Sent to me from a friend:
Letter from Scotia Bank (update, I’ve removed the pdf and have included a link to Scotiabank’s nicely formatted Winter newsletter which contains the same text).
Sent to me from a friend:
Letter from Scotia Bank (update, I’ve removed the pdf and have included a link to Scotiabank’s nicely formatted Winter newsletter which contains the same text).
the part about taxes being passed on to children of US citizens is the most atrocious of all. Born into servitude. It’s utterly ridiculous!
Two things stand out for me here….one, i like how they assume we all know our tax obligations to the IRS…and Two; they make reference to gains in an RRSP possibly not tax sheltered??
I thought we had the 8891 election for (3520 for 2011)??
Did we give something up in the US-Canada tax treaty? If so, this would most definitley be double taxation!
Or am i reading this wrong.
I”m just fed up with that place. I’m going to get the remaining documents I need for citizenship today.
A big part of the problem is the the treatment of Canadian mutual funds as PFICs. This appears to be a new thing described as follows:
“Earlier this year, the Internal Revenue Service changed its views with respect to the US tax treatment of non-US mutual funds. This change in policy was the result of Chief Counsel Advice (CCA) 201003013, issued on January 22, 2010, which determined that a Canadian mutual fund should be classified as a corporation rather than a trust for US tax purposes—this, despite the fact that many Canadian mutual funds are classified as trusts for Canadian tax purposes.”
http://www.ica.bc.ca/kb.php3?pageid=4770&mobileSession=a34b516a61cdded03bbabe466a90e4bf
Now, the question I have is whether this applies from the date of the ruling – January 22, 2010 or before that. I thought that I read somewhere that the treatment of PFICs as corporations was on a prospective. Although, I generally assume that anything from the IRS is unfair, this seems to me to be another example (assuming this is not prospective from Jan. 22/10) to be incredibly unfair.
Does anybody have any knowledge or insight on this? Calling:
@Mona
Here is the actual ruling that is causing all the trouble. I note that this is an IRS interpretation – it does NOT have the force of law. It seems to me that this would be an area that might be worth “class action consideration”.
http://www.irs.gov/pub/irs-wd/1003013.pdf
The more information we get from various sources, the more confusing it becomes. Like Mach7, I also thought there were provisions for Canadian RRSPs This letter seems to indicate otherwise.
I also understand RESPs, RDSPs, TFSAs, etc. do not have any provisions. This letter doesn’t even mention them.
Did I miss it or does the letter neglect to mention FATCA and how Scotia Bank plans to comply or not comply or how they plan to determine for their purposes who is and who isn’t US person without a birth certificate (which they will not accept as valid ID) of a customer or even of a customer’s parent?
Everyone loves telling us to consult with a tax expert, lawyer, etc. Do they have any idea how much that costs?!? Do they care? Oh wait, I think I know the answer to that last question!
@ Petros
I am unable to open the link to the letter from Scotia Bank. What am I doing wrong.
@tiger I’m rarely able to open PDFs with Google Chrome. Try another browser.
I have a question in with my financial advisor on the RRSP election to defer issue.
I far as I know, it is treated like an IRA in the States. If they take away the defer tax election, then the RRSP becomes a lead balloon.
This would mean double tax…and if thats the case it would be better to liquidate and pay CRA there money.
Looks like the IRS is taking away the money we have today, and the money we were counting on tomorrow.
And what about a companies Defined Benefit Plan….that is a trust right????so will i have to pay tax on that as well????
WTF
@Mach7 I wouldn’t view newsletter like this as anything like a definitive statement, but a propaganda piece written by bank employees who in most cases know less than you. Thus, your understanding of the RRSP is correct. Don’t let it trouble you. (The US taxpayer makes an election in their tax return the first time reporting on an RRSP account).
As for the defined benefit pension, that is not an account in your hands, so I don’t think there is any reporting. But I am no expert. It is to be paid to you over time after retirement. By that time, though, I doubt you will be a US person any longer.
Now this is an interesting text, and what Mach7 is referring to. If it is true, I think that it is clearly time that everyone renounce as quickly as possible–for it is saying, “We make the rules, and we can change them whenever we want.” But Mach7 is correct to maintain that the tax deferred vehicle should not incur taxes, and the RRSP is recognized as a tax deferred pension plan in US taxes. Bad IRS.
Like Mach7, I also understood defined benefit pension plans could be vulnerable, even though they are not in our hands. I don’t remember where I read the information and I haven’t been able to locate it. Does anyone else recall anything about this?
Until a IRS fact sheet comes out. I am going to put my panic back in the drawer……
My Accountant advises this is the first her heard of this…..so…like Petros says;
I wouldn’t view newsletter like this as anything like a definitive statement, but a propaganda piece written by bank employees who in most cases know less than you.
Anyway…if thats the case then we will have to deal with it, until the day we can renounce!
