I have today received a letter dated May 16, 2012, from the Honourable James M. Flaherty, Minister of Finance. I had no idea why I did not get a reply to my correspondence when I knew others had, so I am very pleased to finally get Mr. Flaherty’s letter. It does not give me what I’d like to hear, but it stops my guessing regarding the use of the beneficial Registered Disability Savings Plan for my son and the disabled family members of other such Canadian-American families.
He has confirmed that the RDSP (as well as the TFSA and RESP) are not recognized in the Canada-United States Income Tax Convention but that my concerns on this matter will be considered when the Convention is next open for renegotiation.
Mr. Flaherty has made it clear that the RDSP, which is used as a retirement tool (versus using a Registered Retirement Savings Plan) for many disabled persons,
as: Money paid out of an RDSP will not affect a person’s eligibility for federal benefits, such as the Canada Child Tax Benefit, the Goods and Services Tax credit, Old Age Security or Employment Insurance benefits. In addition, RDSPs will have little or no impact on provincial and territorial social assistance payments. For further details, contact your provincial or territorial government.
should only be used if the Beneficiary or the Holder of the RDSP is NOT also a US Person. It is not a beneficial tax-saving tool when such persons are US Citizens in Canada. Such persons are by virtue of their US citizenship, Second-Class Canadians, discriminated against and deprived of saving for their retirement by the use of an RDSP so their federal and provincial benefits will not be affected (vs the use of RRSP). It is apparent these Second-Class disabled Canadians must miss out (or be subject to US tax) on the following:
To encourage savings, the Government of Canada introduced the Canada Disability Savings Grant and the Canada Disability Savings Bond.
The Canada Disability Savings Grant is a matching grant that the Government deposits into the RDSP. Each year, the Government will match contributions made by paying up to $3 for every $1 paid into the plan, depending on the amount contributed and on the beneficiary’s family income. The Government will deposit a maximum of $3,500 each year, with a lifetime limit of $70,000. Grants will be paid into the RDSP until the year the beneficiary turns 49.
For example
If the beneficiary’s family income is less than or equal to $83,088*:
• The Government will deposit $3 for every $1 on the first $500 contributed to the RDSP and $2 for every $1 on the next $1,000.
If the beneficiary’s family income is over $83,088*:
• The Government will match $1 for every $1 contributed on the first $1,000.
* Income amounts will be updated yearly based on the rate of inflation.The Government of Canada will also pay a Canada Disability Savings Bond of up to $1,000 a year to low-income and modest-income Canadians. The good news is that no contributions are required to receive the bond; simply open an RDSP and fill out an application form at the financial organization where you have your RDSP. Bonds will be paid into the RDSP until the year the beneficiary turns 49. There is a bond limit of $20,000 over the beneficiary’s lifetime.
For example
If the beneficiary’s family income is less than or equal to $24,183*:
• The Government will deposit $1,000 each year into the RDSP.
For beneficiary family incomes between $24,183 and $41,544*:
• The Government will deposit a portion of the $1,000. As your income increases, the bond amount paid decreases.
* Income amounts will be updated yearly based on the rate of inflation.
From Mr. Flaherty’s letter to me:
Thank you for your correspondence of November 14 and 21, 2011 and January 4, 2012 regarding the taxation by the U.S. of income earned by dual Canadian-American citizens resident in Canada, as well as the requirement for these individuals to file tax and information reporting forms in the U.S. Please excuse the delay in replying.
In your correspondence, you draw attention to financial interests held in Canadian deferred income arrangements, such as Registered Disability Savings Plans (RDSPs), Tax-Free Savings Accounts (TFSAs), and Registered Education Savings Plans (RESPs). While I cannot comment on the specifics of your situation, I would like to make the following general remarks.
Canada and the U.S. have agreed in the Canada-United States Income Tax Convention to exempt from withholding tax dividends and interest paid to a trust, company, organization or other arrangement operated exclusively to administer or provide pension or retirement benefits, such as a Registered Retirement Savings Plan or a Registered Retirement Income Fund. Accordingly, when the above requirements are not met, dividends and interest are subject to income tax.
Since an RDSP, a TFSA or an RESP can be set up to pursue financial objectives other than he exclusive provision of pension or retirement benefits, they do not meet the criterion set out above and, consequently, they do not receive an exemption from U.S. income tax under the Convention.
Your concerns on this matter will be considered when the Convention is next open for renegotiation.
