I am going to post the reply letter I received from the Finance Minister.
Although the content is encouraging, I sense that the Canadian Government believes our problem has been ‘solved’ by the December 13th IRS Fact Sheet, and the only other obstacle to deal with is FATCA.
Having said that, I give credit to the reply, and have faith that the Canadian Government is at least making an effort.
Thanks very much for sharing this. You say that:
“Although the content is encouraging, I sense that the Canadian Government believes our problem has been ‘solved’ by the December 13th IRS Fact Sheet, and the only other obstacle to deal with is FATCA.”
You may be right, but I don’t read it that way. I do sense that Mr. Flaherty is more concerned about FATCA as a long term problem. But, I don’t read into the letter anything suggesting that he thinks the “past compliance” problems have been solved. Remember that he would have to be careful of what he says in public.
What I read into this is that:
– They may or may not be working on the “past compliance” FBAR issue;
– They are saying that in any event, the penalties won’t be collected by the Government of Canada.
Now let’s look at this from the U.S. perspective. It is simply impossible for the IRS to publicly carve out an exemption for Canada. In other words, everybody is subject to the same laws. But, the country you live in, how long you have lived there, whether you had paid tax on the money in the accounts are (I believe) all factors in deciding whether there is “reasonable cause”. It may be that “reasonable cause” will be more available to U.S. citizens living in Canada than in other places. Interestingly the IRS news release of the FS referred to:
“FS-2011-13, December 2011 – This fact sheet summarizes information about federal income tax return and FBAR filing requirements for duel citizens in Canada, the United Kingdon and other countries.”
Canada and the U.K. are two countries that are actually named.
The U.S. government is becoming a diplomatic problem for well – the U.S. government. Although we are feeling intense pain, I think this is still early in the game.
Remember this: Outside of OVDI there is no instance (that I am aware) of anybody being subjected to huge reporting penalties. I am certain that the moment that some Canadian citizen is hit with these penalties that there will be both a strong objection from the Canadian government and a restatement that they won’t collect the penalty. This would exacerbate the diplomatic problem that the U.S. already has.
Anyway, that is just my thought on this.
http://renounceuscitizenship.wordpress.com/2011/12/09/irs-issues-information-for-u-s-citizens-or-dual-citizens-residing-outside-the-u-s/
Yep. it sounds like he thinks the Fact Sheet solved the problem–which it didn’t. Or maybe these are just weasel words to gracefully back away. I’m still very skeptical.
His reply was written before IRS deputy secretary announced a couple of days ago that a FATCA option they are now considering to address privacy laws is to have financial institutions report to governments in home country and then have those governments report to IRS under tax treaties. I hope Flaherty will quickly issue a resounding no to that idea.
I wish the government would voice the same rights for Canadians of American origin as they did for Canadians of Eritrean origin. (I just learned this from another post by Tim earlier today. Here it is again
Quotes from Immigration Minister Jason Kenney:
Q: What if it’s more indirect in the sense the Eritrean government is raising money in Canada, then using a portion of its budget to support Al-Shabab?
A: We have clear laws on this. We expect Canadians to respect those laws, and our law enforcement agencies to ensure they are applied. What I’m saying is that, generally, if there is any foreign government using intimidation to extract payments from Canadian citizens, that would be very disturbing to us.
Q: Eritrean-Canadians complain they have come to Canada as refugees to get away from the Eritrean regime, yet find themselves pressured to give money to the very government they had fled.
A: A point well taken. I would just encourage any Canadians to realize they have no obligation to a foreign government, that if they see any illegal conduct going on they should report it to the relevant law enforcement agencies, and they have no reason to be afraid of the activities of a foreign government in Canada. People who come here, particularly those fleeing persecution, enjoy Canada’s protection, and if in any way they’re being pressured by a government that was the source of their persecution, they should report that to the relevant authorities.
@Blaze
Well if citizens of Eritrea are being protected but U.S. citizens are not, then U.S. citizens are being discriminated against in Canada.
But, given the conduct of the U.S. government, why would anybody want to be anywhere near a U.S. citizen?
U.S. Citizenship – The Most Toxic Citizenship In The World
Yesterday usxcanada received almost the same three-page Flaherty letter with the same Jan 24 2012 date stamp.
@Blaze
My hunch is if they won’t collect tax on behalf of the IRS then they won’t share information nor do I believe they can as a matter of Canadian law. They do already share information on US “residents” who have Canadian accounts so the fact the US is pushing for something beyond that has been very telling all along. My read of the letter is there has been no substantive change in position since October(Notwithstanding some indications in December that Canada might have been softening its position) when Flaherty sent that big open letter to all the American newspapers on the Canadian governments part so as we get closer to FATCA compliance day the odds of a train wreck are increasing with no indication the Canadian side is going to back down. In particular they will probably let the next Congress get a chance to repeal it before they start talking publically about retalitory measures(Which I have to believe are being drawn up in private at the Department of Finance) towards the US. Overall keep the pressure up especially on your local/bankbench MPs.
@Blaze: great point on the Eritreans. There’s even a UN Security Council Resolution (which the US voted for!) condemning Eritrea for “extortion” (the literal word used by the report) of diaspora tax: http://www.new-york-un.diplo.de/Vertretung/newyorkvn/en/__pr/Press_20releases/PM__2011/111205-VNSR-RES-Eritrea.html?archive=2990092
Myanmar also stopped collecting tax from their expatriates very recently:
http://www.japantimes.co.jp/text/nn20030912b5.html
Before that, they would refuse to issue passports to anyone who hadn’t paid the tax. Sound familiar, y’all?
http://www.japantimes.co.jp/text/nn20030912b5.html
@Blaze:
The oly problem ist that Eritrea does not have tax treaties with other countries like the US does. Most US tax teaties EXPLICTLY exemp ANY US citizen from applying any of the refief offered to others in those treaties, except for some social security benefit relief 🙁
@uncletell: precisely!!
