For those waiting for further analysis on the new IRS Instructions [Published on Friday, 07 September 2012 15:59 Written by Roy A. Berg JD, LL.M. (US Tax)]
If you are a US person residing in Canada and are one of the unfortunate few who does not have a graduate degree in US tax and who is not related to a cross-border US tax professional you may have missed filing one of the myriad of tax forms that are required every year (the failure to file of which can carry dire penalties). If this is the case, the IRS may have a new streamlined procedure just for you. The bad news is that few will likely qualify and those who do not qualify face serious consequences just for applying.
The new streamlined procedure went into effect on September 1, 2012. Click here to see the full text of the streamlined procedure. The program is designed for expats with simple returns and little or no tax due. But whether by design or defect, it threatens to entrap most of its likely applicants. For those who qualify, the new program may be a breeze. But for those who do not, and we suspect most expats will not, the streamlined procedure is a lot like a lobster pot – easy to get into, hard to live in, and harder to escape
Moodys Further Analysis: Completing the Questionnaire, or Entering the Lobster Pot.
Unfortunately the IRS has not given guidance as to which of the above-listed risk factors or combination thereof, will increase the taxpayer’s compliance risk, and therefore disqualify him from the streamlined procedure. Further, the questionnaire raises a number of extremely serious issues of which every taxpayer considering this procedure should be aware.
*Only part of the problem here is that the jumped up “leaders” in the country just to the south of here won’t let us legally visit. But that’s SAP for many second and third world countries, and, it would seem, for those heading in that direction.
I am just waiting for the 1st average Canadian to be held in the USA or have their bank records turned over to see the outcry. Canadians generally do not like the USA for the most part.
@Joe Smith
Who will ‘regular’ Canadians blame? We can only predict that the average Canadian will be as poorly educated as the average homelander about the complexity of citizenship based taxation. I predict that like the homelander, Canadians will tend to blame the victim-the US person abroad, and whether or not they are US tax compliant, as it that will be irrelevant to what’s possibly about to unfold. The Canadian government is going to have to find some way to protect its citizens, both ‘regular’ Canadians and those with US personhood, against the harmful effects of the US’s extraterritorial taxation of its citizens abroad. FATCA is not it! US persons need to come with warning labels.
*@bubblebustin
All Canadians will suffer from FATCA. It will result in increased banking fees (to cover additional costs to banks, insurance agencies, investment houses etc), and increased federal taxes (because the folks at CRA don’t work for free and will require additional recources to handle any reporting requirements under the pending IGA).
@Woofy
Precisely, and I suggested in my submission to Canada’s Finance Committee’s Pre-2013 Budget Survey that they make a full accounting of what FATCA will cost Canada and Canadians in any way, shape or form before agreeing to anything!
I have more faith in Canadians. Use the China. India, Somalia, Russia analogy…
I have just read the rules respecting the reporting obligations for financial institutions. Wow. I am not a US citizen and yet any account upon which I am joint with my US citizen spouse is considered a reportable account!! So much for my government standing up for me. And there is no escaping this. Considering the reporting requirements for banks outlined in the Jan. 11, 2013 rules there is no escaping their attention. I cannot believe what the IRS can impose on other sovereign nations and how our elected government can be so limp and anemic. Has Flaherty or his staff read this stuff? It would also appear that the obligations placed on our financial institutions are extremely onerous and costly. This will hurt everybody. Relinquishment has just become a stronger option.
@John Green,
Yes, it is very troubling. I so hope that the step of relinquishment may still be on the table. As you are approaching retirement, relinquishment seems such a straight-forward, easy option for protection of all you and your spouse have worked for in your lives. Keep up your research on just how onerous this all is. There are at least a couple of (to me) troubling reports re pre-FATCA happenings in Jerusalem and in Canada in comments here at Isaac Brock today.
*i missed the preFATCA troubles in Jerusalem. Where will I find it?
@ John Green,
Look for the comment at 10.44 pm at this link Press Release: FATCA … thread.
@John Green,
Jerusalem: thread at http://isaacbrocksociety.ca/2012/12/24/fatca-fact-finding-forum-video-link/ and related at Consulate Report Directory thread: http://isaacbrocksociety.ca/2012/03/24/consulate-visit-report-directory/
Canada: http://isaacbrocksociety.ca/2012/12/24/fatca-fact-finding-forum-video-link/ (comment from ‘downtherabbithole’)
@ John Green, I agree with Calgary on this one. Not only is this joint account reporting stuff offensive, but as long as there is a USC tag in your household, you are susceptible to future changes they might dream up. Also, experience has shown as outlined in reports here on IBS that in cases such as your spouse, a relinquishment should have virtually no downside, unless one really wants to retain USC.
