Liberty and justice for all United States persons abroad

The Isaac Brock Society

Posted on by Posted in Issues regarding US persons abroad 106 Comments

You may remember Ambassador Jacobson’s “70 year old Grandma”  speech on October 18, 2011:

“When I read all of this I was concerned. So last week I called the Commissioner of the United States Internal Revenue Service to see what we could do. I explained the problem to him.

The result is that both he and I are sympathetic to the concerns. We are going to work together to see if we can’t find a way to accommodate grandma — and others — here in Canada. But we have to figure out a way to do it without letting the person who is trying to evade taxes in the Cayman Islands off the hook.

My message on this one is to sit tight. We are not unreasonable. We are not unsympathetic. We are not irresponsible.”

Tonight, November 2, Ambassador Jacobson provides responsible education about the U.S. electoral system on the Agenda.

Update – November 3:

1. According to the Agenda you should be able to see the interview online.

2. The comments on this post are directed to the continuing disappointment and betrayal that U.S. citizens abroad feel at the hands of the US government. Specifically how Ambassador Jacobson promised relief and clarity. Relief in the sense that US citizens abroad should NOT be subjected to massive penalties for “footfaults”. Clarity in the sense that direction would be provided in terms of how to come into compliance. I wrote a number of posts last year on the topic of how US citizens abroad cam come into compliance with US tax laws. It has since become clear that the IRS is not offering any reasonable way to come into compliance. Furthermore, the silence of the IRS and failure to address this issue suggests that the IRS would rather operate through threats of penalties. The September 1, 2012 guidelines are useful to such a small percentage of people that they are meaningless. US citizens abroad now fall into one of two groups. They either renounce US citizenship or they do the full ostrich. On a personal level I have simply come to terms with the fact that the Government of the United States as represented by the IRS is:

Unreasonable, unsympathetic and irresponsible.

The worst thing is the realization that many of the things we believed about the United States – “land of the free and home of the brave” – are just simply wrong. Margaret Thatcher used to refer to the United States as “That great citadel of freedom and justice“. Right, this is a country that levies huge penalties on US citizens abroad who invest in Canadian mutual funds.

Lioness, comments on the penalties she has  received from the IRS. I note that she was using a US based CPA firm. The more I learn about the experiences of people using US based professionals, the more I think you should consider using professionals in your country of residence. See the following comment thread from here to here on this topic.

Finally, don’t forget about one of Ambassador Jacobson’s 70 year old Grandmas.

And, thanks to Calgary411 for your great comments on this post.

There are times in life when bad things happen to good people!

 

106 thoughts on “US Ambassador to Canada – David Jacobson – “We are not irresponsible” – Updated”

  1. *It has now been slightly more than a year since the Ambassador made that speech commiting to get the IRS monkey off the back of the 70 year old Grandma

    Has he announced any solution to this problem?  If so, I must have missed it. Having been a year, I hope this commitment has not been forgotten.

     

  2. *If the 70 year old Grandma owns a house in Canada, then she has an “investment” which, according to this article, defines her as being an evil, horrible and endlessly terrible tax cheat:

    The US Internal Revenue Service has pushed back the proposed
    implementation dates for the Foreign Account Tax Compliance Act (Fatca),
    which is aimed at ensuring US citizens based overseas pay tax on their
    investments    .
    http://www.ftadviser.com/2012/11/02/investments/north-america/fatca-delay-will-not-affect-uk-implementation-Ie5ARYimlRuLtHjuYsfSXP/article.html?ftar=true

    This line is cute:

    self-invested personal pensions may be subject to a 30 per cent withholding tax if it cannot be proved that the investor is not a US citizen.

    If one is a US citizen abroad and one saved for retirement, then one is a criminal. Lock the 70 year old Grandma up for life in Fort Leavenworth, if not Guantanamo Bay. Never mind terrorists, when one can hunt after US persons abroad instead. The best part of the article is:

    “back to the dark ages”

  3. Hi, Roger.

    I got a reply back from the Ambassador David Jacobson’s office a few days ago — to my query about number of actual Relinquishment and Renunciation appointments at Canadian Consulates and Embassy. I have sent him numerous queries this past year and this is the first reply from his office I’ve had / never from him. I’ll try my luck again and ask what has been done for the 70 year old Grandma the IRS is not after.

