From PLAN (Planned Lifetime Advocacy Network) a membership-based non-profit organization, established by and for families committed to ensuring the safety, security and well-being of our relatives with disabilities.
RDSPs and FATCA: Warning to People With Disabilities With Any Connection to the U.S.
My comment and my sincere thanks to this incredible organization:
My friends at PLAN, I thank you so much for providing the WARNING STICKER that all Canadian Registered Accounts, including the RDSP, should have for anyone deemed to be a ‘US Person’ in Canada. It is negligent that this has not been accomplished before now by those who offer these products. (I have paid over $2,000 in US taxes for the Canadian government’s contribution of bonds and grants to my son’s RDSP, for which I am the Holder. There is no other way to say it — these are $$$$ stolen from Canada’s taxpayers who provided the funds for those grants and bonds — and also from the Canada’s treasury to go to the US.)
I object to my Canadian-born son (born to me in Canada before I became a Canadian citizen in 1975) now being being referred to by the Canadian government and the Canadian Bankers Association, respectively, as “a U.S. citizen resident in Canada” and “a U.S. taxpayer resident in Canada”. He has never been registered with the US, never lived in the US, never got any benefit from the US – only from Canada and for those benefits I am forever thankful.
Hopefully, I am no longer described that way as I have officially renounced my US citizenship and now have a Certificate of Loss of Nationality that I can show my local CANADIAN “foreign financial institution” when I am asked if there is any reason the US would consider me a ‘US person’ in order to turn over account information to the CRA to then turn over to the US IRS. I cannot renounce on behalf of my son, even with a court order.
I can’t thank you enough, PLAN, for the needed warning to Canadian families who would not have an ounce of extra strength left over after caring for family members who have some type of disability to deal with US tax and financial account reporting to the US on top of that. In addition they most likely do not have any extra money to fork out to US tax law and accounting professionals year after year after year for compliance of US tax and reporting for which there would likely be no taxes owed. I was “lucky enough” to have retirement savings to pay for coming into compliance. Some families may be like my family and have a son or daughter who would be entrapped into US citizenship and this year-after-year-after-year absurdity and stress for no (or very little) actual tax owed to the US.
Bless you for saving other families what mine has experienced in the past several years. This is just the awareness I’ve been working for.
US Persons in Canada are now deemed 2nd class citizens — and this should not happen to Canada’s most vulnerable.
This, my friends at Isaac Brock, is the awareness to the right families that I have been working for. I will sleep a little better tonight KNOWING that this information will now better get to the ones I want it to reach.
@GeorgeIII – There’s the other side of the coin. One side of the coin, you’re threatened with penalties etc / US Tax, while at the same time the USG wants to exclude you from opportunities that potentially could be a taxable US event by forcing you to stay ‘in the US system.’.
Governments very rarely succeed by tying someone’s arm behind their back forever.
As always FATCA off.
Thanks, pacifica and muzzlednomore.
PLAN, by its mandate, is a very caring organization. Working for years on the concept of the RDSP, getting it in place (with the help and blessing of Canada’s Finance Minister Flaherty) and developing networks for persons with disabilities is a big part of their important Canadian work. They set an example for other countries.
It is this kind of support I get for my adult son that shows me how very lucky I am to have crossed that border and to have raised my family in Canada. This is one reason it is so disappointing to me to see Canada’s humanitarianism take a step backwards in now deeming with the FATCA IGA ‘US Persons’ in Canada second-class to any others who live here.
The Financial Post runs a regular “Family Finance” column on retirement planning. To draw additional attention to the risks of clinging American citizenship and the related difficulties in planning for retirement, an American-Canadian on this board could request an analysis which would then be published in the Financial Post under a pseudonym. The journalist’s email address is available at this link:
http://business.financialpost.com/author/andrewallentuck/
As late as it is for you and many others like you, this development would have not come about at this time if it wasn’t for your hard work and perseverance in advocating for your son and other disabled people in Canada, Calgary411. Nice work.
