82 thoughts on “Allison Christians was right, Mr. Mahany: The annual cost of filing U.S. taxes can be “astronomical.” CORRECT!”

1. @Em

   Keep safe, just imagine how much freer you are going to feel, very soon!

2. Just to highlight my today’s UPDATE to this post:

   IMPORTANT UPDATE, February 3, 2014:
   WhiteKat, a close friend of Brad’s, is helping him contact Brain. Here is WhiteKat’s comment on behalf of Brad (Brad’s comment seemed to be blocked at TaxConnections.com for some reason) — and my reply: http://taxconnections.com/taxblog/cbc-distorts-fatca-facts/#comment-1027

   WhiteKat
   February 3, 2014 at 9:27 am

   Mr. Mahany, Brad Smith asked me to post this because he seems to be blocked from your site. Can you help him please!:

   “Brian, I called the two tax firms you recommended, but both quoted me three-four times your estimated $300 filing cost. I have practically no income and just a bit of savings. I’m getting seriously scared. I want to pay my fair share and even though I live in Canada I fear that IRS will arrest me and put me in jail.

   These companies tell me that it will cost me a LOT of money to file past returns even though I owe no tax! Something is really wrong here. No way I’m a tax crook. I have hardly any money which is not my fault. What can I do? Brain, PLEASE HELP!”

   Reply

   calgary411
   February 3, 2014 at 9:39 am

   Although many will not relate to Brad’s situation, there will, in fact, be countless so affected.

   As McGill law professor, Allison Christians, points out in blog post “Citizenship-Based Taxation and Taxpayer Rights Don’t Mix”:
   “It is another to say to other countries–and much less individuals in other countries–if people who live in your country have US status AS WE DEFINE IT, you are harboring potential criminals and you must help us find them and enforce our claim over them even if your government also claims them and even if our claim conflicts with your government’s own law.” … which is more “entitled USA” hogwash and US collateral damage to Brad and so many others, in the process destroying individuals and families.

3. Note: I have made a change to the comment that WhiteKat submitted on behalf of Brad, as the Administrator at TaxConnections.com has taken liberty to change it to:

   Mr. Mahany, Brad Smith asked me to post this because he seems to be blocked from your site. Can you help him please! Changed by the TaxConnections.com Administrator to: “Mr. Mahany, The gentlemen you spoke with earlier asked me to post this. Can you help him please!:

   Brad’s name has been replaced by the administrator with the word “gentleman.”

   Note: I understand that Brad has NEVER been called a gentleman before. Just want to update the readers of this situation for Brad, the gentleman.

   Will WhiteKat be blacklisted now forever? One would hope not. WhiteKat is Brad’s friend and just trying to be of help!

4. @Em
   Have a safe journey and your husband have a successful appointment.

   So Brain has not responded yet on Brad?

   It will be interesting to see what he says. Perhaps nothing and the blog will go away..with no more comments..

5. atticusincanada says:

   I used H and R Block and they didn’t do my forms correctly three times in a row. Instead of fix their mistake for free they charged me each time to do a whole new form. That firm though cheap is not recommended. If they make a mistake you pay the penalty not them.

   Anyone who does international taxes and who knows what they are doing is not going to be charging the rock bottom prices of those who simply say they know what they are doing. As many of you know my forms are very simple. In total by the time I am out I will have paid close to 4000.00 and that is cheap.

   This will be no consolation, but you could have spent even more with one of the shyster big-name accounting firms to have them

   •  nickle-and-dime $100 & $500 you every time you asked a question about anything — even their own clear mistakes

   •  charge you through the nose for boilerplate that they called “research” any time they thought you were asking a really chargeable question

   •  “pro-actively” carry out unauthorized work and insist on charging you

   •  hand-off your simple stuff to a different person every year to boost billable time and increase mistakes because of no familiarity with the file

   •  duplicate your own work to “verify” it and then charge you for the time

   These are little horror stories from swimming with the sharks, long ago left behind to inflict their feeding frenzy on other smallish bodies who are under the illusion that there could be honor and competence in a brand-name accounting firm. One of those sharks moved out into self-practice and now specializes in extraterritorial spawn of the US, and is sometimes covered in the media as an expert [free advertising]. Beware.

6. Em, Have a safe trip and tell Mr.Em Congratulations in Advance!

7. Well just met with my former bank, NBC. Coincidence because I went in all flustered and the lady turns out to be “American” (same as me, just born there and moved to canada at a very young age – under 5). She had 4 siblings that are in the same boat. Only one of the sibblings plans To come forward as she went to school in USA and worked there at some point. The banker didn’t seemed worried at all but she didn’t know much about it.