  5. No, of course they didn’t. But I did get a reply, saying I would get a reply:

    I just got a reply (well – sort of) to my email to US Ambassador to Canada, David Jacobson.

    Dear Ambassador Jacobson,

    Can you help with how I can find out how many actual appointments have been completed at US Consulates and the Embassy in Canada for renunciations and relinquishments to date 2012? I just want the ACTUAL NUMBER, no other information, no names. Can you, as US Ambassador to Canada, or the Department of State be transparent with this information (not the information published on the quarterly “Name and Shame” list)?

    There is a lot of speculation about actual numbers. There would be better trust with information provided if these numbers are very transparent and reportable.

    I would appreciate an answer whether or not this can be provided.

    Thank you very much,

    calgary411

    From: Johnson, Sylvia D
    Sent: Wednesday, October 31, 2012 4:55 PM
    To: calgary411
    Subject: Your Inquiry for Information

    Dear Ms. Calgary411,

    Thank you for your inquiry to the Ambassador. We will reach you to provide a response to you as soon as possible.

    This email is UNCLASSIFIED.

    Note: I have sent many emails to the US Ambassador to Canada. This is the VERY FIRST response (of any kind) I’ve gotten from the US Ambassador to Canada — or his office, so that has been progress over the last year.

  6. I seem to recall that there were 3 “promises” made, one of which was that those unfairly penalized in OVDP/OVDI would receive refunds. Never heard a word about it again.

  7. You go Calgary411! Ambassador Jacobson is probably not expecting to hear from a real live advocate for Canadian ‘grandmas’! He probably thought he’d get away with making that facile promise – and no-one would hold him to account.

    And, oh readers of IBS, what if Canadian grandmas (and grandpas) started writing to Minister Flaherty, quoting the Ambassador, to remind him of Jacobson’s promise, and that Canadian grandmas are still being hunted by the IRS – since the promised ‘streamlined’ process has serious flaws and restrictions? And, remind him that we are counting on our government to hold the US Ambassador to account for his promise.

  9. ok, not quite refunds but…

    http://www.theglobeandmail.com/globe-investor/personal-finance/taxes/us-taxman-to-go-easy-on-american-residents-in-canada/article554625/

    The policy shift will come in the form of new guidance from the IRS, expected to be issued before the end of December. U.S. officials said the statement will make it clear that:

    – If a U.S. citizen files tax returns late and owes no taxes, there are no penalties for failure to file.

    – U.S. citizens who were unaware of the bank account reporting requirement can file previous reports now, along with a statement explaining why they’re late. No penalty will be imposed if the IRS determines that there is reasonable cause.

    – Individuals who took part in earlier amnesty programs this year and in 2009 can reapply and get back penalties already paid.

     

  10. oh boy, that sure helps me a lot. So, the good people live in USA and maybe now Canadians are maybe not tax evaders.  Everybody else is

  11. I  hope everybody  notices that Globe and mail article was dated December  2011,  and the end of December  referred  to was 12 months ago. We saw what they gave us,  and it wasn’t much

  12. *interesting December 2011 article, but not true.  I am a US citizen who married a

    Canadian 38 years ago.  I am a law-abiding citizen who always files her cad tax returns.When i found out about the ruling last June, 2011, I filed 3 years of US income tax forms – all basically the same.  In the past two months I have received the following notices from the IRS:

    2008 – $10,000 late penalty fee, 2009 – reasonable cause was accepted, 2010 – $57,000 late penalty fee. I owe no taxes in the United States.  I have, of course, sent more “reasonable cause” letters – another big expense!  I just cannot believe that we are being treated this way.I’m so thankful to have found this site. 

  13. From: calgary411
    Sent: Friday, November 02, 2012 8:31 PM
    To: US Ambassador to Canada David Jacobson
    Subject: US Persons in Canada

    Dear Ambassador Jacobson,

    US Persons in Canada read statements from you over one year ago (which seemed to indicate to the Canadian press that what US persons in Canada were experiencing was no big deal) …

    “We had an obligation to make our situation clear,” Mr. Jacobson explained. “What they have done is clarify what’s going to happen with innocent folks who didn’t know their obligations and are now going to try to comply with the law.”