The rest of the letter relates to our requirement to file a Foreign Bank Account Report (FBAR) and what has been reported in the Finance Minister’s correspondence to others. It also highlights the December 7, 2011 IRS guidance on U.S. tax return and FBAR filing requirements for citizens living in Canada and other countries.
It reiterates that penalties imposed by the IRS under FBAR will NOT be collected by the Canada Revenue Agency (CRA) on their behalf and that the CRA does not and will not collect the U.S. tax liability of a Canadian Citizen if the individual was a Canadian Citizen at the time the liability arose (whether or not the individual was also a U.S. Citizen at that time).
The Fact Sheet was enclosed for information purposes only, not to be viewed as tax advice.
Thank you once again for thinking further on this, 5th Swiss.
Right now, my main concern is the Canadian Government, through Flaherty’s statement in his CARP letter, says that a US citizen should take up their concerns with the US, not Canada. My son was born in Canada, never registered with the US, never lived in the US, never had any benefit from the US. He DOES have Canadian citizenship — I don’t think Mr. Flaherty has gone so far to say he doesn’t. He is a Canadian. I believe that Canada should stand up for my son and any such others as they are Canadian. My son has no one in the US to take up his concerns with — he has no representation. Even if he were to go through the process of obtaining a US Social Security Number now (which he cannot do because of ‘mental incapacity’), he would not be able to renounce his US citizenship (because of his ‘mental incapacity’) and a parent, a guardian, a trustee cannot do that for him (or any other person with a ‘mental incapacity’, be that another child of any age or a person with the ‘mental incapacity’ of another kind, say ‘age-related dementia’, “even with a court order”. My son is supposedly entrapped into an extraneous US citizenship never registered for — and the cost of administration of its upkeep by tax and reporting compliance. Were it a CLAIM to US citizenship, there would be fairness — neither he nor I on his behalf have or would be claiming US citizenship for him.
To me, in principle, this is all wrong. I just want common sense. If Mr. Flaherty maintains, now, that my son does not first have Canadian citizenship, as a person born and raised in Canada, that he cannot benefit from a Registered Disability Savings Plan (RDSP) as any other Canadian with a disability with a right to have savings for him in that Canadian registered account, so be it. I will use my voice to say that I (and it is only I) think it is discriminatory and unjust. It appears to me that the Government of Canada says my son does not have the same rights under the Charter of Rights and Freedoms as any other Canadian would have. I’m just seeing a spade as a spade. In the meantime, I will save otherwise for my son to have when I am no longer here (will the legalities have the US able to tax and give penalty to that as well?).
I recognize and appreciate that the RDSP and other Canadian registered accounts will be ‘looked at’ when the next Canada-United States Income Tax Convention is open for negotiation. At 70 years old and wanting some peace of mind that my son will be OK when I am gone (and that the US will not have claim to anything I’ve save for him), that is not good enough for me. In principle I believe that Canada should stand up for my son and others like him, if nothing else as a vulnerable Canadian citizen, in saying that his Canadian citizenship trumps his automatically acquired, not registered for US citizenship. I will maintain that any citizenship law (US or otherwise) that entraps a person into that citizenship with no way out because of a ‘mental incapacity’ is bad law. I understand a CLAIM to US citizenship; that, to me, would be fair. If not claimed and used when a child born outside of the US to US parent(s) is of age and requisite ‘mental capacity’, it should be just that — an unclaimed US citizenship — with none of whatever benefits go with it.
And, no, I haven’t looked at, as I’m a stubborn old lady, what might be done to take advantage of my son’s present, and my former, US citizenship, through US Social Security. I don’t want that from the US. I just want to be able to be completely done with anything U.S., even at the cost of never crossing the US border again to visit sibling that are left there (my parents are gone and thank god don’t see any of this).
I would like Canada to say that my son (and others like him as vulnerable Canadians), are protected from any of this — that Canada does not recognize their US citizenship. But then, I’d like all of this to not be happening and that I could be somewhere on a nice get-away vacation than at my computer fight this in my retirement. I’ll count the blessings I do have. Life ain’t fair. We don’t get all we’d like.
I also realize that I could not or should not have brought any of this issue up, rather just have been a silent good girl in the corner, bowing to the bully US. My son may not have been identifiable as a US Person. The accounts I hold for him were reported on my Foreign Bank Account Reports to the US, so they do that information. More importantly, I don’t want to have a work-around, a hope that my son (born in Canada so with no US place of birth on his passport) will not be ‘identified’ (just that concept is repulsive to me). I want a law and a way out of US citizenship for my son (and others) that makes sense. I don’t want to be one looking over my shoulder for the rest of my life, wondering what will happen (although I probably, by coming out with my story, still will be). That’s me; that’s my level of risk and my level of what I think should be common sense and corrected. C’est la vie.
