My understanding is that the Government of Canada is supposed to respond to our Claims 30 days from the date the Amended Claims were filed, which was on October 9 (see the link).
There will be a record on this link when the Statement of Defense is received, and we will post the response:
@Polly and @Tricia, I can recall how vulnerable and terrified I felt back in early 2011 when I first learned of not only FBAR fines but all my PFIC problems; I had just learned about the very harsh OVDP and OVDI programs. I realized that I was in an especially dangerous mess because had already been filing annual tax returns but with many unintentional omissions and missing required forms.
I quickly realized that with FATCA looming, I’d have to correctly amend the earlier years and that I would have to find a specialized tax preparer and possibly a tax attorney. I didn’t feel that OVDI was fair or appropriate for me but everything I was reading led me to believe that I would have probably been railroaded into OVDI by many accountants.
I was also terrified that I’d be bankrupted just in professional fees, as I held close to 50 individual mutual funds. One cross border firm was going to charge me something £75,000 because those PFIC 8621 forms are expensive and complicated to prepare.
Another refused to deal with me, probably because it seemed so messy. So for me, it wasn’t just the FBAR fines, which could have set me back over $2,000,000 but also the very real worry that the Byzantine PFIC taxation and accounting fees would wipe out all my investments even without going into OVDI.
Thankfully, I found a firm who were willing to take on my case without OVDI. The taxes were painful but not nearly as high as I’d feared they might be. But what scares me even now is that because I had under-reported my gross income by more than 25%, my statutes of limitation will be six rather than the more typical three years for those amended returns.
At the time, I realized I wanted to renounce but was worried that to do so shortly after making a quiet disclosure with such hugely complex amended tax returns (totaling almost 1000 pages!!!) would draw even more unwanted attention to my case. I thus decided to come into full compliance and hire a US -compliant advisor who moved my investments out of the PFICs into a boutique investment portfolio.
This had very high ongoing charges and to make matters even worse, they didn’t want anyone with a portfolio worth less than a million so that wasn’t going to work either. I was also going to face ongoing accounting fees of at least £1500 and my accountant explained that because my personal pension fund was possibly also considered a foreign trust by the IRS that I would suffer ongoing 3520/3520A form issues even though my PFIC issues had been sorted; these foreign trust forms would have doubled my annual fee to close to £3000!!!
This wouldn’t have been too painful on a six figure salary but with annual wages of less than £20,000, I just couldn’t afford to keep compliant. I thus decided to go ahead and renounce early last year even though my statutes of limitations won’t have fully closed for the amended tax returns until June 2016.
My accountant believes that the IRS will be aware of my specific case due to me being such an anomaly but that they would almost certainly not come after me with a nasty audit even though many others would have recommended OVDI due to the high taxes and under-reported income and accounts.
I think a major reason why I was treated mercifully is because I was not even required to declare the bulk of the PFIC income on my UK tax return since most were held in ISAs which don’t need to be declared. I had assumed that I was protected from double taxation by the tax treaty so had assumed it was sufficient just to claim the foreign earned income exclusion on my earned income and just declare my US -sourced income on the US tax returns.
The point of all this is that I could be made an example of if the US wanted to be really vindictive, which is why I am still too scared to come out in the open to the media like Trish, Carol, and Peter have all done.
My case has more shades of grey than I am comfortable with. I believe the IRS reading this blog may well already know who I am anyway but I feel the real risk for me is to stick my neck out and openly criticize the US government, especially when I have family over there who I need to regularly be able to visit.
I feel that I could have been the poster child had the IRS really wanted to punish a minnow for making a quiet disclosure instead of going into OVDI. I mentioned on another blog that my total taxes, accounting fees, legal costs and misc FBAR penalties would have probably set me back at least $250,000 if not $500,000. In other words, I would have been wiped out.
