I am making what you could call a “noisy” non-disclosure. I have stated that I do not plan to file FBAR. I am no criminal, but because I’ve not done FBARs in the past, and I plan never to file one, actually filing an FBAR creates a substantial hazard because of its criminal penalties. This is the fatal flaw in the FBAR requirement. If there were only draconian civil penalties, no one could invoke the Fifth Amendment in refusing to file it.
But the problem for someone who has relinquished US citizenship like me is that the Form 8854 reveals too much damning and detailed information about assets, giving the IRS the ability to deduce that the person has financial accounts and how much must be contained within them. I have learned that while the Fifth Amendment will not allow a person to make no tax filings at all (remember Al Capone went to jail for that), one may withhold information on a tax form, if that information could lead to a violation of person’s Fifth Amendment privilege. Therefore, here is Part V of my 8854 (I’ve blackened the actual declared numbers, which is actually the necessary numbers in order to make it possible for the IRS to determine that I am not “covered”):
So the IRS will be able to see that my assets fall below the $2 million threshold and they can see that I have owed zero taxes for the last five years. I am not a covered expatriate.
But they have no right, under the Fourth Amendment, to an inventory of my assets, and therefore, I will not provide sufficient information to them so that they can charge me with criminal FBAR. The Fifth Amendment is invoked for the value of all my Canadian assets. For all they know, my house is worth the full amount of the declaration. As for the categories with zero, it will hopefully show to the IRS that all my assets are already “offshore” and therefore safely out of the reach of their grubby hands. In any case, all I have in this life has been earned in Canada, and not subject to the jurisdiction of the IRS.
I invite comments.
Was anyone else impressed with the list of complaints/issues to be brought up in the Democrats Above presentation posted above by Tim only to be massively underwhelmed by their proposed solutions at the end?
I agree totally. However I feel like those “solutions” may very well be what’s coming down the pike in coordination with a delay of FATCA for one year. My view is outside of the US we need to fight for something better than that. My hunch though is that there is still substantial resistance in the bureaucracy to even some of those items thus this whole mess will continue to drag on. You might also see the requirement of providing a place of birth under FATCA eliminated replaced with just a straight citizenship question(Don’t Ask Don’t Tell).
Raising the reporting threshold for FBAR doesn’t do anything in terms of the complex requirements dealing with RRSP, RESP, TFSA, foreign pensions, PFIC’s etc. all of which are deeply embedded in the US tax code.
PFIC’s were my nemesis…but I should have checked first before the DIY investing. In fact, I’d even suggest that investing might not realistically be appropriate for low earners.
If I’d done it over, would have stuck to CD’s instead of mutual funds or stocks. Oh well
@monalisa1776- don’t blame yourself. You did the absolutely correct thing. The U.S. government is the criminal here and it is profiting from the avails of its criminal activity.
They are behaving no differently then the local gang who shakes down honest businesses to pay protections money to them so that the gang won’t burn or rob them.
It is an example of how the U.S. unjustly cripples expats by treating them as criminals. Expats should be free to engage in any legal investment activity of their country of residence. Once you move away you are no longer of any concern to the IRS.
They can’t say that their regulations are preventing harm to anyone, not even the U.S. And the prevention of harm is the point of all law.
@markpinetree;
I asked my local Democrats Abroad the same thing in an e-mail, and I got no reply at all.
The Democrats Abroad must be conflicted like me. Want to work for Obama but can´t deny that his administration is making my life hell. Don´t know yet how I am going to resolve this…
@monalisa I identify with you. I also have this severe super-ego que forces me to what is right all the time.. Sometimes I pay for this. Now I lay awake every night…
@Tim;
Re: above in this thread
May 1, 2012 at 5:21 pm
“Raising the reporting threshold for FBAR doesn’t do anything in terms of the complex requirements dealing with RRSP, RESP, TFSA, foreign pensions, PFIC’s etc. all of which are deeply embedded in the US tax code.”
I asked a question related to this issue at
http://isaacbrocksociety.com/2012/01/13/ask-your-questions-about-us-expat-tax-fbar-and-fatca-discussion-thread/#comment-16303 because Minister Flaherty specifically mentioned FBARs in his public admondishment of the US and IRS, but he did not address the 3520 and treatment of all those you list above – including his proposed PRPPs – which would be treated similarly – precluding our ability to use them for our savings as well.
Anyone ever read that book about the five stages of grief? Denial, Depression, Anger, Bargaining, and Acceptance. That’s just what I’ve been cycling through since hearing about these IRS requirements.
I am currently at an Anger stage! For my 2007 returms I paid $500 in tax since I had capital gains on US stocks. Now I’m preparing 6 years of amended returns since I didn’t know I had to report foreign interest or accounts. I’ve discovered the tax amount was figured wrong – that you have to base it on what it WOULD be if your worldwide income were taken into account, not based on the actual capital gain amount! That combined with the reporting of an additional $6,000 foreign interest income, means I am suddenly in a new tax bracket and owe $2,500 instead of the $500 the CPA figured. I was confident I wouldn’t owe anything extra, or maybe very little.
Since I have US savings, mutual funds and stocks which I inherited, and I’m very close to my aging parents and want to be there for them as they get older, I plan to move back next year. This means I have no alternative but to suck it up, cave in, flush this out, then eventually move all my money to the US so I won’t have to deal with this anymore…. then when I retire and leave again, maybe I’ll renounce!