It is wrong for a Canadian Government official to throw the matter back to the USA. You should get in touch with those who negotiate tax treaty protocols — both at the US Treasury (where, unhappily the only person I knew, Jim Ammerman is long dead: I am older than you) and in the Canadian Foreign Ministry and Finance Ministry. And, if there is one, I’m not sure: http://oig.state.gov/documents/organization/147144.pdf don’t forget the US Treasury (finance) attaché in Ottawa (that was Jim’s job for 7 years, in London). You should also lobby the financial services industry, either directly or (much easier) through their trade association. Frankly if anybody had thought this was a problem when the RRSP matter was discussed it could easily have been folded into the solution. I used to attend negotiations for the Government as an expert just to monitor the interpreter who would be a better translator than I but would not know the substance. I know that each side comes with a want list. You should try to get your issue on both of them. Maybe you don’t have ten years, but as part of the lobbying you can find out when it is likely a new protocol will be negotiated.
The point of qualifying for Social Security Disability is because that’s the qualification for a disability trust in the USA. You need to collect as many arguments as you can, and I fear you are running around in circles. I do not spend much time on this site or on the blogs, but I have read about you both here and in the press. Others have agreed with me that as a practical matter you have done yourself a disservice with publicity. For the reason I mentioned: those responsible for enforcement would like it for cases such as your son’s to stay beneath the radar. That, at present, is the most they can do. Even if you had violated PFIC and tax rules they would have taken no initiative against you. But now you are notorious: it may be your strategy but it is not the best way. It is not “bowing to a bully” at all. The alternative is simply wasteful of time and money: the State has unlimited funds for enforcement if you insult its agents and they choose to take you on. Human rights rarely get a hearing in tax issues. (I have mentioned elsewhere the European Court of Human Rights in connection with (Swiss) government attempt to levy penalties on heirs of a tax debtor; but Canada isn’t in Europe and penalties imposed on an inheritance are not, or not yet, an issue in your case.)
This Web site and its members, however well-meaning, can easily send you in the wrong direction. And, by and large, journalists are yours for a day and then they are gone.
Finally: You may not have a senator and Congressperson anymore but your son does, at your last US domicile or wherever you have family and can use their mailing address. Ask for constituent services, ask for support in his (your son’s) campaign on this. A Tax Protocol provision is easy: it takes no legislation, only Senate ratification.
@ Swiss5th
Calgary411 has done her best (an extraordinary effort, BTW), acting as the Canadian that she is, to try to obtain clarity and fair treatment for her Canadian son’s situation. The USA has deliberately created so much taxation lunacy that anyone venturing into that cuckoo’s nest is risking their own sanity. Speak to a US Senator or Congressperson? Ridiculous! May as well talk to a rock. The response would be exactly the same.
@5thSwiss, Doing the dirty work of threatening innocent people now?
@Em and @Petros:
If flamed I will go away and not come back. I am a practising lawyer, a former USG official. I am trying to be helpful and I happen to know whereof I speak. There was a time when I accompanied Congressmen and Senators around on their junkets.
Either you want Calgary411 to succeed, or you want to take advantage of her for your own political purposes. I am looking at her as a quasi-client, what I would do for her, and how I would advise her, after almost 50 years of experience.
You can say what you like, but if you insult people who have knowledge this Web site will be left with only blowhards. And that is not far from “tax protesters”.
@Blowhards:
Let me add one thing. I have paid a few pennies less than $1,000 of my own money to go to Montréal (OK, I like the city, but I wasn’t planning a visit just yet) to attend the McGill meeting; more than that if you add the hotel bill. I have nothing to gain. I am not seeking (and rarely accept) clients and could not possibly renounce my US nationality even though I have another (one of my daughters has 4: imagine if all of those countries sent her tax bills).
Thank you, Petros. I don’t like that I am told that I must sit back, shut up and stay out of sight in order to protect my son. In fact, this is no longer, for me, about my son. It is about the whole principle and other sons and daughters and persons with any kind of ‘mental incapacity’ to be entrapped in a US citizenship. When did it become right to allow this to happen to ourselves?