Touch wood, it’s been over three years and I haven’t been hit with any FBAR fines or nasty audit. My accountant believes that it helped that I am a minnow and that I no longer have any assets in the United States so am not a low hanging fruit.
My biggest fears are that I might face problems trying to visit if the US were to start enforcing the Reed Act or pass the Ex-Patriot Act because I did suffer substantial US taxation on my locally owned mutual funds in my ISAs. The US might assume I’d renounced for tax reasons.
I feel less scared nowadays though because I believe that I would have heard from the IRS or DOJ about the quiet disclosure and FBARS if they were going to press charges. I do realize though that in spite of having a CLN, I won’t be completely out of the woods till my still open statutes of limitations have finally closed sometime in 2020 for my 2013 FBARS and final tax return/8854.
I’m assuming that it could be as early as June 2017 for this 2013 tax return though, with 8854, wonder if it might be six years and this mid-2020.
Two things that scare me are that 1) I might hear from the IRS again completely unrelated to the earlier amended returns and delinquent FBARS if the IRS starts erroneously receiving accounts data from the FATCA reporting starting in Sept 2015. I also 2) worry that the US might in future expand how it defines US persons and thus reclaim me for tax purposes.
So in that sense, Peter Dunn may be right in that we may never be able to enjoy full certainty that we are fully out from the US government’s clutches. But I would guess that a lot of what I went through was from scaremongering via the tax compliance industry.
In other words, had I not found my accountant willing to take on my case (for still very painful fees), I might have been very tempted just to file going forward and just treated my then investments as ordinary dividends, interest, and capital gains without filing 8621 PFIC forms, and just used software.
It wouldn’t have been because I would have wanted to be a dishonest; it would simply have been an act of self-defence, as it has been implied by an attorney that this wouldn’t have been their legal advice but they explained that some expats would have done this, especially if not whales.
I thus probably drew a middle straw in that I could have suffered less damage though, with expatriating, can sleep more soundly knowing that I did things above board and corrected the past mistakes. Time will tell if I made a clean break but as time passes, I feel more and more optimistic and less frightened. 🙂
As it turned
I dont want to make anybody feel sick or stressed out. I know how bad it is. But I dont think time figures into the equation. I dont think they will stop even if they come after us in 5 years time. The only thing that can change outcomes are the court battles. But there also is the avenue – if the court cases are won- to sue to get the money back. I sometimes wonder if that is known by them. I dont think the arguments that that was then and this is now will hold if the courts call FATCA unconstitutional.
But I dont think any of us are “forgotten” or “overseen”. I think thats wishful thinking. We have no choice, but becoming complacent just because there is silence doesn’t mean a thing. Sorry- don`t mean to upset people. I know some people who have renounced and then just gone into hiding. I don`t think they will get off the hook either. Someday somehow they will get a letter from the IRS. But how will they deal with it?And maybe just maybe- by then the court cases will have come up roses.
@ Polly I think you are just stating what is obvious. I have a hard time believing that the US would bother pushing Canada into FATCA unless they have a plan to work around Canada’s “we do not collect taxes or penalties on behalf of foreign governments”. They bullied Canada into violating our Charter of rights, why not bully to get their money. This lawsuit cannot happen fast enough.
@Polly, I share your fears that the IRS could well come after people who’ve renounced even many years down the line. The laws could change to extend statutes of limitations beyond the three or six year periods too. Plus, they could find a way to use technicalities to extend statutes of limitations if they wanted to be very mean.
However, I suspect that many in the IRS privately share our dismay over CBT and FATCA, as expressed by the sympathetic Nina Olsen herself. They are having to enforce badly made laws passed by Congress even though it’s not efficient to do so, especially being so understaffed.
I actually fear more potential problems from the banks and fear mongering tax-compliance industry. I could see cases of banks freezing accounts or at least threatening to withhold 30% of the value of anyone’s accounts who is suspected to be a US Person and bankrupt unwilling to provide proof of full tax compliance.
