Hello Isaac? It’s me, Ladyhawk. Is there anyone here who still has US citizenship? Well, anyway, in case anyone is interested in how things are going for people like me who are still trying to make the dual thing work, I thought I’d tell you what happened when I went to the US Consulate in Toronto to renew my US Passport.
I’ve been in Canada since 1969, took out Canadian citizenship in 2003, and have no plans to renounce or relinquish my US citizenship. I got my first US passport in 1986 and renewed it in 1996. I had to go to the US Consulate in Toronto both times because that’s the way it was done then. Not a big deal since I live about an hour’s drive away. Since then it has become possible to renew passports by mail, unless your passport has expired and it has been more than 15 years since you last renewed. That was the case for me, so I had to appear in person to renew.
Things have changed. The US Consulate in Toronto is still in the same building, but the big wide welcoming doors at the front on University Avenue are closed, and entry to the building is now at the back, through a smaller door where security is simpler. You don’t get into the building unless you have an appointment, and most people who go are there to get a travel visa for the US. Since I was there for a passport, I was escorted past the lines, through a security checkpoint similar to airport security, and up the stairs to the upper floors by a relay of security guards who kept each other informed about who was coming and going. It was swift and efficient.
At the first window, an agent checked and collected my documents (appointment letter, expired passport, application for renewal, passport photo, and self-addressed Express Post envelope). Then I was sent to the next window where I paid the fee, and from there I went into the waiting room. It was open and uncrowded, with a TV screen on the wall tuned to the CBC news. The resident security guard politely asked if any of us had any questions he could answer while we waited. Within 15 minutes I was called to another window.
Here the agent asked me some questions confirming the information on my application. He noted the state in which I was born and asked if I had grown up there. I said yes, and he smiled and said he was from the state next door, so we were practically neighbours. I smiled back and we chatted a bit about life in that part of the country. He noted my travel plans for the summer and assured me I would have my new passport within two weeks, in plenty of time for my next trip outside of Canada. He asked in a very friendly way about why I had waited more than five years after my passport expired to renew it, and I confessed that I had been very busy with work and family concerns, and had simply not gotten around to it. He did not ask if I had dual citizenship. He did not ask any questions about taxes. I was back on the street in less than 45 minutes.
Since everything was in order, I should have my new passport within a fortnight. The only doubt I have is to wonder whether my information will be checked against my tax status, although I did file taxes (but not FBARs) for 2010. No one at the consulate said anything about that. If I receive anything from the IRS requesting more tax information before my passport is issued, I will report it here.
All the people I encountered in the embassy, from the security guards on the sidewalk outside to the officials and clerical staff, were uniformly pleasant, friendly, helpful and competent.
@bubblebustin, if you have a CLN then I am sure this would not deter the IRS for going after you for anything they perceive you still own to the IRS. From previous posts I am sure that the Canadian Government would not assist the IRS in collecting penalties assessed by the IRS for, as an example, having failed to file FBAR reports. But I am not sure what assistance the Canadian government might provide to the IRS in collecting taxes due from prior to receiving the CLN. One thing is sure, if you owe the IRS anything; taxes, fines or penalties, you will be “live meat” to the IRS if you step across the border into the US, even though you have a CLN in hand. The CLN does not pardon you for past “sins.”
@Roger and bubble, the Canadian government will not assist the IRS in collecting FBAR fines from Canadian residents at all, and they will not assist the IRS in collecting US taxes from any Canadian citizens if those tax obligations occured after the person gained Canadian citizenship. It has nothing to do with the CLN, which is only a US document and means nothing to the Canadian gvernment.
The CLN will stop the banks from ratting you to the IRS though. See http://isaacbrocksociety.com/2012/02/11/is-a-certificate-of-loss-of-nationality-really-necessary-new-fatca-regulations-are-in-gobbledygook/
@petros, Understood. But I thought from earlier posts that Canadian banks were prohibitied by Canadian law from asking clients their nationality or citizenship, so do they really know which of their account holders have, or have had, US ctizenship?
As Petros said, with the CLN I do not have to worry about the Canadian banks anymore. That is one reason why I renounced first, and decided to worry about the taxes and FBAR later. Now I need to get a SSN or a taxpayer ID number. It is to bad that renunciation was the only sensible thing to do, although it was easy for me to do emotionally since I consider myself a Canadian first and foremost. The United States was my home as a child and even though I thought I had lost my USC many years ago (not so), I would still be happy to have now if circumstances were a little different.
@ TrueNorth You probably did lose your citizenship. If you have renounced, you don’t have to do FBAR. It is not part of the exit procedure. Why bother getting a SSN number? If you insist on doing the 8854, just do it. I personally would try to stay out of the IRS system altogether.
@ Roger I don’t think that the banks in Canada know what they are going to do for sure. I get the impression that they plan to be compliant.
@Petros and Roger
I think what Canadian banks will end up doing is very unclear at the moment. I think the big ones of course are taking the default position that they are going to comply however, when you get into the nitty gritty details of how that will happen it becomes quite murky. I don’t see any reasons though if entitled to a CLN not to demand it.