    “Our intention was not to abscond with some innocent grandmothers’ savings,” he said. “From where I’m sitting, it’s going to take care of the problem I was most concerned about … which is that people just didn’t know they were supposed to do this.”

    “What the IRS is saying here is that if … you don’t owe taxes to the U.S., and you file your return and they show you don’t owe taxes, there aren’t going to be any penalties for having filed late,” Mr. Jacobson said in an interview Thursday.”

    Your website says:

    IRS Announces Efforts to Help U. S. Citizens Overseas Including Dual Citizens and Those with Foreign Retirement Plans

    On June 26, 2012, the U.S. Internal Revenue Service announced a plan to help U.S. citizens residing overseas, including dual citizens, catch up with tax filing obligations and provide assistance for people with foreign retirement plan issues. “Today we are announcing a series of common-sense steps to help U.S. citizens abroad get current with their tax obligations and resolve pension issues,” said IRS Commissioner Doug Shulman.

    Shulman announced the IRS will provide a new option to help some U.S. citizens and others residing abroad who haven’t been filing tax returns and provide them a chance to catch up with their tax filing obligations if they owe little or no back taxes. The new procedure will go into effect on Sept. 1, 2012.

    The IRS is aware that some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs). Some of these taxpayers have recently become aware of their filing requirements and want to comply with the law.

    To help these taxpayers, the IRS offered the new procedures that will allow taxpayers who are low compliance risks to get current with their tax requirements without facing penalties or additional enforcement action. These people generally will have simple tax returns and owe $1,500 or less in tax for any of the covered years.

    The IRS also announced that the new procedures will allow resolution of certain issues related to certain foreign retirement plans (such as Canadian Registered Retirement Savings Plans). In some circumstances, tax treaties allow for income deferral under U.S. tax law, but only if an election is made on a timely basis. The streamlined procedures will be made available to resolve low compliance risk situations even though this election was not made on a timely basis.

    Taxpayers using the new procedures announced today will be required to file delinquent tax returns along with appropriate related information returns for the past three years, and to file delinquent FBARs for the past six years. Submissions from taxpayers that present higher compliance risk will be subject to a more thorough review and potentially subject to an audit, which could cover more than three tax years.

    The policy shift was supposed to come in new guidance from the IRS. The December 2011 “new” guidance was a reiteration of what was already in place and now we have a new “streamlined procedure” in effect since September 1, 2012. That latest, too, is indecipherable by the average US Person in Canada. We must seek professional guidance to understand what is being offered – to avoid what you agreed were “draconian” penalties. Can you provide plain, unencumbered translation to let us know how the US is not absconding with a Canadian grandma’s savings or that any of the small segment of us eligible for this new procedure can have confidence that the latest guidance can be used without further very expensive US legal tax advice? How about the US persons here already in OVD / OVDI programs? How about those of us who have ourselves tried to comply without expensive US tax law and accounting professionals to help? In your own words, what is your definition of “amnesty”?

    Here are questions asked by US tax professionals in Canada.

    The new streamlined procedure is deceptively complex and may not apply to many taxpayers.

    The new streamlined procedure went into effect on September 1, 2012 and is designed for expatriates with simple returns with little or no tax due. However, whether by design or defect, it threatens to entrap most of its likely applicants. We believe that most expats will not likely qualify for the new streamlined procedure for the following reasons:

    Eligibility for the new streamlined procedure is extremely narrow;
    The risk factors used by the IRS in making the determination as to whether a particular taxpayer has “low compliance risk” are neither defined nor weighted; and
    The determination of “low compliance risk” by the IRS is subjective, resulting in significant uncertainty and risk to the taxpayer.
    Eligibility for the new streamlined procedure

    According to the rules announced in August 2012 a taxpayer will not qualify for the new streamlined procedure if any of the following criteria apply:

    1. The taxpayer has resided in the US since January 1, 2009.

    The term “resided” for purposes of eligibility for the new streamlined procedure has not been defined. For example, is a taxpayer who spends winters in the US each year treated as having “resided” in the US since January 1, 2009, and therefore ineligible for the new streamlined procedure?