I also believe that many former citizens may have their financial accounts mistakenly reported to the IRS with resultant mix-ups. The IRS might get into a muddle and not realize that 8854 has been filed, etc.
It seems to me though that the most vulnerable people will be those discovered by FATCA (both current and former citizens) who’ve not filed FBARs or tax returns because those tax returns will even now have completely open statutes of limitations without any clocks running.
Even minnows who’ve expatriated could face substantial exit taxes on the full value of their private pensions if they are deemed to have covered status. As I understand things, this confiscative tax on pension funds is a roundabout way for the IRS to punish even those of modest means if they can be caught out on technicalities.
This is why I’m more comfortable having decided to rely on my tax preparer even though It’s cost me over a year’s salary so that I can at least certify five years tax compliance on 8854.
Thank you for the update, Stephen.
Articulate, controlled and very effective interview Tricia. Thanks so much to you and ADCS for being the face and voice of so many who cannot come forward, and for all the hours and days and more that you and the others are putting into this fight.
Take care, all of you.
@Badger, I was also so impressed with not only the content of her delivery but also how articulate, well-presented, and sensible Tricia seemed. It helps make our cause more palatable.
It’s such a fine line between expressing our anger, fear and principles in a way that can get the point across and hopefully spur on more people to support the case and get on board.
@IDEA-WORKS @Petros @ADCS
Not a lawyer but here are some thoughts.
The Founding Fathers devised the US system of government as one with “checks and balances” between three principal branches of government: Legislative, Executive, and Judicial. The idea is that for any laws impacting on Americans that there would always be this check and balance system + The Constitution/Bill of Rights. No laws would be effective in other countries except by international treaty.
I point out that the American FBAR and CBT laws goes beyond US Persons and impact on nonUS persons – think Canadian only spouses and family of US persons. In the case of Tricia Moon, the potential penalties that she could have faced were largely on income generated by her Canadian only husband for income generated outside of the US. No doubt the compliance costs and penalties that the Moon family have faced have thus diminished Mr Moon’s financial security in retirement.
However, is Mr Moon covered under the US check and balance system? He is impacted by laws from the US Legislative and Executive Branches but does he have protections under the US judicial branch. ? As Mr. Moon is a Canadian only citizen living in Canada one may argue that he is not extended the protections of the check and balance system, and as such, perhaps those laws from the Legislative and Executive branches impacting him then are invalid. ?
The Canadian-US Tax treaty says nothing about FBAR penalties or CBT so it neither affirms them nor refutes them. However, in so far as FBAR and CBT impacts on Canadian spouses and Canadian children, the tax treaty is quite clear in its omission of permitting impact on Canadians – so does not say it is ok for the US to tax, inflict compliance, impact privacy of Canadians only.
Lets take the example of estate tax with a Canadian only spouse and children and a Canadian with US personhood living in Canada until the US person passes away. US laws prescribe estate tax. Canadian laws do not. The result of any US estate tax would be the denial of the portion of the estate to the Canadian only person/children as is allowed under Canadian law – estate legally and rightfully theirs. What right does the US have to take a portion of this/potentially the family home to pay the US taxes? Two sets of laws here, Canadian law and US law yet on Canadian territory. The same may be said with FBAR penalties, and US taxes on retirement funds that form a cornerstone of family financial security for Canadian only family members.
I imagine that those Canadians impacted may file for damages against the US for confiscation of what rightly is theirs. US law should not trump Canadian law in Canada – especially where not permitted by the tax treaty or other treaty. Claim may be made not only for US confiscation of wealth and diminishment of family financial security but of the stress inflicted on those nonUS Canadians in Canada by the US laws.
One thing the Harper government could have done while it was blackmailed into accepting the IGA, it could have launched a class action suit against the US on behalf of Canadians impacted by US FBAR and CBT laws arguing for the sanctity of family financial security – especially for Canadian only family members.
