I think for the vast majority nothing. They are going to start with anybody with large balances. They likely have to do an official audit. If you filled a tax return and the interest is deficient they can do the cheap letter that says we adjusted your return and now you owe this extra tax + interest + 20% accuracy.
If they have to audit then they spin up a process that probably costs thousands to do. So they just pick off the big balances first.
This is a weakness for us as nobody cares about people with any kind of money. It’s only when they get to the lower balance people that anyone will care. They may never get to them because there isn’t any money there. Now of course if they are trying to prosecute you for anything they can tack this stuff on.
The worst thing for me in this whole mess is that my husband (who is ONLY a Canadian) gets his personal, private financial information sent to a foreign government. In our Charter challenge, I think this really needs to be emphasized. OF course, we’ve structured our finances so that this likely may not happen, but really… that my government even THINKS that his information belongs in the hands of the US government is absurd. I have not and will never fill out an FBAR, primarily for that reason. So the new streamlined compliance offer doesn’t do it for me. The other reason is that a foreign government does NOT need a road map to my financial information (unless, of course, they plan to confiscate it). A normal US citizen living in the homeland does not have to provide their bank account numbers and balances at tax time… so why should I?
@fifi – Canadian citizens are being denied the right to have full control of their rightful assets. Why should one Canadian citizen have to take their name off the martial assets because of FATCA?
It put one person at the mercy of the other in the event of martial breakdown and one party being able to hide assets or worse spend them.
Another byproduct of FATCA madness. If the Charter legal challenge is successful, the Canadian government is going to have to look at a Resident Citizen Carve Out and stop banks from reporting.
Nothing gets people as mad as paying a foreign government taxes and get nothing in return. There’s a ship in Boston Harbour representing that very fact.
@Fifi,
The information doesn’t even belong in the hands of the CRA let alone the IRS! As Professor Cockfield expressed, is an unprecedented handover of private financial information in Canada. If banks and the CRA are going to collect and report on one sector of Canadians, they must in all fairness do so on all customers alike.
I agree with Neill, if offshore residents get scrutinized at all right away, they’ll start with those with the highest bank balances and work their way down. They may even find some enthusiastic homelanders to volunteer for the job. There’s gold in them there hills of paper!
IMO only, if you have determined via the IRS guidelines that you meet their definition of a US person then you need to decide what to do to avoid becoming classified as a ´recalcitrant taxpayer´ or a ´covered alien´ because if you receive either of those designation then your (financial) life will become hell. You have a number of options to avoid either of those designations; I would suggest you get familiar with them asap so that you can develop a plan in order to deal with FATCA.
The plan is that everyone on earth WILL have their information invaded no matter the borders of ‘sovereign’ countries. It is progressive. They start with on goal and move on down to everything. Everyone who has a bank account or any assets of any kind anywhere is vulnerable.
From FATCA we will move to OECD’s GATCA in September.
In the IGA it states that it follows OECD guidelines ( which are residency based BECAUSE they intend to eliminate borders) From the threshold at the beginning they move to downward to where everyone is caught in the net. They can and will use third party snitches both for FATCA and GATCA.
Their searches include bank accounts , retirement accounts, insurance . Anything and everything that might have a scintilla of money that belongs to somebody else. And confiscation is the aim and includes ‘bail-ins’.
Would ANYBODY want the likes of Mr. Koskinen to have any of your information or that of your family considering what they have been up to and intend to be up to?
Here is a potential ‘worst case’ scenario:
A Canadian citizen, retired, with distant US ties but born in US, is unaware he is a US taxpayer, and unaware of FATCA and CBT, and unaware that his financial account info has been sent to the IRS.
Mr. ‘US person’ gets a surprise letter in the mail from the IRS for a bankrupting penalty, has a heart attack and dies on the spot. To make matters worse, some hacker had broken into an IRS computer, stole his identity, and opened up a bunch of loans in his name.
Mrs ‘US person’ (who is not a ‘US person’ herself) has to deal with not only the loss of her spouse, but also the IRS penalties levied against his estate, and has to clear up his name regarding the loans that were taken out by the identity thief.