    2. The taxpayer has filed a US tax return for any tax year subsequent to 2008.

    As discussed above, a taxpayer who has filed US tax returns for the 2003 to 2010 tax years under the OVDI or OVDP will be ineligible for the new streamlined procedure. Also, taxpayers who filed US tax returns for the 2011 tax year will be ineligible for the new streamlined procedure.

    3. The taxpayer does not owe more than $1,499 in any of the tax years beginning in 2009 and ending in 2011.

    There are a number of situations in which preferential tax treatment in Canada may result in US tax owing on a US tax return, including flow through shares, the capital gains exemption, more generous provisions related to the exemption for principal residence, stock options, and RRSP contributions.2

    4. The taxpayer is not submitting an amended return for any of the 2009 to 2011 tax years, except to file a late Form 8891 to defer tax in a Canadian RRSP or Canadian Registered Retirement Income Fund (“RRIF”).

    A taxpayer who otherwise filed a tax return in any of the 2009 to 2011 tax years but failed to file a required form that is not Form 8891 is ineligible for the new streamlined procedure. For example, where a taxpayer failed to file Form 3520 or Form 3520-A in respect of a Canadian Tax Free Savings Account (“TFSA”)3 or Registered Educational Savings Plan (“RESP”),4 such taxpayer will be ineligible from filing such delinquent forms under the new streamlined procedure.

    In another example, where a taxpayer is a member of Canadian pension plan that is not a Canadian RRSP or Canadian RRIF, and has failed to elect deferral from current taxation under the Treaty,5 Form 8891 is not available. Rather, the Treaty position for elective tax deferral must be made on Form 8833. Such taxpayers are ineligible for late filing Form 8833 under the new streamlined procedure.

    “Risk factors” under the new streamlined procedure

    Notwithstanding that a taxpayer may at first appear to be eligible for the new streamlined procedure, the subjective assessment of “risk factors” by the IRS’s review of the requisite questionnaire completed by the taxpayer may result in the taxpayer’s disqualification from the new streamlined procedure. Such questionnaire contains a number of questions which contain several traps for the unwary.

    Given the inherent uncertainty in the subjective assessment of low compliance risk by the IRS, the unwary or uninformed taxpayer is at risk of triggering adverse tax consequences by simply applying under the new streamlined procedure.

    Prior to making an application under the new streamlined procedure, taxpayers must understand that such application will result in the following consequences:

    Disclosure of sensitive and detailed information to the IRS through the completion and submission of the requisite questionnaire;
    No protection from the risk of criminal prosecution; and
    Where the IRS determines that the taxpayer’s submission is ineligible for the new streamlined procedure, such disqualified taxpayer will not be eligible to participate in the OVDP.
    Conclusion

    Opting out of the OVDI or OVDP may produce beneficial results to the taxpayer already in these programs, however, that will not be the case for all taxpayers. Individuals need to carefully consider all of the consequences before choosing to opt out. Once a decision has been made to opt out it is critical to opt out at the appropriate time.

    At this time it is unclear whether a taxpayer who is currently participating in the OVDI or OVDP will be able to opt out of those programs and into the IRS’s new streamlined procedure. Until such time that the IRS clarifies the uncertainties discussed above, it would be imprudent for any taxpayer to pursue this course.

    Can you speak to the above points, Ambassador Jacobson?

    I am a ‘US Person’ Canadian grandmother who has been “lucky enough” to have retirement savings that I have spent in trying to reconcile my situation. What of other ‘US Person’ Canadian grandmothers or any of the rest of US Persons in Canada (even those who were not born and never lived in the US or were born in the US but never actually lived there)? We are still grappling with how to come to terms with the US as we live in other countries and constantly read in US (and even Canadian) media that we are tax evaders and traitors.

    Over and over again, US persons in Canada are becoming aware of what the US is requiring. Many are in or nearing retirement, not sleeping as they worry about what to do, know they cannot do what the US now asks by themselves, yet many, many not being able to afford competent legal and accounting professional assistance. Some think there is an “amnesty” – but it does not meet the definition of such. You have said “We had an obligation to make our situation clear…What they have done is clarify what’s going to happen with innocent folks who didn’t know their obligations and are now going to try to comply with the law.”

