Typical investments — the kind the average person makes in planning for a sound financial future — can be rendered pointless or even have disastrous financial consequences due to US taxation of US Persons on income they make in their home country as well as siphoning non-US income out of that country and into the US.
This paper provides concise information on how tax-deferred accounts, mutual funds, and capital gains on the sale of one’s home result in taxes owed to the US. Useful to whip out if anybody tries to tell you that US extraterritorital taxation is no big deal.
Thanks to LM’s hubby, its author.
@Nononous
Call me, Boris Johnson and MANY others crazy if you will, but we all have our reasons for cutting that cheque – especially when not doing so could potentially destroy your livelihood.
Hear, here iota.
Just saying, if one is a Canadian citizen with no US assets or income or other connections to the US, why cooperate, why play the game, why send money south of the border? Ignore the IRS.
(Rhetoric aside, Boris probably cut his cheque because he was making enough money from book deals and speaking fees that it was ultimately worth his while to settle.)
“It’s a matter of self-respect. I don’t want to let the IRS force me into lying about who I am and where I come from. Their guns aren’t big enough to make that a worthwhile choice, for me.”
I used to feel that way too. But their guns are more powerful than you think they are, along with the US Department of Justice and courts who are more powerful than you think they are. Each one of them was enough to teach me to commit perjury, though of course that was the breaking point that persuaded me to renounce. US Court of Appeals for the Federal Circuit even forced me to fabricate a social security number for my wife, which the IRS didn’t force me to do.
Boris Johnson was unwise enough to complain loudly and state his intention to not pay US tax on his house sale in a very public manner. He basically left left the IRS no choice but to “reach out” to him. His own lawyers probably advised him to settle quickly before things went from bad to worse.
Personally, I have no problem with lying to prevent being robbed by an unjust and immoral US tax system or being “outed” by complicit Canadian banks and our cowardly Canadian government. Not doing everything I can do to resist this outrage is what would damage my self respect.
Every situation is different and people must do what they are comfortable with. You can be 100% tax compliant without your bank knowing you are a USP.
@Norman Diamond – I’m sorry you received such bad treatment. I knew as soon as I found out about CBT that I would be renouncing, so for me the situation was very different, and less of a threat.
@Marie – “Every situation is different and people must do what they are comfortable with.”
Exactly.
“…most people are too honest for their own good.”
People are probably themselves the best judges of their best course of action as they know all their own circumstances.
“Your place of birth/national origin/other citizenships are none of their business.”
That used to be the case but as globalization progresses the first world countries are moving fast towards requiring such information. But only FATCA singles out a single citizenship to scapegoat.
Call me optimistic, but I think there’s going to be a great deal of wink-wink-nudge-nudge with Canadian financial institutions. When I cheerfully offered to sign a completely perjurious W-8 for my investment firm – which everyone knew was a lie – they backed right down and stopped asking citizenship questions. Suddenly it wasn’t such a priority for them.
That’s my approach. Lie when you need to, don’t worry too much, and take solace in the fact that the US can’t touch a penny north of the border if you’re a Canadian citizen living in Canada.
Who are these people? http://www.uscitizenslivingabroad.com/index.html
Looks like a way for the US to keep all retirement investments for themselves.
Someone posted in a Reddit thread about renouncing U.S. citizenship that “the tax thing is a bit overblown” and that “so far the US has gone after exactly 0 of these people for taxes if they reside in Canada.”
https://www.reddit.com/r/canada/comments/4k9083/i_renounced_my_us_citizenship_yesterday/
Any rebuttals?
http://www.ustaxcourt.gov/InOpHistoric/rusten.sum.WPD.pdf
US Tax Court upheld the IRS’s determination that Mr. Rusten was subject to double taxation of social insurance taxes (though his ordinary US income tax was zero due to foreign tax credits), but that he wouldn’t have to pay a penalty that the IRS claimed. Mr. Rusten worked in Canada, but the ruling doesn’t say if he lived in Canada.
http://www.ustaxcourt.gov/InOpHistoric/rusten.sum.WPD.pdf
The deceased and executors were all Canadians, not US persons, but the deceased had an investment in the US. I don’t understand large parts of this decision, but I think the US got to apply estate tax to most ov the value of the investment in the US.
There are lots of US Tax Court rulings against US citizens residing in the UK, France, Hong Kong, etc. and working as flight attendants (i.e. minnows) over international waters, for example
http://www.ustaxcourt.gov/InOpHistoric/ready.sum.WPD.pdf
but I didn’t find one about a resident of Canada.
@Zambonia: Looks like it’s been rebutted already by the regulars there. In particular, the arrogant little prick near the bottom saying things like “I find what you did messed up and short sighted” and “What the heck do you do for a living? Retail?” is at negative 40 points on some of his comments.
Regarding that reddit post, and all it’s ensuing comments, it actually makes me feel a little more secure for the moment. There are lots of comments in that long thread from people that actually think that maintaining US citizenship is a great thing etc. and I’m sure that’s true for some, but my “more secure” comment refers to the fact that obviously there are lots of suckers still out there volunteering as low hanging fruit that are more likely to get FATCAed than those of us in the know. OK, that was selfish.
Here are two more minnows, US citizens residing in Canada, who were double taxed by the IRS for self-employment tax though not for ordinary tax. The US decided that church ministers are self-employed and therefore deserved to be double taxed before the social insurance treaty took effect.
https://scholar.google.co.jp/scholar_case?case=1963084713738187466&q=&hl=en&as_sdt=2003
https://scholar.google.co.jp/scholar_case?case=10859402887360171019&q=&hl=en&as_sdt=2003