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It sounds a little ridiculous at first, but think about what they say in the 1st renunciation interview:
1- You are not off the hook for any crimes you may have committed;
2- You are not off the hook for any taxes owed.
Haha. I got a recent copy of my FBI certificate to naturalise here. All clean 🙂
Oh yeah, let’s send the IRS all our confidential bank account information along with a list of all our assets so we can be sitting ducks for identity theft by their own employees. Even the CRA doesn’t ask for this information and we live in their jursidiction.
The IRS actually sent this guy $1,865,000 in refunds before his own bank figured out he must be running a scam.
Former IRS Employee Sentenced for Identity Theft
http://kfyo.com/former-irs-employee-sentenced-for-identity-theft/
@hijacked2012
Re “Firstly, I have consulted an immigration lawyer who has confirmed that it is his understanding that those who committed expatriating acts before 1994 should be exempt from the exit tax regime.”
Would this mean that any of us who committed expatriating acts before 1994 (including taking Canadian Citizenship Oath) would have to have the ever-important Certificate of Loss of Nationality in hand to prove that we did?
As most know, I became a Canadian citizen in 1975, was warned that I would relinquish my US citizenship, but I was not told about, so did not know nor do I have that important CLN.
I was advised by a cross-border accounting firm in 2008 that I was still a US citizen and would have to file back tax returns to the US, which I have done and am now compliant 2005 through 2010, as well as FBARs for the same years. That was my Waterloo and I continued to make bad choices for myself 1) in going to a cross-border accountant for my advice instead of to an immigration lawyer; 2) then based on that bad advice, filed back US taxes so I am presently compliant from 2005 – 2010 and out in excess of $15,000 for being in compliance for these years; then applied for and received in 2009 a US passport (because of what I think of as intimidation by a US border guard to do so before I crossed the border the next time). As well, to add insult to injury I foolishly had cast my first US vote (before the passport) since I might as well now make some use of this dreaded US citizen and perhaps help make a difference for what I considered the absurdity of the administration “governing” the US.
Now I need to commit another expatriating act, which will be my renunciation of US citizenship once I have ensured that everything is in order to do so. From what this immigration lawyer says I would not have been subject to the Exit Tax if my expatriating act was before 1994 (and if I had the CLN?). So, I now see it as, since I am back in the clutches of the US, I could be subject to the US Exit Tax if it is determined that I fit the US description, which I need legal assistance to understand (I hope not!).
I know I am the fool, but I’ve had plenty of help in this cursed process and I’m really tired of going around in circles. Let me off this wretched merry-go-round.
And, thanks for that gem of information that we hadn’t heard — that those who
relinquishorrenounce will have their name turned over to the FBI, as well as be on the “for shame” list. Have at it — I’ll be honoured.Since you obtained a passport and voted, they will consider you American until the day you renounce. It is unlikely you will pay any exit tax. 1. Your net worth would have to be greater than 2 million. 2. If it is, you would file 8854, calculate the increase in value of your assets over their cost base, subtract $636,000. from any increase and pay the exit tax on that net amount.
The downside is you could have to pay an accountant. On the bright side, you are compliant and almost finished this nightmare.
Some of us are only at the beginning of a 5 year process.
@KalC: “Some of us are only at the beginning of a 5 year process.”
There’s nothing wrong with filing five years’ worth of returns and renouncing.
@calgary411
As I understand it (and that’s only how I understand it this minute, not necessarily tomorrow when some other bad news may come to light), I can apply to relinquish and if all is right with the world, sometime in the future I would be granted a CLN backdated to my expatriating act in 1967. Then the consulate (or possibly the Dept. of State) woul send the information to the IRS . According to the immigration lawyer, who by his own admission is not a tax attorney, and information on Isaac Brock, I shouldn’t be subject to the exit tax, or to filing back tax returns and FBAR’s, as long as I “establish to the Secretary of the Treasury that such loss of US citizenship occurred before Feb. 6, 1994”. Being a pessimist, I’m not entirely convinced that the 1996 amendment stipulating this hasn’t been replaced by some other amendment. Who can understand this stuff? In some respects I think it would have been wiser to consult a tax attorney as that is the part most difficult to make sense of.
Unfortunately these are uncharted waters for the most part and who among us knows what to do. At least you’ve made a start. I’m still vacillating back and forth – which option is safer, less expensive, least objectionable, etc – and the rules, if you can understand them, change daily.
Your story is appalling but you made the best decisions you could along the way, according to the information you were given at the time. Nothing foolish there.
@hijacked 2012
I am so hoping that you and others that might be able to hold that you did relinquish (we were told that in the 70’s) when you took the Oath of Canadian Citizenship — get your Certificates of Loss of Nationality with no problem, no cost, no Exit Tax. I’m in your corner — I’m rooting for you 150%.
And now, we’ve also got to do something for the “Accidentals” — appalling that there is NO CHOICE, both for them whether they wanted to take advantage of what their birth could provide to them, and for us whether we wanted to be reinstated with US citizenship. Most of us would say we did not want that, thank you very much.
Well I just filed 6 years back-taxes with IRS and filed FBAR as well Hope they accept it. I genuinely did not know of this requirement until recently. If they do impose big fines. . well I just won’t go to USA again ever. Or just travel on my Canadian Passport which shows my Canadian birthplace. And I would file to renounce my citizenship if I am required to pay big tax penalties. I was born in Canada anyways.. just got US citizenship through naturalization. My Father being American born. The worst thing is that they tax our TFSA, RESP, and even Disability benefits. These are Canadian government registered tax shelters and should remain so!