How’s that Joe?
@FuriousAC
I suppose the treaty clause that protects Canadians against collection is as only as strong as the government in charge of defending it, when it comes to the US getting their man (women and children)?
Can a Canadian FFI designate you a ´US person´ without you knowing about it? As it stands now, I think you have to self-identify as a US person. Please correct me if I´m wrong.
@bdwight,
If the worst case scenario I described is what triggered your question, keep in mind that someone who is unaware of FATCA and CBT, could conceivably self-identify when queried on an account opening as to place of birth, and yet not realize the implications of such self-identification.
Since, neither the banks, nor CRA are required to notify a ‘US person’ that their financial info has been sent to the USA, I imagine that it is possible for such a scenario to occur.
@bdwight
A Canadian FFI designates your accounts as reportable if you have the following indica on your customer file:
– US birthplace
– US home address
– US telephone number
– POA to a US person
– Standing order to transfer funds to a US bank
The FFI then follows up with you and then the onus is on you to provide the necessary documentation to “cure” the indica (as US Citizenship is surely a disease), and prove that you are not a US person.
If you have assets over $1,000,000 and you are managed by a Financial Advisor, and he knows you are a US Person, he is obliged to treat your accounts as reportable. However, as one Brocker at RBC experienced, she was told her accounts had to be reported by her branch staff due to their knowledge of her US Citizenship, despite the fact that her assets were nowhere close to $1,000,000.
Here is a question: for those of use who do get flagged and asked to provide a US Social Security Number, I know we can refuse. The end result is that the IRS gets the info via the CRA anyway, and the CRA levies a fine. I think the fine is $100.
Is the $100 fine a one-time occurrence, or will that penalty be assessed for every instance where you refuse to provide a Social Security Number?
I was born in Canada lived my entire life here to date, I own an Amercian passport along with a SSN(my mom is american) I take it I’m a “US Person” for tax purposes?
@kbella
Yes, kbella, you are a US Person, unfortunately. You acquired US Citizenship at birth via your Mom’s bloodline. Only US Citizens can receive Passports.
Only US citizens legally possess a US passport so you certainly are a ´US person´ as defined by the IRS.
@kbella
If you are a young person (aged 18-25), and are a student or just leaving school with few financial assets and little net worth;
and you are a Canadian citizen and intend to spend your life in Canada;
and you have no strong emotional ties to the USA and the idea of renouncing your US Citizenship does not bother you immensely;
my suggestion would be file the necessary returns and go to your nearest US Consulate and get out now.
Many of us on this board are much older and have significant assets/net worth, and so trying to file the necessary paperwork and renounce is much more difficult (at least in my case).
I’m not young in.my 40 ‘s, what do I do take the streamline way?
non US persons can accidentally get a US passport, in actual fact. My brother who is not a US person by virtue of a long ago relinquishing act was told (by US border officials due to his US birthplace) to get a US passport and got one. The right hand does not know what the left hand is doing regarding citizenship and relinquishing acts. He should NEVER have been allowed to get a passport and yet…he has one.
My worst case scenario is this. They send my info to the IRS and I get a letter from them saying I am supposed to file. I send back the envelope with a “no such person at this address”. Then I go to the bank and close out my accounts and use my already existent CU accounts (opened a few months ago for FATCA insurance). The CU knows nothing about my status since I know I opened my account without any US indicia.
If I continue to receive letters from the IRS – I will just keep on sending them back with “no such person” on the envelope until they give up. I won’t ever admit that I am US, ever ever ever.
What will happen is you will get a “polite” letter informing you of your obligations and a deadline for compliance.
They may even acknowledge that the letter may have been sent in error, but the catch is that you have now have been put on notice and any non-compliance will be considered willful.
Anybody who does not comply will receive an increasingly threatening series of letters to “encourage” you to comply, in a few highly publicized cases suits will be filed in Washington DC against non filers with US assets in order to encourage the rest to comply.
