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!
@Thanks, Roger, for all you do on behalf of all of us here at Isaac Brock, as well as your unflagging efforts in educating the US legislators and homelanders. You are an outstanding and respected advocate — and I’ll bet this is only one issue that you have taken on in your life.
@Tim & Just Me – Mea culpa. Out of curiosity, I did some googling and it appears to me that IBS and it’s members are already doing all of the right things to try and get traffic, and use social media effectively, but I guess you probably knew that. Mea culpa…
I am aware of 3 of us “Brockers” who are on Twitter:
Just Me
renounceuscitizenship
myself
It is hard to get noticed. Just wondering if a few of you could go to our sites and “follow” us………..it just looks a bit better, if nothing else.
Thanks
Also tweeting is eric
whoops again
and Victoria
That is Eric’s twitter name? Not sure if I am following him or not.
@Nobledreamer- I’m now following…
@Just Me I’m quant18 on Twitter. Most of my tweeting is about non-IRS stuff, though.
Thanks Eric…
I am following you now…
@Outragec Thank you!
@Eric, sorry I didn’t post correct name…….
UPDATE I just got home to this email:
From: CBC Input
Sent: Friday, March 09, 2012 1:36 PM
Subject: IRS cracking down on U.S. expat taxpayers Article
Dear “calgary411”
Thank-you for your letter regarding the March 7, 2012, story about the U.S. tax system and expatriates living in Canada, http://www.cbc.ca/news/business/taxseason/story/2012/02/27/f-tax-season-irs-fatca.html.
This story was written as part of a CBC income tax season editorial package. It was intended as a primer for Canadians who were born in the U.S. or who hold dual citizenship, in order to provide them with basic information about actions being taken by the IRS that they might not be aware of, and which could have direct tax implications for them.
When the story was published by CBCNews.ca, the editorial team received queries about whether the Canadian government would help the U.S. enforce any penalties the IRS imposed on Canadian citizens under the U.S. FBAR or FATCA provisions. In the interest of providing Canadians with the most thorough information possible, CBC contacted both the Canada Revenue Agency and Canada’s Department of Finance to get their latest position on the issue so we could answer readers’ questions. We have added this information to the story. The addition was also noted in a clarification notice attached to the article.
Sincerely,
Ian Johnson
CBCnews.ca Senior Producer for Features, Special Projects,
and for Technology and Science coverage.
I answered:
Thank you for your email, Ian.
Really, you got queries about whether the Canadian government would help the US enforce any penalties the IRS imposed on Canadian citizens under the US FBAR or FATCA provisions and in the interest of providing Canadians the most thorough information possible contacted both CRA and Department of Finance to get their latest position on the issue? Or, did you get many emails from angry bloggers at http://isaacbrocksociety.com telling you the glaring errors made in the story and demanding that you correct the relevant facts so as to not further fear mongering? I was one of them.
Anyway, however you did it (and it was very soon after our first round of emails, and then another correction when it took another email to tell you what was missed in your correction), thank you for now correctly informing US persons in Canada. Hopefully, most already know the basic information the CBC Business article provided. What we would like to see is expansion of such and on how the US citizenship-based taxation is grievously affecting your fellow Canadians. For example, please do not use the IRS descriptive words “come clean”. We are NOT tax evaders and this is NOT about tax evasion. We are contributing members to Canadian society; we earn and pay all of our taxes in Canada, many of us for decades. The US has turned a blind eye to us filing for decades as there is usually NO TAX DUE. However, they are now coming at us with penalties for Foreign Bank Account Reports (FBARs) which they didn’t bother to advice us on. The US will also hit Canadian financial institutions with FATCA rules in 2013 and 2014, which will be a cost for implementation and loss of financial privacy to EVERY Canadian.
We look to CBC for accurate, in depth reporting, not the poor journalism that article represented. Thanks for your prompt corrections. (It is too bad there is not a place for comments to your news stories.)
Regards,
“calgary411”
Calgary, AB
great calgary411!
