Psychologists describe 5 stages of grief based on the Kubler-Ross model introduced by Swiss psychiatrist Elisabeth Kübler-Ross in her 1969 book, ‘On Death and Dying’. Although originally ascribed to the emotional stages experienced due to death of a loved one, the model can also be useful to understand the responses to any subjective trauma that a person may go through, for example a relationship breakup, a job loss, or a ‘OMG! I am a US taxpayer’ moment.
The key here is ‘subjective trauma’. Many ‘US persons’ know what it is like to have people roll their eyes, yawn, or wonder why we are so worked up, just because we discover we are subject to FATCA (what’s the big deal? You ARE an American!), or because we discover we are US taxpayers (if you don’t like it why don’t you renounce?). Typically, we do not get the sympathy one would get if we had a serious illness, or lost our job, or divorced our spouse.
Non-US persons for the most part, just do not ‘get’ the ‘US person’ curse, because to be FATCA’d and CBT’d is not within the realm of normal human experiences. We are unique and special in the world that way – thanks to USA’s exceptional treatment of those it deems ‘US persons’. Nevertheless it IS traumatic for those of us who have lived most or all our lives in countries other than the USA, and who have never had a clue we were US taxpayers on our non-US income, to be FATCA’d and CBT’d.
The following are the 5 stages of grief as outlined in the Kubler-Ross model. Keep in mind that these stages are not necessarily linear. One day you may feel like you are angry beyond belief, and the next day you may feel that it just is what it is. Hopefully, at some point, most of your days will fall into the latter category.
Denial.
The first reaction to hearing one has a terminal illness, or their house burned down, or they are subject to the tax laws of a foreign country, is denial. This just CANNOT be for real. It makes no sense. This has got to be wrong. How could I have lived all these years and NOT known I was a US taxpayer? There must be exceptions for people like me who don’t live in the USA. They surely cannot be referring to ME.
Anger.
Once the initial shock wears off, anger follows. We want to blame someone or something. We may be angry at the doctor who gives us a bad diagnosis, at the driver who caused the accident, or at ourselves for not doing something to prevent whatever bad thing happened. We are angry at the Canadian government for not standing up for us, at our spouse who thinks we are over reacting, at our neighbour who doesn’t want to listen to our rants, at ourselves for not figuring out years ago that we were US taxpayers, or at the American government for acting like it owns us.
Bargaining.
This is the stage where we play games with ourselves, and with others, desperately trying to ‘work it out’ or ‘fix things’, so that we can go back to the way things were before. The person whose romantic relationship is at an end may promise to change their behaviour – anything to not have the relationship end. The dying patient may promise God he/she will be a better person or take better care of himself/herself – anything to not have to die. The newly aware US taxpayer searches for a way to work out their non-compliance: streamlined program? 5 years tax compliance catch-up? – just please don’t penalize me for my ignorance.
Depression.
Reality is setting in now. There is no easy way out. We are not going to bring our loved one back. Our job is gone forever. The relationship is definitely over. No matter which route we take to solving our ‘US taxpayer status’ we are going to pay – whether that be in taxes, compliance fees, penalties, loss of privacy, loss of US citizenship, or by being forced into hiding. It sucks no matter how you look at it, and this just makes us sad. 🙁
Acceptance.
Psychologists and grief counsellors say you are lucky if you get to this point. Many people get stuck in anger or depression for years or even a lifetime – the widower who becomes a recluse when his wife passes away, the mother who mourns a lifetime for the child she lost, the aspiring athlete who never made it to the big leagues and seems forever lost in his former glory years, the ‘hidden’ US person who cannot shake the mental chains of his unwanted ‘US taxpayer status’ even if he has logistically found a way to deal with it. The luckier people at some point accept the reality of what has happened and find a place to put it so that it does not interfere in their daily lives anymore. The widower finds peacefulness alone, or maybe finds new love. The mom, whose child is gone, remembers the happy times she spent with him/her and stops dwelling on what was lost. The US person, finds a way to deal with his/her own particular situation – stays hidden, or becomes tax compliant, or renounces – and moves on with his/her life.
@monalisa1776: Are you aware that you wrote they warned me that I would never be able to •love• or work there again as an NRA without a special work visa?” Hmm, now you need a visa for that?
I have never been convicted of any offense, for anything- or even charged.
@ Portland: I have not lied to any FI but am grateful mine does not have me recorded as a US person. I do not see civil disobedience as an excuse for lying; I see it as resistance to unjust laws or actions.
“A revolution is interesting in that it avoids like the plague the plague it promised to heal.” -Daniel Berrigan
@Duchesse, they were just explaining to me that as a former citizen I had relinquished my rights to live or work in the U.S…it is chilling that I had to give up my birthright but it was the only way I could live a normal life here in the U.K.
It would be intriguing if we win our case and CBT is abolished, whether the Supreme Court might offer to restore citizenship to former citizens who’d essentially renounced under duress. Of course this could also spell disaster if we lose our case and the Supreme Court revokes recently issued CLNs with our U.S. tax obligations retroactively restored. That would spell utter disaster to any retirement planning but they may think ‘well that’s just too bad….’