They wont actually file suit in Canada because the Canadian Supreme Court has closed that door. Just don’t cross the border.
@kbella
That is one option. You have to understand the particulars of Canadian vs. US Tax Law before you do anything. Some of these particulars include:
– the US does not recognize a Capital Gains exemption on the sale of a primary residence
– tax sheltered accounts such as TFSA, RESP, and RDSP are not recognized by the IRS. Any gains in these accounts are taxed as ordinary income.
– RRSPs are recognized as tax sheltered accounts, but that requires an annual election on the US Tax Return
– If you own Canadian Mutual Funds, due to the way the IRS views them. you are in for quite an unpleasant experience; google the term PFIC (Passive Financial Investment Corporation) to find out what I mean
– And then finally there is the Foreign Bank Account Report (FBAR); sharing the specific details, including account numbers and balances, of all your Canadian accounts with balances over $10,000 which the IRS views as “foreign”
Even someone with a simple financial portfolio could potentially be looking at $1000s of dollars in accounting fees due to the asinine way the US runs its tax code.
I AGREE WITH THE ONE SUGGESTION BELOW.
My worst case scenario is this. They send my info to the IRS and I get a letter from them saying I am supposed to file. I send back the envelope with a “no such person at this address”. Then I go to the bank and close out my accounts and use my already existent CU accounts (opened a few months ago for FATCA insurance).
DO IT NOW!!!
The CU knows nothing about my status since I know I opened my account without any US indicia.
If I continue to receive letters from the IRS – I will just keep on sending them back with “no such person” on the envelope until they give up. I won’t ever admit that I am US, ever ever ever.
The question is Canadian centric. The answer should not be.
The politics of the new streamlined and OVDP procedures reveal their thoughts. They have determined that the worst actors are those people who have their money in the banks they have determined to be bad–ones that are participating in the plea bargains. If your funds have been in those banks (pssst, because you live in that place), they will be after the account holders regardless of living there.
The countries with strong banking systems already are suffering the focus–Bahamas, Caymans, Lebanon, Kosovo (yes, there is a strong bank system there), Austria.
Then, personally, they can think about who is “rich”– a term that this administration will use for responsibly-saving persons nearing retirement.
I have been trying to gather the information to file FBAR as a preliminary to renunciation. I ordered all account information for the past 6 years from my bank. I have closed some accounts over the years largely due to choosing accounts I believed to be more advantageous not because of the issued discussed here. The bank says that they cannot give me any information on any account that is closed or no longer has my name on it because they do not have it any longer. So… even if I decide to be keen and fully disclose all my information I really can’t. I haven’t kept records of how much $ checking or basic savings accounts held. I didn’t need it for my taxes as the interest earned was pennies at best.
@Joe, GwEvil: That option may work. Until your credit union begins asking the “US person” questions. GwEvil, you said yesterday your brother was told all credit unions in Canada will be asking the questions.
Within the last hour, I completed the transfer of some of my funds from one credit union to another which is in a much more inconvenient location for me. The first credit union, where I have been a member for 15 years has made it clear they fully intend to comply. So far, the new credit union has made it clear they have no interest in knowing where a member was born. I don’t know how long that will last.
My fear about my information going to CRA to hand over to IRS actually isn’t about taxes. It’s about the security of the information and what will be done with it.
I also feel a phenomenal sense of violation and betrayal that after 41 years as a Canadian citizen, 33 years as a Canada Trust customer and 15 years as a credit union member that this is happening.
If TD Canada Trust begins asking me the US person question I plan to try a Human Rights or Privacy Commissioner complaint–and transfer funds to a credit union. I am not making the CU move now because I am not convinced they will not also comply in the future.
The IRS sends you a bill for 300% of your personal financial wealth. You make the check out to ADCS instead.
Can someone dig up that video that I believe ‘not that Tara’ posted while she was ‘Tara’ that was of the IRS or Treasury person by the name of Tara who when asked by British bankers if prior knowledge of US personhood status had to be reported by the banks?