I am wondering why they decided not to allow comments for that story, and why they wouldn’t have at least looked for past CBC content, and listened to the details in their own 2 part Currents radio show from CBC Radio 1, September 8, 2011 http://www.cbc.ca/thecurrent/episode/2011/09/08/irs-us-tax-law/ for background? It was much more accurate about some of the details. They should get Anna Marie Tremonti onto it!
UPDATE — another email:
Hi “calgary411”
Thank-you for your note. Whenever we receive questions or typo reports about a story from readers, we move as quickly as we can to verify the query and publish a clarification or correction if one is needed – I can’t speak for other media, but that’s standard practice at CBCnews.ca for any story. I don’t know who the authors of the e-mails regarding this story were, but the news desk received notes in the morning pointing out that the article didn’t say whether the Canadian government would co-operate with the IRS or not. We agreed this information would increase the story’s usefulness to readers, and immediately contacted people at both the Canada Revenue Agency and the Department of Finance. We had confirmed information back from both of them just after noon, and added that information to the story as soon as it was received.
We also had a typo report about the monetary value of foreign accounts listed in the story. The original wording of the IRS directive is rather obtuse and can be read different ways, but we clarified the information with the IRS and corrected the story on that point immediately. Both of the updates are noted in a correction box attached to the story.
I do want to point out again that while the taxation story itself has many interesting and important angles, this particular story was written specifically for a tax season editorial package and was intended to be a basic primer for American-born or dual-citizenship Canadians who are unaware of the US taxation issue. It wasn’t meant to be an examination of the impact the IRS actions are having, which I agree is extensive – there’s only so much ground that can be covered in a single story. This is a major issue affecting an enormous number of Canadians, and you can be assured it’s not the only piece of coverage CBC has offered, or will continue to offer, particularly as we approach the FATCA dates.
Thanks again for your quick response and for noting how the story could be improved to be more useful to readers. I hope we addressed your concerns, and your feedback is much appreciated.
Regards,
Ian
@ calgary411 – when he mentions the “typo report about the monetary value of foreign accounts listed in the story” – I called, and e-mailed to point out (among other things) that they left out that the threshold for FBAR reporting was actually the AGGREGATE sum of the values of ALL accounts/assets with co-signatory powers. They originally said ‘if the total in any account” was 10,000. or more. Big difference!!
AND they did not mention that the aggregate threshold included non-personal accounts – another really important detail. I urged them to note that it also includes those on which the US deemed ‘taxpayer’ has NO ownership, financial gain or financial interest and does not (ex. Canadian employer accounts, volunteer treasurers, merely holding but not using a power of attorney for finances, executor for a Canadian citizens accounts, etc. That is critical because:
who in their right mind would ever consider that to be the case – it is simply unimaginable to have to report on other peoples/organizations accounts?
Clearly Ian isn’t addressing the feedback with an open mind because yes, the IRS pages are obscure and abstruse, but a very flawed business CBC article that misrepresents facts is actually dangerous – much more dangerous than no article at all!!!
@Calgary411@Brock the Badger
You know, in the scope of things, that is an excellent response from CBC. Would to god, that I could even get a simple non automated acknowledgement from PBS or NPR in the States! Total silence is all I hear, so you guys are way way way ahead of the media game. I would have been ecstatic to get two such responses from an Ian equivalent from NPR! It is stunning to me that they reacted so quickly!
So, I think I would focus on the glass being half full here. It is rare that I ever see a story get all the nuances absolutely correct. You would hope they would, but this story is not an easy one for those not totally immersed in the details as we all are. We must remember, (and it is hard when we have our own narratives we would like to see), that reports like this try not to take a perspective, and I do take their point. They were trying to inform. Made mistakes. You corrected them. They reacted. Didn’t get it totally right yet, but still pretty good effort.
Now, it would be good if CBC did something extensive on the impacts of the IRS jihad, along with something from the opinion pages of why this is bad. So keep working on that. All in all, I think it is good that CBC was so responsive to you all. You should be commended for jumping on it, and having a hand in correcting as much as you did! Well done…
Cheers
@Just Me,
You’re right. Thanks for pointing that out. We are lucky in so many ways here in Canada.
