IRS cracking down on U.S. expat taxpayers: Steep penalties for Americans who don’t comply with U.S. tax laws (Updated: CBC has corrected the article)
We should call for an apology from reporters from our own government funded media who fail to point out the specific protections that the Canadian government has offered: (1) Never to collect taxes for the United States from a Canadian citizen. (2) Never to collect an FBAR fine from anyone ever. Why does Jon Hembrey of CBC News fail to point out these protections in his article? Instead, this is what we get:
There are also steep fines for failing to file FBARs — up $10,000 US for non-willful violations and the greater of either $100,000 US or 50 per cent of the account balance for willfully failing to file.
The same December release from the IRS said FBAR penalties would be waived if they were the result of a “reasonable cause.”
Bewick said many people have expressed anger at the rules governing U.S. citizens living abroad, some going so far as to suggest they would renounce their citizenship to avoid the reporting requirements.
Renouncing American citizenship, however, requires a person to file five years of income tax returns, Bewick said.
“People just think it’s unfair — it’s completely unfair — and it probably is unfair. But unfortunately the law is the law and it’s just better to get compliant than try to fight off the IRS,” he said.
The issues of FBAR, FATCA and US extra-territorial taxation, have been around for a while, but Hembrey seems like a newbie, who has learned about the problem yesterday, and he relies mainly on United States government sources and Bewick, a cross border accountant.
UPDATE: The Isaac Brock Society (as reflected in the comment stream) has apparently been instrumental in getting the CBC to make certain corrections to this article. It now has the following note at the bottom:
Corrections and Clarifications
- CBC News added information to this story noting that the Canadian government says the CRA will not collect penalties imposed on Canadian citizens by the IRS under FBAR. The story was also updated to reflect the fact that the U.S. government requires Americans to file annual Reports of Foreign Bank and Financial Account (FBARs) if the aggregate value of all their foreign financial accounts exceeded $10,000 at any time during the calendar year. March 7, 2012 | 12:30 p.m. ET
Good job everyone!
@Petros, while you are working hard to pry open the eyes of the Canadian Government, I’m working on the seemingy impossible task of doing the same thing with the US Government here in the US.
Here’s the text of a letter I sent to the Editor of the Wall Street Journal which was published in today’s printed and on-line editions:
“Chinese Currency is no Problem for the Swiss:
Gov. Mitt Romney is not alone in failing to understand that our massive China trade deficit is the consequence of our unique tax laws, not China’s currency manipulations (“How I’ll Respond to China’s Rising Power,” op-ed, Feb. 16). Germany and Switzerland, whose currency values have appreciated over the dollar, recorded 2011 trade surpluses with China, not because they imported less but because they exported 7.9 times and 9.3 times respectively more per capita to China than we did.
How? They encourage their citizens to relocate abroad and sell job-creating exports, whereas the U.S. imposes punitive U.S. taxation on our citizens, on top of the foreign host-country’s taxes, so they can’t survive abroad and therefore stay home. It takes feet on the ground to capture foreign markets. That’s the real reason our higher-price competitors do well in the China’s market, while we had a $300 billion trade deficit with it in 2011 and, consequently, an unemployment rate well above Germany’s and triple that of Switzerland.
(signed) Roger Conklin”
And to add insult to injury, the Swiss, whose trade with China was up 54% in 2011 over 2010, are negotiating a free trade agreement with China to create more Swiss jobs. I guess they are just not satisfied that their 3% unemploiyment rate is low enough.
http://fta.mofcom.gov.cn/enarticle/chinaswisen/chinaswissennews/201202/9515_1.html.
@Petros
Where is the way to get to this person with comments?
Besides not emphasizing what Canada has said it will not do regarding collecting US FBAR penalties for anyone residing in Canada and collecting taxes for the IRS for a Canadian citizen residing in Canada, effective the date they became a Canadian citizen, here it is again said:
” Americans are also required to file annual Reports of Foreign Bank and Financial Account (FBARs) for ANY ACCOUNT which held more than $10,000 at any point in the tax year.”
People will take for gospel what this “CBC Business expert” writes. Confusion and fear reign.
Found my answer:
” All these CBCNews.ca staff can be reached by email. The address format is: firstname.lastname@cbc.ca. ”
so, Jon.Hembrey@cbc.ca
http://www.cbc.ca/contact/
Shallow, too. Misleading in that Mr. Hembrey makes it sound like filing taxes is no big deal
He says, “It also applies if a person has dutifully paid all their taxes — often at a higher rate — in Canada, although a treaty prevents such a person from getting dinged twice by the taxman.”
That’s all he says … not that it can cost as much as $1000 in accountants fees to get the bizarrely complicated US tax return prepared, even when, due to the treaty, it results in no money owed.