   I banked at NBC for several years and she couldn’t pull my old checking account nor my GICs. She could only find a few of my investments. So if it’s this hard for ME to get the info, how the hell will the IRS get it?!

   Question: will I be put on the IRS map if I attempt to relinquish, get denied, and walk away?

   So much to think about. As soon as I have a course of action, I learn somethig knew.

8. It is said that “Brad is a 27 year old single Canadian resident and Canadian citizen living in Toronto who just discovered that he is a U.S citizen”.

   Assuming the proposition is true, one would want to know where Brad was born and how and why his US connection came to his attention. One would then want to know when and where he was born and research whether in fact he may have lost his US nationality. (The IRS has no standing to initiate a State Department or Immigration Court proceeding on nationality issues.)

   Does he have a Social Security number? Apparently his is and has always been a Canadian citizen. Does he have assets, income or heirs in the USA? Has he ever availed himself of an attribute of US nationality?

   The chances of enforcement (and the restrictions on at the mutual collection procedure in the tax treaty) might be so slim as to permit him to defy his US tax obligation, or to suggest that he might file prospectively only, using (for example) cheap software like TurboTax.

   Ever since United States of America v. Harden, [1963] S.C.R. 366 it has been clear that the IRS will not venture into Canada and seek enforcement, or allow Canadian courts to interpret US tax law.

   It is said (but the number came from American Citizens Abroad, a Geneva organization with a vested interest) that there are 6 million Americans abroad. There are only a few hundred thousand US tax returns filed from abroad. This is unlikely to change. While fear, even panic, has been engendered by some tax experts through blogs, forums and Web sites, one has to remember that these accountants and lawyers make a nice living assisting with OVDP filings. The fact is that enforcement efforts thus far — and into the foreseeable future I should think — are focused on US-resident noncompliant taxpayers.

   During Prohibition, there were numerous incursions by US “revenooers” into Canada by way of hot pursuit. I would like to think that the Ronald Anderson case taught them something about their international-law and diplomatic obligations. http://www.uniset.ca/other/news/wp_ronaldanderson.html

   In my experience persons who did not know they had a claim to US nationality are treated gently. The Simas Kudirka case (1974) is only one where the issue of nationality was not obvious. While the law isn’t clear on the point, almost never is a person who successfully sues to have his US nationality affirmed asked to pay back taxes or file back tax returns for years when the USG did not recognize his nationality. Rev. Rul. 75-357, PLR 8138071 (on persons whose US nationality was retroactively restored by the Supreme Court) is consistent with what I have written.

9. @5thSwiss

   Let’s hope that Brad never enters the OVDP, as he would be “entitled” to only a 5% FBAR penalty for not knowing he was a US citizen. FAQ #52.2:

   http://www.irs.gov/Individuals/International-Taxpayers/Offshore-Voluntary-Disclosure-Program-Frequently-Asked-Questions-and-Answers

10. @5thswiss
    As I wrote further up- it will be the banks etc who become the collectors of US taxes because if they dont, they will have to pay a 30% with holding tax. In Switzerland it is so that the banks have to pay up, which is why they are throwing out US customers right and left.
    And I said this before too- I think it would be much more fair, if the penalities reflected the length of time somebody has not spent in America. Say – a 5% reduction of penalty for every decade spent abroad. I think that would help especially those who have made their homes abroad for a long time. This would show how little a person has any affiliation with USA the longer they are gone. It also reflects the lack of use of american services. I mean – people are talking about how preposterous the penalties are – even Nina Olsen said so. If all of this is actually happening- then at least it should be done in a more fair way. I know- nothing is fair about CBT- but where can we get an edge? Maybe a coompromise? Because we do a lot of talking here and sharing information- but that train just seems to keep rolling on. Who is really grasping the unfairness of it all= What is being done about it- beside Nina writing a report that most people seem to be ignoring? I`d like to see some results which would make this extremely bitter pill less toxic.

11. @Stressed
    I just met a gentleman from my group in the library who I talked about FATCA with and he said he is an American person. He married and American woman and lived in the USA for about 4 or 5 years. He gets a US pension from where he worked then. He divorced and came back to Canada. Another one who has just had an OMG moment.

12. And the problem is- its not just America. The whole world is in cahoots with America. They are all going along with it to catch their own “tax evaders.” or at least not to lose the “protection” of American armies. They dont seem to realize the implications for privacy and industrial espionage. But just now in the german news- there is a group of computer hackers which has filed a suit against the german government and Merkel for betraying the german laws which promise privacy. They say that they have already won their case because it is written so clearly in the german laws that people cannot be watched without just cause. They say that Germany was working together with the NSA!! And for that matter- so were the 5 Eyes. Also in the news- England forced the Guardian to destroy Edward Snowdens disks. Only they had already made copies so that didnt work- but England is also working together with America.
    So what we are facing here isnt just America- it is the whole of the western world. They are all working together. So how about making it more fair? Sadly- thats how I see it now. Europe has long been a co-conspirator in covering up the bank fraud of Wall Street too.

