The Isaac Brock Society consists of individuals who are concerned about the treatment by the United States government of US persons who live in Canada and abroad.
If clicking on a link brings you to the wrong page in the comment thread, click here to arrive on the current page of the thread: http://isaacbrocksociety.ca/2011/12/14/about-the-isaac-brock-society/
The United States is one of two countries in the world that taxes its people no matter where in the world they may reside. The other is Eritrea, which the USA has condemened for terrorism and for its diaspora tax. The majority of US persons who live abroad are not aware of their filing requirements. But recently, the US government has decided to crack down on those who are not in compliance.
But what is more, the US government has begun, since about 2004, to apply with great pressure a long-neglected requirement of 35-year old law called the Bank Secrecy Act. That requirement is FBAR, the foreign bank account report, which the United States government expects annually from those who have accounts outside of the United States which exceed $10,000 in aggregate. The fines for failure to file this form are extortionate, and virtually no US person who lives abroad even knew about FBAR, while most of them, over a certain age, own bank accounts with retirement savings exceeding that amount. The threats of fines and imprisonment has frightened many people who as a result have consulted expensive accountants and tax lawyers to get this mess sorted out, only to face high accounting or legal fees on top of potential fines and back taxes. In 2009 and 2011, the IRS offered voluntary disclosure programs (OVDI). Some who entered into the 2009 OVDI, because of fear of the penatlies, were shocked when the IRS assessed them fines in the tens of thousands, essentially treating them as tax evaders instead of a law abiding citizens in their countries of residence.
For many US expats, renunciation now seems like a really good idea. Why not? Many haven’t lived in the US for years and now they have few ties there except perhaps some family members. So they want to renounce their citizenship only to find that the laws regarding expatriation are confusing and that the exit tax requirements are at best complicated and invasive, and at worst, extortionate and utterly in violation of their right to expatriate.
The media coverage of this issue has been uneven. There have a been a few balanced stories, but most of the time, the media has merely publicized the purposes of the US government; this is especially true of US media sources. The Canadian media has generally done a much better job of grabbing the attention of the world about the abuses of the US government. That being said, even the Canadian media sometimes falls into the IRS trap of projecting fear in order to force compliance. Overall, we regret when the media offers only condemnation and fear without telling the story from the side of the victims or informing them of their rights and alternatives.
US persons abroad also face US border guards who are starting to put pressure on all those who have a US place of birth to travel only on a US passport, even if the person has not been a US person for decades–an arbitrary change of policy making those who relinquished citizenship into would-be loyal taxpayers to a profligate government that has to borrow 40 cents on every dollar its spends.
The Isaac Brock Society is here to fight. Sir Isaac Brock prepared Canadians for war with the United States and gave his life in repelling a US invasion in 1812. So we also want to fight for US persons who are frightened by the IRS, the border guards, the compliance condors, and the media. We are here to provide one another with resources and strategies, comfort and advice.
But not only so, we are here to warn other Canadians about the illegal incursion of the US federal government into the lives of the US expat community. Pretty soon, with the new FATCA legislation, this arrogant attitude of the United States will affect every man, woman and child on the planet who wants to open or maintain a bank account or to invest in a retirement fund. Now, according to FATCA, you will have to tell the United States whether you are a US person when you open up a bank account in, e.g., Australia or Thailand. This makes every country in the world a protectorate of the United States, for, if they comply with FATCA, they are ceding their very sovereignty to a nation which has not invaded or conquered the rest of the world, but only uses its waning hegemony over the financial sphere to coerce other nations.
So whether you are a US person living in exile, a Canadian or a citizen of any other country, we ask you to join us in this struggle for freedom and justice.
@Mark, oops forgot to add it’s going to cost you $2,350 to relinquish. The fee for this came in back in November last year.
Thanks that’s really helpful; the only other advice I have had so far is to file under the streamlined procedure!
@Mark
Just to add to Medea’s excellent advice.
