The Inter-Governental Agreement between Canada and the United States (IGA), which will implement FATCA regulations in Canada, is sufficiently complex that it will take some time before Canadians come to grips with what rights our government has traded away and what safeguards are in place to protect, hopefully, the majority of us. While I am completely against the CRA trading the private banking account information of Canadian residents and citizens with the hostile government to our south run by President Obama and his band of merry thieves, who steal from the poor to give to the rich, I do believe that the vast majority of Canadian residents can protect themselves. We now have not only to navigate the treacherous waters of IRS threatening to fine us at multiples of our total financial wealth (up to 380%), we must also know how to deal with bank’s inquisition which will begin to question all Canadians: “Are you or have you ever been a US person?”
This means that the Canadian government has left hapless citizens to know how to protect themselves. We must all be bad asses–Clint Eastwoods–with a “Go ahead and make my day” attitude not just in the face of the IRS, the US tax compliance industry in Canada, and US border guards, but also now, with the sanction of the Tory government, in the face of the inquisition that is taking place at our banks. Under no circumstances do Canadians want their banks to believe that they are US persons, because at that point, the bank will be obligated by this unlawful law (i.e., IGA) to betray their bank account information (though not RRSP, TFSA, RESP and RDSP accounts) to the criminal IRS in Washington, where we have no representation. I am not trying to scare people. But the loss of Canadian sovereignty is happening in baby steps of which the FATCA is a major accomplishment.
In the post, “Prove you are not American“, Schubert, in his classic exuberant fashion, made an important comment saying that we should not scare people with incorrect interpretations of the IGA: The banks will not be asking for proof that parents and grandparents are not US citizens. But this does not take into account the over-zealous twit who may land himself or herself a nice position as bank inquisitor. It is now their duty to ferret out “US persons” hiding their true status. Consider the closure of accounts of US persons in Switizerland, even when they are resident in Switzerland and citizens of Switzerland. To my knowledge, there is actually nothing in the agreements between Switzerland and the USA that requires Swiss banks to do this, but in their attempt at CYA (cover your ass), they have decided that the safest thing to do is to close the accounts of US persons and not permit US persons to open new accounts or even renew mortgages.
Consider the following paragraph from the IGA dealing with new accounts (p. 23; emphasis mine):
If there is a change of circumstances with respect to a New Individual Account that causes the Reporting Canadian Financial Institution to know, or have reason to know, that the original self-certification [that person is not a US citizen] is incorrect or unreliable, the Reporting Canadian Financial Institution cannot rely on the original self-certification and must obtain a valid self-certification that establishes whether the Account Holder is a U.S. citizen or resident for U.S. tax purposes. If the Reporting Canadian Financial Institution is unable to obtain a valid self-certification, the Reporting Canadian Financial Institution must treat the account as a U.S. Reportable Account.
Now imagine the following scenario:
Canadian-born Johnny banks at TD in Huntsville ON. The new manager, Jim, went to High School with Johnny. Jim knows that Johnny’s father is a US citizen, while Johnny’s mother is a Canadian. Johnny lived for ten years in the US and moved back to Canada and was a new student with Jim in grade nine at a local school. Oops. One day, Jim recognizes Johnny his former high-school mate and decides that he must call Johnny in for an inquisitional hearing. Johnny tries to prove he is not a US person, but to no avail. He has never obtained a CLN or his dog ate it. Never mind why, he can’t prove to Jim that he is not a US person and he becomes a specified account holder. The change of circumstance: the manager Jim knows Johnny personally, and since Jim is a complete dick (enough of these sort of people in every country), he gives Johnny’s account information, as specified under FATCA, over to the CRA, which then sends it to the IRS.
This is not likely to happen every day, but it will certainly happen in a country of 30 million people with as many as 1 million so-called US persons. So now I really believe that the IGA is irresponsible on the part of the Harper government, and it is a step towards the annexation of Canada by the US. But for now we have some ability to protect ourselves.
Have a question that needs some assistance. I am the person who was born in US by happenstance. Mother British living in Canada, father deceased ~ Canadian. I moved to Canada when I was 4. I obtained my Canadian citizenship at 19 years of age. Joined Toronto Police followed by York Regional Police and then at 22 joined the Canadian Army. By virtue of these oaths of secrecy and oath of allegiance to Canada I had renounced my US citizenship. I am in the process of gathering all docs to make an appointment in Ottawa to confirm my status rather than ask for and/or renounce US citizenship. My question is of a financial matter. In 2013 my spouse and I who is also Canadian military retired, received a lump sum. In order to reduce our tax burden for 2013 we need to either open a spousal RRSP or simply pay out the tax burden. I am afraid to open a spousal RRSP due to FATCA. Spouse is born Canadian. Again, I never worked, voted, owned property, no US accounts, never lived in US since age 4……should I pay the tax burden or is it safe to get a spousal RRSP. We never have previously due to military pension….thanks so much for your help.
@worried, this touches on a point I make in the post. You can get a spousal RRSP, provided you are not filing US taxes or refuse to tell them about it.
However, there is no deferment of taxes for RRSP contributions in US taxes for individuals. Therefore, if you are filing in the US, then you would probably have to pay taxes in the US on the income. No benefit in that.
Your date of relinquishment is also important. Presumably it was many years ago, and you can get a back dated CLN. In that case, I sincerely hope that you stand up for your rights and you refuse to file anything to the IRS.
Thank you for your post. The date of relinquishment would have been 1985 at age of 21 (not 19 as I thought originally) followed by joining the police in 1986 on ward. I am confused about the filing for RRSP in the US you mention. It would be a Canadian bank. I have read others have concerns with spousal RRSP’s so I am wondering if it is safer to just pay the taxes rather than carry an investment so to speak that the IRS can deem tax worthy.
@worried, you have no filing requirements to the IRS. The best is to ignore the IRS threats. No RRSP will be divulged to the US government by your bank or the CRA. I give you permission to get the spousal RRSP, provided you refuse to file anything to the IRS. Zip, zero, nada. You are not a US citizen. So why would you file anything to the IRS? Stand up for yourself.
The banks will not be asking for proof that parents and grandparents are not US citizens.
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Don’t forget the thousands of Canadian born children whose American parents registered their births with the US consulates. Which most of these folks probably don’t know about.
Thank you so much. I also confirmed the following: there is a tax treaty that excludes RRSP , so the US government won’t touch it. The CRA also won’t touch a 401k in the US
I have to say that this website is a blessing for so many individuals like myself. Furthermore, the people such as yourself who take the time to assist us is very kind. I can’t thank you enough and I agree, it is a mind field of scenario’s that people are unaware of as yet. Bravo Zulu as we say in the military!
Another possible change of circumstance is that the US simply challenges someone’s self-certification. And what is a ‘valid’ self-certification, if the original one is no longer satisfactory? Who defines what is valid – the US no doubt.
And what if you want to challenge your being designated a US person? How do you address problems and challenge errors or injustice? In a Canadian court? In a US court?
Implementing this just seems like opening a legal and ‘due process’ can of worms.
@Frank,
but in some cases will know, as in mine:
…except for the acts of persons like me (and others in families like mine for their children born in Canada) (who, incidentally, did not register my Canadian-born children with any US Consulate),
**********
and has included on my *required* FBARs sent to the US the account (that I hold on behalf of) information for one of my children who is *mentally incompetent* and thus cannot renounce his so-called automatically acquired US citizenship — and I as a parent, a guardian or a trustee do not have the right to do on his behalf.
**********
…and, to highlight this absurdity, have given my story to the CBC. My consolation is that by doing so, my story and the story of others brave enough to come forward helped break the silence of FATCA law coming across the Canadian border, our banks and now the CRA becoming arms of the IRS.
False-positives and false-negatives will abound.
Hopefully history will remember February 4 as a sadder day for the Conservative Party than for Canada itself.
@ Petros. Re: The page 23 paragraph of the IGA which you highlighted.
My reading of that tells me that the default position of the bank will always be to “cover their ass” and go ahead and report the account. In some circumstances, they might lighten up and choose not to report it but there is absolutely no standard; not from one dick-head employee to another and not from one dick-head bank to another. The only thing these chicken-shit banks really care about is not getting themselves in trouble. That’s been their position from the get-go.
It’s clearly a crap shoot. As an account holder you might get lucky and you might not. And if you do get lucky, next year your luck may well run out. All of the people here on IBS have been studying the convoluted “US person” rules for years now. To expect the banks or individual bank employees to get up to speed on this subject is delusional. Not going to happen. Their bottom line; when in doubt, report.
Why doesn’t Harper just go for currency union with the debauched US dollar and finish the job?
My understanding of the present state of affairs is that a bank would not tell one of their customers they were reporting their account to the CRA and the CRA would not tell the person they were sending the info on to the IRS.
The first inkling a person would have that they had been ratted would be a letter from the IRS. The solution is simple. Just take a black marking pen, write “no longer at this address-return to sender”, obliterate the address, and drop it into the nearest Canada Post mailbox. That should gum up the works a bit. Let the IRS deal with the junk mail they distribute!
@maz57, I agree with both your comments. That’s what each person should do. And that highlights why this is a betrayal, because the government of Canada is telling everyone, hey, we might give your info to the US, but be stand strong on your Canadian rights because we won’t enforce the fines and taxes on you if the IRS assesses you with anything.
But hey, the Harper government is protecting our private information (according to the Ottawa Sun). NOT.
