Help! I would like a second opinion on what this page on the HR Block Canada site is really saying. It appears to me that they are either directly saying (or at least implying) that U.S. citizens in Canada MUST enter the Voluntary Disclosure Initiative. To me this sounds as though they are saying that people must enter the OVDI program that was reactivated in January 2012. VDI is certainly different from a general requirement to file U.S. tax returns. The page URL is here (it states a 2012 publication date):
http://www.hrblock.ca/canada-irs.asp
What follows is an excerpt from the page. (You may want to read it all.) Am I misreading this? Am I misinterpreting this? How would a U.S. citizen in Canada interpret this? Help! At the very least I think this is highly misleading. I have highlighted certain parts. Your thoughts?
For US Citizens Living in Canada
Any US citizen who lives in Canada (regardless of when he or she moved here and regardless of how long he or she has stayed) needs to file a US tax return with the Internal Revenue Agency (IRS) under the Voluntary Disclosure Initiative (VDI).
Contact us today to find out how we can help.
Key Points Relating to the VDI for Canadian Residents
- The IRS program formerly known as the Offshore Voluntary Disclosure Initiative (OVDI) is now closed. The final application deadline was August 31, 2011. This was not an amnesty program and as such venalities and interest were still imposed by the Internal Revenue Service where applicable. Therefore, the sooner a taxpayer files, the easier it will be to mitigate any penalties and the smaller any interest assessment for balances owed will be.
- The need for US citizens living in Canada to file under the VDI does not negate their obligation to file Foreign Bank and Financial Accounts (FBAR) forms and tax returns with the IRS. See below for more information.
- While there is generally a three year time limit to receive funds in return, there is no time limit when you owe taxes to the Internal Revenue Service. Furthermore, the statute of limitation does not start running until the tax return has been filed. Filing an incorrect or incomplete tax return will also prevent the statute clock from beginning to run.
This problem is going to get a lot worse before it gets better. The truth is that the only people who are competent to do U.S. taxes are too expensive for anybody but the wealthy.
Very discouraging. Starting (I believe for 2011 tax year) paid preparers have to register with the IRS which will further reduce the number of options.
http://renounceuscitizenship.wordpress.com/2011/11/28/paid-u-s-tax-preparers-must-register-with-the-irs/
http://renounceuscitizenship.wordpress.com/2012/01/23/attorney-cpa-ea-or-registered-tax-preparer-your-choice-of-dance-partner/
@ All
Remember, H & R Block is an American company (I believe headquartered in Kansas). They are in the “business of making money”, so of course, they would see this as an opportunity to have their Canadian division raise alot of money.
http://www.reuters.com/article/2011/10/12/usa-tax-preparers-idUSN1E79614I20111012
“Tax preparers are chewing their pencils as the U.S. Internal Revenue Service gets ready to impose the first comprehensive program of fees and rules on the industry’s 730,000 practitioners.
Some fear the IRS campaign against tax fraud could squeeze out small, independent businesses and allow large competitors such as H&R Block Inc and Jackson Hewitt Tax Service Inc to capture market share.
…”
Hello All,
I decided to call H&R Block to make them aware of the error of their ways. I called the # shown from that page (800 472-5615). By some MIRACLE, i was fairly quickly transferred to a lady in the proper department (somewhere in Kansas!). She was looking at that page (at my request) as i detailed some of the errors & contradictions therein, and was taking notes on all i had told her. Unfortunately, my (skype) connection failed then, & i had neither gotten HER name, nor had the foresight to give her mine. When i tried to reach her again, i was mis-directed FOUR times – over the span of nearly 1.5 HOURS trying to get back to her! I’ve now given up, at least for today. I note there IS a Canadian 800# which may be to their main corp ofcs there (800 561-2154); not sure whether you can get any satisfaction from them there.
http://www.hrblock.ca/cust_support/general_support_form.asp
I just left the following comment comment for H&R Block:
Your page warning US residents “Any US citizen who lives in Canada (regardless of when he or she moved here and regardless of how long he or she has stayed) needs to file a US tax return with the Internal Revenue Agency (IRS) under the Voluntary Disclosure Initiative (VDI)” is blatant misinformation, exploiting those who do not have the $$ to get their US tax advice from a competent professional.
Please see http://isaacbrocksociety.com/2012/03/12/check-out-the-following-page-on-hr-block-site-suggests-u-s-citizens-must-under-voluntary-disclosure/#comment-9217 for a posting on H&R Block’s practices and many comments entered.
US residents in Canada need factual information, including what Canada will and will not do regarding collecting US taxes and FBAR penalties, not a sales pitch.
@calgary411, Good, I am glad you did that!
Bravo!!
I sometime feel the IRS is like Mahatma compared to the lawyers who are just leeching on the already terrified population.
Maybe this is a make work project for lawyers. Let’s make everything illegal so all these law school graduates can find work.
@kumsr, I’m inclined to agree!
The H&R link in the original post above doesn’t work but if you copy and paste it into the address bar the page is still there.
@all- Well I stopped in at our local H&R Block office to ask about this and according to them they don’t send in anything to the IRS. They prepare the forms and it is up to the client to submit them via whichever route he/she decides is most prudent.
I guess they never saw the Dec fact sheet.
Does anyone know anything – good or bad – about Greenback expat tax services? Their website is not fear-mongering and has a lot of basic info, which is encouraging.
@recalcitrant
I guess many tax preparers would do just that to “protect themselves”. H&R Block must think or know that relieves them of any responsibility to their clients regarding their sales pitch or poor preparation, with not enough knowledge for some of their “preparers” on what is actually required.
In 2008, my daughter, too, had a big penalty from the IRS for something H&R Block missed although the backup was there for them. She eventually was able to resolve her issue, but it was troubling and would have been expensive. For the H&R omission, the IRS wanted her to appear in some kind of tax court in the US as I remember. She was the one to resolve the problem, not H&R Block.
