Just retweeted this courtesy of Terry Ritchie.
US Citizens in Canada – Status of Penalty Forgiveness
Monday, March 05, 2012 by Kevyn Nightingale
I have written previously about Americans in Canada who are delinquent in filing their US tax returns and Foreign Bank Account Reports.What We Already Know
On December 1, 2011, David Jacobson, the US Ambassador to Canada suggested that the IRS may provide these people with some relief from the over-the-top penalties that can apply. The IRS issued a fact sheet on December 8, but that sheet basically reiterated the Service’s longstanding position. The IRS will evaluate each filing to determine whether the taxpayer has “reasonable cause” for filing late. There are no specifics about relief from penalties, so there is no certainty whether penalties will apply. Each taxpayer is dependent on the vagaries of the particular IRS agent assigned to her case.
The Good News
The good news though is that the IRS is acting on this imperative. On March 2 at the 36th annual Tax Law conference held by the US Federal Bar Association, IRS Chief Counsel William Wilkins said the IRS is “actively studying options for a different kind of kind of disclosure path for citizens residing abroad who do not have material US tax obligations.” This is the first time an IRS official has proposed something new on the record.
A Reminder
The 2011 OVDI has been reintroduced , essentially identically, for 2012.
But people anticipating coming forward should consider waiting until more details are forthcoming from the IRS.
********
This fellow is a lawyer in Toronto and I am quite surprised he would advise anyone to wait.
IF IRS really does develop a different kind of disclosure, do you think it would really change much? Would they stop asking for FBARS? 8938s? 1040s? Would they ever acknowledge our registered plans? Do you think anyone will re-consider renouncing?
I made a comment on Kevyn Nightingale’s blog a few weeks ago, which never appeared, after moderation. I suppose the managers of his blog don’t want their clients learning about the Isaac Brock Society.
I have a question:
If an IRS agents were to enter Canada for the purpose of attempting to collect US taxes, or even for purposes of auditing the tax return of someone resident there, would this agent be subject to arrest by Canadian authorities for attempting to enforce US laws within its sovereign territory?
It is my understanding that in those rare cases where the IRS performs an audit outside of the US that great care is taken to insure that the audit takes place on what is considered to be US diplomatic property for this very reason.
Sure, I was thinking the other day that the Canadian government should set up the IRS headquarters at Downsview Airport here in Toronto. It’s a vast swath of land in our largest city which is hardly used. Has a runway, and they could use helicopters and fixed wing aircraft to enforce IRS regulations throughout Canada. The Canadian government should also pay the salaries of the IRS special agents who will take guns to each person’s house to see if they have any American citizens inside.
If an IRS agent ever entered Canada, I think our Finance Minister would hunt him down with a rifle.
@OMG, Are you mixing up our finance minister with Dick Cheney?
IRS Ottawa
The Internal Revenue Service (IRS) does not maintain an office in Canada. For information tailored to both U.S. citizens in Canada and Canadian citizens, please refer to this page at the IRS web site.
http://canada.usembassy.gov/service/taxpayer-assistance2.html
I don’t think so : )
Dick Cheney would leave too much collateral damage.
@Roger
Direct US tax enforcement within Canada seems highly unlikely under current laws and precedents. No foreign state has authority to do so here and must rely on Canadian law enforcement; even to arrest a suspected felon. Unlikely the RCMP would assist in auditing a Calgary granny because she was born in Michigan 60 years ago.
Re-posting important legal opinion article (in condensed form)
RE: US TAX COLLECTION IN CANADA
“US Tax Collection in Canada”,
published in “Canadian Tax Highlights” Vol. 19, Number 9, Sept 2011-10-14
Newsletter of the Canadian Tax Foundation.
Article documented difficulty enforcing US tax claims in Canada.
Summary:
– Canadian courts have not enforced US tax revenue claims in Canada
– Canadian courts also very unlikely to enforce FBAR penality
– Under the Canada-US tax treaty, Canada Revenue Agency cannot collect US taxes from Canadian citizens, unless the tax claim proceeded their date of citizenship.
Final paragraph:
“In summary, a Canadian citizen need have little concern about the collection of US tax, interest, and ancillary penalties. However, a US taxpayer who is a Canadian resident and not a Canadian citizen and who owes US tax, interest,and penalties may face collection thereof by the CRA pursuant to treaty article XXVI A. It is extremely unlikely that Canadian citizens or residents will have to face collection of FBAR penalties, except in the very unlikely event that those penalties may be characterized as registrable civil judgments.”
The authors are: Erin L. Frew and S. Natasha of Reid Thorsteinssons LLP, Vancouver (leading tax law firm)
“Canadian Tax Highlights” newsletter is available from tax lawyers, accountants, and in legal libraries and by subscription.
@NobleDreamer…
Thanks for the link to that. I retweeted it too. I had missed that one from Terry in my haze of incoming tweets! 🙂
@ Just Me – you’re too good!
But seriously, does anyone have any faith that some good may come from this?
@ALL
“………..said the IRS is “actively studying options for a different kind of kind of disclosure path for citizens residing abroad who do not have material US tax obligations.” ”
Can anybody clear up the legal MumBoJumBo for me and explain what “material US tax obligations” means, or do I have to seek leagl advice from a lawyer? 🙂
I am by no means a lawyer nor an experienced person with tax issues but I read it to mean (material US tax obligations), those who do not owe taxes to the US.
@UncleTell,
The IRS probably has no more idea than you do since it is requred by US law to enforce the tax laws passed by Congress and signed by the president. It may have to go to Congress with its hat in hand to beg for Congress to change some aspects of the law, but don’t hold your breath that anything positive is going to happen, based on this very nebulous statement. I would be surprised if a lawyer has any idea on what it means either. At this point it is just bla bla bla.
I’m sure they that “help” will have you seek proper legal advice, Uncle Tell.
@nobledreamer,
Then, why didn’t they say so? The gobbledygook is more tiresome by the day.
Well, history says they can define and re-define ‘material tax obligation’ any way they want. I for one place would place no faith in that. I also still say they have no right to any of my info and that I should not have to file any income taxes to the US. I don’t want a ‘disclosure path’, personally – I want recognition that I am Canadian and have no obligation to have anything to do with the US/IRS. A pipe dream, I know.
@calgary411
Gosh, how would I know? Gobbledygook is not my language! 🙂
I was just applying the simplest possible interpretation but not implying it was the only one, nor what they meant………
@calgary411;
here is the reason…
http://www.americanprogress.org/issues/2011/05/irs_letter_perfect.html
“”You can’t really have a democracy if the public doesn’t understand what the government is doing,” says Annetta Cheek, a retired Interior Department regulations writer who co-founded a group of federal employees evangelizing plain language since the mid-1990s. “Transparency fails if information is out there but no one understands it.”…
………”The “big breakthrough” on the IRS project, Etzkorn says, was when the consultants figured out that the agency’s entire taxpayer correspondence apparatus, with its 120 authors and 44 discrete systems, really boiled down to two messages: Send us more money, and send us more information.”
: )
Sounds like Senator Levin wants to kill the US tourist industry by making it impossible for foreign tourists to use their credit cards when they visit the US. That will make it just like it is right now if a visitor to Cuba tries to pay his hotel bill with a US-issued credit card.
Delicious delicious irony..
“The Plain Language Act, signed by President Obama last October, officially went into effect. By now, agencies must have training programs in place and must begin writing materials in plain language.
Documents covered by the law include anything necessary for filing taxes or receiving federal benefits, and any document, paper or electronic, that explains how to comply with a federal requirement.”
http://blogs.govexec.com/fedblog/2011/10/plain_language_act.php
@calgary411, nobledreamer, outragec and All;
Funny, I don’t see any plain language translations of the FBAR and FATCA Mordish/GobbledyGookish on any of the IRS web pages….
but,
Apparently, It’s the law! :
http://www.plainlanguage.gov/plLaw/law/index.cfm
“By October 13, 2011 agencies must:
Use plain language in any document that:
is necessary for obtaining any federal government benefit or service or filing taxes
provides information about an federal government benefit or service, or
explains to the public how to comply with a requirement that the federal government administers or enforces
Write annual compliance reports and post these reports on its plain language web page
OMB issued its Final Guidance Reader on April 13, 2011. ”
What shall the penalty be for non-compliance (willful and non-willful)? Will it be Commissioner Shulman or Timothy Geithner who will resign (or pay the fine)?
@Roger – I wonder if this would also affect online ordering? Although companies like Amazon have set up Canadian sites, there are still plenty of times I have to order from US websites. Would also cost the credit card processing companies a fair amount of money, I would think, to reprogram…
@nobledreamer
You maybe once were not experienced with tax issues — with the education you’ve gleaned here, you could probably now be a consultant of sorts.
It would make it impossible to use credit cards in the US issued by foreign banks, credit unions, etc. that are not FATCA compliant. It is not a law yet, and may never be, hopefully. It would do far more harm that good. It is a strong-arm tactic to force foreign banks to enforce US tax laws, it appears. Hopefully it will never pass and become law. I don’t think we have heard the last of this mess.
Roger said: “It is a strong-arm tactic to force foreign banks to enforce US tax laws, it appears.”
It’s a strong arm tactic kind of like what a suicide bomber does. I’d say go ahead Mr. Levin blow yourself up, thanks for the heads up.
Maybe in his next life Mr. Levin will want to open up a store with a big sign out front that says “Go away, we don’t accept cash”.