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
@ Christophe
You know I cannot think why the countries you list would be going along to get along with the USA on FATCA. It is not of any advantage to them and yet they seem to want to cave into the bully tactics. There could be even more serious threats being muttered in secret. Who knows? This might be a good comment to repost on the “Ask your Questions About: FATCA” thread.
@Christophe, the reason why the US has a burning interest in obtaining informaton on foreign accounts while other countries are not is because the US is the only country whose tax policy is citizenship based. There are some 7 million US citizens living outside of the United States, all of which are subject to the tax laws of the US, whereas other countries do not subject their citizens who live abroad to home-country income tax on their world-wide income.
That is the fundamental cancer. I live in hope that other countries are going to rise up in arms and join together to demand that the US cease and desist from leviying and collecting taxes within their sovereign borders.
I can understand that other countries are interested in reducing the evasion of taxes by their residents who hide income-producing assets in other countries, such has been going on since the beginning of time in Switzerland, but probably to a much lesser degree in the US. However, under US tax laws the interest earned by non-resident alien bank deposits in the US is not taxed by the US. With no revealing of this interest income to foreign countries there undoubtely is some tax evasion on the part of residents of those countries.
In order to have something to offer in exchange, the IRS has recently published a regulation requiring US banks to report this information to the IRS. Everyone understands that the US hopes to use this information as bait to convince other nations that their banks should provide this same information on US citizens and US residents for the IRS to be able to supress their tax evasion by not reporting financial earnings from abroad.
@cristophe
There is a worldwide effort underway, led by the OECD, on preventing tax evasion. This is the Convention on Mutual Administrative Assistance in Tax Matters agreed during the G20 held in France in 2011. It has been signed by quite a few countries but has not been ratified by each nation’s legislative bodies .
http://www.oecd.org/document/14/0,3746,en_2649_33767_2489998_1_1_1_1,00.html
“The Convention facilitates international co-operation for a better operation of national tax laws, while respecting the fundamental rights of taxpayers. The Convention provides for all possible forms of administrative co-operation between states in the assessment and collection of taxes, in particular with a view to combating tax avoidance and evasion. This co-operation ranges from exchange of information, including automatic exchanges, to the recovery of foreign tax claims.”
So, it could be that the five who agreed to a reciprocal FATCA may have done so in light of the future application of such a convention but also because it could be a diplomatic means to stall the costly implementation of FATCA and force the USA to come to more reasonable terms?
Just a thought.
Just to add that it is interesting to note all of the reservations that the USA has made regarding this convention (http://conventions.coe.int/Treaty/Commun/ListeDeclarations.asp?NT=127&CV=1&NA=&PO=999&CN=999&VL=1&CM=9&CL=ENG).
Some examples below.
It is the USA “Do as I Say” rather than “Do as I Do” principle !
“The United States will not provide any form of assistance in relation to the taxes of other parties described in subparagraphs b.i or b.iv of paragraph 1 of Article 2 of the Convention (taxes imposed by or on behalf of possessions, political subdivisions, or local authorities)(as permitted by paragraph 1.a of Article 30 of the Convention).”
“The United States will not provide assistance in the recovery of any tax claim, or in the recovery of an administrative fine, for any tax, pursuant to Articles 11 through 16 of the Convention (as permitted by paragraph 1.b of Article 30 of the Convention).”
“The United States will not provide assistance in the service of documents for any tax, pursuant to Article 17 of the Convention (as permitted by paragraph 1.d of Article 30 of the Convention); this reservation does not apply to the service of documents by mail, pursuant to paragraph 3 of Article 17 of the Convention.”
@Roger Conklin
“under US tax laws the interest earned by non-resident alien bank deposits in the US is not taxed by the US. With no revealing of this interest income to foreign countries there undoubtely is some tax evasion on the part of residents of those countries.
In order to have something to offer in exchange, the IRS has recently published a regulation requiring US banks to report this information to the IRS.”
