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@Old&Simple, please, I want to affirm Duke of Devon’s position. Just Me is experienced and knowledgable, but with respect, he is incorrect in your case. Why? Because FBAR is a requirement for those who are under the jurisdiction of the United States. You are not. You are neither a citizen of the United States nor a resident or Green Card holder. Therefore you can safely ignore FBAR. Besides, the Canadian government has stated officially that it will not collect FBAR fines. So provided that you have no assets in the United States, the IRS has no leverage to use against you.
I would recommend, depending on your circumstances (of which I am not aware of all the details), that you make an appointment at a consulate to obtain a CLN as a result of your relinquishment that took place years ago. The pre-2004 date is significant, because there are not even any tax forms to fill out for your situation; in addition, if it was before 1994, there was no obligation to inform the Consulate for IRS/tax purposes. In this case, all you lack is the actual CLN to show your bank and to show to a US border guard if you try to enter the US with your Canadian passport. Just get the CLN and forget about the IRS. You don’t owe the IRS anything if your relinquishment took place pre-2004 and any information that you actually give to Treasury or the IRS can be used against you.
The law about informing the IRS about your relinquishment is actually a 1996 law called the Reed Amendment. Thus, before 1994-1995 (depending on the document you read), there was no such obligation, and it was not applied retroactively. Yet today, because of FATCA and because of overzealous anal retentive US border guard bullies, the CLN is useful for Canadian citizens who wish to prove that they are not US citizens. But remember, if any fines or levies or arrestation is to occur in your case because of alleged US citizenship requirements, the onus would be on the IRS/US government to prove that you are an American citizen. Unless you can think of a reason how they could do that, then you should never pay a fine or taxes or even file your taxes to IRS. Stand on your two feet. Stick your fist in the air. Perhaps flip the bird. You don’t have to hide. You just have to be tough and stand up for yourself.
*Just Me ,Old & Simple. Do you really imagine IRS will be able to deal with millions of FBARs? For an individual such as O&S they can be ignored. I continually plead for common sense by and for minnows. What do you think they can do to O&S? Scare tactics from the accounting establishment are bad enough…..
*Petros, Better said than mine. Our comments crossed in the ether.
As far as standing up, I kinda like Dan’s approach.
“you only tell them about what they already know… and of course you are destitute and living off of relatives overseas. In fact, you’re losing money. ……………It’s not something they need to know, as it’s literally none of their business”
*There are actually some rumors swirling around simply that the IRS wants to make FBAR filing electronic manditory. This is obviously because already they have simply become overwhelmed by them and cannot really make any use of the information.
@Tim- it is still a waste of time for the IRS to have to maintain the databases. It won’t make the information any more meaningful just because it is in electronic form. The problem is that the information is too voluminous to be meaningful.
What the government needs to do is to be concerned simply with those who reside within its borders instead of trying to be omniscient.
*recalcitrantexpat
I agree with you. In fact to re-iterate my point the IRS IS very strongly considering mandating electronic filing of FBAR. Why well your guess is as good as mine but clearly they are overwhelmed in paper filing I suspect. They also have now have duplication between FBAR and Form 8836. However Form 8836 or the “tax” FBAR is a normal tax return document and thus as long as your allowed to file a paper tax return you are allowed to file a paper tax fbar. So one justification from the standpoint of the IRS to creating an electronic filing requirement for FBAR is well that a justification for keeping to seperate filing requirements.
If the FBAR filing becomes manditory in electronic form, they must be assuming it will take less (ie none) manpower to process, because it will all be done by computer. They must really think there’s lots of valuable information in those FBARs.
But what would they do about all the “US persons” abroad who don’t have a SSN. They’re not exactly making easy for people to comply with the rules they already have. My son tried to apply for a SSN at the consulate in August so he could “keep his options open” with his US citizenship. Nothing but headaches (and no SSN) yet.
So then we will start getting computer generated FBAR letters, without ever having any human input into anything. And, as they say, ” to err is human; to really foul things up requires a
computer.” I can just imagine how difficult it will be to deal will
all the nonsense that gets spewed out electronically.
I am still working on whether I can renounce my citizenship and continue to have power of attorney and be the person responsible for my elderly mother in the US who appears to be getting dementia. Aaaargh……….
A simple and dramatic increase in the FBAR reporting threshold that is indexed to inflation would be a good start in reducing size of the paper bomb hitting the IRS. It also may encourage greater compliance by minnows as it takes the FBAR penalty fear and filing complexity off the table for many.