Nor the constant fear of draconian penalties (unheard of in Canada tax law) if one makes a mistake, mistakes which are practically inevitable due to the bizarre complexity and constantly shifting sands of US tax law and forms.
Nor does he mention how the US prohibits US-born Canadians from making the sensible investments that all other Canadians can make with the unfair impact on RDSP/RESP/RRSP, rendering them useless or close to useless, etc, etc.
Only when these things are mentioned will all Canadians realise the true gravity and oppressiveness of the issue.
An inaccuracy. Mr. Hembrey says, “That applies to dual U.S.-Canadian citizens living here — even those who might have moved to Canada as a baby and *never returned to their home country*”
I was born in the US. Canada is my *home country*.
Is he implying that Canadians citizens born outside Canada are different from other Canadians, that we have divided loyalties, that we’re not really Canadian? Does he think we’re here on a visitor’s visa?
Also, he doesn’t mention that many of us are caught up in straightening out that “retroactive reinstatement” of our relinquished US citizenship.
I’ll cut him some slack maybe on the latter point — it is a short article — but that home country bit is insulting to all Canadians born anywhere outside Canada.
If I may make a small suggestion, perhaps we should cc the executive online news staff as well: Rachel Nixon – director of digital media, and Marissa Nelson – managing editor. The whole page of contacts is here in case people think someone else should be included:
http://www.cbc.ca/news/canada/story/2012/01/31/cbc-news-online-credits.html
As a rule, we should always be contacting the managing editors and any other relevant people above, as just writing to the journalists may not elicit a response. Most journalists these days are lazy after all, and need a push from the public.
Write to this CBC “journalist”.
This is the email I just sent and copied to Marissa Nelson, managing editor, CBCNews.ca. I also copied onto the cbc contact page that Joe Smith provided. :
Sent: Wednesday, March 07, 2012 8:28 AM
To: Jon.Hembrey@cbc.ca
Cc: Marissa.Nelson@cbc.ca
Subject: IRS cracking down on U.S. expat taxpayers Article
http://isaacbrocksociety.com/2012/03/07/canadian-federal-funded-media-carries-irs-water-cbc-scaring-canadians/#comment-8375
I was disappointed to read the CBC Business article you wrote, which as I read it would further scare, intimidate and spread fear to US persons in Canada. They need and deserve complete accurate information. http://isaacbrocksociety.files.wordpress.com/2012/01/hon_jim_flaherty_new1.pdf
I will appreciate seeing the clarification in your CBC Business story.
Thank you.
“calgary411”
Calgary, AB
I think this is a fairly typical business article on FATCA, comparable to what I have read in the Globe and the National Post. Bewick is an accountant; on principle, he is not going to advise non-compliance. That being said, there has been a feeding frenzy among tax lawyers and accountants, who stand to gain business by scaring people into their offices.
I called the CBC audience feedback number, but have no answers as to why there is no online option to comment on this story. In terms of avenues to submit feedback on the veracity, balance, or to correct inaccuracies, apparently you can try the “correct typos” or “submit feedback” links at the bottom of the article, but there is also this: http://www.cbc.ca/news/feedback/index.html
and,
contacting the CBC ombudsman: http://www.cbc.radio-canada.ca/docs/policies/journalistic/xml/policies.asp .
The mandate of the ombudsman fits this story – see ‘CBC Mission and Values’: (described at http://www.cbc.radio-canada.ca/docs/policies/journalistic/xml/policies.asp ).
Unfortunately, time is of the essence as we come to another series of IRS FBAR filing deadlines, and the FATCA feedback date of 30 April 2012. Comments via the Ombudsman avenue takes time to work through, and in the meantime, the story is there – without any counterbalance – and without any opportunity to pose question or offer additional information.
What route is best to counter this and urge the CBC to do a better job researching and presenting this issue? They could start by listening to their own previous story http://www.cbc.ca/thecurrent/episode/2011/09/08/irs-us-tax-law/
Thanks everyone, I will be contacting CBC as well. This is laziness at it’s highest form – at least I hope that’s all it is. It’s not paranoia if they’re out to get you….
@Calgary411- thanks for providing the contacts. I quickly sent off my email before my outrage faded. I also sent to Jon Hembry and Marissa Nelson. Here it is.
“CBC is well respected and this kind of article does nothing but harm that good reputation.
There are many, many people in Canada who were born in the US who are not US citizens, a fact that the IRS is carefully avoiding mention of in their news releases and which you seem to have bought into.
For the real story, not IRS propaganda, you need to speak to people other than those that have a vested interest in making their fortune off of this situation – which the tax accountants and the IRS most assuredly do.