It is very nice that http://www.fatcalegalaction.com incudes FBAR in its excessive fines claim. Somewhere along the line I heard one Republican talk of giving the FBAR penalties back (and also trying to get those renouncers to regain citizenship for which there will likely be nil takers).
Back to FBAR and CBT impact on Canadians and confiscation of Canadian family financial security. We know that ADCS is focusing on this one law suit at this time against the IGA. Yet perhaps the arguments could be developed against the extraterritoriality of FBAR and CBT and this may also help with the ADCS fund raising. ADCS could fund a legal opinion about it. ?
@monalisa and others: Will expatriates ever sleep peacefully? Not only is there the Reed Amendment, there is also section 2801 requiring the IRS to assess tax on US persons who receive gifts and bequests from “covered expatriates”. We were “promised” guidance on this shortly after it became law, but nothing, so far. The best case scenario may be that it ends up unenforced, like the Reed Amendment. The worst case scenario is that US people are pursued to pay taxes based on what their relatives may have done, many years before. How is a US person going to know whether their foreign relative was an expatriate, much less a covered expatriate, years from now? The way things are going with FATCA, I fear that if a US person receives a gift or bequest from a foreign person, they will have to disclose whether that foreign person was born in the US or has other US indicia, and the foreign donor will be presumed to be a covered expatriate unless the US recipient can prove otherwise (an impossibility).
I belatedly watched Trish’s interview a few minutes ago. Excellent interview. Reasoned, calm, focused discussion. Just the kind of publicity and coverage that is needed to make ALL Canadians aware of what has happened and what is wrong with it.
@monalisa
I think the statute of limitations only works if you have already sent in your tax return.
I wrote this on the wrong thread- but the anniversary of the Berlin Wall was just this week. Maybe FATCA will just fall and crumble like the Berlin Wall did one day. Because people realise how wrong it is.
But in the meantime- LAW SUITS.
@Polly, I agree that any people who’ve expatriated may be in for a nasty surprise if they haven’t correctly logged out by certifying 5 years tax compliance via 8854, especially those who’ve never filed. It could be quite straightforward to assess non-filing fines. As time passes and things get more publicized, it will be harder and harder for expats to claim they didn’t know they had to file. The IRS may be less willing to accept claims of non-willfulness.
ML1776. Joe lives in otherland. He renounces but doesn’t file taxes or 8854. 7 yrs later he gets a letter. ‘Pay up or else’. Joe says ‘else’. End of story.
@Duke of Devon
And that’s when it’s going to get very interesting, but will it ever get to that point? With the IRS’s apparent inability to handle FATCA due to budget constraints, my guess is that they’ll need to prioritize and focus on domestic tax cheats – and save themselves the diplomatic nightmare of rounding up grannies living in foreign lands who don’t owe tax anyway. But who knows for sure. It takes very little effort or investment to send out threatening letters, that is if the consequences of their actions are worth it. Remember Lincoln’s words: the best way to have a bad law repealed is to enforce it strictly.
That’s “is” to enforce it strictly.
@Monalisa @Duke of Devon; From the US Congress on the governing mutual collection treaty. “Explanation Of Proposed Protocol Amending The Multilateral Convention On Mutual Administrative Assistance In Tax Matters” Submitted On: February 21, 2014
—
Ratification of the protocol is not intended to alter the reservation of rights or declarations
of understanding that the United States made when it ratified the existing convention in 1991. In
its instrument of ratification, the United States reserved the right not to provide (1) assistance for
taxes imposed by possessions, political subdivisions, or local authorities of other parties to the
convention; (2) tax collection assistance; or (3) assistance in serving documents (except the
service of documents by mail). The reservations are reciprocal; to the same extent that the
United States will not provide assistance, other parties need not assist the United States. Thus,
only the provisions relating to information exchanges and service of documents by mail are in
effect for the United States.
—–
Canada AM: US tax backlash
@Bubblebustin and all,
My understanding is that the Government of Canada is supposed to respond to our Claims 30 days from the date the Amended Claims were filed, which was on October 9 (see the link).
