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Hi KalC…. This is the issue I have been concerned about. Not only do I owe taxes on dividend income which the US taxes higher, I expose my husbands PC which I am a shareholder of. The article in the Globe back in Dec. had indicated that it was yet to be determined how persons with PC would be treated in regards to the penalities as taxes would be owed. Once again non-compliance seems to be the best answer for me. Thank goodness I have no ties to the US and all my RRSP investments are non-US funds so I should be safe when FATCA comes into place.
Accidental. I reread your posts including Jan 31. I agree with your plan 100%. I don’t think you have any other option.
I firmly believe canadian banks will not ask where you were born and it also appears that RSPs will be exempt from FATCA reporting by the banks.
KalC… Thanks for reading my story. It angers me to no end with how little I have had to do with the U.S. throughout my life that I have to make this difficult decision that effects my husbands and my future retirement plans. My own accountant agrees that exposing the PC and all my dividend income is not a good option. The accounting would also be so complicated. Not at all straight forward like some people with straight T4’s. My other personal income all comes from self employed sources with write-offs the U.S. probably don’t except. Scary to possibly not be able to cross the border and frustrating to feel like a criminal. Can you explain the RRSP’s not being part of FATCA? I didn’t know this. I thought they had to be reported and that they could take a good percentage as well. What if some of your RRSP’s are in Mutual Funds?
Accidental, This is preliminary as the regulations are still in draft form and are pretty much gobbledygook. However, the draft regs that the banks would follow if they choose to are here.
http://www.irs.gov/pub/newsroom/reg-121647-10.pdf
Skip to page 286 and 287. The way I read it, banks can ignore RSPs and other tax favoured accounts when deciding whether or not to report their US account holders.
I don’t see how your RRSP is invested has any bearing on the matter. Your bank won’t ask where you were born and you don’t need to tell them. You are Canadian.
Addendum; This is from the regs as interpreted here
http://paper.li/CUMicah/1328750124
Note the last paragraph.
7. Definition of Financial Account
FATCA reporting is required only with respect to United States accounts.42 A U.S. account is any financial account held by a U.S. person or a foreign-owned U.S. person.43 Accordingly, if an account falls outside of the definition of a financial account, it is exempt from FATCA due diligence and reporting. The definition of financial account has been narrowed in the proposed regulations to focus on bank accounts and custodial accounts.44 The proposed definition excludes most debt and equity securities issued by banks and brokerage firms. Specifically, the proposed FATCA regulations would narrow the definition of financial account to include only:
A) Depositary accounts in a financial institution.
B) Custodial accounts.
C) Non-publicly traded equity or debt in a financial institution (including hedge funds) and
D) Cash value insurance contracts.
Retirement and pension accounts subject to non-U.S. laws are excluded from the definition. Tax-favored non-retirement savings accounts established under non-U.S. law that limit annual contributions to $50,000 or less are also excluded from the definition.
Wondering about how FBAR obligations and reporting requirements apply to US citizens/’persons’ participating as volunteers in community and professional associations – which are frequently governed and run by an entirely volunteer board – whose members may have co-signatory powers on organizational accounts (to co-sign checks for expenditures, pay staff salaries and deposit funds from fundraising…): Example (a) non-profits such as community and charitable groups (e.g. food banks, literacy groups, children’s sports leagues, etc.); OR Example (b) US citizens/’persons’ participating as volunteers in governance of professional associations – as treasurers, and board members with co-signatory powers…. I’m assuming that we have to report those accounts on FBARs as well – even though we have no actual personal benefit in the assets? Should US citizens/’persons’ then refrain from participating in their communities in order to avoid yet another FBAR (and FATCA?) obligation?
@Brock the Badger
Yes, its all got to be reported. I have been refused signing authority twice due to FATCA not only at my company but also at a voluntary organisation. I have also heard stories of “US Persons” being asked to stand down as Treasurer of a Parent-Teachers Association and of another who had to stand down as the signer of a hobby group’s accounts.
But yes, that seems to be the US is sending: “Volunteer…but only in America!”
Thank you so much for this…trying to glean as much info as I can on what to do next. Truly terrifying. I’ve been here since 1974 and now retired.
I have a quick question.
If I close all my foreign bank accounts, except for the one where my salary gets transfered to from my employer once a month, and my wife (NRA) opens a new account at a different bank in her name and I have no signature authority on this new account, do I still have to file an FBAR as long as I automatically have the balance of my salary account tranfered monthly over to my wife’s account. My monthly salary is not yet over 10’000 USD π
@UncleTell I have a question for you: How well do you get along with your wife?
@Petros
lol
I guess as long as the money keeps rolling in we’ll be fine π
After thinking about it for a while, no not about trusting my wife π , I might not have to file an FBAR but the money I transfer to my wife’s account will probably considered by the IRS a gift and since she is considered an NRA there will probably be gift taxes due π
Ya just can’t win with the IRS can ya ? π‘
Transfer it to her account if you want–it is not a gift. Don’t tell the IRS–why is it their business? Consider it a disbursement to pay rent, food, etc. and not a gift.
Such a solution wouldn’t work in Canada unless you keep an accurate ledger of your money and hers. Then, you keep track of how much money your money earns and you pay income taxes on it. Giving your spouse money for investment purposes is not allowable form of income splitting. You may lend to your spouse at interest. So I would check with an accountant in your own country to see if you can give your wife all your money and what the rules are. Of course, it is a manner to dis-empower you and to empower your wife. Don’t you think it would be simpler to relinquish your US citizenship?