ML methinks you overthink the situation. The sun might rise in the west tomorrow but we have to act as if it will continue to rise in the east.
@Monalisa1776: “Chilling” would be one of the feelings I would have, too. In the case of some of the scenarios you imagine, I’ll bet there would be huge constitutional challenges to even the proposal of such action.
@Duchesse, I’m you’re correct that we’d have strong constitutional arguments if they we’re to start playing nasty games like that. I’m so grateful for the likes of John Richardson in this world…
@ Portland (or anyone else who wishes tor reply): Been reading and thinking. You laid out some options, one of which was “Renounce and try to finesse the 8854.” I think I’d be in the “expatriate” (not covered) category. But what might (in theory) be involved in the finesse?
I was never a bridge player, but I am a senior who does not want my retirement gutted-and it would be.
If your net worth is under 2 million and you are compliant for 5 years , there is no problem.
Duchesse. It’s not clear what you mean by “expatriate” ( not covered) category. If you are not covered there should be no exit tax to pay.
@Duchesse
I know that you find a lot of solace here – but please know that if worst case scenario happens, you cannot tell the authorities that the people at Brock advised you. Your circumstances appear different to me from those here who are in hiding. I have heard of somebody who has not been honest on his tax returns in Europe. Of course, that is not Canada which, for now at least, offers protection to duals. But a lawyer friend said that this would be considered tax fraud, and not just tax evasion, and that is a whole different can of worms. How different that would be in Canada I dont know. So maybe talk to a canadian lawyer just to make sure that under your specific circumstances, you would actually be safe from America`s long arm in the future? Because in a worst case scenario, you can`t call on Brock as your legal advisor. We are here to help, but if the law suits are lost, and America increases its threats of sanctions- will Canada still protect its duals? And if it doesn`t – can you argue that you didn’t know what you were doing? And btw- it isn’t just about not being able to travel to America in the future. Other countries will work hand in hand with America in extraditing tax evaders/frauds to America. So you can avoid pretty much all of Europe in the future too, as well as other countries who work together with International criminal investigations.
@ Portland: I’ll be close enough to the line b/t covered and not to want to be sure I am under $2M; therefore will likely transfer title to property to non-US spouse; that should do it, but I will check that that’s legal in Canada. As one person said, I must obey the laws of the country where I am living. “Finessing” seems to me to imply there are options in the listing of assets. Someone also referred to “File a bullshit 8854”, so I know others are clearly thinking of what to represent.
@ Polly: Rest assured, I would not cite any advice or opinions I read here! The most I would do would be to present various viewpoints to a (Canadian) lawyer, under lawyer-client privilege.
re what your lawyer friend thinks we should do: I’d like to know how many retired US persons, whose security depends on their (non-US) mutual funds, disclose them; I suspect if they have •no US property or family• and are not attached to their US citizenship, they are not. Lawyers tend to go by the book; they have to. But if a law is this unjust, does the person comply and accept poverty?
What incenses me especially is that the US will tax foreign mutual funds not just going forward, but from time of acquisition.
For dual nationals who also have American citizenship, but who are residing in the country of their other nationality, there should be nothing to worry about. That is because American citizenship ends at the US border, and unless the host country recognizes and treats dual nationals as US citizens, their citizenship is of that country and not of the US. This is because of the way US citizenship is defined in the US Constitution:
Amendment 14: Section 1 of the US Constitution reads: “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.”
Both conditions of “born or naturalized in the United States” AND “subject to the jurisdiction thereof” must be true for this definition to be valid and true. Therefore, by definition, a person outside of US borders and not “subject to the jurisdiction thereof”, and who is not a resident or citizen of any state of the United States, is not a US citizen UNLESS the country in which a person is residing recognizes and treats him as such, and does not recognize and treat him as one of its own citizens. Countries, however, do not recognize or treat one of their own citizens as foreigners; therefore, such a person, not being subject to US jurisdiction and not recognized as a foreigner, is not a US citizen.
The important point is that CITIZENSHIP IS DETERMINED BY THE COUNTRY IN WHICH ONE IS PRESENT, and not by the claims that a foreign government like the United States might make. If a country like Canada recognizes you as a Canadian citizen, even though you might hold other nationalities, then you are Canadian citizen and not the other nationality.
The Canadian government, along with many others, are very confused about this point, and this is something that needs to be resolved. This is something that can be argued at the supreme courts of all countries and at the US supreme court as well.
Your problem is with your own country and getting your country to understand this point, and not so much the US. The US can huff and puff all that it wants, and it has managed to intimidate the whole world, but citizens have to work to get their governments to do the right thing.
You might point out these points I raised to your lawyer if you one.
And don’t worry about the US claim that US jurisdiction extends to any American citizen anywhere in the world. This is just a bluff, which is easily called by simply asking them to prove it. This is something they will not be able to do short of invading that country and taking it over.