@maz57
So basically anyone can say screw it & just toss the info to CRA to pass the info.. it’s not their problem… Or better yet… Look at that person’s last name.. they can’t be a true canadian… This is going to open up a big can of worms.. cause once u are tossed into the system… u will never be able to claw yourself out without spending a crap load of money. Once u are in one database… u will be spread to other databases that will make it almost impossible to fix. That is the problem I see is going to go on. My family member had their ID stolen. Took them yrs to clear it up… even now they still have problems… 5+ yrs later
CLOSING Account V. FREEZING Account
i don’t think a bank closing my account is that scary. i can find another bank, somewhere in the world, to take the money or use the money somewhere else.
what does scares me is FREEZING my account. i still don’t understand how fatca works and if that can happen..
@ USP Foreigner. Yup, the banks will not only pass the buck, they’ll pass the info.
@ dass99 CLOSING vs. FREEZING. Good point. The IGA claims accounts will not be closed. It says nothing about freezing that I have seen. The only good thing about such a scenario is that at least the account holder would know their bank was ratting on them.
I think there is an important comment about “due process” concerns about how data is going to be transmitted.
This post at Maple Sandbox merit consideration..
With FATCA Flaherty and Harper seem to have thrown due process under the bus, too
Read the letter at Maple Sandbox…
@ das99
Of course FREEZING is what we all fear and sadly there have been examples of this in other countries. However CLOSING is also bad if you have significant sums of money on deposit. There may not be any other bank willing to take you on as a customer because if CLOSING bank has found you to be “suspicious” then potential OPENING bank will be asking you all those questions which will end up making you “suspicious” there too. So OPENING bank will likely not accept you as a new customer. Therefore you have no place to put your money. (I, for one, would never trust my money to go anywhere outside of Canada’s borders. But that’s just my untrusting nature. I only want my money where I can glare across a counter at anyone who makes the slightest error with it.) Furthermore, taking large sums of cash out of your CLOSING bank will again make you a “suspicious” person as far as Canada’s equivalent of FinCEN is concerned. CLOSING bank will absolutely report you. Even if you manage to get cash from your CLOSING bank (and it will obfuscate that process to the upmost) you will be putting yourself at risk by being in the possession of a large sum of cash. You will find it necessary to spend a considerable portion of your cash making your home into a fortress in an attempt to keep it safe there. (Best to add a “safe room” for yourself and family too.)
The Harper government has not only stripped us of our privacy and freedom, it has taken away our sense of security. It has placed us into the same category as money launderers, crooks and drug dealers. We sunk right past second class citizenship into the bottom of the barrel. We are of no value to our government, a risk to our financial institutions and will forever be trying to convince others we are not tax cheats. We did not deserve to be hunted by a foreign government and betrayed by our own. It is wrong and the only way out is to keep fighting and put whatever we can afford into a legal challenge. That’s what I’m going to do anyway.
As in any good witch hunt, the suspected witch must drown to prove her innocence.
@bubblebustin
If it was only the singular witch… All of our families and associations are at risk if they get that nasty US person stench/taint on them. Like the flu… touch by accident could cause a nasty sickness.
@Em-if Canadian Brockers can set up a bank account please that we can all contribute to globally to fund the fight???? I think I@m gonna change my alias to “spittingnailsinLondon”.
Yep. I am fighting through the same. I am a contractor, but I cannot create my own contract (consulting) company because of the thousands of hours needed for a “foreign shell company” reporting to the US. So, I have found the UK invoicing services. However, they want me to copy my passport and send it to them. I’ve also explained to them that copying passports and currency is illegal due to old worries of forgery. I don’t want my birthplace connected with my salary.
In my last communication, they stated they required it and, as proof, they sent me the instructions for applying for a UK passport.
So, lets see if I can get paid.
I’m tired of this. If my parents should pass away, I think I will have to get rid of this blue thing. I have little desire to go anyplace where I am required to be fingerprinted. I see it as a total cutoff from the place I spent the first 2/3rds of my life.
It is proposed that Canadian banks be free to report any client whatsoever as US person to CRA, without any notification to said person. If I were a Canadian bank under those conditions, I would pass all of my client information to CRA without making any attempt to “discriminate” against a class of customer. This action would offload the costly sifting task to the CRA. If I were the CRA under those conditions, I would pass all intermediated client information to IRS and offload to IRS the costly sifting task, serving only as a pipeline. Consequence: no possible FATCA liability to either Canadian FFI or to CRA. Total CYA the only antidote to FATCA poison. Swamp the IRS.
@ crystal london
I think Blaze over at the Sandbox is working on something. Stay tuned and thank you for offering to help. It will be an expensive lawsuit. Success hinges on an honest judiciary and truthfully I’m no more trustful of Canada’s judiciary than I am of the USA’s. I know, however, that Canada has good lawyers, one of the most admirable (in my opinion), Doug Christie, died last year. But there are others like him and we’ll vet them all out to get the best.