13. As long as there is financial benefit governments will co-operate. Governments don’t really think of human rights. Remember even in Canada None were Too Many.

14. @brockers all……………keep up the postings, research and fabulous profiles ps. you guys keep me going. 🙂

15. This issue of US nationality is complex, and not all US nationals are alike in rights and obligations. To simplify, 14th Amendment citizens (born in the 50 States) are one class of citizen; those born or naturalised in territories are citizens under Organic Laws; those naturalised otherwise and those born abroad to one or both US parents with qualifying presence or residence are yet another class (of statutory citizens). Under present constitutional law one has the right to expatriate.

    But wait, there is now a new category of attachment to the USA: “US Person” which includes Green Card holders and certain others. Thinking back, there was once another: those who took out First Papers (for naturalisation).

    If you think of US nationality as “allegiance” — which it really is, based on old English Common Law — rather than a Christian, Civil-Law notion of “nationality”, then you may understand it better. This is why expatriation is, for the Congress, akin to apostasy (and your Web site, perhaps, to blasphemy!)

    There comes, if not now then in the future, a time when the US will have reached its limit in bullying and cajoling. It has already exceeded its ability to enforce FATCA as against those who are not notorious in their US Person status.

    But wait, there’s more: All persons with “a claim to US nationality” must use US passports when traveling to and from the USA. By extension, the IRS would like to enforce tax law against all such persons. But who has a “claim”? Let me cite two infants whose status I was recently consulted on, both born in Europe. Both have at least one US grandparent.

    Child #1 was born to a person herself born abroad to US parents. She has never lived, and only very briefly visited on occasion, the USA. Her husband is a NRA. The child only has a “claim” to US nationality via expedited naturalisation under § 322 http://photos.state.gov/libraries/greece/38517/USCIS/US_citizenship_eligibility_section322INA.pdf

    Child #2 was born abroad to an unmarried mother who lived, while the child was age 2-3, for 1½ years on the US side of the Canadian border. If, and only if, the child did not cross that border and interrupt one full year of presence in the USA, then (and only then) is the child a US citizen at birth. Otherwise the child could be naturalised under § 322. My understanding is that the State Department would (contrary to the terms of the law) disregard the mere possibility of the child having crossed the Canadian border and interrupted US presence unless that fact were brought to its attention.

    But, as readers of this Web site will be aware, possession of US nationality is hardly an asset unless a person intends to live out his or her life in the USA.

    Now, as to banks and other financial services providers as collection (or enforcement) agents of the IRS: that’s certainly true if and only if the bank is aware of its customer’s US Person status. There remain millions of US Persons abroad whose status is not obvious and as against whom enforcement, either by a bank or by the IRS, is wildly improbable, denunciation aside.

    Denunciation is the key word: many cases are brought to the attention of the IRS by disgruntled, scorned women and angry business competitors.

    Once the IRS is aware of a nonresident, noncompliant person’s defalcation it can pursue assess indirectly through correspondent accounts in the USA. But there are limits: http://uniset.ca/other/cs6/68OR2d379.html (Van deMark case: the Canadian bank wound up paying twice).

16. Thank you, 5thSwiss. I am interested in your words as you were a former US Consul General (I believe) so worked for the US Department of State. Is that correct? If so, I think you will have a good understanding of this and I appreciate reading your words (even though I don’t like them).

    This issue of US nationality is complex, and not all US nationals are alike in rights and obligations. To simplify,
    – 14th Amendment citizens (born in the 50 States) are one class of citizen;
    – those born or naturalised in territories are citizens under Organic Laws;
    – those naturalised otherwise and
    – those born abroad to one or both US parents with qualifying presence or residence
    are yet another class(of statutory citizens) .

    Under present constitutional law one has the right to expatriate.

    But wait, there is now a new category of attachment to the USA: “US Person” which includes Green Card holders and certain others. Thinking back, there was once another: those who took out First Papers (for naturalisation).

    I have confirmed at the expense of a Washington, DC US nationality / immigration lawyer, that my son falls under the statutory “those born abroad to one or both US parents with qualifying presence or residence”.

