cross-posted from citizenshiptaxation.ca
Last week in my email was a link to an article by Michael J DeBlis (unable to determine whether it was the father or the son). It runs in my memory that prior to the launch of the Tax Connections website, the younger Michael had started a blog that was specifically about expatriate issues and many of us joined and took part. He seemed particularly sympathetic and supportive of our plight and one who I would never have labelled a “condor.” And this post is in no way meant to be demeaning.
Imagine my surprise to read this:
Consider the following example. Pierre is a dual citizen of the U.S. and Canada who presently resides in Montreal. He has fastidiously filed U.S. and Canadian tax returns for the last ten years. Following an audit of his 2012 U.S. tax return, the IRS determined that there was a $ 20,000 deficiency and mailed him a notice of deficiency. Pierre timely filed a protest but Appeals found in favor of the IRS. Having failed to file a petition with the tax court, that deficiency soon became a $ 20,000 assessment.
The IRS now seeks to collect on its claim by imposing a tax lien on real estate owned by Pierre in Canada. Essentially, what the U.S. government is attempting to do is cajole collection officials from the Canadian Revenue Agency (Agence du revenue du Canada) to do its dirty work for it: namely, to collect Pierre’s unpaid U.S. taxes by enforcing an IRS tax lien on property located within Canada.
As incredible as this might sound, reliance upon a foreign taxing authority for assistance in collecting a tax judgment against a citizen of the requesting country is entirely permissible under the terms of the U.S.-Canadian Treaty. Of course, such a request must be accompanied by documents firmly establishing that the taxes have been finally determined.[ix]
Therefore, the Canadian Revenue Agency would have no choice but to enforce the lien and to collect the unpaid taxes. But what if Pierre filed a motion in a Canadian court to have the tax lien imposed by the Canadian Revenue Agency, at the behest of the IRS, set aside? