A frequent contributor, Em, e-mailed her story to me.
I am Canadian (born in Canada). My husband is American (born in the USA) and became a Permanent Resident of Canada in 1996. We lived in the USA for 12 years after we got married in 1982. I was issued a green card that year which I never used — did not earn any wages in the USA — did not access any USA benefits — did not pay into Social Security and will not therefore be claiming it for myself in retirement. We came to Canada to visit my parents in the spring of 1994. My mother was taken to the hospital just hours before we arrived. Several weeks later she passed away but my father was not able to take care of himself and his home so I stayed to help.
I only got back to the USA on brief trips (a couple of weeks each) 3 times after that — all before the end of 1997. We had to winterize our house in the USA, bring belongings to Canada and prepare our USA house for sale (finalized in l997). I have not travelled into the USA in the past 15 years but my husband still makes frequent trips to the USA to visit his elderly mother. The years 1994 to 1997 were a particularly stressful time (my father also passed away) and the last thing on my mind was my green card status but it was a few years after I returned to Canada that I heard or read that if you did not keep your green card “active” when absent from the USA for a long period it would become null and void. All these years I have felt certain my green card was null and void. I put the card away — never used it — never realized I should have returned it and filled out a form of some kind. I just found my old green card recently and happened to discover that the IRS has a classification called “US person for taxation purposes”. Now this card has become kryptonite in my hands.
RE: USA tax filing … My husband and I have filed jointly all through the years (we included a note saying I am a Canadian citizen, formerly a resident alien of the USA) but now we’re thinking it might be best for him to file separately to allow me to be completely free of the system (I hope it’s possible). We didn’t really know how to untangle his income from mine so we just did what we thought was the right thing and declared both of our incomes on the 1040s so the numbers would match those on our Canadian returns. (We have always included a copy of our Notices of Assessment with our 1040s.) Like most couples, our accounts (merely chequing, saving and GIC), were all jointly held for many years but not so now as we decided a few years back to completely separate them with my husband having no signing authority over my individual accounts (not what we would like to do but we sensed it was better that way when we saw the change in the FBAR form).
RE: FBAR filing … My husband has always completed a FBAR with all of his individual and our joint accounts listed. I never did a FBAR for my individual accounts because I did not think I was “US person” of any kind since 1994 or at least 1997 (my last visit to the USA). Apparently the IRS considers me to still be a “US person for taxation purposes” because I still possess what I believed to be a null and void green card. I have never professed to be anything but a Canadian and I cannot afford to pay an “expert” to explain to me a safe way to disentangle me from this mess.
If I try to return my old green card at this late date to get an ALPRS (I-407) I think it might put up red flags and expose both my husband and myself to some “unknown unknowns” (audits?, penalties?, more intrusive forms?, IRS and/or Treasury Dept. harassment?). Whatever I do, I cannot jeopardize my husband’s ability to visit the USA to see his mother. (I decided years ago that I would never go to the USA for any reason.) Now FATCA hangs over our heads and yet another intrusive form (i.e. 8938) has arrived on the scene with penalties as severe as FBAR. We are in a Catch 22 despite our attempts to maintain IRS compliance. Meanwhile, the IRS continues to churn out complexities which are beyond all reason and ken and threatens everyone (including those who owe no tax) with bankrupting penalties. I simply want and believe I am entitled to complete freedom from the USA tax system. For now all I can do is tentatively trust the Canadian government to protect me from IRS penalties and hope some degree of sanity prevails in the USA regarding the large net the IRS casts out to catch the big offshore tax evaders (i.e. the “whales”) while entangling innocents living abroad (i.e. the “minnows”).
Note:
FBAR = Report of Foreign Bank and Financial Accounts
FATCA = Foreign Account Tax Compliance Act
ALPRS = Abandonment of Permanent Residence Status
Form 8938 = Statement of Foreign Financial Assets
@Em –
Just know you are not alone. I feel probably like your husband that my previous birth in the U.S. has caused my family stress and anguish.