I just got this link in another email (concerning RDSP information sessions for families with a person who has a disability).
and, as I’m groping on who to discuss this absurdity with, sent this: Query to The Office for Disability Issues, Disability Programs, re US Persons in Canada
Thank you again, 5th Swiss. I will have to go down the path I’ve started for myself — as this is not just about my son. That every family who will be so affected (with someone with a ‘mental incapacity’ either through developmental disability or something like age-related dementia) has the funds or the energy to accomplish what you suggest would be a miracle. There is a time when we have to stand up and do what we think is right. Even if I am a foolish old woman who has made so many mistakes with regard to my relationship to the US and having brought into this world another US citizen who I cannot release from bondage. Had I known then what I know now, my son would not have been born to me until I had been released from my own US citizenship. I realize very well all said about hindsight.
@Calgary411 wrote: “Thank you, Petros. I don’t like that I am told that I must sit back, shut up and stay out of sight in order to protect my son.”
Far from that. You are doing fabulous work. But in my opinion, having spent countless hours fruitlessly on another matter that concerned Canadians and Americans, and wound up making me into a bankruptcy lawyer for awhile, matters were decided between John Major and George H.W. Bush over lunch. All the sob stories of my clients and thousands of others were … useless.
I would like nothing more than to solve your son’t predicament, and would do so free and gratis. It happens that my work is on (1) nationality and (2) taxation. I spent 22 years at various universities collecting wallpaper that my children can one day throw away. I write law review articles. I have given you, albeit off the cuff, my best thinking of today. If my going to Calgary would change anything I would even do that (I was going to take the train from Vancouver to Montréal but (a) it no longer stops in Calgary, and (b) my Wall Street daughter has decide to take off for Puerto Rico those days, so I’ll have to fly to see her.
It is best advised to think carefully about who your friends are.
@5thSwiss, well I do believe that you are a former USG official. I’ve had run ins with this kind of person before, and I can say that it was an unpleasant experience. You can call me a blow hard all you want, but I am a real person. You on the other hand, are just someone hiding behind an alias talking big, so if you go away, no loss to any of us.
And as for being careful about who our friends are, we will start with former US government officials. We are not masochists after all. And we will not take having you treat us as inferior.
@ 5thSwiss
I was not flaming. Perhaps someone with “influence” (such as yourself) can speak to those rocks in the US congress but an ordinary Canadian, in Canada, doesn’t stand a chance. Even our “expert” Canadian negotiators couldn’t get any better deal than any other country in their IGA capitulation. This is why we are grateful to have James Jatras and Shadow Raider truly trying to help us out from the other side of the border. So this is just my opinion, made from a position of “non-influence”, but you are free to discount it as you wish.
And that is not far from “tax protesters”. Yes, we’re pretty aware of what the USG has in mind for those.
@ 5th Swiss,
This isn’t a case of an American family looking for an expedient solution to a routine tax matter. It’s about life control by a foreign State, which affects many people in her son’s situation. Not only does Calgary have love and concern for her son, she is concerned about the many Canadian families which include a loved one who is disabled and therefore literally trapped in US citizenship – and knowing the risks, she feels the courage to speak out about it in hopes that awareness will lead to change.
I don’t think she needs advice to think carefully about anything, let alone who her friends are – it’s pretty clear from her writings and presentations that she’s a very thoughtful and intelligent person as well as a courageous one.
I didn’t mean to defame rocks by associating them with the US congress. I like rocks actually. Petros, for instance, is a rock.
@Petros: So you are the jerk of jerks, and I am gone.
“if you go away, no loss to any of us.”
I understand that. And it’s more than 20 years since I worked for the USG and since I was in a posit where I was assigned to give professional advice for free, I suppose it was outside your experience.
It would not be beyond my experience to be sued for free advice. My E&O insurance has expired.
Bye.
5th Swiss –
Most of what Brockers have to go on are strings of words emitted by shadowy avatars. What can be derived from any particular string depends a great deal upon assessment of narrative quality.
What can be perceived across postings to construct personality? Is there content, and does that content jibe with what is known? What appears to be the intent of the words (to help, to problematize, to vent, to inform, to rile, etc.)? Is there logic or fallacy (one of the worst is ad hominem) in the perspective offered?
In the more distant past here I have tried to sketch an ugly sociology of scapegoating. Brock has too many participants who knee-jerk into attack-dog tendencies. It is the way societies function. Go after the beam thought to be in the eye of the other.
The Brock forum is a total grab-bag, and has no credibility in and of itself. It is nothing more than the accident of being the virtual water cooler. An individual posting can be a gold nugget. Or a turd. Or a huge cloud of hot vapor.
Do not let aggravation drive you away. In you I sense a kindred spirit.