If you ‘intended’ to lose your US citizenship when you became British, then you have already relinquished your US one. You now wish to document that relinquishment at the embassy and receive a CLN . Filing US taxes now would negate your relinquishment.
@Mark, if you’ve been talking to accountants then yes, that’s the answer you’ll get because there’s money in it for them.
And as heidi says, don’t start filing now as it will count against you when applying for a relinquishment. The more you can say no to the questions on the DS-4079 form the better.
Thank you so much. Would this also avoid the exit tax as well as avoiding any filing for taxes in arrears?
@Mark
I believe so.
Read the section on this site.
“Important if relinquishing act performed before Jun 4, 2004.”
Many here have claimed a successful backdated relinquishment. You can also read the Consulate directory reports.
I have an appointment at the US Consulate this March (2016) to formally relinquish my US citizenship (I obtained my Canadian citizenship in 2007). While the consular meeting seems straight forward, I am a little confused about what happens after (particularly US Taxes). I have still been filing them dutifully every year since I read some fairly sobering articles on expats being hammered by the IRS. Once the US gov’t recognizes my relinquishment, what are my tax filing obligations? If nil, are there any other documents I would need to file to the IRS or other relevant US gov’t agencies once my relinquishment is approved? Thanks for any assistance (and any other advice you want to give about the consular meeting).
Re:
Not necessarily. So far the relinquishers who’ve filed taxes that we know of (only 5) had no problems with relinquishment.
But these people filed suddenly, in confusion/panic after not having filed since their relinquishing act. Not sure at all how that would play out if you’d been filing steadily all along.
Generally if you go to your consulate meeting for a relinquishment-based CLN and the consul says it is, or probably is, a no-go for whatever reason, they’ve let the person renounce on the spot if the person chooses to do so (no need for a further appointment, presumably because the paperwork is basically the same). If the consul says it’s a go, there is the possibility DC could reject it – not common at all (the consulates usually err in the other direction), but it could happen.
So, in any event, if anything’s dicey, for absolute certainty of getting a CLN as soon as possible, renounce. If you apply for a relinquishment based CLN and it is rejected by DC, then you’d have to book again (and, IIRC, but not sure, pay again) to renounce.
Since you’re a post-2004 person, you’d have to file anyway to cleanly exit the tax system – and you’re up to date on taxes, so at least your “previous five years” filings are already done.
Sorry you’re caught up in this mess. Good to hear your appointment is soon – you’re on your way out. Best wishes!
IRS instructions for final Form 8854, which you would file in 2017, along with your final 1040 / 1040NR. https://www.irs.gov/instructions/i8854/ar01.html#d0e21 (new form and updated instructions available from the IRS at the end of 2016).
Good information from Hodgen Law regarding 8854: http://hodgen.com/?s=8854.
Some have chosen to not file after expatriation, but if you are up to date, there is not too much more you will have to do and you do not want to be deemed a *covered expatriate*. Any decision would be based on your tolerance for risk and whether or not you ever want or need to again enter the USA.
Read all you can at http://isaacbrocksociety.ca/consulate2/ regarding others’ experiences at their consulate appointments. There will be other posts on the right hand side of the home page that will give your further information as well. Research, then come back and ask any further questions you have. Good luck, greg!
Are you up to date with FBARs – FINCEN114 to be filed electronically?
@greg, welcome to IBS. You’ll need to file a final partial year for 2016 (up to your relinquishment date at the consulate) and also an 8854 next year to clear you US tax filing obligations.
https://www.irs.gov/pub/irs-pdf/i8854.pdf
https://www.irs.gov/pub/irs-pdf/f8854.pdf
Greg, once you’ve relinquished, per the IRS you must file that final year’s tax return, and the 8854 exit tax form. One copy of the 8854 goes to a Treasury address, the other goes with your final tax return to the IRS.
@Greg
Do you have an appointment to renounce or an appointment to claim a backdated relinquishment to 2007?