I found some of the information about pension plans. Some of it was in Position Report of Amerians Overseas: http://aaro.org/position-papers-2011?start=1
According to this, Contributions to domestic pension funds are tax deductible Contributions to foreign pension funds are not tax deductible. AND Employers’ contributions to U.S. pension funds are not added to individual’s taxable income Employers’ contributions to foreign pension funds are added to individual’s taxable income.
Plus, this report indicates there are reporting implications for pension plans outside US. Again, I think I read in a newspaper article these should be reported in FBAR, but I can’t locate that article. Does anyone else remember this?
“…your Advisor would be pleased to discuss
with you any changes you may wish to make regarding
your current investments”
I think somebody at Scotiabank saw a golden opportunity for business development here.
@Blaze. Thanks for that troubling info.
I cannot interpret how defined benefit work pensions are valued for Net Worth for Form 8854. I haven’t found that in the instructions in terms that I understand or be confident of.
http://www.fulbright.com/index.cfm?fuseaction=publications.detail&pub_id=4923&site_id=494&detail=yes
“No Blanket Exemption for Pension Plans and Welfare Benefit Plans. The government declined to grant a blanket exemption from FBAR reporting requirements for pension plans and welfare benefit plans.[8]
Exemption for Participants and Beneficiaries in Certain Pension Plans. Participants and beneficiaries in retirement plans described in section 401(a), 403(a) or 403(b) of the Internal Revenue Code of 1986, as amended do not have to file FBAR reports for Reportable Accounts held by or on behalf of such plans. Participants and beneficiaries who are not covered by this exemption should determine whether they are exempt from FBAR filing on the basis that they do not have a “financial interest” in the Reportable Accounts.
Exemption for Certain Trust Beneficiaries. A beneficiary of a trust in which the United States Person either has a present beneficial interest in more than 50 percent of the assets or from which such person receives more than 50 percent of the current income does not have to file FBAR reports for Reportable Accounts held by or on behalf of such trust if the trust, the trustee of the trust or agent of the trust is a United States Person that files an FBAR disclosing the Reportable Accounts.
Person Responsible for Filing in the Case of Life Insurance. The FBAR Regulations clarify that the person responsible for filing an FBAR in the case of life insurance is the policy holder not the beneficiary.”
Here is the response from my Accountant;
This is completely incorrect. RRSPs have the protection of the treaty (article XXI(3)) because they are for retirement income, thus cannot be reclassified — scotiabank does not know what they are talking about.
….there you have it…any comments????
I am desperate to transfer ALL my savings that are vulnerable to FACTA/FBAR to a “local credit union” that does not have any connection to U.S. companies, or own U.S. assets…Is it possible to find one in Vancouver, or am I sunk??
@Bird Thanks. You are definitely not sunk. This battle is still in its infancy and the banks have until mid-June 2013 to sign their FATCA agreement and will not start ratting on people until Jan 1, 2014.
But even so, the only FBAR fine you have to pay is one that is handed over “voluntarily” since the Canadian government has explicitly said that they will not collect FBAR fines. Unless you have assets in the United States. Then IRS can seize, put liens on or otherwise make life miserable.
@calgary411: Sorry to give you the troubling news. I hesitated to post anything for fear of alarming people even further–but I think we all need to share whatever info we have.
The information you posted seems to indicate pension plans (and I would assume this includes defined benefit plans) do not have to be reported under FBAR.. Am I correct in that understanding?
I don’t understand what this issue about life insurance is all about. Would that include life insurance through work–which is the only life insurance I have. Am I the policy holder or is my employer the policy holder?
I’m still taking the position that my divorce from the U.S. was legal, binding and final 40 years ago. I just wish the U.S. Consulate hadn’t kept the divorce decree for themselves! So, U.S.–Stop harassing me–and my Isaac Brock friends–just because you’re broke!
I have been reading over US Canada Double Taxation more throughly today and that very least there seem to be some drafting errors. I also really don’t get the feel that dual nationality was ever contemplated(In fact I know it really wasn’t) I know there has been past litigation over the treaty but never by someone who was a dual citizen.
When I get some more time I will try to post comments on some of the more interesting sections.
@Blaze & calgary411
Defined Benefit Pension plans DO NOT go on FBAR because you have NO signature authority over them
Defined Contribution Plans DO go on FBAR because you HAVE signature authority on them.
@Mach7: Thank you. That’s at least one relief.
@Tim: When you say you don’t think dual citizenship was contemplated on dual citizenship, do you think that will work in our favour or against us?
Also, in another post you said you aren’t a lawyer, you just play one on TV. What does that mean? Do we have a star in our midst?
Thanks, Mach7.
@ Blaze
Like you I always assumed my divorce 40 years ago was final. How dare they say otherwise. I have applied for the copy of the oath I took: I feel confident that State would have to issue a CLN; but, I have no confidence that IRS would leave me in peace. Apparently, they are allowed to pass ex post facto legislation.