person without triggering gift tax. If you want to give more in a year, you give $11,000 in your name only and DH give $11,000 in his name only each year. (that means writing two checks to make it clear to the Infernal Revenue Service that this was $11,000 each and not $22,000 from one of you.)

If you've hit the Lotto and want to make that $44,000 a year to each grandkid, then each of you give $11,000 to DD and each give $11,000 to DSIL; you cannot *demand* that they then donate the entire sum to the kids, but the IRS doesn't need to know that you hinted that this puts them in a position to donate $11,000 each to each kid once this is "their money" to do with as they wish, no strings attached.

Whether there's a different procedure when the gift comes from outside the US is something DD would have to discuss with a banker and/or tax preparer. Do I recall correctly that DSIL is in the military? I'm sure JAG has seen this before with War Brides' parents and would have an answer from past experience.

ISTR that it's possible for a grandparent to circumvent that $11,000 limit by writing your check directly to the university. Of course, in

Is there a reason you want to put it in a Canadian bank rather than a US bank, other than your convenience? Might prove less complex if each birthday/Christmas, you sent DD a money order to deposit in a US bank or US investment fund, so that you don't have large sums crossing the border all at once.

WARNING: If the money is in the kid's name, it belongs to the kid when he/she turns 18, even if he/she doesn't go to college. "Our" kid blew it on partying instead of tuition. Not a darn thing we could do about it, either, because she could sign the withdrawal paperwork herself after age 18. Darn it, I keep forgetting to call to get that same paperwork sent to her brother (and I'm not going to remember till his mother tells me he needs the money for some purpose she approves of). Drat these CFS memory problems! :) (He knows the account exists, but not which investment company and account number.)

My grandmother's brother, who had some bucks, set up an account in Germany in his sister's name. He regularly sent her "gifts", which she deposited to "her" account, but the account was only touched when he was visiting and needed the convenience of a German account. She "inherited" her "own" account when he died; no paperwork involved, since there was absolutely nothing in writing to indicate that her brother had anything doing with that account, simply a handshake agreement between an older brother and his little sister that he trusted her not to steal his money.

I'm sure we could set up something similar amongst ourselves; e.g., I could put Mavia's name on a Canadian account, and when she reports she paid $10 extra tax because of my money, I send her $10 of stash as compensation.

Actually, I went through Canada on my MasterCard. Not one bank within a couple thousand miles of where I was, was a member of the same ATM network as my bank. Not as in "you have to pay a fee", but it simply spit the card back out at me as "unrecognized". Thankfully, I remembered the PIN for the MasterCard, and paid roughly the same fees for the cash advances as I would've paid for foreign ATM usage. And, of course, most stores were quite happy to take my MasterCard so I could save my surcharged cash for the $5 hamburger or $1 postcard that didn't warrant using plastic.

I highly recommend you do not get legal advice here. There are many ways you can go about what you are asking, but contact either a tax accountant for a consultation, or an attorney to be sure.

Thank you all for the helpful information. I was thinking of a Canadian account simply because I wanted to sort of make a monthly deposit. But think I will look into a US account . Not talking big bucks but thought if I put aside small amounts on a regular basis that by the time they finish High school it might be a little help. Now if I win the lottery well that would be easy. LOL! Again thank you Ruby

How about a hybrid? You open a Cdn account for your convenience in making the deposits, and then every Christmas send them a money order to put in the US account. Sorta like a Christmas Club, except you don't take the money out to spend. :)

A good idea. Thank you ruby