A relinquishment would not be approved as you have to show that you have not acted as an American in any way since you obtained Canadian citizenship , IE filing US taxes, voting in a US election or using a US passport. If this is the case then you should change to a renunciation appointment which should be approved with no problem.
You would have certify on the 8854 form ( due June 2017) that you have completed 5 yrs of tax returns 2011-2015 and a partial year for 2016 (up until your renunciation date.) Also 6 yrs of fbars. The 8854 is a statement of your net wealth to be calculated on the day BEFORE your renunciation., but due in June the following year.There is a wealth of information on this site, take some time to read and absorb it . Good luck
@greg & pacifica
I just wanted to make it clear that if Greg was planning a relinquishment and there was a strong chance the paperwork would be would be sent and refused, then a renunciation would be simpler and safer. There are reports that they will not refund the $2350 relinquishment fee if refused and a second renunciation fee would be charged.
Relinquishment is always a gamble if not a slam dunk case and especially now it is no longer free.
Thanks for the helpful comments, all of you. I too filed my taxes in a panic several years ago (having not filed taxes for a while) as I was afraid of the potential repercussions for not having done so. In any case, I think I will proceed with the relinquishment and see what the consular officer has to say. Furthermore, I have done nothing else to demonstrate any allegiance to the US. So, we’ll see what happens. Thanks again.
@ Heidi,
Yes, I agree. I just wanted to point out that the option is available for someone to consider if one strongly feels they want to go the relinquishment route, it not having been a barrier so far, noting of course we have very few cases to base it on.
And as you said, “Relinquishment is always a gamble if not a slam dunk case,” I couldn’t agree with you more.
So far, if my memory serves me correctly, from reports posted here, all the overrides DC has done on consul’s recommendations have been overriding negative recommendations, resulting in relinquishment-based CLNs being issued (they’ve been pretty clear-cut cases where the consul clearly didn’t know the law but the Brocker did). Can’t think of a report of DC overriding a positive rec, but the possibility does exist.
@ Greg,
On the topic of taxes and relinquishment, here’s some links to people who reported on that.
Of the 5 people I know of who filed taxes, 3 of the people (2 are a couple) commented on Brock. They’re from some time ago, as are the 2 people who didn’t comment on-line. I know of a currently in-process case, also not on-line. This person had no problem at the consulate but no CLN yet. I’ll get in touch with him and if he has news, I’ll post, as a current case would be really good to know about.
In the comment links, I’ll include date and time, so if the links go to the wrong place on the thread (they sometimes do), you can scroll to them.
(1) The Kingstons
Consulate meeting:
Submitted on 2013/09/04 at 4:48 pm
Submitted on 2013/09/04 at 5:20 pm
CLN received:
Submitted on 2013/11/15 at 9:29 am
(2) Cornwall
Consulate meeting:
Submitted on 2012/03/21 at 10:16 am
CLN received:
Submitted on 2012.09.26 at 4:39 pm
CBC’s The Exchange Interview Request
Hello, My name is Jessy Bains and I’m a producer with the CBC’s Exchange.
We’re hoping a member of your group is available today. We would like to chat about the following at around 4:20 this afternoon at our Toronto studio if possible…
Revenue Canada quietly handed 155,000 Canadian banking records to IRS
THE CANADIAN PRESS/Sean Kilpatrick
The Canada Revenue Agency quietly turned 155,000 banking records over to the U.S. Internal Revenue Service during last fall’s election, without waiting for an assessment from Canada’s Privacy Commissioner or the outcome of a court challenge to the controversial move.
According to documents tabled in the House of Commons, roughly 150,000 of the Canadian bank records transferred to the IRS on Sept. 30, 2015 related to individuals who are U.S. residents or people with U.S citizenship living in Canada.
The transfer, the first of its kind, was the result of a deal worked out between Canada and the United States in the wake of the U.S. decision to adopt the Foreign Account Tax Compliance Act (FATCA), pressuring financial institutions around the world to reveal information about bank accounts in a bid to crack down on tax evasion by U.S. taxpayers with foreign accounts.