I filled out the DS-4079 form before I went in, they took a copy of it, but I was told they did not think that I has relinquished and I should renounce. I still hope that the State Department may see it a different way. I will know for sure when I see what date they put on the CLN. I kind of wanted it over and done with then and there. I had planed to file five years of returns to avoid being a covered expat, I also thought that I would need to file the FBAR forms as well, but perhaps not as you say. Another thought that has crossed my mind is if they accept my relinquishment date I would be free and clear of FBAR. The tax seems to be up to the date I notify state, not so with the FBAR as far as I am aware. And yet another option may be to check the no box as far as being tax compliant, become a covered expat, I would still be under the approximately $600,000 exemption and so still would owe nothing, that may save me years of unnecessary tax returns. I will let everyone one the site know what happens, I know many think you must become tax compliant before renouncing.
@foxyladyhawk,
I think the guy is fishing for clients.
Until FATCAT comes into play, IRS faces a lot of issues getting enough information from DOS to be useful. So far, my research has shown that while the IRS is able to get info from the DOS (i.e, via passport) it has not been effective primarily because what they send is very limited information and mailing addresses are not reliable.
http://www.treasury.gov/resource-center/tax-policy/Documents/Income-Tax-Compliance-US-Citizens-and-Residents-Residing-Outside-US-5-1998.pdf
(This info is from 1998 however, I have looked extensively and not found anything more current ).
Code section 6039E, added by the Tax Reform Act of 1986, requires DOS to collect certain information from U.S. passport applicants and forward that information to IRS.
The section provides that any individual who applies for a U.S. passport must provide:
(i) the individual’s taxpayer
identification number (that is, the individual’s Social Security number);
(ii) any foreign country in
which the individual is residing, and;
(iii) any other information the Secretary of the Treasury may
prescribe.
Currently, DOS collects and sends to IRS each applicant’s:
(i) full name;
(ii) Social
Security number;
(iii) mailing address; and
(iv) date of birth.
I was looking into what systems DOS looks at when doing a background check and found this :
http://www.state.gov/documents/organization/109089.pdf
Passport information maintained by Consular Affairs may be disclosed to external agencies under the authority of routine uses published in the Privacy Act system of records titled STATE-26, Passport Records. Under the above arrangement, PIERS is more commonly the system from which passport records are disclosed in a manner consistent with a published routine use.
*PIERS Passport information electronic records system
The PII elements collected are the applicant’s surname, date of birth, address, telephone number, social security number, passport, driver’s license or other identifying number(s), education, financial transactions, employment, medical or any other
identifying attribute assigned to the individual. The source of the information provided to PIERS is the passport applicant.
With regard to the sharing of information with external departments:
*Internal Revenue Service for the current addresses of specifically identified taxpayers in connection with pending actions to collect taxes accrued, examination, and/or other related tax activities;
* Department of Homeland Security for border patrol, screening, and security purposes; law enforcement, counterterrorism, and fraud prevention activities;
(There are more deparments with descriptions but I don’t want to type out the entire list and make this sooo long)
also http://www.allgov.com/agency/Bureau_of_Consular_Affairs
•Taking the lead within the Department of State on continuation of negotiations with foreign governments for the international sharing of terrorist lookout information, through the Consular Lookout Support System (CLASS).
– CLASS Consular Lookout and Support System
The principal name-check system for visas and passports
•Continuing to operate its two-way sharing of the CLASS database with the Department of Homeland Security’s (DHS) Treasury Enforcement Communications System (TECS), which is used at ports of entry, and which presently includes approximately 29 million names.
•Transferring fingerprints collected with visas to the DHS IDENT (PDF) system, and data on lost or stolen passports to Interpol.
BTW, I like your idea about the Institute for Justice. Could ACLU be of any help?
I emailed Michal Moore at the very beginning of my involvement here (mid-Oct 2011) and never heard anything back from him, just for the record.
@bubblebustin
I remember looking through my passports (1982, 1987, 1997, 2007) and the tax info appeared in the last two. This matches info below:
http://www.treasury.gov/resource-center/tax-policy/Documents/Income-Tax-Compliance-US-Citizens-and-Residents-Residing-Outside-US-5-1998.pdf
(vii) Addition of a statement to all U.S. passports issued after early 1993 reminding the holder that all U.S. citizens working and residing overseas are required to file U.S. tax returns and
report based on their worldwide income;
@bubblebustin & Roger
The Canadian government will have to collect taxes and forward to the IRS from Americans who are only residents of Canada (i.e., not citizens). The CLN is not what matters, what matters is whether or not one has Canadian citizenship at the time the tax was incurred.
@nobledreamer, do you know for sure that the Canadian government does collect taxes on behalf of the IRS from non-dual US citizens in Canada? I know this is what the Tax Treaty obligates Canada to do. I am aware, from a conversation with an American tax provider in France that she was aware of one case where the French Government indeed did this on behalf of the IRS.
