A reader sent me the following e-mail and eventually gave me the permission to publish it earlier this week. The IRS is hammering Canadian residents who they deem to be US persons. All Canadians should be aware of the hazard–that if we allow the IRS to shake down our people who happened to be “United States persons” it makes all the rest of us poorer because (1) it decreases our taxable base; (2) it reduces the total investment in the Canadian economy (destroying jobs); (3) it will increase the total tax burden on workers who have to pay the Old Age security for people impoverished by United States taxation of Canadians; (4) it is a very real threat to Canadian sovereignty because it is the exaction of tribute from Canadian taxpayers. We should all be very alarmed about United States extraterritorial taxation! We must put pressure on our politicians to nip this in the bud. Here is the story of one Canadian couple who
the Godfather Douglas Shulman Barack Obama is shaking down:
Dear Mr Dunn,
Thank you for responding. This is our story. Any insight and advice you may offer us would be appreciated. I’ve been reading little bits of Isaac Brock for a while, and know a few people who contribute to it. It’s a wealth of information. Thank you for championing US citizens living everywhere.
To tell you a little about my husband and me, I came to Canada in 1968 at the age of 12 with my Canadian mother and 2 siblings. My husband was born in Canada and obtained a US citizenship card at 20 through his American father. I became a Canadian in 1996. Neither of us has ever worked in the US. I’ve voted in a US election once, regrettably to help bring in the individual whose party has brought this hell storm down upon us.
Our adventures in OVDI began last August when we read about it in the press. With only a week or so before the deadline to file for the 90-day extension, our priority was to first seek the advice of a US tax lawyer. We were told that ignorance of the law was no defense. After analogies involving boogey-men with chain saws from our well respected but exhausted lawyer, we decided to enter OVDI in order to become tax compliant at the first opportunity. Any misgivings we had were outweighed by the absolute terror of what our 51 bank accounts we had recklessly opened over the course of eight years would do to our nest egg; accounts we opened for our children, parents, businesses, mortgage providers, etc. Then there was the sale of our ridiculously overpriced house in Vancouver in 2008, netting us a capital gain and the FBAR penalty arising from it (apparently, the IRS has a claim on that nice little tax exemption gift from the CRA on the sale of a principal residence in Canada). For us, there was no consolation in knowing that the Canadian government would not collect penalties on behalf of the IRS against Canadians, we needed to be able to enter the US freely for personal reasons and do business with Americans bringing funds to Canada. Then there was FATCA. We felt it was better to be a low hanging fruit than to have them chase up the tree after us, and being angry with us for having to.
My first indication that something was rotten was when the deadline to apply for the 30-day extension was given another week because of hurricane Irene. I remember saying “there’s a storm blowing from offshore, but it’s not Irene. They’re overwhelmed and don’t want to admit it”. Other indications came just as we signed on to OVDI and were asked to turn over the names of those who helped us in our financial dealings. Also, by then I had done enough research to have an idea that something had changed, that other delinquent filers before us had maybe been given a pass. I asked our lawyer what was different. He said the OVDI’s Q & A. OVDI still looked better than $10,000 x 51. So be it.
Of course, the learning curve being the steepest since then, we began to have misgivings about our decision. We recognize the heavy handedness in how we’ve been dealt with as otherwise law-abiding citizens living in another country. The penny really dropped for us after reading Nina Olson’s report to congress. We’d been duped!
Over the course of this ordeal I’ve written appeals to politicians on both sides of the border, the US ambassador to Canada, the IRS themselves and have met with my MP John Weston. He said he was working hard on the issues facing duals in Canada and finally after many months of silence and my own theories of government media blackouts, I just today received a letter from him bringing me up to date on his efforts. In it he writes: “… The IRS at least acknowledged the unfairness of what it formally proposed to do in enforcing the FBAR…There is still uncertainty how the IRS will enforce the rules. While I am not completely happy with the aggressiveness and unfairness in the way the IRS has gone about its business towards Canadians, Canadians are at least in a better position than they were a few months ago…”
Not completely happy? His way of saying he’s disappointed. Better position? As far as I see, it’s more shifting sands coming from the IRS. There you have it, the MP who’s been designated to report directly to Minister Flaherty on issues effecting duals offering little in the way of encouragement and news of real progress for us.
We’ve been in contact with TAS. Our nice lady from the department that deals with international taxpayers said that she wasn’t able to formally open a file for us, as there hadn’t yet been a response to our submission. She did confirm, in no uncertain terms, that the IRS doesn’t consider ignorance of the law as an excuse for breaking it. Knowing a little about our situation she did give us hope, however, that we may be able to benefit from a first time penalty abatement. And there is the tax. John Weston had told us that Article XXV in Canada US tax treaty might exempt us from a capital gain in this circumstance. Our lawyer does not agree. I asked her if she would have TAS’s legal look into it. So that’s where we are right now. My question is: why is the IRS negotiating within OVDI when they said they wouldn’t?
I don’t know what direction the US is going to take on these issues. The IRS seems like it’s going to collapse under its own weight, and with all the bad policy coming out of congress things don’t look like they’ll get better any time soon. I certainly don’t think an apology is coming soon, either.
For us the whole process has been like going through the five stages of grief: denial, anger, bargaining, depression, and eventual acceptance. As difficult as that’s been, it’s not as bad as it would be if I was hiding without a voice and trying to keep one step ahead of the IRS.