Some of you are aware that I wrote to each of Canada’s MP’s expressing my concerns regarding FATCA. I’ve heard back from a few, but most importantly from my own MP, John Weston, a member of the Conservative Party and designated by Minister Flaherty to look into matters concerning US citizens in Canada. Many of us have been anxiously waiting for some indication of the stance our government will take on FATCA. I believe that we now have one:
Thank you for your letter. I share your concerns about the IRS’s actions in pursuing Canadians who also have US Citizenship.
I have taken the initiative among Government Caucus members to consolidate information concerning this matter and have worked closely with the Honourable Jim Flaherty, our Minister of Finance, who has taken our concerns forward effectively. Among other things, I arranged for prominent US tax attorney Mark Matthews to come to Ottawa on May 30, 2012 to brief Caucus members concerning these matters. Mr. Matthews not only works with Canadians who have US tax problems but he also served previously as Deputy Commissioner at the IRS.
Concerning the Foreign Bank Account Regulations (“FBAR”) matter, the IRS issued a directive in December 2011, “reviewed or updated June 13, 2012”, that appeared to acknowledge these concerns. You can find the IRS Directive [here].
However, as you will see in Minister Flaherty’s statements, which I have enclosed, you will see there is still considerable uncertainty. I join the Minister in recommending that you take US tax advice before making decisions on how to proceed.
Foreign Account Tax Compliance Act (“FACTA”)
Concerning the FACTA matter,
- FATCA has far-reaching implications as it would turn Canadian banks into extensions of the IRS and would raise significant privacy concerns for Canadians
- Since the beginning of last year, we have raised serious concerns directly with the US
- We strongly believe this is unwarranted
- Canada is not a tax haven and we already have joint arrangements in place to prevent tax evasion
- We strongly believe rigidly imposing FATCA on our citizens and institutions would not accomplish anything except waste resources on all sides.
- While we’re pleased the US has taken note of concerns we’ve expressed on behalf of Canadians by delaying FATCA’s implementation until 2014, clearly this only a first step
- As such, we have and will continue to express our strong concerns relating to FATCA with the U.S. government
- We are actively seeking a solution both countries will find agreeable
I wish you success and peace in resolving how to deal with the IRS. I will continue to work on your behalf and with Minister Flaherty to try to bring this situation to a more satisfactory conclusion for all Canadians.
I think we have cause for encouragement that the Canadian government will not just roll over. I also like how Mr Weston has the sensitivity to not refer to us as “duals”. If anyone would like me to post Minister Flaherty’s statements I will, but I believe many of us are already aware of their contents.
When I saw that Weston said this…
I wondered if this wasn’t the same Mark Matthews that wrote a pretty comprehensive analysis of the OVDI back in December of 2011 entitled:
OVDI Is Over — What’s NextFor Voluntary Disclosures?
You might be interested in reading it and getting a feel for Mark Matthews, who will be consulting with your MP. In fact, you might want to send it to him. There were many notable comments he made, but the one that really stood out for me, was in section D.
@Just me, this pleases me, thanks for catching that. Sounds like Mark Matthews may be a thorn in the side of the IRS. Glad Canada is taking counsel from him, shows they aren’t going the wrong direction.
*It’s the same Mark Matthews. http://pan2.plumtv.com/mmatthews
I am aware of at least one Vancouver cross border tax attorney who also consults with Mark Matthews. Have heard he has ‘attempted’ to meet with the IRS on behalf of accidental americans and also those ‘american-born’ Canadians who believed they had relinquished their U.S. citizenship decades ago.
@tiger, would that cross border tax attorney be Steve?
If you mean Steve K, then yes. I was given the info by a friend who works there.
@Tiger, he’s our man, lol! My husband remembers him mentioning someone he talks to in Washington and the name rang a bell. We also have an advisor at RBC Dominion, but ours is male. Maybe we’ve crossed paths 🙂
<6 degrees of separation?
Your other names isn’t Kevin Bacon, by chance?
Just re-read the emails between myself and friend from S’s office. M.M. was definitely looking into things with IRS regarding ‘accidentals’ and ‘relinquishers’ of decades ago. We haven’t emailed in a while, I will contact her again to ask if there has been any update.
From my friend’s description, I think you chose well in your accountant!
I have not been able for some time now, to read all that goes on but I am amazed (and grateful) to hear you wrote every MP. Wow! Thank you for such a great effort. And Weston’s response is certainly “music to my ears.”
I remember the article Just Me posted the link to, as it came out about 2 days after I first discovered the old expat forum. It was way too complicated for me to understand then. I have learned so much, mostly from everyone here. I totally missed the fact that Matthews/Caplin were very clear in pointing out the realities that we face(d) and they did not mince words regarding the IRS. In addition to the section posted above by Just Me, the following sections of the article are so reasonable and likely to result in a much better situation for all. It just boggles the mind that the IRS continues on the narrow and miserable path it has started….
Just wonder if there’s any chance that IRS will ever come to their senses about all this. Rather doubt it.
A little out of the context of this thread, but I personally attended the FATCA debate in Zurich yesterday and wrote a detailed report in the comments section of ACA’s Jackie Bugnion and J. Richard Harvey debate FATCA for two nights this week.
Key takeaway: Jackie excellently articulated our concerns about FATCA. Dick Harvey, one of FATCA’s authors, admitted expecting that banking and financial services would be denied to US persons overseas, and that he didn’t really know what would come about from his creation (“it will be interesting to see what happens [after implementation]”). I have written more in my report.