@Roger, the possibility of future enforcement of the Reed Act is one of the main reasons I’m hesitant to renounce. My parents are in their 70s, plus I have brothers and niece/nephews I need to continue being able to visit, plus i’d be heartbroken if I were exiled from my homeland.
I chose to make a new life in England so have to accept that American exceptionalism is forcing me to pay for a specialized accountant and a degree of double taxation. As I had gone native and had invested like a Brit in local mutual funds in ISAs (tax-efficient savings/investing schemes), I thought I was OK because of my rrsicency and joint UK citizenship. I also naively believed that the tax treaty protected me from double taxation.
Turns out I was mistaken. Gravely mistaken…had to pay many thousands due to anomalous PFIC taxation on phantom capital gains when all along had assumed that because I was a tax resident of Great Britain that I too could make use of tax free investments here.
But with hindsight I now realize that I had effectively forgot I was still American and that our system effectively requires us to use accountants, especially as expats. So I blame myself, really. I concluded I had no option but to amend the earlier nominal returns and pay what I owed.
To not have done so would have been dishonorable. Of course I feel bitter but the law is the law. Hover, I don’t consider my self a tax cheat and didn’t feel that OVDI’s draconian fines of 25% of all my life savings was fair for my situation which had been created unintentionally.
My accountant agreed. Nevertheless, I have still been hit hard with all the back taxes, interest, and standard penalties. I will owe taxes for 2011 and probably 2012 but because she and a certified financial planner have advised me to move my remaining assets into a FATCA compliant fund, I believe my future US taxes will be at most a few hundred dollars a year which I can live with.
I will feel safer sticking with this accountant for the next several years, at least till I get through my statutes of limitations for the amended returns which will be around June 2016. And because I had over 25 accounts for FBAR, I am also aware that the DOJ could interrogate me about exactly what I had anytime up till July 2018 because 2011′ s FBAR will have been the last shortened version I will have submitted.
Once I’m finally in the clear in six years, I’ll then feel safe enough to consider whether I wish to keep my US citizenship…hopefully by then, things will have been reformed but I also realize that they could instead take an even harderline stance via the Reed Act and aggressive audits, etc. But if I keep it, I will by then have a simplified enough situation to be able to switch to a less expensive accountant, most likely.
@nobledreamer – I read the links you provided. OK, now I’m nervous. Isn’t this ridiculous? I keep having to remind myself – “You are not a tax cheat. All you did was fail to report!”
If the IRS looks for me, they’ll find my 2010 tax return. I did it wrong, but even if I correct it, I won’t owe any taxes. I just…..totally ignored Schedule B. And 8891. Ignorance, pure and simple. Now is when I second-guess even doing that much. Sigh.
@True North,
When you can and if you wish, we would sure like to include your information on relinquishment vs renouncement, which Consulate you are dealing with, one appt vs two, date of first contact, date of first appointment and second (if applicable) and of course the finale — the date of your CLN.
http://isaacbrocksociety.com/2012/03/14/draft-pdf-compilation-of-relinquishment-and-renunciation-data-as-reported-on-isaac-brock/,
and,
http://isaacbrocksociety.com/2012/03/14/draft-pdf-compilation-of-relinquishment-and-renunciation-data-as-reported-on-isaac-brock/
Good luck in your endeavours!!
@Roger
I have been looking and looking for the reference I’ve seen where it is clear that CRA will have to collect taxes due from American citizens in Canada who are not dual. The context was in the oft-quoted phrases, “The CRA will not collect FBAR penalties” and “The CRA will not collect taxes from those who were Canadians at the time the tax was incurred.”
I’ll keep looking!
@nobledreamer, I suspect that this “obligation” is in the Tax Treaty signed between Canada and the US. I have not checked the text, but if it is like other US tax treaties I have looked at there is this mutual obligation of one country to assist the other in collecting legitimate tax obligations who are living in the other country.
@Roger
Yes, I do know it is there. But there was some mention in an article somewhere, that emphasized this would be done as a matter of the Treaty, in spite of the “protection” for FBARS and for taxes if one were Canadian when incurred. It is definitely in the Treaty.
@foxyladyhawk
Oh dear, sorry about that. Which links are you referring to?
@nobledreamer, Roger.
Will this help? reply from Minister Flaherty in Schubert’s post http://isaacbrocksociety.com/2012/02/13/3200/#more-3200
@nobledreamer, not to worry, I was reading your references on passports and taxes and got paranoid about the fact I’m waiting for my renewed US passport to arrive, knowing now that the DOS routinely sends info to the IRS when passports are renewed, and I am still in the process of doing my US taxes and pondering the options I have regarding back taxes and FBARs. I don’t believe there should be any problems with my passport since I have no issues wth the IRS at this point.
@nobledreamer, he seems to be saying that Canada will help the IRS collect taxes, and only taxes, from US citizens in Canada that are not dual Canadian citizens. But if they have Canadaian citizenship then the IRS will get no help from Canada. Am I reading this right?
We were told by our lawyer that Canada will help collect taxes, but not penalties from Canadian citizens.
@calgary 411
yes, my dear friend, you have provided exactly what I was thinking of, but could not remember!~