    …except the US Consulate / Department of State tells me that under DOS regulation my Canadian-born son cannot renounce his *unasked for, unregistered with the US* US citizenship (though he has only lived in Canada and never received any benefit from the US) and that a parent, a guardian or a trustee DOES NOT HAVE THE RIGHT to renounce on behalf of that person, even with a court order. Without requisite ‘mental capacity’, he also is unable to go through the process of getting a SSN then back-filing US tax and information returns, all for the purpose of renunciation, which is impossible. I call my son (and all others like him — and I’m sure there will be many) ENTRAPPED into a *supposed* US citizenship and the absurd cost of administration of compliance of this citizenship — for little or NOTHING that would ever be owed to the US. Only the draconian penalties that would be involved. So, I add this as another category of US nationality complexity.

    I understand that your:

    Denunciation is the key word: many cases are brought to the attention of the IRS by disgruntled, scorned women and angry business competitors.

    is not aimed at me, OTHER THAN …

    I AM a woman betrayed and scorned by the US I grew up in (though in 2012 I officially was able to renounce my US citizenship which I was WARNED I would be losing when I became a Canadian citizen in 1975. I have a CLN to show to my local CANADIAN “foreign financial institutions”.) As a betrayed and scorned woman, a 70-year old retiree who has used a good chunk of my retirement savings to try to deal with my family situation and confirm that those like my son are indeed ENTRAPPED, I have come forward with an interview to the CBC about my son’s / my family’s situation — which will be that of many other families.

    brought to the attention of the IRS.

    Interesting, the US entitled audacity:

    If you think of US nationality as “allegiance” — which it really is, based on old English Common Law — rather than a Christian, Civil-Law notion of “nationality”, then you may understand it better. This is why expatriation is, for the Congress, akin to apostasy (and your Web site, perhaps, to blasphemy!)

17. @usxcanada, thank you for weighing in. I second your comments – what you relate is all too familiar.

18. @5th Swiss

    Given your background, I would be curious to know if you have any sense as to whether or not State Department finds the surge in renunciations in any way troubling.

19. @Calgary411 and @Edelweiss:

    1. I was a vice consul, lots of years ago, and later held other mid-ranking diplomatic assignments. Consuls general are usually charged with political reporting.

    2. The State Department, specifically American Citizen Services, is staffed with bureaucrats like any other government agency. They would like to do well by their constituency but are limited to those, frequently exorbitant, laws the Congress chooses to enact. “Troubling” is not a descriptive for their attitude in doing their job; that’s a matter for Congresspersons once they’ve finished dealing with lobbyists and collecting campaign contributions. State Department regulations (the Foreign Affairs Manual and similar) do not have the status of law although they may be worthy of respect. A CLN is simply State concurrence in the fact of loss; those who lost nationality under prior law probably will not have a CLN (they may or may not have an Embassy letter of notification). Ultimately the interests of the child (or the “incompetent” prevail. But then who can afford the cost of pursuing what is for me an academic issue? An alternative is to ignore the matter, and if the IRS seeks enforcement to challenge it on the constitutional issue of nationality or, more usefully, jurisdiction. Calgary411’s case has been well aired in the press; I wonder whether she might have better served her case by staying beneath the radar.

    3. It is not obvious to me, given the history of nationality starting with Hamilton and Jefferson and continuing through the present, that a minor or a mentally challenged adult cannot lose US nationality. There are other situations that have resulted in doubt, usually resolved at age 18. (One case that comes to mind is the child of accredit foreign diplomats born in the USA: s/he is treated until age 18 as a “legal permanent resident” and at majority can come to the USA and claim status or can abandon it.) While international law provides that every State is the sole determinant of who are its nationals, it’s not obvious that such status can’t be challenged or avoided by or on behalf of its target persons. Without encouraging the expense and notoriety of challenging the issue, I draw your attention to those countries, including historically Iran and Greece, which had no provision for loss of nationality. Except, in the case of Greece, for those who happened not to bee “Greek” in their eyes: ethnic Turks and ethnic Slavs (ref. former art. 19 of the Greek Nationality Law. Nationality is often a matter of expediency. Thinking of First Canadians with Jay Treaty status: how often does the IRS go after them? Probably never, unless there is a customs fraud issue: the Trapilo and Pasquantino cases.)

    4. I wonder whether Canada and other countries are obliged to accede to the USG’s claim that a certain person is American if that person has never “availed himself of an attribute of US nationality”.

    5. The US-Canada tax convention provides that Canada (CRA) is not obliged to assist the IRS in collecting tax from a person who had Canadian citizenship at the time the claim to tax accrued through the present.