The Conservatives have argued that given the penalties the U.S. was threatening to impose, they had no choice but to negotiate the information sharing deal and through the deal was able to exempt some types of accounts such as RRSPs and Tax Free Savings Accounts from the information transfer.
A second transfer of records to the IRS is scheduled for September 30, 2016.
As part of the deal, the IRS also agrees to send the CRA information on Canadians with U.S. accounts.
While the government says financial institutions should be open with clients about their files being sent to the IRS, the CRA is not automatically informing those whose records have been transferred, saying it is up to individuals to ask for the information.
The CRA says it submitted a privacy impact assessment to Privacy Commissioner Daniel Therrien’s office for review on Aug. 27, 2015 but only received recommendations from Therrien on Jan. 4, 2016 – well after the records had already been transferred.
Critics, including Prime Minister Justin Trudeau before he came to power, have raised concerns about the information sharing deal, saying the implications of the CRA reporting to a foreign government agency about Canadian citizens was “troublesome.”
“The Liberal Party of Canada believes that the Conservative government’s efforts to safeguard the personal privacy of Canadians have been inadequate,” Trudeau wrote in a letter dated June 25, 2015 to Lynne Swanson of the Alliance for the Defence of Canadian Sovereignty, which has been fighting to stop the CRA from turning the records over to the IRS.
“While the United States has the right to target tax evaders using offshore accounts, targeting hard working Canadians who pay taxes is unfair,” Trudeau added. “The Government of Canada has a responsibility to stand up for its citizens when foreign governments are encroaching on their rights. We believe that the deal reached between Canada and the U.S. is insufficient to protect affected Canadians.”
During the election campaign, Liberal Darrell Samson, who was elected MP for the Nova Scotia riding of Sackville-Preston-Chezzetcook, pointed out that Liberals had criticized the information sharing in the House of Commons and questioned whether the move was even constitutional.
“We also have concerns that the agreement reached with the U.S. may not stand up to a Constitutional challenge given that it forces the banks to treat clients differently based on their national origin, something forbidden by Section 15 of the Charter of Rights and Freedoms,” he wrote on his website.
Since taking office, however, Trudeau’s Liberal government appears to have been silent on the deal.
A spokeswoman for Revenue Minister Diane Lebouthillier said the minister was not available for an interview Tuesday.
Swanson, who has been a Canadian citizen since 1973, says she feels betrayed – first by the Conservatives and now by the Liberals.
“I’m furious. I feel totally betrayed,” she said, rattling off a list of prominent Liberals who spoke out against the deal before they formed the government.
Swanson questions whether Canadians would accept a similar deal to share private information with any country other than the U.S, saying it treats some Canadian citizens differently from others.
“FATCA requires Canadian banks and other financial institutions to report to the IRS private banking information, private financial information. In terms of bank accounts that includes account numbers, account balances, total assets, transactions, address and other personal identifying information.”
“If all Canadians were having that information submitted to the Canada Revenue Agency to pass on to a foreign government, there would be absolute outrage in this country.”
Swanson said her group’s constitutional challenge of the information sharing deal is currently before the courts. NDP Revenue Critic Pierre-Luc Dusseault, who placed the question on the order paper, is concerned that the CRA is not advising people whose records were shared with the IRS.
“What is worrying me is that CRA is not notifying people automatically whose information was transferred,” Dusseault explained. “So the CRA has some information on Canadian citizens who are happen to also have American citizenship and these people had their information transferred on September 30 without a lot of noise.”
Dusseault says the CRA should notify all of those whose records were transferred.
“Some people may not know that they are part of that transfer.”
Dusseault says he is also concerned by the CRA’s decision not to wait for the privacy commissioner’s ruling and to transfer the records during the election campaign – a time when under the caretaker convention public servants are supposed to abstain from anything but routine actions.
Dusseault said he plans to propose a parliamentary committee hold hearings into the CRA’s actions.