“Unfortunately, the threshold for filing an FBAR is only $10,000 in aggregate for all foreign accounts. The amount per account is measured at the highest point during the year. The $10,000 threshold has not been indexed for inflation by Treasury since the early 1970s.”
http://www.mohlernixon.com/informed/2012/05/fbar-deadline/
@CanuckDoc- I am sorry to hear that your son doesn’t yet understand that if you are a U.S. person then there are NO options.
@Recalcitrant…
He knows he has the option to renounce. He has so little income and savings that very little of the nasty IRS stuff will have much effect on him. He is a world traveller, and not ready to settle anywhere, so having Canada, UK and US passports looks pretty good to him at the moment. But he understands the implications, and I expect he will eventually decide it is not worth it in the long run.
Thanks Petros, Duke of Devon, Just Me and Innocente.
Let me add a little data.
As of next month I can arrange for there to never be more than 10k in my accounts at the Caisse Pop which is also trying to negotiate an automatic FFI compliance certification from the IRS. So I really need to understand two things :
1. If my Caisse finds itself complying to FATCA’s rules for reporting US persons, can I still end up on a list even though I have less than 10k$ in my accounts? 2. Even if my financial institution gives my name to IRS, what are the chances of IRS collecting fines for past failure to file FBAR and tax returns? The feedback comments to an article that appeared a couple of days ago in the Globe & Mail shows some people fear Flaherty is negotiating an IGA (intergovernmental agreement) with the US to throw us to the wolves. Paranoia?
For those who aren’t aware, “US lottery winnings are taxable, as are ALL lottery wins over $600, anywhere in the world, if the player is a US citizen.”
Be prepared to cough up 38% of your Canadian lottery winnings if you are a USP, as they are tax free in Canada!
http://www.homepokergames.com/lotterytax.php
*Old & Simple. there is no need to arrange to have your account less than 10K.. If you wish and are fearful, keep it less than 50K. Even 1 million would be safe in your case. I suspect we are not talking about a million here.
Your bank/caisse will not give your name to the IRS or rev. can. The US can not collect FUBAR penalties from Canadian citizens. There is too much nonsense going around. These laws are aimed at American tax payers living primarily in the USA. The only non US residents in serious danger are wealthy. Bye and large they know how to protect themselves and will already have done so.
Repeat after me–the only minnows to be caught are those who voluntarily leap into the net.
Hi again Duke of Devon.
Thanks for the encouragement.
To be clear, would asking for a CLN be jumping into the net? Sounds like a useful document unless it can be turned against us.
*No it would not. Just don’t contact the IRS after you get your CLN. Or don’t even bother with the CLN
@Old&Simple, Please note that there are two reasons to get a CLN: (1) to be able to pass through the US border with a foreign passport to prove that you no longer have US citizenship despite a US birthplace. (2) To present to a bank if asked to prove that you are not a US person for the purposes of FATCA. If you have insubstantial assets, i.e., accounts under $50,000, then it is extremely unlikely that your bank will apply FATCA to you. However, if ever you wish to open a new account, it is likely that you would have to sign an agreement saying that you would give them that information, and then you would have to refuse and you would become a recalcitrant account holder. At that point, it would be a good idea not to invest in US source investments.
I.e., a recalcitrant account holder who does not invest in US source investments or has any US source income or wire transfers, is not going to have his account information handed over to the IRS, since the bank is not privy to the status of your US citizenship unless you have already told them by filling a W9 form which also includes your Social Security Number. If you have no Social Security Number, the bank probably has no idea you are US citizen, unless you gave your US passport as one of the pieces of ID when opening the account.
In the end, it is absolutely better for some people to obtain a CLN, while Duke of Devon is right to say it may not be necessary in your case. I had to get one because my TD Waterhouse accounts had already been marked as US under previous rules. Then I closed those accounts and opened up new ones but presented my CLN when I opened them. A person who has never indicated to the bank their place of birth or that they are a US person, has next to nothing to worry about in terms of surprises: i.e., your bank is gonna let you know that they plan to rat you out, and they are planning to do it with your permission.
* Thanks Petros.
Your clarification on the CLN and the way banks are likely to handle small accounts is encouraging.
I’ve being doing catch-up reading in other sections of Isaac Brock and have been finding similar info.