I heard about this but it seems like it would mainly benefit Mexico and Canada. I doubt many non-US residents from Europe would travel to the US to open a bank account just to evade taxes. And again, it seems that the US would get the tax anyway 🙂
@oohlala, Thanks. The article on Convention on Mutual Administrative Assistance in Tax Matters is interesting. I missed that. It happened before I started researching all this 😉
@Christophe, There is no published data that I am aware of on where these funds come from, but I recall reading probably 35 years ago that the # 1 source of these funds was Brazil. I suspect that given the tight foreign exchange controls in Venezuela today, that country, as well as Argentina could well be very hign on the list of depositors with US accounts. Given the traditionally high levels of tax evasion in several Latn American countries I suspect that is the primary area of the world from where these funds come.
But it is political instability, probably more than tax evasion, that drives Latin Americans with money to stash it away outside of their own countries. Argentina today, just having nationalized the National petroleum company YPF, I suspect is causing a lot of Argentines to want to stash money outside of the country.
With Brazil and Chile enjoying excellent economic growth I would suspect that a lot of money stashed abroad is going back home because investing it there is likely to bring a much better return than having it earning practically zero interest as in the US today.
When we lived in Peru, there were rumors that because of the government’s fiscal deficit, there were persistent rumors that a devaluation of the Peruvian Sol was imminent. The President went on TV and spoke to the nation guaranteeing that there would be none. A Peruvian businessman told me “when the president goes on TV to tell everybody not to worry becuase there will be no devaluation, that is the moment to buy dollars becuase that is exactly what is going to hapen.” And sure enough after many years of S 26.80 per US dollar it devaluyed and the exchage rate went to S 26.80 to S. 45.0 per US dollar.
I never forgot those words, even though that was back in 1968.
UPDATE: First of all, sorry to be so chatty (and yes opinionated too) on this forum lately. It has become my stress reliever as my husband continues to deal with his mother’s illness down in the USA. It would be nice to be with him but I can’t and besides the bills for his mother come here to be paid so someone has to be here to deal with those. I stay close to the phone which is close to the computer and the temptation has simply been too great to keep popping into IBS. Anyway, this will just reiterate my past position and reinforce my chosen present position so here goes …
I did not do FBARs because I had no inkling that I was a “US person” all these years after my return to Canada and I thought it was NOYB (None Of Your Business) anyway. Now, even though I know they consider me to be a “US person for taxation purposes”, I will continue to not do FBARs because I still think it is NOYB. Every dime in my bank accounts has been properly taxed here and in the USA and the mere existence of those accounts is not taxable, only what small amount they earn in interest is taxable and I will continue to offer that up for taxation here and in the USA until I know I’m free and clear of my expired green card stigma. I guess in the pre-revelation times (only weeks ago actually) I was ill-informed and not what I, at least, would call willful but now, post-revelation, I am informed and intend to be willful by continuing to not file FBARs. No apologies either — I just won’t do it. Unlike so many here with whom I have great sympathy, I have no dire need to cross the border and if I sense any danger to my meagre retirement fund I will remove it from the bank and say, what the heck, with interest rates as low as they are, why do I care?
I’ll admit the US personhood revelation scared me witless but eventually I got to a point where I could not maintain the fright and flight response and I plunged directly into willful. I decided to do my best with my dignity somewhat intact and I will still insist that my bank accounts (holding absolutely no ill-gotten gains) are nobody’s business but my own. I’ll let the chips fall where they may. They can throw willful epithet sticks and paper penalty stones at me but they cannot break my bones … unless the Canadian gov’t makes some sort of sordid deal with the IRS. I’m going to take a chance that that will not happen because I think the student uprising in Quebec is showing even the Harper gov’t that people will rebel and the more the gov’t tries to repress their rebellion the more persistently they will rebel. I would find a way to get to any protest which Brockers and other “minnows” residing in Canada might have to organize in the future … if it ever comes to that. I did it for the War of Terrors, I will do it for this injustice as well.
It may seem like a small step on the journey to being free and clear of the IRS but my I-407 is now, with proof, in the hands of the USCIS, awaiting its stamp of approval. Just to remind anyone in the “oops I still have a green card” camp that you don’t have to go to a consulate to submit an I-407, you can send it directly to the same office in Texas that the consulate would be sending it. Make sure you send it registered mail. It is important to track that package containing your old green card all the way to its destination.