Senator Percy Downe, who sits as a Senate Liberal, says the CRA should have waited until after the election before transferring the records to the IRS.
“It’s quite surprising that they did not ask for an extension,” he said. “The extensions the IRS gave others they claimed did not apply to the CRA but I’m sure the IRS would have understood if the CRA had said, ‘We’re in the middle of an election, the election’s over in October, we’ll have a new minister in November.’ What’s a couple of months delay?”
Downe said he was also surprised the CRA transferred the records before getting an assessment from the privacy commissioner’s office, which he said made recommendations about limiting the collection of information, limiting the disclosure of information and the retention of personal information.
“This is after the horse had left the barn, if you will, because the information was already turned over in the rush to get it to them.”
Green Party Leader Elizabeth May says the Canadian government should repeal the information sharing agreement with the U.S. because it is unconstitutional.
“It’s unconstitutional because it treats one class of Canadians differently than another class of Canadians.”
May said government documents she received through access to information include a letter from a constitutional expert to former Conservative Finance Minister Jim Flaherty, indicating that the agreement was unconstitutional.
May, who said the information sharing agreement could also be applied against Canadian snowbirds, says FATCA was intended to root out Americans seeking tax havens.
“Nobody moves to Canada to find a tax haven. We are not a place that people go to shelter taxes that they should ordinarily be paying.”
elizabeththompson@ipolitics.ca
I am a U.S. citizen no resident facing OVDP because I cannot do streamlined as I have been in the US more than the allowed 30-35 days each year. Costing a fortune in accounting fees. Lots of PFICs, etc. I see that I may not have too many assets to have to pay an exit tax, so am considering giving up my passport, but i do not have dual citizenship.
Any experience with someone in my position opting out of OVDP and getting a lenient solution arguing my only problem of not being in the more benevolent program of Streamlined is the unmet physical presence test, although I AM a bona- fide resident and pay taxes in my resident country?
This has been an unexpected nightmare as I had no idea my stays in US to visit ailing parents over the years would hinder me once I tried to become compliant in US tax returns I have never filed in all my decades of living overseas.
There is a domestic version of streamlined where the penalties are “only” 5% of the unreported accounts. I’m not 100% sure of the details, but I think this would be better than OVDP. Don’t rush into anything (http://isaacbrocksociety.ca/2016/07/18/haste-harms/). Research your options and consider getting professional advice. Relevant threads here for posting your questions are:
http://isaacbrocksociety.ca/renunciation/
http://isaacbrocksociety.ca/expat_tax/
There are also country specific threads http://isaacbrocksociety.ca/country-specific-posts/
@No Way Out, as many have said here before OVDP is for criminals.
You have the option of meeting the non-resident test in 2017 by staying outside the USA enough days then do streamlined in 2018.
You need to do all the forms and then look at them. You need to assess what the actual penalty could be NOT what the condors say. By way of example per the IRS/FINCEN memorandum from 2015, the maximum non-wilful penalty for FBAR is $10 k per year with discretion to have a one off penalty or simply a warning letter.
To be honest after much research there is a HUGE disconnect in 2016 between the alphabet soup agencies and the compliance condors.
Are you really and properly bona fide resident overseas according to the bonafide resident test not the physical presence test?
Do you actually owe any real tax (not penalties)? If you live in Western Europe/Canada, you would likely owe the USA nothing.
The FBAR filing process is actually set up with non-filers in mind and you can pick from standard reasons on their form why you did not file. They did this for a reason.
My attitude has turned greatly where I have less fear of the alphabet soup agencies and simply loathing for the compliance condors.
Your big fear is likely FBAR, I would suggest that you google IRM 4.26.16. This is a fresh document.
First the IRM states under delinquesnt filing procedures, “No penalty will be asserted if the IRS determines that the failure to timely file an FBAR was not willful and was due to reasonable cause.” Thats the official manual NOT websites.