We all need to continue our efforts with media of whatever form, wherever we can, with more than what was in that CBC article though.
I appreciate all you’ve done in that regard and your support of everyone here!
@calgary411, my first response upon reading those letters to you was utter disappointment – I expect better from the CBC. Just Me’s comments did make me re-think and maybe I’ve gone from severe to only mild disappointment. Perhaps I think too much of CBC, or perhaps I’m just a little naive. I’m just so tired of the media spouting IRS propaganda…
The bias and selectivity of CBC reporting on the matter of IRS compliance for Canadian citizens lines up for me with multiple experiences of their reporting on other issues.
Only direct involvement with a particular topic produces the personal yardstick that makes evaluation of “news” possible.
The CBC relies on general ignorance and/or noninvolvement of audience to perpetuate the warm fuzzies that translate into acquiescence in and approbation of its task execution.
The CBC is a branch of government that exists to manufacture state ideology. Go to mainstream media for corporate ideology.
Go to indy media for an unpredictable and sometimes crazy welter where sifting and evaluation cannot be avoided. Brock is so indy!
CBC programs may interest and inform and entertain. But those aspects and functions are incidental. Not for nothing is the nickname MotherCorp.
I’m surprised by the mainstream media’s lack of coverage – because this is one hell of a story! Here’s how I would pitch it to a journalist:
A troubled and dysfunctional foreign state – $15 trillion dollars in debt and borrowing to keep the lights on – desperately asserts a cruel and unusual extra-jurisdictional tax and penalty claim on hundreds of thousands of law abiding Canadian citizens. This is based not upon their assets or earnings, but simply upon their birthplace. Most affected are long-term Canadian citizens, many are seniors, while others were simply born in the US while their Canadian parents were visiting.
This results in significant and widespread distress. Yet it is primarily a campaign of fear, because there is no clear legal means to collect this tribute from Canadians within Canada. And the Canadian government confirms this repeatedly.
Then Canada’s banks are enlisted – under coercion and protest – in an unprecedented and likely unfeasible extra-jurisdictional program to identify their US-born Canadian citizen customers (and their utterly legal Canadian bank accounts) and to send their private financial information to this foreign state…or withhold funds…or close their accounts All in violation of Canadian laws governing banking and anti-discrimination in service provision.
Yet Canada’s banks have no clear legal path to doing so – the concept of “US person” has no standing in Canadian law (just substitute “African person” or “Chinese person” to realize the fundamental problem). And our banks don’t even know their clients’ birthplace, and no clear legal reason to ask.
Meanwhile, hundreds of thousands of Canadian citizens are suffering panic, distress, confusion and even suicidal despair as feel their life savings and personal security suddenly jeopardized by forces totally beyond their control.
This sure seems newsworthy…
@Wondering: It sure sounds like a great news release to me. I can also think of some points to add: Some were born in Canada, but had the misfortune to be born to someone born in the foreign country.
Retirement savings, education savings and disability plan savings for Canadian born children, and a Canadian’s principal residence are all in the line of target by the foreign government.
Many of those assets are held with a Canadian born spouse who has never had any contact with that foreign government, other than to fall in love and marry someone born there. The foreign government is even demanding to review accounts loyal volunteers and employees have with signing authority for with charitable organizations, with employers or in their own businesses, which employ Canadians.
@usxcanada: I’m sure everyone in the Conservative party would roll on the floor laughing at this: “The CBC is a branch of government that exists to manufacture state ideology.” That’s certainly NOT how the Conservatives view CBC! They would love to dump CBC completely because they think CBC is made up of left-wing Conservative bashers.
@blaze, @wondering;
I like the pitch – and it could be tweaked for different types of audiences – add in more personal ‘Canadian grandmas’ and the impact on the voluntary sector – for some (more general reading audiences), emphasize the economic aspect (and underscore that FBARs and FATCA penalties and witholding necessarily SUCK ASSETS out of Canada and transfer them to the US). What we don’t have, we can’t spend here at home – same for all those others in countries other than Canada. There is a more formal term for it (something like net transfer…?) but I can’t remember what it is. What we’re afraid of investing in (ex anything the IRS makes it too difficult to hold, understand – and report) we’ll avoid too. Reporting our employer and workplace accounts to the IRS – Perfect business angles there!