@Calgary, Wow, that’s pretty bad. I’ve heard better things about Turbo Tax for software. Was this daughter based in the US or Canada when the all this happened? Glad she sorted it out herself though!
These guys also seem to be misleading: http://www.taxesforexpats.com/services/help-fbar-ovdi-past-taxes.html?
They quote the Dec fact sheet, especially the reassuring parts – then at the end of the page they seem to be suggesting that OVDI (with their help) is the thing to do. In fact, they may be confused that the fact sheet and OVDI are one and the same (not very encouraging for a specialist in expat taxes).
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@Howard
In responding to your comment:
“These guys also seem to be misleading: http://www.taxesforexpats.com/services/help-fbar-ovdi-past-taxes.html?
They quote the Dec fact sheet, especially the reassuring parts – then at the end of the page they seem to be suggesting that OVDI (with their help) is the thing to do. In fact, they may be confused that the fact sheet and OVDI are one and the same (not very encouraging for a specialist in expat taxes).”
I believe you are correct – one more example of confusing information. They are clearly confusing the December FS and OVDI. So, beware of this. Also, the title of the article suggests again that people should enter OVDI – which many (and I also) believe is in general a bad idea.
I may do a separate post on this one – its doesn’t seem to be to be much different from the HR Block advice.
To Mr. Shulman: If the tax preparation firms can’t understand this, how can we the taxpayers?
Logical options for coming into compliance include:
Logical Options For Coming Into Compliance
I emphasize that these are logical or theoretical options. Some of them don’t make practical sense for most people. Nevertheless, here are some logical options:
1. OVDI – Offshore Voluntary Disclosure Initiative – If you want to interact with the IRS on the assumption that you are a criminal, this is for you. The reason is that “reasonable cause” arguments will be entertained only with an “opt out”. On the other hand, Canadians may be able to take advantage of the 5% penalty. It is therefore conceivable that this could be a rational option for those who find the payment of 5% of your assets an inexpensive way to go. For most people entering into the OVDI makes little sense and OVDI should be approached with caution.
2. VDP – Good “old fashioned” voluntary disclosure. Voluntary disclosure implies that you are notifying the IRS that you are filing back tax returns, etc. Obviously this would include the making of “reasonable cause” arguments. It is not a “quiet disclosure”.
3. Reliance on the IRS 2011 FS for dual citizens of Canada and the U.K. This probably assumes simple facts and a relatively unsophisticated taxpayer.
4. Compliance on a “going forward” basis – probably appropriate for only people with simple situations
That said, you should take steps to resolve any past compliance issues only with the assistance of a competent adviser.
For the complete post from where this was taken see:
http://renounceuscitizenship.wordpress.com/2012/03/09/u-s-tax-compliance-the-costs-of-compliance-the-costs-of-non-compliance-and-how-to-choose-a-lawyer/
@monalisa1776,
She was in Canada, having returned after working and living in the US for several years. (My daughter was the one that “educated” me on my jagged journey with the US income tax system “requirements” when she asked “who does your US tax returns, Mom?”. I still remember how “OMG” I was as I told her I didn’t file US taxes that I was a Canadian. I need to resolve all this without instilling further guilt on her for my mistake in not consulting an immigration lawyer before I consulted a cross-border tax firm.) Unfortunately Isaac Brock Society site did not exist way back then.
@calgary411
You might have previously posted this information but I was unable to find it. I know that you started to file your U.S. tax returns, prior to consulting an immigration lawyer. I am curious, did the immigration lawyer inform you that you had no obligation to file those tax returns. I realize that by filing you negated the “relinquishment”; but was his advice (the immigration lawyer) to “do nothing” or was his advice to just apply for a CLN using a ‘former expatriating act’ as the reason.
No, I had a one-hour consultation with the immigration lawyer to find out if indeed I actually would have relinquished my US citizenship when I became a Canadian citizen. That was confirmed. There was nothing he could do — I was already up to my neck by all the mistakes I had made (using a cross-border accounting firm to file back US returns, obtaining and using a US passport after I was “questioned” at the border, thinking I could help make a difference in the 2008 election, the only US election in which I ever voted). i.e., my mistakes were made. Too late for me, but others can benefit, and people on this site are so far ahead of anything I would have been doing on my own.
@calgary411
Thanks for the info.
@Calgary411 – remind me again, what year did you become Canadian? Thanks for remaining and helping all of us newbies with this, and allowing us the benefit of your experience.
@outragec, tiger, blaze,
I came to Canada in 1969 and became a Canadian citizen on March 25,1975.
I’ll send you the contact information for the lawyer I consulted with. I don’t know whether or not he would be the best for you guys; maybe also ask around for other suggestions. I have no basis to recommend one way or another.
Later — I’m off for a therapeutic massage with my daughter who is using me as a case study. (She’ll soon be done with her second year of this and ready to pursue her own renunciation.)
Short on time so could not read all the responses but I successfully filed, on my own (with lots of reading at “the old” forum) 5 years of IRS returns — just got my notices from the IRS and I owe a nominal amount for two of the years, nil for two years and a $400 refund for the Making Work Pay for 2010. (did not get a notice for the nil years but confirmed that by phone) It was 4 months from submitting to receiving their letters. Payment was “due” the day I received the letters but I was told I have a grace period to March 30.
Yes, it took many hours to figure it out but the IRS either rubber stamped my calculations or agreed with them because not a penny was changed. I didn’t like the failure-to-file penalty (lesser of $100 or taxes owed), failure-to-pay penalty (25% of tax) plus interest but my amount owed is not much more than the refund. That nominal payment is worth it to be rid of this citizenship.
Now I patiently await my CLN!