I think for the vast majority nothing. They are going to start with anybody with large balances. They likely have to do an official audit. If you filled a tax return and the interest is deficient they can do the cheap letter that says we adjusted your return and now you owe this extra tax + interest + 20% accuracy.
If they have to audit then they spin up a process that probably costs thousands to do. So they just pick off the big balances first.
This is a weakness for us as nobody cares about people with any kind of money. It’s only when they get to the lower balance people that anyone will care. They may never get to them because there isn’t any money there. Now of course if they are trying to prosecute you for anything they can tack this stuff on.
The worst thing for me in this whole mess is that my husband (who is ONLY a Canadian) gets his personal, private financial information sent to a foreign government. In our Charter challenge, I think this really needs to be emphasized. OF course, we’ve structured our finances so that this likely may not happen, but really… that my government even THINKS that his information belongs in the hands of the US government is absurd. I have not and will never fill out an FBAR, primarily for that reason. So the new streamlined compliance offer doesn’t do it for me. The other reason is that a foreign government does NOT need a road map to my financial information (unless, of course, they plan to confiscate it). A normal US citizen living in the homeland does not have to provide their bank account numbers and balances at tax time… so why should I?
@fifi – Canadian citizens are being denied the right to have full control of their rightful assets. Why should one Canadian citizen have to take their name off the martial assets because of FATCA?
It put one person at the mercy of the other in the event of martial breakdown and one party being able to hide assets or worse spend them.
Another byproduct of FATCA madness. If the Charter legal challenge is successful, the Canadian government is going to have to look at a Resident Citizen Carve Out and stop banks from reporting.
Nothing gets people as mad as paying a foreign government taxes and get nothing in return. There’s a ship in Boston Harbour representing that very fact.
@Fifi,
The information doesn’t even belong in the hands of the CRA let alone the IRS! As Professor Cockfield expressed, is an unprecedented handover of private financial information in Canada. If banks and the CRA are going to collect and report on one sector of Canadians, they must in all fairness do so on all customers alike.
I agree with Neill, if offshore residents get scrutinized at all right away, they’ll start with those with the highest bank balances and work their way down. They may even find some enthusiastic homelanders to volunteer for the job. There’s gold in them there hills of paper!
IMO only, if you have determined via the IRS guidelines that you meet their definition of a US person then you need to decide what to do to avoid becoming classified as a ´recalcitrant taxpayer´ or a ´covered alien´ because if you receive either of those designation then your (financial) life will become hell. You have a number of options to avoid either of those designations; I would suggest you get familiar with them asap so that you can develop a plan in order to deal with FATCA.
The plan is that everyone on earth WILL have their information invaded no matter the borders of ‘sovereign’ countries. It is progressive. They start with on goal and move on down to everything. Everyone who has a bank account or any assets of any kind anywhere is vulnerable.
From FATCA we will move to OECD’s GATCA in September.
In the IGA it states that it follows OECD guidelines ( which are residency based BECAUSE they intend to eliminate borders) From the threshold at the beginning they move to downward to where everyone is caught in the net. They can and will use third party snitches both for FATCA and GATCA.
Their searches include bank accounts , retirement accounts, insurance . Anything and everything that might have a scintilla of money that belongs to somebody else. And confiscation is the aim and includes ‘bail-ins’.
Would ANYBODY want the likes of Mr. Koskinen to have any of your information or that of your family considering what they have been up to and intend to be up to?
Here is a potential ‘worst case’ scenario:
A Canadian citizen, retired, with distant US ties but born in US, is unaware he is a US taxpayer, and unaware of FATCA and CBT, and unaware that his financial account info has been sent to the IRS.
Mr. ‘US person’ gets a surprise letter in the mail from the IRS for a bankrupting penalty, has a heart attack and dies on the spot. To make matters worse, some hacker had broken into an IRS computer, stole his identity, and opened up a bunch of loans in his name.
Mrs ‘US person’ (who is not a ‘US person’ herself) has to deal with not only the loss of her spouse, but also the IRS penalties levied against his estate, and has to clear up his name regarding the loans that were taken out by the identity thief.