I like you because of not knowing I had any further ties to the U.S. never filed and when I looked into this – it would have cost me my house and savings to comply with something I knew nothing about because of a greedy U.S. government. You know they are desperate and greedy when in 25 years there has never been any question by crossing a border with a CDN passport that showed I was born there or anyone ask if I had filed a U.S. tax return.
I won’t comply because I am not an American anymore just because they choose to redefine to suit their cause and even if I wanted to – I couldn’t as it would bankrupt my family. So like you I am praying the Canadian government supports all of us “minnows” that the U.S. has decided to go after.
Keep the pressure on the Canadian government (and others to limit the scope of FATCA and fines etc). I do know one thing..the US will never solve its money problems from ex-pats the answer
lies in domestic taxation.
Hopefully after Election ’12 the following year they’ll raise taxes (or my suggestion bring in a comsumption tax) and remove pressure from enforcing and passing hairbrained ideas like FATCA.
Jim Flaherty is right. Canada’s strength is not lower corporation taxes, it’s its ability to make decisions. The “do-nothing” US Congress ought to listen to him.
People think China is growing fast because of its population etc. No so…they ram decisions down the people’s throats without much resistance. That’s one major why China continues to grow.
@Em, yes, as Proud Canadian says, you are certainly not alone. There are many of us in similar situations, and we are all, I think, feeling the angst, frustration, and fear caused by our past associations with the US. As I read here, and on others, I swing from giddy hope to numbing despair, but I am sticking to my principle that I am NOT a US citizen, I am a Canadian citizen. I, also, am hoping and expecting protection from our Canadian gov’t, that’s all I have. I have no intentions of filing taxes or fbars, entering any disclosure programs or any mis-named amnesty programs. The least I want is recognition that I owe the US nothing whatsoever. Like you, I am more than hesitant to contact any US agency. I would like to find out if I can get a backdated CLN from the 70’s, but, for right now, I’m holding tight, hoping that our gov’t will do something to help us.
Hang in there, Em, we’re with you….
Em Rest easy. Sit tight. The IRS can’t possibly do a thing to you. Or to your husband. He is 100% compliant. You will not need any protection from the canadian gov’t.
Outraged – Holding tight? US Ambassador David Jacobson says you should be sitting tight. Especially if you happen to be a grandmother. Haven’t you heard that he is going to initiate prosecution against all who are “holding” rather than “sitting”? [[Joke]]
@USXCanada – LOL. If I sit I may never get back up again 🙂
@ All — Thank you for the words of support. I very much appreciate them. Now we need something substantial from the Canadian government (i.e. put it in legislative writing) that it will indeed stand behind its Canadian citizens.
@petros, with regard to the email you posted: If she didn’t formally renounce the green card, the IRS treats her as still being a US resident (though I’d love to see someone take them all the way to the Supreme Court on exactly how someone with an invalid green card who doesn’t actually livein the US can still be seen by the IRS as a US person for tax purposes). She would have been required to file a separate return if she didn’t file jointly with her husband. I wonder if she had Canadian bank accounts for which she should have filed FBAR reports when she lived in the US. Apparently she does now.
Likely when she lived in the US she filed a joint tax return with her husband since, with zero income of her own, that would have resulted in a lower US tax.
With all that “US persons” resident abroad are going through today it would probability take a Supreme Court Ruling to declare some of these Congressional-andated IRS actions unconsititutional in order to turn things around. But who among those so adversely affected has the financial recourses to appeal through the US court system so that the Supreme Court would make a determination?
@ Roger Conklin
“I wonder if she had Canadian bank accounts for which she should have filed FBAR reports when she lived in the US.
When I moved to the USA I took everything I owned there. I did not have any Canadian bank accounts when I lived there so no FBAR was required. And yes, we have always filed jointly, even when living in the USA for 12 years. We just didn’t know any other way to do it. Married filing separately didn’t seem to make any sense to us. Every line on my 1040 while living in the USA would have been zero if we had filed separately. Incidentally I stopped filing Canadian tax returns (nothing owing there either) when I moved to the USA. I began filing Canadian tax returns when I returned to Canada. CRA (Revenue Canada back then) did not say one word about it to me. Just a virtual “welcome back” and start filing now that you are here again kind of thing.
