FATCA- US Canadian taxpyers
January 23, 2012 - 11:35pm
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Hi, I was wondering if anyone has a topic thread yet on the the FATCA mess where the US IRS is going after Canadian citizens born in the US who immigrated to Canada decades ago. I know Megan Leslie did an event a few days ago in Halifax on it and the BC NDP(Federal) caucus along with Elizabeth May wrote a strongly worded letter to Flaherty condeming any attempt by the US to go after law abiding Canadian taxpaying citizens and demand the Federal Government block any cooperation by Canadian financial institutions to cooperate with the IRS in these "collection" attempts. However, I haven't heard much recently and just wanted to see how much this issue has been brought up here. I some of my own thoughts but I want to see anyone has heard any more recent news. I know Denise Savoie was active on the file along with Paul Dewar and Don Davies back in the fall.
I myself fall into the category of "Canadian citizens born in the U.S. who immigrated to Canada years ago," actually. It's a huge problem. In my case, though, I was lucky enough to be told when I immigrated to Canada that I had to file a U.S. tax return every year, so I've been doing it (always with a grumble, but it always gets done). I feel just terrible for those who didn't know.
Having filed tax returns does not get you off the hook at all. Unless you dont mind coughing up a chunk of your retirement.
Practically speaking, and depending on how long it has been since you left the US, you can easily be better off never having filed.
And if you do not stand to inherit anything in the US, or do not care about it, in practice they have no club to wield over you. Though, that is a complex legal question that everyone affected should look into. I will not inherit a dime- but I know enough about it to say that I bet there are even ways to safely and prudently get funds that you would inherit... with some preparation.
Anyway, I dont believe that this has been more then mentioned here.
I do not know that there is any way presently that the IRS has of collecting from Canadians on funds held here. And if the government ever gives any indication that they are going to cooperate with the IRS in finding some new means... we'll have lots or warning.
Having filed tax returns does not get you off the hook at all. Unless you dont mind coughing up a chunk of your retirement.
The issue with bank or RRSP accounts is at least somewhat a separate one (the FBAR form). It also only applies to people who have accounts that contain over a certain amount of money. The people in real trouble are the ones who don't make much money at all but haven't realized for 20 years that they were still obligated to file U.S. tax returns even if they didn't have to pay anything.
BUT, it needs to be said:
That even if you filed dutifully, you could be, probably WOULD be, just as exposed to them determining that you owe them a substantial chunk of your retirement savings. At a minimum: you are exposed, and having dutifuly filed will not get you off the hook.
Its just as likely you will be worse off for it. There are advantages and disadvantages to each- and people make their choices just guessing about the variables that are key to deciding.
But that's just hindsight. Which has implications on your options now. But a different story, and just as much making the best guess you can based on the limited we know and can know about where this is going.
The US governemnt of course says that you are in deep trouble if you have not filed, and they will fine you for it. But that does not mean that you are not in deeper trouble if you do as they tell you.
I have not looked into this deeply, but from what I can tell, you are best off continuing whatever couse you had taken before this came up. If you have filed, keep filing. [But start thinking about the future, you are only off the hook for now.] If you have not filed, even if it was totally out of ignorance, you should look into whether or not you should start filing.
But I believe the "amnesty" ['we'll be merciful when we penalize you'] is over. So unless it has been extended [ir tacitly still exists], it may render that question effectively moot.
BTW, there have always been future potential consequences to filing US tax returns where you never owe them anything on an annual basis.
Some day you sell your house for a substantial capital gain. Or you have a business. That is different than what you have been doing for X years of filing your annual income.
I dont know how that works out in practice- except that I know you cannot assume it will be like all those annual IRS returns.
The IRS extended the voluntary disclosure program earlier this month. See:
http://www.jdsupra.com/post/documentViewer.aspx?fid=b756199e-451e-4ce8-a859-e7038d4abdd7
for details.
Overall, FATCA is going to be a huge headache for financial institutions around the world, as well as American citizens who weren't aware of their reporting obligations. And the estimated revenue it will bring in over the next ten years is $8 billion: not nothing, but trivial compared with a $1.6 trillion annual deficit. See:
http://www.bloomberg.com/news/2012-01-23/new-tax-rules-harass-foreign-bankers-for-little-in-return-view.html
for details.
Yes, they will only ding accounts above a certain amount. I forgot what it is, but the treshold is very low incomparison to even meagre retirement savings.