There will be a record on this link when the Statement of Defense is received, and we will post the response:
http://cas-ncr-nter03.cas-satj.gc.ca/IndexingQueries/infp_RE_info_e.php?court_no=T-1736-14
@Polly and @Tricia, I can recall how vulnerable and terrified I felt back in early 2011 when I first learned of not only FBAR fines but all my PFIC problems; I had just learned about the very harsh OVDP and OVDI programs. I realized that I was in an especially dangerous mess because had already been filing annual tax returns but with many unintentional omissions and missing required forms.
I quickly realized that with FATCA looming, I’d have to correctly amend the earlier years and that I would have to find a specialized tax preparer and possibly a tax attorney. I didn’t feel that OVDI was fair or appropriate for me but everything I was reading led me to believe that I would have probably been railroaded into OVDI by many accountants.
I was also terrified that I’d be bankrupted just in professional fees, as I held close to 50 individual mutual funds. One cross border firm was going to charge me something £75,000 because those PFIC 8621 forms are expensive and complicated to prepare.
Another refused to deal with me, probably because it seemed so messy. So for me, it wasn’t just the FBAR fines, which could have set me back over $2,000,000 but also the very real worry that the Byzantine PFIC taxation and accounting fees would wipe out all my investments even without going into OVDI.
Thankfully, I found a firm who were willing to take on my case without OVDI. The taxes were painful but not nearly as high as I’d feared they might be. But what scares me even now is that because I had under-reported my gross income by more than 25%, my statutes of limitation will be six rather than the more typical three years for those amended returns.
At the time, I realized I wanted to renounce but was worried that to do so shortly after making a quiet disclosure with such hugely complex amended tax returns (totaling almost 1000 pages!!!) would draw even more unwanted attention to my case. I thus decided to come into full compliance and hire a US -compliant advisor who moved my investments out of the PFICs into a boutique investment portfolio.
This had very high ongoing charges and to make matters even worse, they didn’t want anyone with a portfolio worth less than a million so that wasn’t going to work either. I was also going to face ongoing accounting fees of at least £1500 and my accountant explained that because my personal pension fund was possibly also considered a foreign trust by the IRS that I would suffer ongoing 3520/3520A form issues even though my PFIC issues had been sorted; these foreign trust forms would have doubled my annual fee to close to £3000!!!
This wouldn’t have been too painful on a six figure salary but with annual wages of less than £20,000, I just couldn’t afford to keep compliant. I thus decided to go ahead and renounce early last year even though my statutes of limitations won’t have fully closed for the amended tax returns until June 2016.
My accountant believes that the IRS will be aware of my specific case due to me being such an anomaly but that they would almost certainly not come after me with a nasty audit even though many others would have recommended OVDI due to the high taxes and under-reported income and accounts.
I think a major reason why I was treated mercifully is because I was not even required to declare the bulk of the PFIC income on my UK tax return since most were held in ISAs which don’t need to be declared. I had assumed that I was protected from double taxation by the tax treaty so had assumed it was sufficient just to claim the foreign earned income exclusion on my earned income and just declare my US -sourced income on the US tax returns.
The point of all this is that I could be made an example of if the US wanted to be really vindictive, which is why I am still too scared to come out in the open to the media like Trish, Carol, and Peter have all done.
My case has more shades of grey than I am comfortable with. I believe the IRS reading this blog may well already know who I am anyway but I feel the real risk for me is to stick my neck out and openly criticize the US government, especially when I have family over there who I need to regularly be able to visit.
I feel that I could have been the poster child had the IRS really wanted to punish a minnow for making a quiet disclosure instead of going into OVDI. I mentioned on another blog that my total taxes, accounting fees, legal costs and misc FBAR penalties would have probably set me back at least $250,000 if not $500,000. In other words, I would have been wiped out.