@Yazz: Your points, which are well-considered, remind me of an argument advanced by the US-CDN tax lawyer with whom I spoke about my case. He said, “We (his firm) do not consider Canadian mutual funds to be PFICs because they do not satisfy all requirements for PFICs (his argument is here: http://www.skltax.com/certain-canadian-mutual-funds-arent-pfics/). Without legal precedents, an argument is intellectually compelling but not immediately useful when the IRS letters come. I’m not dismissing your points; however, I am hoping my Canadian Charter rights are robust. Thank you very much!
Duchesse,
Sounds like Max Reed: http://www.skltax.com/author/tmtboldt/
For more on PFIC’s:
http://tax-expatriation.com/2015/03/30/the-problem-with-pfics-avoid-pfics-like-the-plague/
Part of a 15-part series: http://citizenshipsolutions.ca/2015/05/28/interview-with-gordontlong-com-citizenship-based-taxation-the-s-877a-exit-tax-and-americansabroad/
@Duchess
I am almost hoping the IRS comes after me so I can make that very case on citizenship, taking it all the way to the US Supreme Court if necessary. I realize that there is not precedent, but a court case would certainly change. That is why I am looking around for volunteers to make this a case to test this legal theory. I am too small-fry for them to even bother with me.
The US seems to think that it is the only one who gets to say what citizenship is. Once a person is out of US jurisdiction, however, the ball is no longer in their camp. One’s citizenship is now a matter of how the country in which one is present defines and recognizes it. For example, many Muslim countries do not recognize Israeli citizenship. An Israeli in one of these countries would be stateless. These countries wouldn’t care what Israel says.
Yes, it is; and the question I did not ask is whether this stance has been successful for their clients. Anyone have experience?
Duchesse. i gather from reading Mr. Reed’s blog that only a limited number of mutual funds are not pfics. It is perfectly legal in Canada to gift or transfer assets to your spouse. But, the thing of it is is I go back to my earlier thought- you left when you were 22, you are now 65+ and concerned about having enough to live peacefully for another 20 years.
You have no US connections and no desire to go there except you might want to revisit New York
You are conflicted enough that you consulted a cross border accountant and you are trying to figure out the proper way to fill in the 8854. The question is why you feel it necessary to play by the rules of a foreign country when the game is fixed.
America IS treating citizens abroad as US persons and all the rest is pure speculation about the future, what is right or wrong, and a trial up to the supreme court would cost about half a million if not more.
@Yazz, are you referring to PFIC? “I am almost hoping the IRS comes after me so I can make that very case on citizenship, taking it all the way to the US Supreme Court if necessary. I realize that there is not precedent, but a court case would certainly change. “
@ Portland: At the time of my consult w/ Max Reed in April, I thought, in the words of the Dylan song, “There must be some kinda way outta here…”; I was searching for options. Since his firm represents over 1,000 persons in this bind, I hoped he could provide a good sample of strategies. That’s when he laid out that argument, which I suspect is untested in actual cases.
Both 45 years ago and now, I want to make a choice with which I can live, morally. One I can clearly explain to my adult children, who will also be affected. During the the Viet Nam war, I had several years to think and plan. The tax issue hit (me, anyway) in a week.
Now, I have much more clarity, and my sense of outrage has annealed-not just for me, but for those in different circumstances.
“So let us not talk falsely now, the hour is getting late.”
Vivienne makes those decisions at SKL, lol. Ask her!
Duchesse. Somehow, a former IRS deputy commissioner, Mark Mathews took a cold call from us. He kindly gave us about 30 min. of his time. His message- “it’s not a moral decision, it’s not a legal decision, it’s a business decision.
“a business decision”
@Duchesse
This is true. IF America is unable to put a lien on your assets and Canada wont help them, then I think it would be possible to negotiate a price with them. You spoke of your own sense of morality- and keeping that- maybe you would feel best if you had a lawyer to handle the situation with them. Be open and honest, say this is how it is and I cannot pay this. Then maybe the lawyer can barter out a price you can live with. I mean- with all the things we are hearing in the press and speaking of a sense of morality…. there was the case of a man whose lifetime savings were confiscated by the IRS under the law of Civil Forfeiture. Seems he had been paying in his savings/earning in increments with cash to his account in the bank because he has a little shop and earned in cash. They took his 100000$ lifetime savings. He got a lawyer to help him pro bono ( after all- he had no money left) and then the IRS called and offered him back HALF. Talk about corrupt! But here we see the IRS bartering themselves! He said no. But what we learn from this is that the IRS is run as a business. So yeah- maybe it is a business decision. Perhaps going this route would make you feel better and with the moral upper hand?
@Polly: Actually I would feel worse enabling that sort of corruption. “Negotiating a price with them” sounds like something done in regimes in certain other countries infinitely higher on the corruption index.
@Duke of Devon: It is chilling to me to hear a senior IRS official make such a distinction. How many age 65+ persons with their security erased (not just dented) by retroactive taxation will agree “it’s business”?
@Bubbebustin: Is Vivienne on this forum? I cannot spend another $300 to hear comments via SK Law. (I did find my conversation with Max Reed informative.)