    6. For the moment, the USG has exorbitantly (that word again) asserted its authority over worldwide financial services. We know from the Nicaragua case that the US is selective in its respect for international aw. At some point foreign States will see that their paramount national interests have collided and they will react. But even now those with the wherewithal to do so, like the late Marc Rich, have stayed beyond the scope of American enforcement.

    7. Things have changed in recent years: Big Data enable the IRS to see potentially taxable transactions in real time. The NSA (as it happens) monitored Marc Rich’s violation of sanctions but in those days “sources and methods” rules impeded the use of the data for enforcement. I wonder whether Snowden’s revelations have done the DoJ a favor by enabling them to use NSA intercepts more liberally. Even for tax enforcement at a certain level.

    8. @northernstar wrote: “He married and American woman and lived in the USA for about 4 or 5 years. He gets a US pension from where he worked then.” That, without more, would not make the person in question a “US Person” or one subject to expatriation tax. A US pension would be subject to article 19 (usually) of the relevant tax convention. As it happens I get a Canadian state pension but I never lived in Canada. (I was a “frontalier” for some years and in fact filed tax returns from my work address and to this day have a valid Canadian driving license (OK it just expired but I will renew it when I get around to traveling to Canada if only for old time’s sake) but even under the most exorbitant interpretation I was never a Canadian resident.)

20. @ bubblebustin, calgary411, Trish, northernstar & saddened123
    Thanks for the good wishes. The deed is done. My husband will be free but not me, not ever. How ironic is that, since I am the Canadian since birth? I posted this elsewhere but I’ll put it here too:

    RE: my husband’s relinquishment. It was not a fun time (we drove through a ground blizzard to get there and it was bitter cold in the big city). At the consulate my husband spent 1.5 hours going through security and waiting on an uncomfortable chair. He only spent 3 minutes at 3 different bullet proof glass windows to get the deed done however. He was 1 of 10 people there at that time who were either relinquishing or renouncing. One renunciant had second thoughts and said she would have to think some more about it. Although nobody was talking (conversations would probably have been recorded in the waiting area) it was said by a few there that they would never have imagined that someday they would be doing this. One of the consulate staff sent an “interim letter” by e-mail for my husband to show at the border if he should have to cross before his CLN arrives. She is also sending a hard copy of this letter by snail mail. It is signed by the counsul himself. The 200 km. drive back home was on clear roads and in bright sunshine. We listened to Pete Seeger “freedom songs” on the way back.

    We had no computer contact while away so we have just found out about the Harper IGA sell-out. My husband and I are both prepared to contribute to any legal action taken against the Canadian government.

21. @EM Congratulations Mr.Em, I am very happy for you! How long did they say it would take to receive the CLN?? Hopefully not long. Glad you got back safe and sound! Yeah!

22. My congratulations to Mr Em. This date will bring mixed feelings for you in the future. I’m glad he was able to beat the rush.

23. @ saddened123
    They would not say how long the CLN will take. My husband got the “interim letter” so that was the best he could hope for.
    @ bubblebustin
    I wonder how many will be doing that long wait in the US consulate in the months to come? Anyway, you know the relinquishments numbers are pure bunkum when on one day, one consulate has 10 people giving up their US citizenship.

24. @Em, That was very smart to get the interim letter!! Good!! I wished I would have thought of that.

25. Thanks, 5thSwiss, for your further comment.

    Re:

    “Calgary411’s case has been well aired in the press; I wonder whether she might have better served her case by staying beneath the radar.”

    My son’s accounts that I hold for him were reported on the Foreign Bank Account Reports (FBARs), all that account information about my son there for the US taking, so just a matter of time.

    It was my duty to myself to not betray myself even further by not speaking out of the absurdity that my son has no way to renounce his *supposed* US citizenship. In fact, I am glad I spoke out and was one that helped break the dam of Canadian silence on the story of FATCA and citizenship-based taxation by speaking with CBC reporters.

    As I’ve said, I don’t want a ‘work-around’ and really don’t want to have to ‘stay beneath the radar’ to always wonder when the next shoe will drop. Ultimately, this whole thing is unfair — and especially for those “accidentals” born in the USA, so they have a US place of birth to show, though never actually taking up residence there. What a pity there is no choice for these persons whose parents never dreamed they were passing on such to their children born in other countries (or within the US and never lived there).

    And, as I’ve said many, many times, this is not just about my son, about my family — it will be the same absurd story for many families. Bottom line: I just want my Canadian life back, with my Canadian family, to live the remaining years of my life free of the USA and will to my children whatever left of what I have earned and saved in Canada — not the USA. I can forego ever visiting my US family — my punishment for US enslavement of my son, never again to cross that border. I have removed from my smallish retirement investments any US accounts. I hope others will do the same.