How’s that Joe?
@FuriousAC
I suppose the treaty clause that protects Canadians against collection is as only as strong as the government in charge of defending it, when it comes to the US getting their man (women and children)?
Can a Canadian FFI designate you a ´US person´ without you knowing about it? As it stands now, I think you have to self-identify as a US person. Please correct me if I´m wrong.
@bdwight,
If the worst case scenario I described is what triggered your question, keep in mind that someone who is unaware of FATCA and CBT, could conceivably self-identify when queried on an account opening as to place of birth, and yet not realize the implications of such self-identification.
Since, neither the banks, nor CRA are required to notify a ‘US person’ that their financial info has been sent to the USA, I imagine that it is possible for such a scenario to occur.
@bdwight
A Canadian FFI designates your accounts as reportable if you have the following indica on your customer file:
– US birthplace
– US home address
– US telephone number
– POA to a US person
– Standing order to transfer funds to a US bank
The FFI then follows up with you and then the onus is on you to provide the necessary documentation to “cure” the indica (as US Citizenship is surely a disease), and prove that you are not a US person.
If you have assets over $1,000,000 and you are managed by a Financial Advisor, and he knows you are a US Person, he is obliged to treat your accounts as reportable. However, as one Brocker at RBC experienced, she was told her accounts had to be reported by her branch staff due to their knowledge of her US Citizenship, despite the fact that her assets were nowhere close to $1,000,000.
Here is a question: for those of use who do get flagged and asked to provide a US Social Security Number, I know we can refuse. The end result is that the IRS gets the info via the CRA anyway, and the CRA levies a fine. I think the fine is $100.
Is the $100 fine a one-time occurrence, or will that penalty be assessed for every instance where you refuse to provide a Social Security Number?
I was born in Canada lived my entire life here to date, I own an Amercian passport along with a SSN(my mom is american) I take it I’m a “US Person” for tax purposes?
@kbella
Yes, kbella, you are a US Person, unfortunately. You acquired US Citizenship at birth via your Mom’s bloodline. Only US Citizens can receive Passports.
Only US citizens legally possess a US passport so you certainly are a ´US person´ as defined by the IRS.
@kbella
If you are a young person (aged 18-25), and are a student or just leaving school with few financial assets and little net worth;
and you are a Canadian citizen and intend to spend your life in Canada;
and you have no strong emotional ties to the USA and the idea of renouncing your US Citizenship does not bother you immensely;
my suggestion would be file the necessary returns and go to your nearest US Consulate and get out now.
Many of us on this board are much older and have significant assets/net worth, and so trying to file the necessary paperwork and renounce is much more difficult (at least in my case).
I’m not young in.my 40 ‘s, what do I do take the streamline way?
non US persons can accidentally get a US passport, in actual fact. My brother who is not a US person by virtue of a long ago relinquishing act was told (by US border officials due to his US birthplace) to get a US passport and got one. The right hand does not know what the left hand is doing regarding citizenship and relinquishing acts. He should NEVER have been allowed to get a passport and yet…he has one.
My worst case scenario is this. They send my info to the IRS and I get a letter from them saying I am supposed to file. I send back the envelope with a “no such person at this address”. Then I go to the bank and close out my accounts and use my already existent CU accounts (opened a few months ago for FATCA insurance). The CU knows nothing about my status since I know I opened my account without any US indicia.
If I continue to receive letters from the IRS – I will just keep on sending them back with “no such person” on the envelope until they give up. I won’t ever admit that I am US, ever ever ever.
What will happen is you will get a “polite” letter informing you of your obligations and a deadline for compliance.
They may even acknowledge that the letter may have been sent in error, but the catch is that you have now have been put on notice and any non-compliance will be considered willful.
Anybody who does not comply will receive an increasingly threatening series of letters to “encourage” you to comply, in a few highly publicized cases suits will be filed in Washington DC against non filers with US assets in order to encourage the rest to comply.