For those who didn’t catch this earlier link on Brock, children coming from the US for adoption in other countries should also come with warning stickers:
http://www.sunriseadoption.com/adoptive-parents/what-all-adopting-parents-in-canada-need-to-know/important-information-for-all-canadians-who-have-adopted-a-child-from-the-usa
@Publius
” I am very fortunate in having an old-fashioned U.K. pension plan that matches the U.S. idea of what a pension plan is.”
Even within your pension plan, the amount you can invest is still subject to fluctuations in the USD and governed by limits that may be inadequate for countries that have a much higher cost of living, is it not?
This bulletin, great as it is needs further tweaking:
They write:
“On March 18, 2010, the United States (US) announced a world-wide provision known as the Foreign Account Tax Compliance Act (FATCA) which demands that every non-US financial institution on earth.”
Actually, it’s every one in the universe.
” It should be noted that the US considers any child born of a US citizen to also be a US citizen, even if the person was born in Canada and has never set foot in the United States.”
Not true, not all USC’s can transmit US citizenship to their offspring. Consider the residency requirements.
Calgary411, you’ve and others have been very outspoken about the Canadian government adding a similar warning sticker on government links to these investments. Me thinks the carve-out for them under the IGA covers any obligation to do so and although they should, providing a warning would I think be viewed as an effort to marginalize certain Canadians. The Canadian government is trying to play both sides of the fence.
@Publius
The status of SIPPs and other personal pensions under the US/UK tax treaty is… undecided. Some experts insist it is an offshore trust for US tax purposes, but of course these same experts will charge handsomely for filling out a plethora of 3520 and similar trust forms and so it is in their interest to take this line. Some other experts see UK personal pensions as fully covered by the treaty. The US has of course clarified nothing at all, and probably never will. Perpetual lack of clarity represents a ‘planning opportunity’, as it allows you to effectively pick whichever treatment best suits you.
bubblebustin,
I have sent PLAN your comment and additional background information on how US citizenship to those born outside the US is acquired:
http://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CDIQFjAB&url=http%3A%2F%2Fwww.state.gov%2Fdocuments%2Forganization%2F86757.pdf&ei=snwkU_GnAoSGogSn_oC4Aw&usg=AFQjCNH9Zwknfla-O8hZlHorO0wlaw8Yew&sig2=eZ71tCHPK89huqICfg__Kw&bvm=bv.62922401,d.cGU&cad=rja
http://en.wikipedia.org/wiki/United_States_nationality_law
Thank you, Calgary411.
Glad you saw that the FATCA universe comment was meant as a joke. Thank you for forwarding that information. It’s very important organization like PLAN don’t send the people off in the wrong direction and as a result, lose some credibility.
It’s a very complex subject and even the media doesn’t t always get it right, as we know. James Fitz-Morris corrected his post Canada IGA broadcast when some of us informed him that the IGA investment carve-outs didn’t exempt them from US tax reporting. BTW, the silence has been deafening at the CBC since then hasn’t it?
Re “Warning Stickers”
had I known…Canadian $$$ would not have gone to the US in taxes owed to them on my son’s RDSP contributions from the Canadian government in bonds and grants. He likely would not have the RDSP, which in itself, should not be the decisions that families have to make. Discrimination abounds.
Notes on using H and R Block. I had a form due in 2011. I went to them as they were the ONLY people in my city who claimed to do U.S. forms for a somewhat reasonable fee. They did my forms incorrectly three times and by then my form was LATE. Use at your own risk. In smaller cities they do NOT have a U.S. tax professional there. They call someone on the phone and do it that way. As complicated as some of these forms are and as easy as it is to make a mistake my opinion is you should not use them.
When they finally admitted the form was not only wrong but also now late they said they’d have their U.S. tax expert call me. I never got a call and ended up having to fix the issue myself.