    Can you clarify because we STILL are not clear. As expats, we try to communicate with US government representatives, including you, with no response. We know that Nina Olson has not been clearly heard on our behalf.

    There is a definite connection to renunciations and relinquishments as those of us living in Canada (and other parts of the world) communicate with our feet that we feel we are being given obfuscated information over and over. I recently sent you another email in which I asked if you could provide to me the ACTUAL numbers of relinquishment and renunciation appointments in Canada Consulates and Embassies – where information was passed on to Department of State in Washington, DC for approval and issuance of Certificates of Loss of Nationality. Can you be transparent with those numbers – I am not asking for names that would invade privacy. I am interested in the actual number, either year to year (Q3 to Q3) or to date 2012. As the representative in Canada for the Department of State, can you provide those numbers? If not, what is the reason you cannot?

    If we in Canada have you as a representative that we can speak to on these important concerns, can you clearly provide answers we can understand?

    My appreciation for what I hope will be your assistance to us.

    Sincerely,

    “calgary411”

  14. @lioness,

    I did not see your comment before I sent another email to the US Ambassador to Canada, David Jacobson (just above). What the IRS has given you flies in the face of what Ambassador Jacobson tried to convey. I suggest that you follow up to my email with your experience as an example of what I am talking about.

    Here is the US Ambassador’s email address: ottawainfo@state.gov

    …and PS — Welcome to Isaac Brock. Your input is valuable.

  15. @Calgary411,

    Another great letter to Ambassador Jacobson. Let’s hope he responds with some concrete answers. Thanks for all you continue to do for so many.

  17. @lioness,

    Welcome to this site. Absolutely terrible  – you owe no tax and yet you are being penalized – and each year is so different. Did a professional tax advisor prepare your returns on your behalf? If so, how does he/she explain the fact there are penalties for two out of three years and reasonable cause accepted for one year?

  18. Yes, Mark Twain, what the US Ambassador to Canada said to the press is another very blatant slap in the face to those of you outside of Canada. I think of him as a clown if he cannot do better.

  19. @lioness

    How awful-I am sure everyone here is horrified for you. I do hope you have not paid any of those fines. I can’t follow the logic of 2008 penalty, 2009 reasonable cause accepted and 2010 $57k penalty. Is there any explanation as to why you are being fined when you owe no tax? Assuming you have a tax lawyer writing those letters, what kind of explanation does he/she have for IRS’s reaction? 

    I think the brutalness of the treatment is something none of us will ever forget and for now, certainly not forgive.

    Welcome, glad you’re here!

  20. @calgary

    Wow! You are inspiring. So much so I even feel like trying my hand at a letter.

    Thank you for this!

  21. Time to board the ships from the motherland and cast the tea into the sea.  The only problem is, that so few people know what is being done to them.

  22. *@lioness, Welcome to Isaac Brock!!

    This is horrible news, I must say I lost my breath when reading your post..It is the most ridulous mess I have ever seen..It is just total abuse of US Citizen’s Abroad. I am sick, something has got to be done.

  23. my sympathies are with you Lioness.  Thank you so much for contributing facts that help us in our decisions.

  24. *Wow! I didnt expect to see all of these return emails…calgary 411 – thank you for sending the informatve email.  i will definitely send my “example” on Monday to Ambassador Jacobson- i was also thinking of sending copies of the IRS abusive letters along with my reasonable cause letters to Harper and Obama. To answer Tiger’s email – yes I was lucky enough to hire a professional tax advisor from Bellingham who prepared my returns. she is at a loss for words, but did indicate that they have been seeing quite a few of these IRS letters lately. I don’t have the exact wording of the IRS letters with me here at home, but will get back to all with the wording on Monday, along with my “reasonable cause” letters.  The penalty for failure to file is $10,000 or 35% of what they feel you did not file on time.  At this point, i refuse to give in to bullies and will not pay any fines.  thankful to have found this site.

  25. *@Calgary411, write another letter and have every American in Canada that you know sign it. Maybe Arrow can sign it too? Are any of them lawyers?  Maybe that will get a response? Maybe this can be coordinated with the help of ACA?

    America really needs to stop being a demorepublican dictatorship, allowing the people to directly vote for or against these clowns in embassies and their budgets.

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