Touch wood, it’s been over three years and I haven’t been hit with any FBAR fines or nasty audit. My accountant believes that it helped that I am a minnow and that I no longer have any assets in the United States so am not a low hanging fruit.
My biggest fears are that I might face problems trying to visit if the US were to start enforcing the Reed Act or pass the Ex-Patriot Act because I did suffer substantial US taxation on my locally owned mutual funds in my ISAs. The US might assume I’d renounced for tax reasons.
I feel less scared nowadays though because I believe that I would have heard from the IRS or DOJ about the quiet disclosure and FBARS if they were going to press charges. I do realize though that in spite of having a CLN, I won’t be completely out of the woods till my still open statutes of limitations have finally closed sometime in 2020 for my 2013 FBARS and final tax return/8854.
I’m assuming that it could be as early as June 2017 for this 2013 tax return though, with 8854, wonder if it might be six years and this mid-2020.
Two things that scare me are that 1) I might hear from the IRS again completely unrelated to the earlier amended returns and delinquent FBARS if the IRS starts erroneously receiving accounts data from the FATCA reporting starting in Sept 2015. I also 2) worry that the US might in future expand how it defines US persons and thus reclaim me for tax purposes.
So in that sense, Peter Dunn may be right in that we may never be able to enjoy full certainty that we are fully out from the US government’s clutches. But I would guess that a lot of what I went through was from scaremongering via the tax compliance industry.
In other words, had I not found my accountant willing to take on my case (for still very painful fees), I might have been very tempted just to file going forward and just treated my then investments as ordinary dividends, interest, and capital gains without filing 8621 PFIC forms, and just used software.
It wouldn’t have been because I would have wanted to be a dishonest; it would simply have been an act of self-defence, as it has been implied by an attorney that this wouldn’t have been their legal advice but they explained that some expats would have done this, especially if not whales.
I thus probably drew a middle straw in that I could have suffered less damage though, with expatriating, can sleep more soundly knowing that I did things above board and corrected the past mistakes. Time will tell if I made a clean break but as time passes, I feel more and more optimistic and less frightened. 🙂
As it turned
I dont want to make anybody feel sick or stressed out. I know how bad it is. But I dont think time figures into the equation. I dont think they will stop even if they come after us in 5 years time. The only thing that can change outcomes are the court battles. But there also is the avenue – if the court cases are won- to sue to get the money back. I sometimes wonder if that is known by them. I dont think the arguments that that was then and this is now will hold if the courts call FATCA unconstitutional.
But I dont think any of us are “forgotten” or “overseen”. I think thats wishful thinking. We have no choice, but becoming complacent just because there is silence doesn’t mean a thing. Sorry- don`t mean to upset people. I know some people who have renounced and then just gone into hiding. I don`t think they will get off the hook either. Someday somehow they will get a letter from the IRS. But how will they deal with it?And maybe just maybe- by then the court cases will have come up roses.
@ Polly I think you are just stating what is obvious. I have a hard time believing that the US would bother pushing Canada into FATCA unless they have a plan to work around Canada’s “we do not collect taxes or penalties on behalf of foreign governments”. They bullied Canada into violating our Charter of rights, why not bully to get their money. This lawsuit cannot happen fast enough.
@Polly, I share your fears that the IRS could well come after people who’ve renounced even many years down the line. The laws could change to extend statutes of limitations beyond the three or six year periods too. Plus, they could find a way to use technicalities to extend statutes of limitations if they wanted to be very mean.
However, I suspect that many in the IRS privately share our dismay over CBT and FATCA, as expressed by the sympathetic Nina Olsen herself. They are having to enforce badly made laws passed by Congress even though it’s not efficient to do so, especially being so understaffed.
I actually fear more potential problems from the banks and fear mongering tax-compliance industry. I could see cases of banks freezing accounts or at least threatening to withhold 30% of the value of anyone’s accounts who is suspected to be a US Person and bankrupt unwilling to provide proof of full tax compliance.