Two more key quotes “After May 12, 2015, in most cases, examiners will recommend one penalty per open year, regardless of the number of unreported foreign accounts. The penalty for each year is limited to $10,000. ” and “For multiple years with nonwillful violations, examiners may determine that asserting nonwillful penalties for each year is not warranted. In those cases, examiners, with the group manager’s approval after consultation with an Operating Division FBAR Coordinator, may assert a single penalty, not to exceed $10,000, for one year only. ”
OK, so you do file six years worth of FBARS and your maximum exposure is $60k of penalties but probably more likely $10k or simply nothing.
So now you have your 1040 returns. Whats the max penalty for non-wilfull late filing. 25% of the late tax. No tax….no penalty.
To be honest it looks like the alphabet soup agencies got their act together in mid 2015 but it takes effort to figure it out and you could drowned by the sound of the condors.
How much US tax even with PFICS can you possibly owe? The cost of doing business is a 25% penalty on that tax owed after foreign tax credits.
Your late FBARS are going to cost max $60k.
Some practitioners since 2015 have started saying “Just File it” and now I finally figured out why.
The FBAR fear had always been 100% penalties per year over six years but the May 2015 IRM guidance ended that fear and according to some they did this now in writing because they feared a constitutional lawsuit on the penalties.
The maximum willful penalty is stated as simply being 50% of all years under examination NOT 100% times six years; “After May 12, 2015, in most cases, the total penalty amount for all years under examination will be limited to 50 percent of the highest aggregate balance of all unreported foreign financial accounts during the years under examination. In such cases, the penalty for each year will be determined by allocating the total penalty amount to all years for which the FBAR violations were willful based upon the ratio of the highest aggregate balance for each year to the total of the highest aggregate balances for all years combined, subject to the maximum penalty limitation in 31 USC 5321(a)(5)(C) for each year.”
Also lets say you are a bona fide non-resident. If the US says you had more income to declare then your resident country gets to tax it first so there is little incentive for the USA.
Lastly streamlined resident will not work for you because your 1040s are delinquent so you can only “Just File It.”
I am now starting to think that for most it makes sense to do a DIY filing and use what you would have paid to a professional to pay the maximum IRM penalties.
@No Way Out reflecting some more…
OVDI will cost you 25% of your assets and tons of professional fees.
Doing a DIY “Just File It” will likely be far cheaper. Also its not a quiet disclosure since you state the reason on the FBAR form!!
I am assuming you are not in Switzerland as thats a seperate kettle of fish.
Thank you so much for all your comments. I am not in Switzerland.
Hopefully this EA will approve this approach, but I am dubious. If he doesn’t, or refuses after he has already done the majority of my returns ( 8 years), what would the next step be? I am totally new and ignorant to this and simply overwhelmed since it is a problem I have no idea how to fix myself, and no one likes to spend money on lawyers unnecessarily.
I am not comfortable waiting to 2018 to file.. couldn’t the repercussions be WORSE than OVDP ? Especially since an extension was made in my name for October 2015 to file late as non resident, which I was unable to meet because the CPA told me too late that she didn’t do pfics. Just lots of complications. I was 50% investor in small company (1.500E investment) with a British partner ..but that closed from inactivity in 2014. All taxes up to date with local government for that company and for personal taxes.
I wish I had found this forum last year
@Way Out……looks like you already paid for returns to be done.
Streamlined Overseas is a no go because you blew the days.
Streamlined Resident will not work because you are delinquent.
OVDP is for criminals and the fee to play is 25% of your highest aggregate balance.
It looks like the Voluntary Late Filing FBAR program is your only option which should be no penalty but up to $60k total for six years.
Then three years of back 1040s that hopefully have no tax due. Hopefully the prior years before that have no tax.
Also with OVDP you are likely to start burning more and more professional hours as it takes YEARS to complete OVDP.
thank you. I am definitely going to pursue this and assume I can do what I want with my returns that I have paid for.
Less is better. http://isaacbrocksociety.ca/2016/07/28/petros-principles-9-less-is-better/