News Flash: The United States government is so desperate for cash that the IRS has put the RRSP back into the penalty base for the Offshore Voluntary Disclosure Initiative. You can read about here and at the Serbinski Forum (see comments by Tacova and tsanaha).
Imagine that. The United States is now raiding the retirement accounts of Canadians. Way to take the high ground Mr. Shulman. Way!
The United States keeps telling us that this is about punishing big tax cheats. Right. FATCA is about getting account information so that every single “United States person” resident in Canada can get FBAR fine for 50% of what is in their RRSP/TFSA/RDSP/RESP accounts. Are you watching this Minister Flaherty?
@Petros, What in the Hell is happening!! I have never heard such crap in all my life..this is never ending!
Flaherty surely will not let this happen. Good Lord!!
@saddened123. Can the IRS really get its hands on these funds in Canada?
I think those who own RRSP (they used to live in Canada) living in US are in trouble. US expats (dual citizens) should not worry that too much.
@Roger, I would not think it could be possible, but the way things are going I just don’t know anymore..This is Bizarre to me. What the Hell is next??
Remember when the Ambassador to Canada said they weren’t going after Canadian grandmas. Well, we can trust that promise as much as we can trust Shulman.
If RESPs of children and RDSPs of children with disabilities are vulnerable, why would we think they would keep their grubby hands off RRSPs? There is far more $$$ in RRSPs than in RESPs or RDSPs.
This is consistent with my belief that this is literally payback time for the over 200,000 draft dodgers who came to Canada and relinquished their US citizenship. Now, they are at or nearing retirement and IRS pops up and screams “You’re still ours! Gotcha!”
@saddened123, that makes sense. Several good friend Canadians I used to work with at Northern Telecom here in the US, who had transferred in mid-career, have stayed in the US after their retirement. They are covered under two separate pension plans; one in Canada and the other in the US for the parts of their service in each country.
Not all of those 200,000 who fled to Canada and were pardoned became Canadian citizens. A relative of mine (Son of a now-deceased second cousin) who did that never did and I suspect he may be facing problems. I have lost track of him so really don’t know.
I just can’t see Canada letting this happen to it’s Dual/Citizens. That is really a horrible thing to do to all the Seniors who have saved all there lives and to have it ripped away just does not make sense.
Also RESPs or RDSPs. I think it is time for a Slap Down!!
Roger, you are correct that not all draft dodgers became Canadian citizens, but the vast majority did. I think your friend will have greater problems. CRA and Finance Minister have said CRA will not collect penalties from any Canadian residents who simply did not complete a form and will not collect any liability of any Canadian citizen if that liability arose when the person was a Canadian citizen, even if that person was also a US citizen. So, your friend may have the first protection, but not the second.
With RRSPs, TFSAs, RDSPs and RESPs all considered off shore accounts, Flaherty needs to get his head out of the sand and start screaming. So far, I’m not seeing much proof the calm approach is working
I wish one of those Republican US political Super PACs would cover our story. They have bazillions of dollars to spend on negative advertising against Obama, they should use some of that to tell our story.
It could go something like see Obama says he’s going after tax evaders but all he’s doing is scaring the crap out of Grandma in Canada.
@saddend123, And only the Canadian Government can do that. The dual citizens themselves are powerless in dealing with the IRS.
@Roger, The Candian Government I would hope will step in..if they don’t I give up..
@omghe’sstillanamarican,
Unfortunately that will never happen. The republican support for the FATCA is as strong as that of the democrats. They just don’t understand, or want to understand, why a person with US citizenship would possibly live anywhere outside of the US except to evade taxes. Having made several trips to Washington as part of the ACA-AARO delegation the barriers to being reasonable are as formidable with one party as with the other.
@saddened Please don’t give up. The point of this blog post is to show Canadians how unscrupulous the United States is. When they say reasonable cause, they don’t define it (then we find out you have to be in a coma to have reasonable cause). When they say that grandma’s retirement is not part of what they want, they go after RRSPs. My question remains: If they fine RRSPs inside the “amnesty”, then what makes us think that they will not use the FATCA data to hand out FBAR fines of 50% for every single undeclared account belonging to a “United States person”?
