Liberty and justice for all United States persons abroad

The Isaac Brock Society

1,012 thoughts on “FATCA Discussion Thread (Ask your questions) Part One”

  1. @a, All US citizens have to file if they pass the thresholds, age doesn’t matter. If the minor’s income is only interest or dividends, parents may be able to include the income in their own tax return and the minor won’t have to file. But I don’t think this exception exists for the FBAR. There is an exception for the expatriation tax: if children renounce their US citizenship between 18 and 18.5 years old (yeah, what a short period to decide), and have lived for less than 10 years in the US, they are not subject to the expatriation tax even if they would otherwise be considered covered expatriates. But I can’t imagine a person owning $2 million at 18 years of age.

  2. @Shadow Rider, I don’t come close to the threshold but I have always filed and had taxes due (b/c I am self-employed and maybe that is the difference?).

    No, I can’t see many minors meeting the 2mil mark either. Just wondered. If there is an exemption during the window. whether a child ever filed or not shouldn’t matter anyway. Even with part time jobs or such as a teen, a kid is unlikely to have needed to. My dd has already asked what is the youngest she can go and relinquish is. I think it is 16 and a half. She will almost be out of school at that point, so I can’t see them telling her she can’t – but who knows. She is keen to be “just a Canadian” like everyone else she knows. She’s been in Canada since she was very small, understands that she is a USP, but she doesn’t like for others to know it.

  4. Yeah, the self-employment thing is the difference. The Canadian govt takes a far less punitive stance with working for yourself than the US does. Yet another reason to leave for good. But I have no issue with taxes on the whole – just privacy invasion and presumption that merely living a bit farther north somehow makes me more likely to be a terrorist, drug dealer or tax evader.  It’s ridiculous and insulting.

  6. More FCC “Must Prepare” warnings…  This time from Australia
    Australian banks will be affected by the introduction of FATCA and should act now to prepare for its commencement.

  7. When “a” brought up the mandatory tax filing for all US persons it struck me that the non-US parents of an adopted US baby should put a 1040 down in front of their little one and give him/her a crayon to fill it out. The phrase ab absurdo “from the absurd” seems to fit here. (No, I’m not so clever as to know any Latin. I looked it up.) 😉

    And congratulations to Grandma Tiger and the whole happy family! Made in Canada with love, eh? That’s really nice news. 🙂

  8. The way I understand is that the tax is on the income alone b/c I contract. Therefore, as best as I can understand it, I owe on every dollar I make. There is no exemption. Contracting is like the lowest form of self-employment in eyes of both govts really.

  9. Well “a” I don’t know what to say because we were wary of starting a business when we returned to Canada so we didn’t do it. Could you do a Schedule C and take all approved deductions to reduce your taxable income? Would the bewildering form 1116 help? I’ll just say it again ab absurdum.

  11. @Em

    Thank you Em. Definitely ‘made in Canada’ with love – lots of it. A long awaited ‘miracle baby’ whose name in Hebrew means “God Heard” (and I am convinced he did).

  12. Some hard questions about FATCA here, more about the inevitability of it, and it’s “survival of the fittest” for FFI’s:

    FFIs will need to make a strategic decision to either establish a business model that is compliant with FATCA or exit the market for US clients. This is a classic example of Darwin’s evolution theory, as FATCA turns FFIs who want to invest in the US into the survival of the fittest. In order to invest, you must adapt your company to the regulations of FATCA, or face extinction in investing in the U.S. There is already evidence of American wealth management clients who want to bank offshore and are being redirected to conduct their business within the US private banking sector…

    Two of the more challenging implications of FATCA for asset managers will be coping with changing requirements for clients on boarding and classifications. As a consequence, these will potentially generate the higher implementation costs. Although these costs will vary, they still could be significant…

    FATCA becomes effective on January 1, 2014, with a continually phased implementation concluding in 2017; and FATCA will not be going away. Sitting back and waiting for further clarification of the requirements is not an option – FATCA cannot be ignored. 

    http://www.wallstreetandtech.com/regulatory-compliance/how-fatca-will-impact-asset-managers/240143995

  13. *For “a”, regarding self-employment income.  I asked my US and Canadian tax preparers about this and both said the same thing.  Social Security is taxed at around 10% of your gross sales, no deductions.  So let’s say you weave baskets for a living.  You sell 80K worth of baskets this year.  You spent 40K on bamboo for the baskets.  Even though you actually made 40K, you pay social security tax on 80K. 

  14. @Marie, exactly. You are taxed on every dollar, which is why I have not started my own business. I have even turned down partnerships b/c I don’t want anyone else exposed on my account. I am toying with the idea of simply not working at all in the upcoming year b/c my pitiful income isn’t doing us much good on the Canadian tax side either.

    There are so many things you can’t do – start a business, invest, save for kid’s education or retirement, own a property b/c selling it is out of the question. Just ordinary things. And you can’t convince me that those who came up with this nonsense down there didn’t know this would happen. Collateral damage has always been quite acceptable to the US Gov. That’s all any of us are.

    Sheesh, they are imposing filing requirements on babies, toddlers and children after all, and I have little faith that the Harper govt will stand up to it. My first election as a Canadian might be to vote Liberal.