For me there is no clearer indication that the US government is out to just do what it wants, regardless unintended consequences. Also, Dick listened to all reasonable arguments against FATCA and the harm it is causing to US persons overseas but seemed unswayed. Good luck thinking you can bring him around to our point of view. I would run for the lifeboats.
*@Wellington – Thank you for your report on that meeting. I just popped over to read it. Yes, very depressing to hear that people like Dick Harvey are in charge of things. 🙁 Why am I not surprised, though? Glad to hear Jackie was eloquent on our behalf.
This whole situation is distressing beyond belief! I had just made the decision to renounce. Then this new update comes along from the IRS. Are they coming to their senses? Will they continue to soften and lighten up on Americans abroad? Am I jumping the gun if I renounce now? OR . . . Is this a trap to lure innocent, unsuspecting Americans into the system and look for every way possible to extract money? Is this indicative of more capricious decisions yet to come? Will they continue to change the rules with regularity like they’ve done in the last 10 – 15 years? Will things get worse as time goes by and they’ll start taxing my RRSPs even though that’s supposed to be under that tax treaty? What will the impact of FATCA be on my life? I get upset to my stomach thinking about this topic.
I think the only solution is to renounce. Weston said it well in his letter: “I wish you success and peace in resolving how to deal with the IRS.” I think the only way I’ll have true peace of mind is to renounce and be free of the ball and chain around my ankle.
I think we’re in for a very rocky 5 – 10 years. When the dust settles far in the future, life may become easier for Americans abroad, but the road getting there won’t be pretty. The “collateral damage” represents our lives and well-being. Of course, the other scenario is completely possible, too: life becomes more difficult as the US loads more and more rules, regulations, and penalties onto the shoulders of Americans abroad.
I wouldn’t have so much angst about this except I do want to be able to visit the US on occasion. I know that should not be a problem from what I’ve read, but we’re in uncharted territory here. 🙁
Don’t worry… Canada will do what Canada does best when the US yells…. roll over.
Mark Matthews interestingly works out of Caplin and Drysdale with another lawyer some of you who visits Jack Townsend’s website may have heard of named H. David Rosenbloom.
These are some pretty heavy hitters.
‘This needs to be clarified in any agreement between
Canada and the IRS.’
This requires a political solution. Now that all the cheering has subsided, what concessions has the US really made? The only significant one, to me at least, is that they are allowing ‘ignorance of the law’ as reasonable cause for not having filed US taxes.
I will have to re-read that but I wouldn’t trust that for a minute. I sent my stuff in mid-December, (just after the awaited-announcement according to Jacobson). I still got a letter saying I would receive “failure to file” penalties . DFidn’t/won’t happen but see the discussion over on the recent post about TAS recent report to Congress. Automation is a huge issue and promises to contribute in a large way to many wrong and large problems once FATCAT comes into play.
The only taxpayers I see who will not be at risk under the new deal (those deemed as low compliance risk) are those who have a <$15K tax liability for three years, do not have enough savings to have to file FBARS and can prove they’ve been in a coma thus are unaware of their tax filing obligations? Likely the kind of people who don’t have the resources to file for 3 years. To prove reasonable cause under these circumstances, the taxpayer will have to support with evidence that they didn’t know about the tax reporting requirement, to prove a negative, which is very difficult to do, however, shouldn’t the onus be on the IRS to prove that the taxpayer did in fact know? Maybe a lie detector test?
I believe it’s helpful not to observe the short-term vagaries of IRS policy, trying to decide if they’re softening or hardening at any given moment, but to look at the trend. This trend from hell started many decades ago when the Supreme Court ruled that it’s lawful for Treasury to tax US citizens residing outside of its territory. From that infamous starting point, we have seen the burden on our shoulders only grow until it’s (for some) crushing.
The meeting with Dick Harvey only confirmed the trend. Clearly, the US gov’t is hiring minions to carry out its dirty work, people who are completely and utterly indifferent to our fate. Is that the proper attitude of a government that demands annual payments from us? I thought a government should be afraid of its people, not the other way around. To lift a quote a little out of context, John Marshall once said, “An unlimited power to tax involves, necessarily, a power to destroy.” Clearly the sovereign still claims its traditional power to destroy our lives and livelihoods, and appears to feel very free to arrogantly impose and expand its own arbitrarily decided penalties on top of the tax burden we already have in our place of residence.
One should also recognize that, in the main, the media at home continue to misrepresent and mischaracterize issues of taxation of US citizens abroad. This is the perfect environment for the government to operate without constraints.
So with a little hindsight and some reading of this blog, the trend should be pretty clear to all but those who are living in denial.
One thing that struck me about the meeting was the presence of a representative of the Tax Justice Network. He argued for the justice of paying taxes and said nothing against FATCA. Was that clown even aware that his presence and statements were in support of a major violation of human rights (i.e., citizenship-based taxation)? Shameful!
Your focus on TREND gets a big amen from me. Wallow in the present morass of detail, and cling to shreds of irrational hope — or look at the big picture and see the longer term.
Back in January I highlighted two articles (only one easy of access, unfortunately) that confirmed for me the later emerging becoming-famous edict from expert Phil Hodgen that present days are semi-good for severing formal connection to a failing state. Check it out: The Long View
*@Wellington – Yes, you are so right about the trend! One really needs to look at the big picture. Things have been going from bad to worse for years. If Congress hasn’t figured this stuff out after the fiasco in 1976, I don’t think they ever will. 🙁
The other disturbing thing is the inconsistent and constant changing of policy and procedures as Mark Matthews describes in his report. It seems like everything is a moving target.
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