*Ireland and has now fallen in line and signed an agreement. So as of now it is Denmark, UK and Ireland. Canada cannot be far behind. It is interesting how everyone seems to roll over and passively agree. Economic terrorism!
@John Green…
It is called Realpolitik
btw, it is still NOT listed on the Treasury web site as an “official” IGA
Pay attention closely to the language the Treasury often uses to make the numbers of IGA’s seem more than they actually are. They often say ‘signed or initialed” and lump them all together. I know it has been reported in the media that Ireland has signed, but it still must be going through some due diligence process and not a done deal yet as officially registered.
Any ideas about how to get an appointment with the US Consulate in Vancouver? I see that all available online bookings are taken and no booking slots have been released for past mid 2013. Can one make an appointment by phoning? Are there any other ways to get into the appointment stream to start the process of relinquishment?
@John,
I strongly advise against waiting to book Vancouver at this time, and instead use Calgary, Toronto, Montréal or Halifax.
Vancouver’s reply to my inquiry in December, asking how to book, was to just keep an eye out for dates as they become available on their online booking site. (At that time, they had about 3 in May and I think a few (3 or 5) in June — I already have my CLN, which the clerk didn’t know, so it didn’t matter).
Another problem with Vancouver is that they’ve been requiring two visits to apply for a relinqushment-based CLN, although standard procedure is to do it in one visit. In November 2012, we were told they had switched to one visit, but an e-mail from that consulate in December contradicted that and we’ve seen no evidence of it. You may have read Tiger who had her first visit in September 2012 is scheduled for a second visit in October 2013.
We understood that they would be improving their availability with the start of the new year. It d certainly does not appear to have happened.
Thank you. We will look into Calgary which is closer to where we live.*
@John Green
Good – go to Calgary. Their online booking site has an abundance of appointments. Dealing with Vancouver only ages one at a rate 3 times the normal rate. I speak from experience.
*there are several categories for booking an appointment in Calgary. Is it the one for notarial services? Thanks
@John Green
Yes, appointments for both relinquishments and renunciation are booked through “notarial Services”
*thank you. This Isaac Brock site is so valuable and a lifesaver! People are so willing to share and support. You are the best!
What about someone who was born in Canada, has always lived in Canada, but has a US passport because a parent is a US citizen? Never lived or voted in US. Can this person relinquish? Is renouncing the only route?*
Having a US passport means is actual proof that the person is a US citizen. It could not have been obtained otherwise. There is at least one instance here where a person was “coerced” into getting a US passport when crossing the border (born in the US and flying from Europe with another country passport, not Canadian). That person presented his case well, able to explain he was forced into getting the US passport and subsequently relinquished.
I found the comment:
I don’t see how a person born in Canada to US parents could relinquish, having obtained a US passport. I believe getting that US passport in the first place would be quite a lengthy process — my daughter did that and worked in the US for a few years. She has now renounced that ill-claimed US citizenship.
@John Green,
If a person were born in Canada, they wouldn’t have relinquished under Immigration and Nationalities Act, s. 349 (a)(1), as they couldn’t have naturalised in Canada with intent to relinquish.
Still, they may have relinquished if they took an oath/affirmation to Canada (a)(2), served in the armed forces as commissioned or non-commissioned officer (a)(3), or worked in a government job requiring an oath/affirmation to Canada (a)(4).
Regarding passports, it depends on the circumstances. In the last few years, people have been told, and even speak of being coerced, by US border officers to get US passports. At Brock, we’ve been learning very recently that acquisition of a passport under such conditions does not necessarily negate the fact that a valid relinquishment exists, at least in s. (a)(1) cases, such as Calgary411 has pointed out. Quite likely this would apply to the other subs too, but we haven’t heard of any yet. In any event, it depends on the circumstances of the individual case.
Recently we’ve received reports of two persons who had relinquished under (a)(1) and received CLNs backdated to the date of the actual relinquishment. As well as the Halifax case which Calgary411 has provided, this also occurred at Vancouver. What’s really interesting is that we know that Vancouver, not being sure, actually sought guidance from DOS in Washington before proceeding. There’s more on that case at p. 47 of 105 of the Consulate Report Directory.
*@ John Green
“What about someone who was born in Canada, has always lived in Canada,
but has a US passport because a parent is a US citizen? Never lived or
voted in US. Can this person relinquish? Is renouncing the only route?”
I know someone in this exact circumstance. This is dual citizenship from birth. But being in the system with a current US passport (although hadn’t been using) & enjoying travel which also includes US destinations, they decided to file the 3 years of income tax & have time to decide whether they want to keep or renounce US citizenship.