But one theme seems to be not discussed very much, i.e., enforcement and collection against Canadian citizens. It is mentionned several times that Canada does not collect for the IRS for fines and taxes in connexion with Canadian income of Canadian citizens. Why then do we also have these stories of Canadians paying large sums to the IRS? Were they lacking info or did they have assets in the US or some absolutely important reason to have to travel there?
For the moment from the data on Isaac Brock, the only risk I see for Canadian citizens considered by the IRS to be US persons, even if they are reported under FATCA, is having to avoid crossing the border or investing in US assets. Of course, there is a certain stress in wondering if the Canadian goverment might one day sell us out.
I’m going to give myself a couple of months before deciding whether to request a CLN and will keep on reading on this excellent site.
As an aside, I live in a French-speaking environment, but read at least one Canadian English language news source every day. That’s how I originally came across this situation. I’ve Googled French-language sources and there is practically nothing. I’d estimate there are tens of thousands of francophones in Quebec who could be at risk as supposed US persons. Someday soon some 70 yr old francophone born in a Vermont hospital before medicare is going to get in trouble at the border, and the shinola will hit the fan here, too.
@Petros
With FATCA, I would imagine that any application for an RRSP or TSFA would also require USP’s identify themselves. Irony: A USP in Canada would have to steer clear of the very thing that they would be denied as a USP (unless of course they have no outward signs of USPersonhood and are willing to be less than truthful about their status when applying). This diminishes the net gain from maintaining an ostrich stance.
@Tim…
I resist all electronic filing ‘opportunities’ that the government might provide. So, I hope the FBAR doesn’t go mandatory electronic, as the only meager pleasure I get out of the requirement is knowing they have to hire a clerk to do the input for them into their Big Brother DATA BASE. It costs them and creates a job for some simple American. I don’t want to put them out of work, by filing the FBAR report and doing their data input too! I like making work for them!
*O&S Now you are getting close. To be clear. Canada will not collect any taxes or fines for the IRS from canadian citizens. Full stop. It doesn’t matter where the income was from. i.e. it doesn’t have to be related to Canadian income.
The IRS doesn’t have the means to attack canadians with a US place of birth if they don’t know they exist. They don’t know of the existence if the person in question doesn’t volunteer the information. That is where a few people got into trouble . There have only been a very few on IBS who have paid anything to the IRS.
bubblebusting and Just Me made the mistake of entering the OVDI. (a program meant for tax evaders not for innocent minnows such as bubble and Just Me. By the way bubble has yet to hear anything after 2 years of waiting.)
bubblebusting A new application for a rrsp or tfsa might ask for citizenship; answer ‘Canadian’
*Duke, but even if the IRS does get the info, how are these people “in trouble” if they can’t collect? If FATCA is implemented and someone has to give his place of birth in order to open a TFSA, will he be in trouble if Canada won’t collect?
Basically, can you say, no collection, no trouble?
@Duke of Devon
It’s actually been 13 months although it feels like two years.
I’ve yet to determine whether entering OVDI was a mistake because the fat lady has not sung. Our decision to enter OVDI was based on a few factors: freedom of travel to the US, the ability to continue receive funds through SWIFT, and the ability to renounce US citizenship. It has all come at a terrible cost, but one day we will be free. Mark Twain wrote, “If you tell the truth you don’t have to remember anything.” Agree or not, for someone with a memory as lousy as mine, this is good advice.
*bubblebusting-my apologies
O&S -exactly- they can’t collect.
Under the proposed FATCA regulations, and these are a matter of record,- they are published and the UK among others has agreed to them, there is no provision whereby a financial institution has to ask place of birth to open an account of any kind
@Duke of Devon
Yes, I am one of those Minnows that willingly entered the net, and came to regret it. All in the mistaken belief that ‘doing the right thing’ was the right thing to do! I look back now, and think, “what was I thinking?” but given the info and focus at the time, plus the advice all attorneys were giving, it appeared to be the only option. So it goes. Now I am tagged and living in the Compliance world and loving it! 🙂
Thanks guys for all the help.Your help has been very reassuring. I was on the verge of an ulcer.
So, as a pre-1994 relinquisher, who never travels to the US, has no investments there, has only a small Canadian bank account, has already liquidated his rrsp (which in the past was only barely over 50k for a few years )… I shouldn’t worry.
The only decision I need to make is whether to apply for a CLN on the offchance I may need one in the future.