Meanwhile, Ive really been looking forward to a happy reunion with family and a new life in a beautiful, sunny part of the US (after 17 rainy years abroad)… The whol idea is now taking on some very depressing and stressful dimensions, but I refuse to let these insane rules and regulations dictate my life.
@Howard;
I understand re: “Denial, Depression, Anger, Bargaining, and Acceptance. That’s just what I’ve been cycling through since hearing about these IRS requirements. ”
I know just what you mean. And every time I think I’ve even started to address the problem, I find out about another issue. I feel trapped. And that is in the face of absence of US tax liability (as I figure it). It’s all the forms and reporting. I don’t know if I’ll ever get to ‘acceptance’ though.
Maybe we should itemize amounts for “pain and suffering” and deduct them on Schedule A!
Let me review and summarize. I don´t mind FATCA because I have nothing to hide. I am sending my FBARS every year now.
Of course with the Tax Credits I am not concerned with the investments I have in the country where I am living and working.
Of course I keep wishing that the USA would become like all other countries and spare me having to file Income Tax in two countries. I never did it in the 30 years I worked in the USA. Now what really bothers me: the time and work I have to spend here to get the data for the IRS and to fill the increasing paper work. Having to pay US tax in a small pension I have here that is not taxed here. At my age having to pay SS Self Employment Tax in two countries because they don´t have a SS Tax Treaty. Having to live in fear of what may happen to me for not having known about the FBARs. Having ro hire a CPA in the USA to do my return because of its complexity. .
Wew! That was a bit jarring at times. Learned a lot. Special thanks Roy Berg, Michael Miller and punktlich11. Really appreciate your contributions and opinions / observations. I always learn from the varying perspectives legal practitioners provide. It takes my brain a while to absorb it all. Thanks for taking the time and effort to provide comments. I am not sure you were expecting a vigorous debate, but that is way of our mate Petros. 🙂
I can’t seem to find a way to contact you, I desperately want to learn how this tactic worked for you, if you ever tried to re-enter the USA with different citizenship or if they ever tried to refuse this method, and any tips for a person on the verge of making one of the biggest most difficult decision of his life as you did (regarding citizenship) and can probably sympathize with.
And at renunciation is all you need to give the IRS the Form 8854, FBAR, and FATCA to be done with it all once and for all?
@Jonathan
Does anyone know how such a tactic works, until the statute of limitations run out? That takes six years. In the meantime, I am Canadian, I can rest on the assurances that Jim Flaherty has made that the CRA will not collect taxes for the IRS from Canadian nor will it collect FBAR penalties from anyone.
@ Jonathan,
Re: Entering US. I’ve visited the US probably a few dozen times as a Canadian citizen (born in the US), no problems, although a lot of these visits go back many years when things were different. This year several people have reported to Brock and Maple Sandbox land border crossings and flying to the US as non-UScitizens (some with CLNs, some without) and none have reported any problems. (Always possible you could run into a jerk with an attitude problem, but they’re supposed to treat you like any other citizen of your country, and so far it sounds like that’s how it’s going.)
Re IRS. For renunciation, the consulate won’t be interested in tax (not their department). You have until June 15th of next year to file your final tax returns. On the 8854 you’re supposed to certify that you’ve filed for the past five years. If you haven’t yet, you can still renounce now and file your past years after your renunciation meeting, as long as you get all your IRS stuff done by June 15th. (I think the final FBAR has until June 30th, but I’m not sure.)
I’m planning on being stateless *on purpose* as a permanent solution to various problems, as I have permanent residency available to me in multiple countries and see no reason to take on the burdens associated with a new citizenship at my young age when I can have residency and no regulations/laws/taxation on me by jumping between my multiple permanent residency locations and whatever places give me temporary visas (for the rich this is never a problem, stateless or not). If I must I will get some disposable citizenship, but statelessness seems the best way forward ironically.
I’ve filed every year for the past five years so no problem. It’s just I’ve only recently started to make money due to a newly successful venture and am about to start triggering those requirements to file certain things so I am wanting to just be done with it. Can I send a renunciation letter with certified mail from a different country? How would I do this. I don’t want to be stuck waiting for months to get an appointment and in that time earn so much that I have new requirements/burdens/risks.
I’d also like to know if I can file “5th amendment” like you did on the FBAR or if that triggers a problem. If I put 5th amendment and wait the 5 years for the criminal statute before ever returning would I be free at that point? My plan is actually to never return for 10 years just to be safe (they reserve the right to tax if you come back within 10 years).
@ Jonathan,
Renunciation can only be done at a diplomatic post. You have to meet with a consular officer and sign the documents in his/her presence. Wait times vary at different consulates — it can be as short as within the same month, depends which one. BTW, if you haven’t yet, be sure to take a look at renunciationguide.com. They have a lot of information there about the process, really well presented, and they walk you through it in five steps.
My suggestion is that if you have a enough money to be a covered expatriate that you get legal advice. If not, then the Fifth Amendment, from the legal articles I’ve read, may not be used to hide a taxable amount, but only certain details which may incriminate the person. So for example, you may not hide the amount of income, but if the sources is illegal, you may plead the Fifth in order to hide that the source of the income is a crime. In my case, my total amount of assets is below the taxable threshold. I’ve thus given the IRS all the information they need to determine if I owe something, but hopefully not enough that they can charge me with a crime.
Nevermind. Delete my posts if you can, I feel a bit stupid getting worked up. Just not fond of having to spend money propping up two industries that shouldn’t be half as big as they are (lawyers and accountants), they probably should lobby for more convoluted tax laws to help them get more work.