Some comments didn’t make the transfer here so I hope Petros doesn’t mind if I just cut & paste them in …
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Em
June 2, 2012 at 2:40 pm
A Condensed Version of My Story (The one above is long and boring. I was pretty stressed when I wrote it.)
I might be the only non-American (not a “dual”, not an “ex” either) at Isaac Brock trying to shake off a long past close encounter with the USA which branded me as a “US person for taxation purposes” (an inglorious form of what I call US personhood). BTW, if there’s anyone else in this particular boat PLEASE let me know. Briefly my story is that after living green carded in the USA for 12 years I returned to Canada and have been here for 18 years. I severed my financial ties to the USA when our jointly owned USA house was sold in 1997. I continued to stroll along my life’s journey genuinely believing the USA had no hold on me. I actually thought I was being quite benevolent offering up my income on the joint 1040s my husband and I filed. As a tax form DIYer, I didn’t know how to separate joint accounts and didn’t think my husband should take the hit alone on those without at least the benefit of the larger married filing jointly deduction. I never realized until recently that all along, stuck under the arch in my shoe, was this huge wad of US personhood. I never felt it there, didn’t even think to look, and now that huge wad of US personhood has slipped into a position where I know it’s there and progress along my life’s path has become a very sticky affair.
It appeared to me the key to getting rid of my wad of US personhood would be to get a stamped I-407 to scrape the dang thing off with (that’s in progress). However it won’t be a perfect fix because after that I will have to stand my ground and as a Canadian citizen refuse to offer for the perusal of the IRS any more information than I have already provided on those 1040s. (I never did FBARs for my individual accounts.) It should not affect my American (on his way to becoming Canadian) husband’s relationship with the USA as he is totally tax compliant (FBARs included) but you have to wonder if guilt by association will rear its ugly head. I just wish there was some certainty but new legislation keeps popping up in the USA and from one day to the next you never know when another shoe will drop on those of us who are already down trodden by the very existence of citizenship based taxation.
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badger
June 2, 2012 at 3:21 pm
@Em, that’s the thing, re the other shoe/s – there seems to be no end to it. Your post wasn’t boring, and I identify with the stressed part! It’s interesting (but sad) l to see that there is no end to the permutations of people caught up in this, because it demonstrates the extent of the illogical, unjust and unreasonable imperial overreach.
It’s very hard to become un-entrapped, or un-entangled – because it has been designed that way.
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Em
June 2, 2012 at 4:17 pm
@ badger
Thanks for the commiseration. I think I’m over the stressed part (short relapses only). I am reading and learning here at IBS, arming myself with brocks (just words, no actual weapons ever) and that makes me feel more empowered to face the day when the IRS says we want FBARs, 8938s, 8854s, etc. from you Missy and I will have to say NO! Hopefully they will keep their spears in their speargun, wisely go off to look for a Whale and leave this Minnow alone.
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badger
June 2, 2012 at 4:21 pm
best wishes and luck to you @Em, hang in there.
: )
Em
That is something all of those who Post regularly should be on the outlook for. There shouldn’t be many that need copying, like you did, but it is possible as Petros as told me. It was all about timing of backups and comments being made at the .com after that time. I have found one, in the interim, and will look out for more. I plan on slowly reviewing my old posts to see if any were made after May 28th, and just check to see if they got copied over to the new .ca address. I like this change, so far.
@ Just Me
I’m liking the changes too — bigger type size, the updated look and the ease of doing bold, italic, etc. Feels like home already. Petros has done a great job and put in a lot of work to accomplish this.
This doesn’t fit with any thread going on right now so I’ll just plop it in here. It’s something I always have simmering in the back of my mind and it regards government electronic surveillance.