A rule of thumb to keep in mind when you ae considering letting the IRS have 20% of what you have, because they are threatening and have the laws to make it much worse:
It will not likely come to this, but worst case scenario is that if they ever do have the actual power to come after you, and your savings are modest, it is neither rocket science nor doing things that risk you going to jail to keep your savings out of their hands. When and if the time ever comes, you can deal with it... and there will be people to help you.
There are some good links and information on FATCA, FBARs, OVDI and the IRS vs. US citizens and US 'persons' 'abroad' (ex. Canada) here:
http://www.denisesavoie.ca/us-tax-information
http://isaacbrocksociety.com/2012/02/07/politicians-all-around-the-world...
http://www.theglobeandmail.com/report-on-business/watchdog-slams-irs-for...
http://www.nytimes.com/2011/12/27/business/law-to-find-tax-evaders-denou...
http://usxcanada.wordpress.com/?s=fatca
http://bsmlegal.com/fatca.asp
Isaac Brock Society is trying to organize and support US citizens in Canada/duals/permanent residents, other US 'persons' in Canada; the site is extensive, very useful, has crossposts from other useful blogs and commentary. Some of the site authors/participants have been writing to Minister Jim Flaherty, and to US officials.
http://isaacbrocksociety.com/2012/01/21/has-your-life-been-stolen-from-y...
http://isaacbrocksociety.com/2012/01/13/ask-your-questions-about-us-expa...
Another extensive and very useful site with information and commentary, links, etc. to assist US/dual citizens:
http://usxcanada.wordpress.com/start-here/ Intro page to site for US/Canadians on crossborder taxation,
http://usxcanada.wordpress.com/documents/ news and other documents for background on FATCA, IRS etc.
http://usxcanada.wordpress.com/timeline/ Timeline of events significant to US citizens/'persons' 'abroad' , in Canada....re FATCA, FBARs, IRS
http://usxcanada.wordpress.com/perspectives/#passport http://isaacbrocksociety.com/2012/02/14/u-s-passport-as-enforcement-tool... the question of IRS proposals to use US passports to track/enforce tax and banking reporting requirements (FBARs, FATCA) and penalties - in light of border control requiring duals to use a US passport when entering/passing through the US (ex. even if live in Canada, and have Canadian citizenship and passport)
http://usxcanada.wordpress.com/links/ lots of well selected and very useful links to other resources
http://www.aca.ch/joomla/index.php?option=com_content&task=blogcategory&... 'Foreign' Banking and Reporting requirements AND PENALTY structures
http://www.aca.ch/joomla/index.php?option=com_content&task=blogcategory&... US and 'Foreign' (read Canada!) banking AND US citizens/'persons'
Canadian Pensions and FATCA:
http://www.acpm.com/search.aspx?q=fatca letters to the IRS and Minister Flaherty on the impact of FATCA and IRS reporting requirements on pension plans in Canada
http://www.deloitte.com/view/en_US/us/Services/tax/ffba750a5bbea210VgnVC...
Note that a submission has been made by the Ontario Teachers' Pension Plan among others listed above and below.
http://bsmlegal.com/fatca-comments.asp Title: [TEXT OF THE FATCA COMMENT LETTER SUBMITTED BY ONTARIO TEACHERS’ PENSION PLAN BOARD] December 23, 2011
http://www.deloitte.com/view/en_US/us/Services/tax/global-business-tax/b...
http://www.collinsbarrow.com/news_showArticle.asp?articleID=466 effects of FATCA on beneficiaries, not just plan owners/contributors
IRS:
http://www.irs.gov/newsroom/article/0,,id=250788,00.html
Information for U.S. Citizens or Dual Citizens Residing Outside the U.S.From the IRS Taxpayers Advocate Nina Olson (NOTE: the taxpayers advocate office takes comments, complaints and provides assistance to those who are being unfairly treated by the IRS - see webpage for details of how to contact, what issues qualify, etc. http://www.taxpayeradvocate.irs.gov/Individuals
"Introduction to International Issues: Compliance Challenges Increase
International Taxpayers’ Need for IRS Services and May
Undermine the Effectiveness of IRS Enforcement Initiatives in the
International Arena
https://docs.google.com/viewer?a=v&pid=gmail&attid=0.6&thid=1356ee3194c4...