For all the suggestions of how to handle things mentioned here. I looked at them…I then realized I was a burden to my NON U.S. spouse since had he married someone from anywhere else all this hoop jumping and cost would not be required of him. Secondly, to the PLAN release Calgary posted here. I also realized my U.S. citizenship was a big burden to my child born here in Canada. There’s no way on earth around that.
As you age, what if you get dementia? What if you can’t physically keep up with all this anymore? Your Canadian forms are simple and someone could be asked to help with those but, the ongoing changes and costs, and impositions of the U.S. requirements? How can you afford to make sure someone will be able to keep up with all of it? Especially if the child you are passing these responsibilities onto already has disability challenges?
For some there is no way to keep U.S. citizenship and be able to plan normally for your old age and your child’s future. For others they cannot get out. What the U.S. has created with CBT is a monster and with FATCA they’ve let the monster out of his cage. For the extremely wealthy they can just pass all their U.S. tax complications on to a very good and expensive international tax attorney. FATCA was meant to trap “fat cats” It’s stomping all over everyone else instead.
@Watcher says
Yes, there are definitely a lot of people who want to ‘help’ us for a fee. My tax-preparer has publicized the Republican anti-FATCA petition, so their heart is in the right place. Some experts are cautious because the IRS has been harsh on Canadian savings plans. I already have another pension, so IRS more likely to consider SIPP foreign trust.
@bubblebustin
It is an employer-sponsored plan defined benefit plan not one where I actually have to invest money myself (which is what I mean by it being very old-fashioned). The IRS doesn’t mind those ones as much, but its assets aren’t keeping up with its liabilities.
@atticusincanada
Good point about dementia. I do plan on renouncing when I retire, but not while I still have to go to the U.S. on business and my parents are still alive. It’s a long way to go to be turned back. I know a leading (and completely harmless) Belgian academic who was turned back at the U.S. border on his way to a conference at Harvard in the mid-1990s for no apparent reason.
Any legislation where more thought has been given to the acronym than to the content should be viewed with suspicion. F.A.T.C.A. is to Fatcats as the P.A.T.R.I.O.T. Act is to patriots.
For US Persons who will return to the US someday, a better option perhaps than Canada’s RDSP? USA Considers Developing Their Own Version of the RDSP
@calgary411,
Won’t be protected by the tax treaty as it’s not primarily for retirement and isn’t related to employment.
Seems like another account for reciprocal FATCA to drain only this time in the other direction.
Right, Neill, that’s exactly what now-deceased Finance Minister Flaherty told me — not primarily for retirement! http://isaacbrocksociety.ca/2012/05/23/canadas-registered-disability-savings-plan-rdsp-canadas-finance-minister-flaherty-responds-regarding-this-as-well-as-the-resp-and-tfsa/
The Canadian IGA, though, has the RDSP as one of the exempted accounts. Of course, that exemption is for the banks, nothing at all to do with any exemption for the individual deemed *US Person* taxpayer.
Contrary to: http://parlvu.parl.gc.ca/Parlvu/TimeBandit/PowerBrowser_SilverLight.aspx?ContentEntityId=11861&EssenceFormatID=480&date=20140529&lang=en / Mr. Keddy re RESP / RDSP and US Citizenship of Children Born in Canada to US Parent(s): start at 35:37.
Here is an answer to my question to my US tax lawyer re how my son’s RDSP was US-taxed to me:
As well as the CRA being happy to send to a foreign nation the US, the personal and financial information of those in Canada with the immutable burden of a US birthplace/parentage status, under the FATCA IGA, it is now also now appears to be trying to deny Canadians with disabilities various necessary Canadian tax supports;
http://business.financialpost.com/news/purported-cra-clampdown-leaves-mentally-disabled-increasingly-restricted-from-key-government-tax-credit
http://www.ctvnews.ca/politics/people-with-diabetes-losing-disability-tax-credit-because-of-advances-in-technology-minister-1.3645742
How ironic that we are seeing this under a revenue minister with a background in social work and community services https://pm.gc.ca/eng/minister/honourable-diane-lebouthillier .