Saw this tweeted tonight,
Yea! Finally someone is taking proactive steps to alleviate tax burden faced by US taxpayers in Canada lnkd.in/av-Z8G
— Roy Berg (@RoyBerg1) October 18, 2012
My immediate response was that this is a nice gesture, but should the Canadian Taxpayer subsidize the International Revenue Service OVDI penalty actions? Curious what anyone else thinks.
This is the direct link.
Although Moodys is to be commended for this initiative it is a bad idea. Under no circumstances should Canada allow a tax deduction for professional fees paid for OVDI. My reasons are:
– Canadian taxpayers are not allowed a tax deduction for tax preparation fees in Canada. Why should be allowed a deduction for tax prep fees for the US?
– To allow this deduction will legitimize this as an expense and will therefore be an acceptance at best and an endorsement at worst of the US assault on Canadian taxpayers
– To allow this deduction will be a direct attack on funds that, if they belong to any government, belong to the Government of Canada
– To allow this deduction would make the Government of Canada a servant of the IRS
If the Government of Canada wants to get involved in this whole issue, it should pass legislation prohibiting the Canadian banks from participating in FATCA.
In summary: very bad idea and very dangerous precedent!
@renounceuscitizenship- I agree with you wholeheartedly. Its a bad idea. The Canadian taxpayer shouldn’t have to shoulder the burden of giving a deduction for the costs that are incurred by a U.S. person to file U.S. taxes on any world wide income that has been earned and taxed under Canadian law.
Posted elsewhere on IBS but without any follow up comments. Not exactly the same as what Roy Berg is talking about.
Something to consider– if a person relinquishes and in the unlikely, but not yet certain event, that the IRS decides for their purposes that the relinquishment date is the date one appears at the consulate, rather than the date on the CLN, it may be possible to claim legal fees in Canada for appealing the IRS decision. Here’s a reference from the Canada Revenue Agency:
Under paragraph 60(o), all taxpayers, including those
persons who report income from sources other than business or property (such as salary or capital gains), may deduct fees or expenses incurred and paid for
advice or assistance in preparing, instituting or prosecuting an objection or
appeal in respect of
(c) an assessment of income tax, interest
or penalties levied by a foreign government or political subdivision thereof,
if the tax is eligible for a foreign tax credit,
A taxpayer may deduct amounts expended in connection with
legal and accounting fees incurred for advice and assistance in making
representations after having been informed that the taxpayer’s income or tax
for a taxation year is to be reviewed, whether or not a formal notice of objection
or appeal is subsequently filed.
One further point:
As OVDI is primarily related to FBAR, it would not be covered by 60(o)(c) as FBAR penalties are not eligible for a foreign tax credit.
This suggestion is simply outrageous in one sense: Moodys is only thinking about how they may help their clients and not how they can help Canada as a country. It does no good for Canada for its residents to get a tax break for US extortion. It would only encourage more such activity.
Perhaps it would have been better if Moodys hadn’t led so many clients into the OVDI like so many sheep to the slaughter. But in fairness, hindsight is 20/20. Yet still, there seems to be a tendency of people, and their advisers, to submit to the extortionate demands of the US government is the problem. One can voluntarily waive every single Constitutional right before government, and this is what the participants in OVDI did. But should their lawyer advise them that it is a good idea to waive voluntarily their 4th, 5th, and 8th amendment rights? I’d rather have a lawyer that helped me to avoid such a path.
Here are the earlier comments on this:
Better yet, why doesn’t everyone who entered OVDI because they were innocently unaware of FBAR and US filing requirements, send their profession bills to the Finance Department or equivalent in their respective country. The Finance department would total up the bills and send one large bill to the US Treasury. If the US doesn’t pay, then issue a garnishee order against the US or freeze bank accounts. If the US does pay, then Finance would refund the fees to the individuals.
While we’re at it, might as well send the US a bill for all the costs incurred by financial institutions to comply with FATCA. After all, FATCA is a US project, so the US should foot the bill.
*Did that! I sent my receipts with a breakdown of accounting
and legal fees to the PM Office, Foreign Affairs, Finance and my MP. I
specifically asked for a tax credit since the FBAR penalty I paid, not that
big, was based on Canadian income where tax had already been paid. No response,
as I had suspected. Now that I have my CLN it seems less critical to me. After filing
my 2012 requirements with the IRS it will be a memory I will try to push into
the deep recesses of my brain.
Way to go!! Too bad everyone else doesn’t follow your example.
It’s sickening that any government should have to pick up the slack for this arrogant nation.
Pingback: Possible Canadian tax relief for US persons in Canada | U.S. Persons Abroad - Members of a Unique Tax, Form and Penalty Club