Once in place, the US can continue to tweak the FBAR, and FATCAs however they like – and a change of government or party in power is no guarantee that it will be dismantled – there are lots of examples in Canada and the US where the opposition keeps a structure they vowed to dismantle – because it is too expensive to get rid of, or because they discover aspects of it that work for them after the fact. Lots of the steps leading up to where we are now involved actions by both parties, and sometimes bipartisan collusion – the more I learn about it, the more clear it is that both Dem and Rep parties have those that are actively suspicious or hostile towards anyone who leaves the ‘mother country’ – or jealous because they perceive some kind of unspecified advantage, lack of loyalty, or even just identify a group with no concentrated domestic power – so easy to scapegoat – you name it… I don’t think that is confined to the US – I think it may be a universal phenomenon.
@ usxcanada: think that there could still be enough ways to tweak the pitches to appeal to the corporate and state ideologies in a way which can still benefit us? If we think of what angle they most identify with – but which also aligns with what we’re trying to accomplish?
@Wondering
I love your media “pitch”. It is long past due. Also, like Blaze’s add-ons
Brock the Badger –
As Wondering has elaborated, and Blaze has embroidered, we are part of a huge story. About six months ago, in one of my first actions, I connected with an acquaintance with longstanding experience in local media and also a background in therapy to say that I thought this situation would become very big on both accounts. Acquaintance agreed, but desires to stay ostrich, as far as I know. Two other media contacts have not picked up on the tip either.
Tweak the pitches? C’mon. There are reasons this huge story stays mostly buried. There is a reason that NDP support has been far more overt than the Conservative. Work through the history of coverage over at USxCanada InfoShop. Those real-life human impact stories are sprinkled across secondary media. And those have totally tailed off. Really nothing in 2012. Most of the reporting is boring technicalities and drumbeating for accountants and lawyers.
Eventually this story has to break. It is too big. Unless IRS does something unexpected to dampen the fuse. A good precipitating incident would help. Maybe schubert1975 could set up an appointment with Jacobson, we could all chip in to fly the Prairie sister grandmas to Ottawa, and a chorus of grannies on the sidewalk outside could sing appropriate background songs? We really do not want a Norman Morrison.
On the wait and see side, a happenstance border incident could spark the coverage.
@usxcanada
So what do you think are some of the reasons this story stays buried. Are people in your mind being paid off? After reading Megan Leslie’s comments in late Feburary I am more convinced that the NDP’s inclination is to fight this but I don’t know how publically.
@Brock and usxcanada — and Tim,
I was lucky enough to meet over coffee and visit with ‘outragec’ in Calgary today. I have had the fortune to meet a few people from Isaac Brock now — what a privilege. We actually touched on some of what you’re talking about.
Just why isn’t this story out there as it should be? It is huge — why isn’t there the interest? Must we be collateral damage?
There are said to be about 83,000 or more US citizens in Calgary. I understand it is a topic of quiet conversation in the oilpatch in downtown Calgary, but where is their outrage in it all? Why is it not happening?
Besides that population of Calgary, I know there are plenty of musicians in Alberta that have a US connection — they may actually be among those who don’t know yet. It seems those I’ve mentioned it to were completely unaware.
I just don’t get it. At times, I even catch myself thinking, “maybe I am crazy (well actually I do know I’ve become a crazy lady!) — maybe I’m over-reacting” but I know that I am not.
Why do our government representatives not engage in some kind of conversation on this issue with the people that elected them? The only allowance I can give them for such poor representation of me is that there must be something going on in the background. No other justification. But, is that like the hope I had in Obama? The government person who represents me in this fashion will not have my vote next time around!
It is so disheartening, so disappointing. The stuff that feeds cynicism for voting to get good government and protecting our rights. Shall I just give up and go to Saturday Night Hockey and Canadian Idol?