I also believe that many former citizens may have their financial accounts mistakenly reported to the IRS with resultant mix-ups. The IRS might get into a muddle and not realize that 8854 has been filed, etc.
It seems to me though that the most vulnerable people will be those discovered by FATCA (both current and former citizens) who’ve not filed FBARs or tax returns because those tax returns will even now have completely open statutes of limitations without any clocks running.
Even minnows who’ve expatriated could face substantial exit taxes on the full value of their private pensions if they are deemed to have covered status. As I understand things, this confiscative tax on pension funds is a roundabout way for the IRS to punish even those of modest means if they can be caught out on technicalities.
This is why I’m more comfortable having decided to rely on my tax preparer even though It’s cost me over a year’s salary so that I can at least certify five years tax compliance on 8854.
Thank you for the update, Stephen.
Articulate, controlled and very effective interview Tricia. Thanks so much to you and ADCS for being the face and voice of so many who cannot come forward, and for all the hours and days and more that you and the others are putting into this fight.
Take care, all of you.
@Badger, I was also so impressed with not only the content of her delivery but also how articulate, well-presented, and sensible Tricia seemed. It helps make our cause more palatable.
It’s such a fine line between expressing our anger, fear and principles in a way that can get the point across and hopefully spur on more people to support the case and get on board.
@IDEA-WORKS @Petros @ADCS
Not a lawyer but here are some thoughts.
The Founding Fathers devised the US system of government as one with “checks and balances” between three principal branches of government: Legislative, Executive, and Judicial. The idea is that for any laws impacting on Americans that there would always be this check and balance system + The Constitution/Bill of Rights. No laws would be effective in other countries except by international treaty.
I point out that the American FBAR and CBT laws goes beyond US Persons and impact on nonUS persons – think Canadian only spouses and family of US persons. In the case of Tricia Moon, the potential penalties that she could have faced were largely on income generated by her Canadian only husband for income generated outside of the US. No doubt the compliance costs and penalties that the Moon family have faced have thus diminished Mr Moon’s financial security in retirement.
However, is Mr Moon covered under the US check and balance system? He is impacted by laws from the US Legislative and Executive Branches but does he have protections under the US judicial branch. ? As Mr. Moon is a Canadian only citizen living in Canada one may argue that he is not extended the protections of the check and balance system, and as such, perhaps those laws from the Legislative and Executive branches impacting him then are invalid. ?
The Canadian-US Tax treaty says nothing about FBAR penalties or CBT so it neither affirms them nor refutes them. However, in so far as FBAR and CBT impacts on Canadian spouses and Canadian children, the tax treaty is quite clear in its omission of permitting impact on Canadians – so does not say it is ok for the US to tax, inflict compliance, impact privacy of Canadians only.
Lets take the example of estate tax with a Canadian only spouse and children and a Canadian with US personhood living in Canada until the US person passes away. US laws prescribe estate tax. Canadian laws do not. The result of any US estate tax would be the denial of the portion of the estate to the Canadian only person/children as is allowed under Canadian law – estate legally and rightfully theirs. What right does the US have to take a portion of this/potentially the family home to pay the US taxes? Two sets of laws here, Canadian law and US law yet on Canadian territory. The same may be said with FBAR penalties, and US taxes on retirement funds that form a cornerstone of family financial security for Canadian only family members.
I imagine that those Canadians impacted may file for damages against the US for confiscation of what rightly is theirs. US law should not trump Canadian law in Canada – especially where not permitted by the tax treaty or other treaty. Claim may be made not only for US confiscation of wealth and diminishment of family financial security but of the stress inflicted on those nonUS Canadians in Canada by the US laws.
One thing the Harper government could have done while it was blackmailed into accepting the IGA, it could have launched a class action suit against the US on behalf of Canadians impacted by US FBAR and CBT laws arguing for the sanctity of family financial security – especially for Canadian only family members.