  15. @ “a”

    Marie is correct about the Social Security tax for US residents and US company employees working in Canada (5 year or less contract) but the Canada-US tax treaty does not require US persons residing in Canada to contribute to SS as long as they are contributing to CPP. When my husband had a small business in the US he paid me $399 per year (for over 2000 hours of work — what a deal!) because if he’d paid me $400 per year all of it would have been liable for SS tax and we needed that $50.

    http://www.ssa.gov/international/Agreement_Pamphlets/canada.html#coverage

  16. I never really understand how wide “self-employed” actually could be.  Few people work as a company.  Most arrangements are that one creates a separate company (corp, LLC, Ltd, S-corp) which lives its life, and the president receives a salary and the owner receives dividends whenever the president decides to pay them out.  SS inside USA would be on the salary of the president.   Don’t know how it would apply on a corp running with the president living abroad.

  17. Have the Canoodians looked through this NAFTA (1102) previously?

    http://sice.oas.org/trade/nafta/chap-111.asp

     

    3. The treatment accorded by a Party under paragraphs 1 and 2 means, with respect to a state or province, treatment no less favorable than the most favorable treatment accorded, in like circumstances, by that state or province to investors, and to investments of investors, of the Party of which it forms a part.

  18. U.S. Treasury finalizes anti-tax evasion pact with Ireland
    Well, it is a steady steady drip of announcements, as if they are all done deals.  Some interesting comments by Steven Miller, the temporary guy is the same as the original. 🙂

    Separately on Thursday, IRS Acting Commissioner Steven Miller highlighted FATCA as a “tool” that has compelled delinquent taxpayers with hidden assets abroad to enter a voluntary disclosure program at IRS.

    FATCA has come under fire from Americans with foreign financial accounts because they are accustomed to secrecy. Foreign financial institutions have complained, too, about compliance costs and the law’s intrusion, especially in countries where banking secrecy has been a part of the financial tradition.

    Despite the controversy, the IRS’ disclosure program has collected $5.5 billion. It continues to receive 75 to 150 applications a week from people seeking to enter the program, Miller said at a tax conference speech in Washington.

    The program will remain open, but will be less sympathetic to new applicants going forward, he said.

    The government-to-government FATCA deals are a pragmatic approach to enforcing the U.S. tax dragnet, experts have said.

    “FATCA is doing its job,” said Nicole Tichon, executive director of the nonprofit, nonpartisan Tax Justice Network, in an email. “FATCA is stemming the race to the bottom in terms of financial secrecy.”

    Miller also said he would consider merging a taxpayer’s FATCA compliance with an older, similar statute known as the Report of Foreign Bank and Financial Accounts (FBAR).

  21. Wouldn’t that be RoFBaFA, to you Mr Miller? He gives the impression that the only banks and Americans complaining about FATCA are “those accustomed to secrecy”. This contradicts the NTA’s reports and is nothing more than propaganda coming from the top ranks of the IRS. I thought there was a law that prevents the US government from using propaganda against its own people still.

  23. British FATCA On The Way, Claim Offshore Finance Centres

    British Crown Dependencies have revealed officials have already met with the government to discuss a UK FATCA like tax agreement.

    Now, officials from several dependencies, including Jersey and Guernsey, claim they have met with HM Treasury officials to learn more about the expected legislation.

    The move follows the UK’s agreement to help implement requirements laid down in the US’s Foreign Account Tax Compliance Act (FATCA) which would see information on US taxpayer’s bank accounts being shared with the country’s Internal Revenue Service (IRS).

    Failure to hand over information will see the US authorities impose a hefty 30 per cent withholding penalty on tax to be paid to the institutions involved.

    Rather than give the information over directly, which would breach many countries data protection laws, the UK will share its information in exchange for UK taxpayers accounts being held in the US.

  25. *shadow raider stated above:

    “All US citizens have to file if they pass the thresholds, age doesn’t matter. If the minor’s income is only interest or dividends, parents may be able to include the income in their own tax return and the minor won’t have to file. But I don’t think this exception exists for the FBAR. …”

    My non-resident alien wife, IRS wording for Swiss, opened bank accounts for our children and she is on the record as the legal guardian, I have no signature authority over these accounts and they are all under 10K USD. I e-mailed the IRS asking them If I needed to include my kid’s accounts on my FBAR and this was the answer I received.

    There is no age limit for FBAR filing. Even an infant with a “financial interest” in an account is required by the regulations to file if the filing requirements are otherwise met. Obviously, a parent or guardian will have to file for the infant in such a case. “Financial interest” is specified in the regulations to include “legal title.”That means if the
    child’s name is on the account, the child must file. “Financial interest” can also mean an account that is held for the benefit of the child, even if the child’s name is not on the account. Children who are U.S. citizens are considered U.S. Persons.

    As you can see they did not answer my question. I still don’t know if I have to report these accounts on my FBAR. I would assume that I don’t, but I remember my 10th grade english teacher once said “You should never assume anything because that just makes an ASS out of U and ME” I tend to believe that she was right.

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