@ Proud Canadian
“Just know you are not alone. I feel probably like your husband that my previous birth in the U.S. has caused my family stress and anguish.”
My husband gallantly offered to divorce me if it would help. Yes, we actually discussed that but our plan now is to assume (despite what the IRS thinks) that I am “divorced” from the USA and my husband will get Canadian citizenship as quickly as possible. After that he will renounce his U.S. citizenship. It’s the best we can think of at the moment, unless we discover a more elegant way to escape this mess.
@Em
When you husband becomes a Canadian Citizen he can relinquish rather than renounce which is free–the only bargain that the US offers in this mess.
Roger please don’t add to Em’s worries. She has been in Canada since 1994 or 1996 and has no intention of even visiting the US. She is just fine.
Em There isn’t anything that the Can. gov’t needs to do for you. you are fine as things stand.
@Chester12, the last thing I would want to do would be to add to Ems worries. What she has gone through already is indeed horrible and, as an American citizen, I aplogize for what my country has done to you. My prayer is that you will be led out of this unbelievable mess and the nightmares will soon be over. For heaven’s sake don’t get a divorce. I am sure that is not the solution.
If you are not living in the US and don’t care about the US, then screw it, they can’t do anything to you that you would care about anyways.
@Em
‘When living in U.S., I stopped filing Canadian tax returns’ – Em, you had no obligation to file Canadian tax returns when you were living in the U.S. Canada, like most of the world, taxes based on ‘residency’ not citizenship. Therefore, Canada would not expect you to file a tax return once you had severed your residential ties with Canada and set up ties with the US.
This is what is so absurd about the U.S. – they expect their citizens and permanent residents and green card holders to file tax returns with the IRS, no matter where they are living. In my opinion, it is evil!
The worldwide tax system is an evil remnant from the Cold War era when the US accounted for 50 percent of the global economy. Times have changed and this system of taxation should be dead and buried along with the past.
Joe Biden is ready to make peace with the Russians, how about making peace with your own expatriates and leaving them the hell alone.
@tiger, I concur with your opinion that it is evil. And it was an evil act for the United States Congress to impose this requirement on persons who do not reside within the US. But as long as all of the other governments of the world acquiese to the US exherting its poisiton that it has a right to exercise this extraterritorial “authority” within the soverign borders of other nations, it is unlikely to change. The US has tax treaties with some 70 countries and all but the few that were negotiated back in the 1950s include the right of the US to do this. Thse countries have agrred to allowing the US to do this. Why, I’ll never understand. And in non-treaty countries the US does it as well. I am not aware that any of them have legislation permitting it although a few with foreign currency excance controls make it illegal to exchange local currency for US dollars to pay this tax obligaton to the US.
http://www.irs.gov/businesses/international/article/0,,id=96739,00.html.
@Roger, you have to wonder why so many countries agreed to this breach of sovereignty. There must have been something in it for them. It seems other countries have benefited from American companies relocating their headquarters.
Maybe while the Americans thought they were playing the foreigners for fools the Americans were the ones that were actually being played.
@omg ‘you have to wonder why so many countries agreed to this breach of sovereignty’. My personal feeling is that the US, for so many years a great power on the world scene, has both a narcissistic attitude and basically has become nothing but a bully. When the tax treaties were negotiated, most of the countries of the world wanted nothing but to be able to ‘do business’ with the almighty U.S.A. Fatca is nothing more than another example of its narcissitic and bullying manner. Let us hope that the countries of the world will not ‘cave in’ once again to the U.S.
“The only difference between death and taxes is that death doesn’t get worse every time Congress meets.”
-Will Rogers
All the anguish over this – stressing families and straining/divorcing marriages, preventing engagements (ex. on one of the European forums), causing dark thoughts and depression, sleeplessness, physical illness, sucking precious savings and wellbeing away, and intruding on all the non-US citizen family around us as well. A barrier to providing for those with disabilities…A cautionary tale if adopting or marrying a US citizen.
Any child of mine will grow up to think of the US – not with respect – only with suspicion and mistrust. I will advise them: do not go to the US, or marry a US citizen. I will never look at the US with any respect or fondness again.