It is very nice that http://www.fatcalegalaction.com incudes FBAR in its excessive fines claim. Somewhere along the line I heard one Republican talk of giving the FBAR penalties back (and also trying to get those renouncers to regain citizenship for which there will likely be nil takers).
Back to FBAR and CBT impact on Canadians and confiscation of Canadian family financial security. We know that ADCS is focusing on this one law suit at this time against the IGA. Yet perhaps the arguments could be developed against the extraterritoriality of FBAR and CBT and this may also help with the ADCS fund raising. ADCS could fund a legal opinion about it. ?
@monalisa and others: Will expatriates ever sleep peacefully? Not only is there the Reed Amendment, there is also section 2801 requiring the IRS to assess tax on US persons who receive gifts and bequests from “covered expatriates”. We were “promised” guidance on this shortly after it became law, but nothing, so far. The best case scenario may be that it ends up unenforced, like the Reed Amendment. The worst case scenario is that US people are pursued to pay taxes based on what their relatives may have done, many years before. How is a US person going to know whether their foreign relative was an expatriate, much less a covered expatriate, years from now? The way things are going with FATCA, I fear that if a US person receives a gift or bequest from a foreign person, they will have to disclose whether that foreign person was born in the US or has other US indicia, and the foreign donor will be presumed to be a covered expatriate unless the US recipient can prove otherwise (an impossibility).
I belatedly watched Trish’s interview a few minutes ago. Excellent interview. Reasoned, calm, focused discussion. Just the kind of publicity and coverage that is needed to make ALL Canadians aware of what has happened and what is wrong with it.
@monalisa
I think the statute of limitations only works if you have already sent in your tax return.
I wrote this on the wrong thread- but the anniversary of the Berlin Wall was just this week. Maybe FATCA will just fall and crumble like the Berlin Wall did one day. Because people realise how wrong it is.
But in the meantime- LAW SUITS.
@Polly, I agree that any people who’ve expatriated may be in for a nasty surprise if they haven’t correctly logged out by certifying 5 years tax compliance via 8854, especially those who’ve never filed. It could be quite straightforward to assess non-filing fines. As time passes and things get more publicized, it will be harder and harder for expats to claim they didn’t know they had to file. The IRS may be less willing to accept claims of non-willfulness.
ML1776. Joe lives in otherland. He renounces but doesn’t file taxes or 8854. 7 yrs later he gets a letter. ‘Pay up or else’. Joe says ‘else’. End of story.
@Duke of Devon
And that’s when it’s going to get very interesting, but will it ever get to that point? With the IRS’s apparent inability to handle FATCA due to budget constraints, my guess is that they’ll need to prioritize and focus on domestic tax cheats – and save themselves the diplomatic nightmare of rounding up grannies living in foreign lands who don’t owe tax anyway. But who knows for sure. It takes very little effort or investment to send out threatening letters, that is if the consequences of their actions are worth it. Remember Lincoln’s words: the best way to have a bad law repealed is to enforce it strictly.
That’s “is” to enforce it strictly.
@Monalisa @Duke of Devon; From the US Congress on the governing mutual collection treaty. “Explanation Of Proposed Protocol Amending The Multilateral Convention On Mutual Administrative Assistance In Tax Matters” Submitted On: February 21, 2014
—
Ratification of the protocol is not intended to alter the reservation of rights or declarations
of understanding that the United States made when it ratified the existing convention in 1991. In
its instrument of ratification, the United States reserved the right not to provide (1) assistance for
taxes imposed by possessions, political subdivisions, or local authorities of other parties to the
convention; (2) tax collection assistance; or (3) assistance in serving documents (except the
service of documents by mail). The reservations are reciprocal; to the same extent that the
United States will not provide assistance, other parties need not assist the United States. Thus,
only the provisions relating to information exchanges and service of documents by mail are in
effect for the United States.
—–