Hi all
My husband and I are US citizens living in Canada for the last 35 years. 3 children with dual citizenship. No taxes owed,but we haven’t filed US taxes or FBARs since living here and are now looking into options. What are the risks of visiting in the US as we try to work this out? Is it true that people with US passports are being asked about their tax compliance at the border? Or that their names are being recorded? Would this interfere with a voluntary disclosure if they already have our names from this? Thanks for any information.
Please read our press release on the voluntary disclosure programs. http://isaacbrocksociety.com/2012/01/10/press-release-isaac-brock-society/
Not being asked about taxes. I presume you have US passports. A very few Canadians with US place of birth are being asked why they don’t have US passports. Be very very careful about OVDI . Read the warning posted by Petros and the long story posted by just me as to how he was hornswoggled by the 2009 OVDI. You are at the beginning of a long and difficult journey.
Sunflower – Passports seem likely to become an increasing problem. I have an article on this in the works and it will come to Isaac Brock as a cross post. In the meantime, dial back to Three Anecdotes.
I have just been very cheerfully told by a tax professional that all we really need to do is file tax returns for the last three years, and FBARs and mutual fund info for 2003 to present. I hope this is true! We are not criminals or tax evaders, as most of us on this site are not, and really do resent the fear and dread associated with this issue. We are becoming more and more convinced that the OVDI is not for us. But I guess we need to do something especially with FATCA coming into being and we hope to continue using banks! We’re just hoping for information on the advisability of visiting with family in the US as we get this sorted out. Or is it best to stay out of the country until we have filed.
@Sunflower, FBAR has a six year statute of limitations. That means you’d only have to go back to 2006 or something. I’m never going to do an FBAR. But I relinquished my citizenship last year. You have to decide what’s right for you.
@Petros, thank you for that information. We are planning on relinquishing when we are in a position to do so. But from what I understand we need to be tax compliant before we are ‘allowed’ to renounce. Is that true? Do my children (they are dual citizens in their twenties) need to do all this filing before they renounce?
@Sunflower,
I think all expats should just do QD (in case you have never filed before). That should be fine. The only problem is mutual fund — IRS treats all “offshore” mutual fund as PFIC — so it is a different rule of gain/loss. Inside OVDI, it is recommended using mark the market method.
I just took a look at TSE index (as I did not have earlier records of my own), it went down from 8,413. at the beginning of 2000 to 6,614 at the beginning of 2003 (OVDI starts on this day!). I think it was due to two big events — dotcom crash and 9.11 attack.
TSE went back to high since 2003, that means loss is my own –Gain (from dip to peak) goes to IRS
Of course, this could be a good argument that even if OVDI period is shorter than my residency time in US, I am comfortable that I would have owed no tax to IRS had OVDI period started on my first day arrival to USA.
@ij, anyone doing quiet disclosure or go-forward disclosures on FBAR must be aware that they are voluntarily relinquishing their 4th Amendment right to require a warrant before disclosing to Federal officials their private banking information.
@Petros,
What is the law of the land ? I guess my right as US resident has been taken away by FBAR — it is a crime if I do not disclose willfully.
So for expats, law of the land may not apply -:). It is under Canadian law — as far as the residency is concerned, am I right ?
@ ij,Petros, could you explain to me how the IRS looks at Mutual Funds??
@saddened123,
I can only speak as an OVDI participant (and US resident), that is inside OVDI, IRS wants you to calculate gain year by year — so, there is no such a thing as capital gain (when you buy and when you sell).
So, if you have fund on Jan. 1, 2003 70K, and by the end of the year 80K — that means you gain 10K — so you report 10K for that year as MTM gain (mark the market gain).
Of course, you can also claim loss — but it would have some limitation.
If you sell fund before the year end, you just use the sale price to replace the year end price.
@ saddened: I’m not an accountant, not even close. What I know is that there are many pitfalls for US expats. That is why as an investor, I found it necessary to relinquish my citizenship. That’s the only way to be able to invest with the knowledge that you can take advantage of the shelters that are available in the country in which you live. RRSPs are allowed. But not TFSAs. Some things like mutuals funds may have gains even when you don’t realize them through sale. That’s why relinquishment is the way to go. How can you ever know if you are satisfying the IRS?
@saddened123,
There is some other method, but to me this is easy to do (DIY), so I pick this one,.
The reason is Canadian mutual fund is considered by IRS as PFIC ( Passive Foreign Investment Company)
http://www.investopedia.com/terms/p/pfic.asp#axzz1mIcliw1L
@IJ and Petros, Thank you very much!!
Sunflower. With respect to you and your children, you are supposed to file 5 years worth before you renounce. there are 3 tests for the expatriation ‘exit’ tax . Google IRS 8854 instructions.
1 Tax owing less than 150,000 for 5 previous years. 2. net worth lesss than 2 million. 3 Swear ‘on penalty of perjury’ that you/they are tax compliant for the previous 5 years.
Very generously, they agree to waive 1 and 2 but not 3 for dual citizens at birth who lived outside the US for at least 5 of the last 15 years. Quote
“Certain dual-citizens. You may qualify for the exception described above if you meet the following requirements.
• You became at birth a U.S. citizen and a citizen of another country and you continue to be a citizen of, and are taxed as a resident of, that other country.
• You were a resident of the United States for not more than 10 years during the 15-tax-year period ending with the tax year during which the expatriation occurred. For the purpose of determining U.S. residency, use the substantial presence test described in chapter 1 of Pub. 519.”
In other words you/they are supposed to file 5 years worth and then renounce. Aren’t you glad you asked? PS i am neither a lawyer nor an accountant but am in this mess.
Accidental, I’m not sure of the details but dividends from personal corps ARE an issue. Apparently, in the US the earnings of the PC flow through in some way to the owner resulting in a mismatch of credits and in tax owing.