The credit union said last week that they had noticed US citizens getting rid of, or declining to invest in TFSAs. Now we do our personal banking in Canada based on what the US whim decides to honour or not? And all producing absolutely nothing of any actual substance at all – merely an exercise and abuse of power.
@ desi
Love that quote!
@badger
You are so right. Mixed citizenship couples face a lifetime of essentially abnormal financial arrangements when the IRS is involved. I don’t think the idiots who dreamed up country of origin taxation were capable of understanding the untenable situation they were inflicting upon such couples. When we got married we had to decide on one country or the other (obviously we could not live one in one country, one in the other) and in hindsight it would have been less complicated to pick Canada but we had no idea at that time what tax complications lay ahead of us by choosing the USA. However we loved the real people (family and friends) we were surrounded by in the USA for those 12 years and I hope that any child of yours will also be made aware of the fact that there are many more good Americans than there are congress critters, corporats and by-the-book bureaucrats. They simply have not found a unified voice and the confidence to claim the power that is there for them to grasp. I have some hope for an awakening but time, unfortunately, seems to be quickening.
@Badger and Em, you both make really good points, and I find myself torn. I have relatives in the US and I know they’re good people and I try to remember that. On the other hand, many of the people I know from the US, both relatives and visitors (I live in a tourist area) are very insular and know little about the world beyond the area they live in. And most of them do buy in to the the US being the best place in the world and still see the US as the most important country in the world. And these are the people that vote in the politicians down there and these are the people that are allowing their country to fall apart. However, I’m not sure if that’s not a trend, it seems so many people nowadays are very narcissitic and only concerned with what will be good for them immediately, not thinking of future impacts. I’ve been a little guilty of that myself, not paying any attention for example on what’s going on down across our border because I didn’t think it had any effect on me (except perhaps global/financially with the markets, etc). I have been hit over the head and awakened abruptly.and it may take something evil like this to awaken the masses down south. How they can live with their health care system is beyond me. As discussed on other streams, a lot of people fell for Obama’s rhetoric and campaign promises, maybe we can hope that they will wake up and see what’s being done to their country. If they love it as much as they say, then they need to wake up and do something to save it. It’s heading for a meltdown.
Dark thoughts for a lovely Saturday morning, but this morning I woke up with the worry back foremost in mind again….
@outragedcanadian, your point is well taken. I once lived and worked in Brazil for a US company opening up a brand new export market when the CEO of that company suffered an untimely death.
My boss took me to meet the new CEO who replaced him and I quickly became aware that as far as he was concerned the the world ended at the US borders and the ocean’s edge along the coast. He asked me to describe what I was doing for the company in Brazil and listened with total disinterest when I told him of the significant market penetrations we had made in just a year. His response was “tell me, do they have things like TV and washing machines in Brazil?” When I told him that the 8th largest TV network in the world was in Brazil, he stared at me in obvious disbelief because instinctively he know that all Brazilians were jungle dwellers dressed in loin cloth with spears used for hunting and killing each other.
My job came to an end just a few weeks later. He also disposed quickly of all of that company’s foreign operations in the few other countries where they had such.
There was a day with for major US corporation that the path to becoming the CEO always included a tour of duty abroad, but that came to an end with the enactment of the Tax Reform of 1976 which so drastically increased the double taxaton of US citizens abroad that overseas duty quickly became a thing of the past for corporate executives climbing towards the top. Today there are few with this experience and, believe you me without this international perspective the large majority of them, have little perception of the market potential of the export market. Canada last year have a very slight world trade surplus whereas the US ended the year with a massive trade deficit. The last US trade surplus was in 1975. It went permanently negative in 1976 tax legislation and since then has reached a cumulative total of $8.5 trillion. Last year’s US $740 billion trade deficit equates to some 7.6 million destroyed American jobs manufacturing for export.
@ Roger Consider this: No trade deficit ever actually exists, because this means that those with goods in other countries accept the United States dollar in return for their real goods. The US exports the dollar. What will happen to the United States after the dollar devaluation that is coming? The answer is that if you don’t have gold, silver or something else that people want, you won’t have a trade deficit any more. And that means that goods will necessarily increase in price in the United States, perhaps out of the range of most buyers.