I am only a slightly dipped (or maybe that’s dipsy) internet user — don’t twitter tweets, don’t book faces, don’t pay pals, don’t contemplate ever climbing aboard a “cloud”. I restrict my searches to the somewhat more secure StartPage so therefore I don’t even google. My e-mailing resembles snail mailing (I write letters and simply press SEND, instead of putting a stamp on) — these missives would be excruciatingly boring for a government agent to read. I rarely register to make a comment anywhere — they might want a registration but I don’t want to be part of their database. I don’t use loyalty cards for the same reason. I don’t even use a credit card unless it is the last resort — particularly if the info has to be transmitted via the internet. I don’t bank online — the walk to the bank is good exercise for me, the tellers are nice to talk to and besides I feel it’s my duty to make sure they are still needed, still employed. And one more thing, I don’t pack beep — that is, I don’t own a cell phone because I had too many years of being “on call” with an electronic leash in my pocket so a land line is all I want or need. So there you have it — I am an old fogy (or maybe that’s foggy) but you should see my heart sing when I’m out riding my bike. Nevertheless, the following youtube clip is certainly something to consider …
Pingback: The Isaac Brock Society - U.S. trade representative urges repeal of law requiring U.S. to impose sanctions on itself
I intend to keep reading Brock and even drop in now and then to read the moderated musings at Sandbox but I probably won’t be making many, if any, comments from here on — unless I come across something really helpful to share with everyone or I just change my mind (it happens all the time). I simply have to try to get my life back on track and return my attention to the many things I let slip away while I anguished for months over newly discovered and very scary bits of information emanating from those infamous 70,000 pages. My previous ignorance was indeed bliss — while it lasted. There’s probably many more things I should know but I’m too tired to look for them. Anyway I think it’s time to reduce the size of my blip on the radar of the IRS. (Undoubtably the IRS and likely other insidious US agencies are keeping track of Brockers.)
I’ve taken some further action on my situation. While some Brockers wend their way towards tax form compliance and then onward to the coveted CLN I have never had any U.S. citizenship to renounce or relinquish. I only had a long expired kryptonite card which assigned to me the igominous title of “resident alien” for about a decade, many years ago. That card is the hands of the USCIS now, even if they don’t acknowlege it. I needed for the sake of my sanity to disengage from the Infernal Revenue Service somehow so I chose to do it by a bit of defiance. The deed is done, there’s no turning back and either I have set myself free or I will find myself seeking protection from the eagle’s talons inside the stick and mud walls of a beaver lodge.
I have to hope my lifelong Canadian citizenship will protect me. I have to hope the Harper government won’t “sell me down the river” or to use a more modern expression, “throw me under the bus”. I have to hope that I haven’t made my situation worse but time will tell. Meanwhile I seem to have placed myself on a tenterhook and I am watching the mail for the arrival (but hopefully not) of a dreaded IRS letter. It will be an anxious wait but at least I’m grateful that there will not be an actual knock on my door (again, I have to hope). I have no idea what to do about such a letter either. I won’t give details of what I did because it might be construed as a possible course of action for someone else and it most certainly is not. I went with what seemed simple and logical to me but we all know the IRS is all about reams and reams of complex and irrational code. It all boils down to the irrefutable fact that I am Canadian, and I do not accept that a foreign government has any right to claim me as chattel. To all Brockers: As our most illustrious Canadian philosopher, Red Green, would say, “Keep your stick on the ice. Remember, I’m pulling for you. We’re all in this together.”
Em, I and most of us will understand but miss your presence here. You’ve been a valuable contributor. I wish you resolution in all of this and getting on with your life. I’m glad you are all-Canadian — may Canada live up to its word!
@Em, all best wishes to you, and may the force be with you. And as they say on the Dead Dog cafe (CBC) “Stay Calm, Be Brave, Wait for the Signs” http://en.wikipedia.org/wiki/The_Dead_Dog_Caf%C3%A9_Comedy_Hour . Always worked for me, though I don’t entirely know what it means!
*Em. Relax. They won’t be the least bit interested in coming after you. You have nothing to fear . I’m not being insulting when I say it isn’t’t worth their while. If you do get a letter, (your chances of winning 6/49 are greater), ignore it. You’re Canadian. Best wishes.
Thanks calgary411, badger and Cornwalliscal — I’m not gone … still reading, still very much appreciating Brock. 🙂 I just need to step back and stop obsessing for awhile. I tend to get emotionally involved in everyone’s plight and it drains me. I wish so much that everyone’s IRS problems would go poof and we could all lead normal lives again. Cornwalliscal — I like those odds! 😉
We so understand. Take special care, Em.