They wont actually file suit in Canada because the Canadian Supreme Court has closed that door. Just don’t cross the border.
@kbella
That is one option. You have to understand the particulars of Canadian vs. US Tax Law before you do anything. Some of these particulars include:
– the US does not recognize a Capital Gains exemption on the sale of a primary residence
– tax sheltered accounts such as TFSA, RESP, and RDSP are not recognized by the IRS. Any gains in these accounts are taxed as ordinary income.
– RRSPs are recognized as tax sheltered accounts, but that requires an annual election on the US Tax Return
– If you own Canadian Mutual Funds, due to the way the IRS views them. you are in for quite an unpleasant experience; google the term PFIC (Passive Financial Investment Corporation) to find out what I mean
– And then finally there is the Foreign Bank Account Report (FBAR); sharing the specific details, including account numbers and balances, of all your Canadian accounts with balances over $10,000 which the IRS views as “foreign”
Even someone with a simple financial portfolio could potentially be looking at $1000s of dollars in accounting fees due to the asinine way the US runs its tax code.
I AGREE WITH THE ONE SUGGESTION BELOW.
My worst case scenario is this. They send my info to the IRS and I get a letter from them saying I am supposed to file. I send back the envelope with a “no such person at this address”. Then I go to the bank and close out my accounts and use my already existent CU accounts (opened a few months ago for FATCA insurance).
DO IT NOW!!!
The CU knows nothing about my status since I know I opened my account without any US indicia.
If I continue to receive letters from the IRS – I will just keep on sending them back with “no such person” on the envelope until they give up. I won’t ever admit that I am US, ever ever ever.
The question is Canadian centric. The answer should not be.
The politics of the new streamlined and OVDP procedures reveal their thoughts. They have determined that the worst actors are those people who have their money in the banks they have determined to be bad–ones that are participating in the plea bargains. If your funds have been in those banks (pssst, because you live in that place), they will be after the account holders regardless of living there.
The countries with strong banking systems already are suffering the focus–Bahamas, Caymans, Lebanon, Kosovo (yes, there is a strong bank system there), Austria.
Then, personally, they can think about who is “rich”– a term that this administration will use for responsibly-saving persons nearing retirement.
I have been trying to gather the information to file FBAR as a preliminary to renunciation. I ordered all account information for the past 6 years from my bank. I have closed some accounts over the years largely due to choosing accounts I believed to be more advantageous not because of the issued discussed here. The bank says that they cannot give me any information on any account that is closed or no longer has my name on it because they do not have it any longer. So… even if I decide to be keen and fully disclose all my information I really can’t. I haven’t kept records of how much $ checking or basic savings accounts held. I didn’t need it for my taxes as the interest earned was pennies at best.
@Joe, GwEvil: That option may work. Until your credit union begins asking the “US person” questions. GwEvil, you said yesterday your brother was told all credit unions in Canada will be asking the questions.
Within the last hour, I completed the transfer of some of my funds from one credit union to another which is in a much more inconvenient location for me. The first credit union, where I have been a member for 15 years has made it clear they fully intend to comply. So far, the new credit union has made it clear they have no interest in knowing where a member was born. I don’t know how long that will last.
My fear about my information going to CRA to hand over to IRS actually isn’t about taxes. It’s about the security of the information and what will be done with it.
I also feel a phenomenal sense of violation and betrayal that after 41 years as a Canadian citizen, 33 years as a Canada Trust customer and 15 years as a credit union member that this is happening.
If TD Canada Trust begins asking me the US person question I plan to try a Human Rights or Privacy Commissioner complaint–and transfer funds to a credit union. I am not making the CU move now because I am not convinced they will not also comply in the future.
The IRS sends you a bill for 300% of your personal financial wealth. You make the check out to ADCS instead.
Can someone dig up that video that I believe ‘not that Tara’ posted while she was ‘Tara’ that was of the IRS or Treasury person by the name of Tara who when asked by British bankers if prior knowledge of US personhood status had to be reported by the banks?