OMG! I got the exact same letter but mine was dated back in Oct. Guess nothing has changed from our side of the boarder.
I also got the same letter.
here is my response
Thank you for taking the time to read my letter and for your thoughtful response. It is reassuring to know that the Canadian Government is listening to our concerns, and attempting to act in our interests. You comment that the IRS document of Dec 7 states that there will be no tax or filing penalties if there is no tax due. That sounds very reasonable. However, given my general lack of trust in the IRS, I looked a bit further along in the document, where it states that:
“In addition to the failure to file and failure to pay penalties, in some situations, you could be subject to other civil penalties, including the accuracy-related penalty, fraud penalty, and certain information reporting penalties. For information regarding the accuracy-related penalty and the fraud penalty, see IRS Notice 746 (Information About Your Notice, Penalty and Interest). For information regarding information reporting penalties, see the instructions for the specific information reporting form. For example, see the Instructions for Form 3520-A for information on the penalty for failure to file Form 3520-A”.
A quick look at the instructions for 3529A which is the “Annual Information Return of Foreign. Trust With a U.S. Owner” states that there can be a fine of $10,000 or 5% of the assets for failure to file the 3520A in a timely fashion. With further penalties if the failure persists.
As you are probably aware, the US considers TFSA’s along with RESP’s to be “foreign trusts” thus requiring any Canadian who innocently opened a TFSA to be liable to penalties that are classified as neither “failure to file” or “failure to pay” if this extremely complex form is not filed
You also stated that the Canadian government would not participate in collecting FBAR fines imposed by the US on Canadian citizens. I am hoping for the same reason, the Canadian government and CRA will not participate in collection of these “Information reporting penalties” associated with RESP’s and TFSA. It is of some comfort to know that the Canadian government will not participate in the collection, but it would be better if the penalties would not be levied at all.
It is my hope that the IRS has no intention of levying those penalties, but I do not trust the IRS.
It is indeed a very tangled web we are all caught in. I hope i will be able to count on the continuing support of my government (and I consider myself truly only Canadian at heart) in whatever is to come.
@CanuckDoc
Correct me anyone if I am wrong but I believe somewhere in the letter or in the past they have stated there will be no collection attempts of any type penalties or otherwise of Canadian citizens.
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@CanuckDoc
@mach73
I also wrote a letter to Minister Flaherty, but more to the point of that the issues with the IRS are not resolved and wondering what the Canadian government is going to do when the banks here ask us to pay the U.S. government or move our accounts and then the question is where is safe. I saw on here somewhere where TD was already refusing accounts. I have never been asked by my bank if I was American as I opened my first account with current bank with SIN and a driver’s license. Has anyone heard how the banks will find out who is and isn’t born in the U.S.? Can you imagine a form letter sent to every account holder – confess your birth place:-) I am thinking credit union soon.
I am someone like CanuckDoc who does not trust the IRS that they will not levy the penalties because I read an article by a Canadian doctor who renounced but ended up paying the penalties just to be rid of the U.S. because he is a high wage earner and they would be bleeding him the rest of his life – he paid over 100K in tax and penalties.
I am sure I will get the same form letter back from Flaherty, but I thought what the heck. I got one from my MP who was no surprise as she is no light bright herself who told me to consult an accountant or lawyer ….duh. I think the see the subject of FATCA or U.S. Citizen and they put the form letter in the envelope. The problem which tells me her office didn’t read it as I did get an accountant who can’t promise me I won’t be fined 10K a year. When I talked to a friend of mine in U.S. who is a lawyer to refer me to a U.S. tax lawyer ….his advice was to not waste the money as ignorance of knowing won’t save me and I will just be in further debt to him/her and still may be fined. Didn’t make me sleep any easier that night.
Truth is if I had known I had to renounce when I got citizenship in Canada 20 years ago I surely would have and if I had known I had to file U.S. tax I would have – but not one accountant I have dealt with ever mentioned or questioned it and I know the answer is I should have known —– well I think I am in a majority versus minority that didn’t – or this site wouldn’t exist. I had only filed a couple tax returns in the U.S. before I moved here – so was naive.
Will let you know if I get different updated revised Flaherty letter or if they are still thinking all of this is resolved and everything is cool. The sad part is that those of us that lived there for sometime and are proud to be Canadian or French or Italian…or something else – we know what the U.S. is capable of – heck we were tattooed with the same sense of arrogance out of the womb – I know I was – was a flag waving Yankee Doodle and if any foreigner said anything bad about the U.S. whether justified or not – would have dismissed it. Now older, wiser and definitely more worldly – I am not sure that Canada which is a fair and trusting country will believe what extent the IRS and the government will go to. It truly saddens me as I use to be so proud to be American – now I am proud to be a free-thinker and be a Canadian.
@ Proud Canadian
I, too, am a proud Canadian. I once was proud to be an American-born Canadian but not any more.
Like you, I might have been naive when I moved to Canada regarding filing U.S.tax returns. I had only filed 2 Tax returns in the US for part-time work in 1963 and 1964. I really don’t think it was naivety. What did they do to make anyone aware of a possible obligation.
One thing you should consider, if you became naturalized in Canada 20 years ago, there is a good possibility that you could show/prove that you ‘relinquished’ your U.S. citizenship when you became a Canadian. Just don’t do anything like start filing U.S. tax returns or apply for a U.S. passport, vote in an election etc.
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