Another update (sigh) …
For my husband and me the long wait for him to get his Canadian citizenship (someone said 21 months now) and then another long wait to get his CLN (up to 1 year maybe) is quite stressful. He will of course continue to do his 1040s and FBARs as he has all along but the IRS seems to make changes on a whim and we’re both afraid of unintentional foot faults. We have never used a tax preparer or adviser, just muddled through the forms ourselves and even though our finances are as simple as they get (no investments, basic banking) we could easily make a mistake and now my husband has to put together the final 1040 for his mother who passed away last Spring too — more complications. We live in a place called nowhere-near-a-tax-specialist so muddling through is pretty much our only option. Thank goodness for all the information available at Brock though. If something happens to me, my husband does not have signing authority over my accounts and what a mess for him that would be. And visa versa if something happens to him. We only want a normal financial life where we can hold all of our assets jointly, just like all Canadian couples with no US connection can do. We’re almost 7 months into the process of obtaining my husband’s get-out-of-jail pass (the coveted CLN) and mired in the quagmire of the FATCA fiasco too. Life should get simpler as you get older but it most certainly does not if you have a US connection.
I read Victoria’s go-ahead-make-my-day Huff Po comment (got deleted apparently for no valid reason — idiot deleter!) that if you think it’s good riddance to bad rubbish when Americans move abroad then let them get out of Dodge with as little hassle as possible — no waits, no forms, no fees — just drop the little blue books outside the embassy door and be gone. Well those aren’t the words she used but they give the gist of it. I get as miffed as she does when the don’t-let-the-door comments pop up after an article that those idiots haven’t even bothered to read or perhaps they don’t have the comprehension skills to understand. My husband and I would like nothing better than to sever the last tentacle of that vampire squid US connection and enjoy the sweet freedom of Canadian only citizenship. Victoria’s comment was great and here’s where to find it …
http://isaacbrocksociety.ca/2012/11/10/huff-post-american-expat-taxpayers-would-rather-ditch-citizenship-than-face-new-irs-rules/#comment-87318
@Em,
Would that be defined AMNESTY? A real amnesty?
Come on, US, do something sensible — get rid of all whom you consider traitors — give us what is really an amnesty. And, please, include it for those who have a developmental disability or are otherwise mentally compromised. Then you can get on with your lives without the un-patriotic expats. Give us a choice, those wishing to keep their US citizenship able to do so, knowing full-well all of the obligations that go with that.
I wish your husband (with you by his side) a quick path to Canadian citizenship and then relinquishment. You’re absolutely right — this unneeded complexity is not what we should be facing in our retirement years as we now realize much of our planning is for naught. What a waste of valuable Just Me-named LCU’s (life credit units). What things could be better done with our time spent on this?
@ calgary411
Thanks — nobody does a kind word as well as you. Brock is so lucky to have you. Our situation is solvable (we think, although maybe we’re delusional) but your situation with your son is horrific. It’s what the term Catch 22 was created for. If anyone could have worked through a solution it’s you and still it persists. There is no rational reason why your son cannot be officially set free from his US connection and thus be able to travel safely to visit American relatives with his mother — after she proudly has a CLN in hand (not too far in the future, I hope). All the best regards to you, calgary411. Keep on keeping on is all we all can do at this point.
Em,
You’re a sweetheart — you always buoy me up and often make me laugh. I love your contributions and wise words here. Keep on keeping on we’ll do.
@ Em, re the cited 21 month wait for Canadian citizenship – complete from application stage to granting, may be shorter than the ‘average’ time posted on the Citizenship and Immigration website. It may be shorter also if you’re over 54, because those 55 and over don’t have to take the test – so perhaps that moves things faster from the ‘processing’ stage of the application to the scheduling of the oath ceremony – without having to account for time spent waiting for the testing and then from testing to ceremony. Secondly, if your husband has been a long time permanent resident already, and the application is straightforward, that may be faster. So, don’t despair.
Tick. Tick. Tick. On all those boxes, badger. That’s sounding more
encouraging. The wait time was supposedly 18 months when he put in his
application so that might help too. I’m drafting a letter for the Dept.
of Citizenship & Immigration about the need to at least consider
faster processing for US residents of Canada. I had initially put that
in my Dept. of Finance letter but decided to direct it more
strategically. My husband who is unbelievably patient tends to keep his
powder dry but impatient me wants to always prod the donkey.