@Petros
I ‘m living in Switzerland married to a Swiss and according to Swiss marital and tax laws from the day we married ALL of our income is split between the two of us. For Swiss tax purposes it doesn’t matter who’s name the account is in. From a Swiss point of view I just have to get on my knees and beg my wife for pocket money every month π
On the topic on renouncing, I’ve been thinking about it for quite a while now but haven’t decided to cross that bridge just yet. I keep wondering what the situation will be in 15 or 20 years from now. A US passport does make it a whole lot easier to settle down for retirement later on, either on or near the ocean some place warm like South Carolina or Florida. Switzerland is a land locked country and the mountains are nice, but I love the ocean too. I don’t make enough money to be able to afford living in both the US and Switzerland when I’m retired. So far the FEIE has been helping me from owing taxes in the US, but I haven’t set a price limit on US citizenship yet in case those idiots back home decide to revoke the FEIE.
@ Uncle Great for you. If everything is in your wife’s name but swiss law says it is common property then it sounds like a good stop gap solution. You don’t have to file FBARs. Take that IRS.
There are nice beach spots around the world with good tax laws: Grand Cayman, e.g. Plenty of places in South America. The US is gonna get worse before better. If you can ride the storm, why not? But it is gonna get much worse. But your suggestion is not a workable option for Canadians. Cheers.
@Petros
O.K. thanks for this great site. I’ll try to keep adding my .02 from time to time, but for now I’d better get back to work!! π
I just had a most interesting phone call. From someone at the local . CRA office.
In December, I had written letters to everyone I could think of, including the Harper, Flaherty, the CRA and the Privacy Commissioner about all this stuff, including FBAR reporting, particularly related to the “signing authority with no interest: part and my job as treasurer of a small local non-profit organization.
The letter I had written had made it’s way to the local branch. She called to tell me it didn’t seem there was much the CRA could do, and it would be maybe better sent to the privacy commission. (The privacy commission has already replied and basically PIPEDA applies to businesses)
But we had a nice little conversation about the difficulties. She said she had read about all the problems and thought it was horrific and wished me the best of luck in dealing with it.
So, to me it means that all the letter writing does have an effect. This one person can’t really help, but it probably prompted her to look into it and it raises conciousness a little bit everytime.
Now if only we could get to the people with the power!.
@all
Found this on the net.
http://usexpatriate.blogspot.com/2012/02/how-to-avoid-irs-expatriate-tax-audit.html?spref=tw
8th Amendment of the US constitution:
Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted
Why should an expat be fined if (s)he doesn’t owe the US govt’ anything? FBAR / FACTA’s are “cruel and unusual punishments” and clearly are “excessive fines imposed”.
The Tax Advocate service even pointed out that FBAR’s penalties could violate the 8th amendment in their most recent report to the US congress: Full report (http://www.irs.gov/pub/irs-utl/2011_arc_internationalmsps.pdf)
P.S. It is on page 81 where they mention it
@showdown Great find.
The point is that the IRS is very much cognizant of their limitations. But still, they think that 20, 25, 27.5% is proportionate for minnows, yet they know that they are unable to wield the heavier fines against most people. That certainly should make us all breathe a sigh of relief, now that we know the IRS is just bluffing. I will post on this very soon.
@Don Pomodoro;
Thanks for sharing re: community volunteer roles (ex. treasurer, or board governance w/ co-signing authority) and obligation to file FBARs on the accounts in question. I’ve written to the TAS and submitted SAMs Systemic Advocacy Management submissions to the TAS ( on that issue, as well as related – FBAR burdens for US ‘persons’ in voluntary (non-paid, non-professional) power-of-attorney-for-property/executor/trustee/guardian roles.
@30-year IRS veteran (and anyone else who might know): On the topic of FBARs required to be filed on other peoples assets/accounts (where there is no personal benefit – and my SAMS submissions above), I’ve also been wondering about the FBAR obligations for US ‘persons’ working as trustees/executors for 1. various financial bodies such as banks/trust companies/credit unions who perform their duties for pay, but may represent many clients (of unknown citizenship) and 2. provincial Offices of the Public Guardian and Trustee (see ex. http://www.attorneygeneral.jus.gov.on.ca/english/family/pgt/overview.asp ) here in Canada. Do those government staff who might have personal FBAR filing obligations (as US ‘persons’ also have to file on behalf of : (a) the ‘foreign’ estates/accounts/assets they manage for clients, and (b) file FBARs if their clients are US ‘persons’? (note: if yes, the clients are deemed incapable of managing their affairs, so how could the IRS hold them responsible?). I would think that to comply would be impossible: due to breaching privacy and fiduciary duties and probably Canadian law, as well as impossible due to the scale of a caseload.
I’ve just been thinking about other ways to demonstrate and challenge how discriminatory or unethical the FBAR (and FATCA) regulations are, – and it seems to me that to demonstrate the impact of the burden on those least able, or least responsible might be very embarassing to Congress and the IRS internationally. If the Canadian and provincial governments were to have to intervene on behalf of civil servants who had to report all their clients (ex. OPGT), that also would demonstrate the ridiculous reach of the IRS – and spur provinces to speak up officially as well.
Any thoughts?
Was asked specifically at pre-clearance at Pearson (once they’d established that I was a USC born and still living in Canada) today whether I’d been filing tax returns.
Broken Man: This is very concerning to me. Were you travelling with a Canadian passport or U.S.? What did you say to them and what ended up happening? I always travel to the U.S. via Pearson and I have a trip planned for May to San.Fran. When I crossed in Dec. they typed notes in the computer after examining my passport. Can you give me more details on your experience.