Did you know that getting past income taxes caught up and filed, and all of the FBAR reports can cost in the $8,000-$10,000 range?
It is not a simple matter of ‘getting compliant’. How many people have that kind of money sitting around? Then there are the insane non-reporting
penalties. How are people supposed to pay this? Take out loans? Sell their houses? Pull from their retirement savings?
Do you understand what an impact all of this will have on our Canadian economy?
How about writing a real article – one that talks about how this bizarre situation is costing Canada’s economy hundreds of millions of
dollars just for banks to become FATCA compliant. How this situation is causing untold stress on hundreds of thousands of Canadians?
How it’s taking away the savings of Canadian citizens – and their families.
How about writing about what Canada is doing, or can do, to protect it’s citizens? Were you aware that the CRA has said it will not collect taxes
or reporting penalties on behalf of the IRS?
I may have been born in the US, but I have lived in Canada for 46 years and have been a citizen for 36 years.
I AM A CANADIAN. And I am outraged at both the IRS and the way the media has been trumpeting the IRS propaganda in order to scare Canadians into compliance.
Please write the REAL story.
@All,
Excellent that we have made prompt response on this sloppy article. Even though it is a fairly typical business article, we need to continue to call out those putting this slant on the issues we’re involved in. Those learning of this for the first time need accuracy. I will use your excellent further contacts, Brock. Thanks.
Just sent my own note to the CBC on this. I successfully bullied the Globe and Mail into banningh this “come clean” phrase, and I’ve threatened the CBC with a class action suit if they use it again. That one makes my blood boil.
Thanks @All, each and everyone who fired off a response to the CBC. Thanks Petros for keeping an eye out and posting the story!
All for one, and one for all…..
A detailed complaint just went out from this quarter.
Update on the CBC website — good work, Brockers!
“Corrections and Clarifications
* CBC News added information to this story noting that the Canadian government says the CRA will not collect penalties imposed on Canadian citizens by the IRS under FBAR. March 7, 2012/12:30 p.m.”
@pacifica777 – thanks for finding the amendment. I have to say, it’s not enough, but it’s, at least, something.
Power to the people 🙂 Although the circumstances suck, it’s been a revelation to me to find so many concerned, committed people who are willing to act!
@ all…
I see this correction has been added at the bottom…
CBC News added information to this story noting that the Canadian government says the CRA will not collect penalties imposed on Canadian citizens by the IRS under FBAR.
March 7, 2012/12:30 p.m.
@..all…
I hadn’t refreshed this page, and see pacifica777 has already added the comment. sorry for the duplication.
@All. That was a great effort.
I’ve asked that they make an additional needed change:
Thanks for taking prompt action to make the correction to the story on what Canada Revenue Agency will not do in regard to FBAR penalties and outstanding US taxes. On behalf of all that responded to CBC on this reporting, our appreciation.
The following has not been changed:
“The U.S. government also requires Americans to file annual Reports of Foreign Bank and Financial Account (FBARs) for ANY account which held more than $10,000 at any point in the tax year.”
This is in fact what the IRS states regarding FBARs at http://www.irs.gov/businesses/small/article/0,,id=148849,00.html :
Who Must File an FBAR
United States persons are required to file an FBAR if:
1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. The aggregate value of ALL foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
United States person means United States citizens; United States residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.
Please make the additional correction for this vital information – going by what the CBC Business writeR states could lead to those “excessive penalties”.
@Outraged,
Agreed, “it’s not enough, but it’s, at least, something.” Hoping more revisions will follow.
I’m also hoping that maybe, due to our numerous e-mails, they may get interested enough to do in depth reporting on it, using sources which would provide a truly accurate picture … maybe one long article or a five day series of short ones, but in-depth and accurate.
On a related note, I’m really glad you contacted W-5. This situation seems to really fit that programme, and if W-5 does something I think that would really raise awareness.
@pacifica,
Great idea — the mistakes could be redeemable.
@Blaze,
Good luck with the W5 submission. Thanks for being proactive in doing that!
Even more changes made in CBC story!
“The question remains how the U.S. could enforce decisions affecting Canadian citizens unless they enter the United States. The Canadian government says the Canada Revenue Agency will not collect penalties imposed the IRS under FBAR. And Canada’s Department of Finance adds that the CRA won’t collect taxes the IRS says are owed to the U.S. by Canadian citizens under FBAR”
Well done people!.
It should actually be Canada’s Department of Finance adds that the CRA won’t collect taxes the IRS says are owed to the US by Canadian citizens (as a general matter NOT under FBAR which is not in itself a tax). CBC must have gotten confirmation from the Department of Finance today if they published this(although we have known this for weeks here at IBS).