But that doesn’t mean you have anything to fear. I am not afraid. That’s why I use my real name. Peter W. Dunn
@Peter, No I will not give up, I am going to fight with the rest of the Isaac Brock Society. I just get frustrated because it so unbelievable. I have only known about this for about 3 months now, I was shocked when I found out this IRS BS has been going on for years now. You and others here are so strong, I really have the upmost respect for this group of fine people. I think it will make me stronger as time goes on. I am still very scared and worried as I am sure most are. But also fed up and tired of it all I just want to have a normal day again without worrying myself sick.. Peter W. Dunn you are a real Trooper!!
@saddened123 & Roger,
I don’t see this as something we cannot do anything about. It isn’t an ideal solution, nor is it one that most want to do. If the CDN govt can’t/won’t help us, then we have to continue with these efforts and protect ourselves by using our feet…..iow, renounce/relinquish. There really isn’t a lot else we can do.
I have to say that as sad as I was, I do feel a certain strength or satisfaction by my small move of protest. My friends have said, “your country betrayed you.” That is so terribly clear that I am almost freed from feeling any regret. And I suppose, the longer this continues, the better I am going to feel about it. I am proud of having renounced.
Actually, would this not be another good reason NOT to go into OVDI?
@Mach7, clearly it is a good reason not to enter an OVDI. Absolutely. Now if I remember correctly, even the Form 8938 does not require the reduplication of reporting of the already declared RRSP accounts, which has a form that you have to fill out (I forget the number now). An unfiled FBAR could never pass as wilful non-disclosure when it is included in a US information tax returns, as a good accountant would have a US person do in his/her return. Furthermore, there will be a diplomatic stink over this. But my point is that the USA doesn’t need our FATCA information in the first place. And the Canadian government should not allow any FATCA information of residents and of Canadians citizens to be given to the USA, because it is obvious that they would want to hand out FBAR fines for registered accounts, even if they say they won’t.
As far as I am concerned this is a direct violation of the US-Canada tax treaty.
The IRS CANNOT be trusted!
You know what…it is not that the RRSP is back in the OVDI penalty box that upsets me so much.
It just that…we are trying to do the right thing and comply with the information at hand…and the thing that is foremost on my mind is…what will they pull out of the hat next to make it more difficult to ‘do the right thing’.
It is very evident that it is not about ‘tax compliance’
To be honest…i have had enough of the BS.
Worst case senerio, they can fine and penalize all of us north of the border…for whatever reason and for whatever amount.
Just try and collect…
WHY WHY WHY would a sane, law-abiding, tax compliant individual write a check to the US government!
You would get better treatment from the mob.
Unbelievable that they would include RRSP in the calculation since it is all reported to CRA!
They have truly lost their minds .Their goodwill is deteriorating rapidly and they don’t even see it… It will have a negative impact on their economy.
Folks…i have been doing some digging. Are we sure that the RRSP was never included in the OVDI in the first place (?).
All I can find is the reference of one individual who spoke to her ‘agent’. Agent to mean tax advisor (?)
@Petros, It appears from reading the Form 1040 instructions that if you are married to a non-resident foreign citizen, whose income is not subject to US taxation, then in filing a US tax return you are considered as single, rather than married, filing separately.
@Mach7, It would appear that a Canadian RRSP does not qualfy under US tax law like a US IRA (Individual Retirement Account) does to defer tax until funds are withdrawn, but it would be advisable to get advice on this from a qualified cross border tax specialist to be sure. If it does not qualify then apparently income deposited in a RRSP is taxable under US tax law, as are earnings received into the RRSP from investments, interest, capital gains, etc. Again a tax specialist shold be consulted to determine the US tax implications and whether after-retirement witdrawals from an RRSP are fully taxable or whether having already paid the US tax when deposits were made and on the RRSP income such withdrawals are free from US tax.
@ Roger The IRS lives in an alternate reality. I am a resident of DC for tax purposes, despite living in Ontario. I am single for tax purposes, despite being happily married. I am a US person for tax purposes, despite my relinquishment on 28 February. The OVDI allows the IRS to seize property without due process of the law, despite the Fifth Amendment. Steven Mopick continues to think that the IRS doesn’t operate above the law, but that’s because it creates alternate realities in which truth doesn’t matter.
I weary of such games.
BTW, the RRSP is covered under the tax treaty–but not the RESP, RDSP or TFSA.
@Petros, thank you. That clarifies all of these quesions. US persons residing in countries with which the US has no tax treaties (which is most of them) are out of luck on their equivalents to the IRA and RRSP, as well as those in treaty countries where their deferred income retirement plans are not specifically recognized as deferred for US tax purposes