Abusers, cast your stones at yourselves.
PS Isn’t it telling how no one took up the challenge to castigate Allison Christians for being a fearmongering compliance junkie?
USX, actually Allison is no such thing. She is a reminder that there is such a thing as international law.
@5thSwiss, I’ve been called worse. Traitor, America hater, and now by you, Jerk of Jerks. But whereas I am a real person, you remain hidden behind the veil of an alias. So I could call you a name, but you don’t receive any public stigma.
@USX, also Allison Christians is a real person not hiding behind an alias. If you want to castigate her, then you can send an email to her, but I suggest that you do it nicely. As for 5thSwiss, he is not a real person, but for all that, he is very sensitive.
@all, in case you believe that @5thSwiss presence here is positive, I call your attention to these words:
Now those of us familiar with Calgary’s case believe that because her son was born in Canada, he is safe from Washington DC, no matter how vindictive any US government official becomes. So it is far fetched indeed that somebody in DC is going to go after him and Calgary “with unlimited funds.” And this is the claim of someone who is a former US government employee? Well I believe that, but I wouldn’t want him to represent me. This is really some of the most disingenuous kind of crap I’ve ever seen in the comments, and I had to say something.
On the other hand, if Calgary’s son is not safe from the US government, then no one in the world is safe from it. Scary thought, eh?
There seems to be some subtle fear mongering going on at this site lately. Many regulars, like Calgary411, have pretty thick skin by this point, but I hope newbies are not scared off.
@WhiteKat The last former US government employee who made comments at Isaac Brock also made similar kinds of threats. He also offered to do pro bono work for Calgary and others, yet I believe he was fishing for business. Later I learned that this man found new clients at our website, but some felt ill-served. Yet @5thSwiss on the other hand says he is not, but I suspect he actually continues to take on new clients.
i believe as this site gets more and more hits there are going to be more and more posting and comments like the ones that are beginning to crop up with the subtle and not so subtle fear mongering. it is crashing in on 7 million views after all.
if you pay attention you can fairly quickly figure out who has been in the fight for a long time and who the new comers are that stir the pot and pontificate this or that.
each and every one of us has our own unique situation and story and it behoves each and every one of us to read and learn as much about our own situation and make our own educated decision based on what we have learned.
while the postings, comments and educating that goes on here at IBS is fantastic i don’t think for one minute that it is or should be the only criteria for making ones decision.
by the same token we should not fall prey to fear mongering either as we each have different tollerance levels for our own unique situation.
given that the IBS is by and large a rag tag group spread around the world via the internet with no central office or even a formal structure what has been acomplished by IBS is nothing less than spectacular.
without the efforts of the all and the concerted efforts of some i shudder to think where we would be in this fight against FATCA.
keep on keeping on….. 🙂
@mettleman, thanks for the encouragement.
I was particularly angered by the way @5thSwiss would dissuade people from coming out in the open. I’ve believed for a long time that if we all just told the press what the IRS was doing to us, that it would have a cascade effect in Canada and beyond, and it would force the our governments to stand against the US. But because we remain quiet, they IRS can do its handy work with the help of the compliance industry, lawyers like @5thSwiss. See, http://righteousinvestor.com/2011/11/15/pillaging-one-person-at-a-time-why-im-coming-out-in-the-open-with-my-fight-against-the-irs/
@ all
all i can see happening from @5thSwiss’s attempt to fear monger or drive people under ground will make that many more people stand up and say “we are mad as hell and are not going to take it anymore” or something similar
@Petros…..your link
http://righteousinvestor.com/2011/11/15/pillaging-one-person-at-a-time-why-im-coming-out-in-the-open-with-my-fight-against-the-irs/
should be required reading before anyone makes any decision based on their situation.
i would like to think (yup maybe i have rose colored glasses on) that this is exactly the baby steps we are taking here at IBS. starting the inevitable ground swell to knock this FATCA thing on its a#$.
or at least i am hoping so. if not at least we can all rest easy knowing that we did the best we could…..win, lose or draw.
Peace out
Hiding in the closet may be the safest course of action, but it sure as hell ain’t gonna bring about any change for Americans who live abroad.
That’s why I am in favor of renunciations — the more the better.
The world needs to see that the American dream is pure bullshit, nothing more than a big trap and rape scam for any US immigrants wanting to return to their places of birth or natural born Americans wanting to live beyond the borders of the USSA.
CBT is all about capital controls — human capital that is. Gotta keep them slaves on the plantation.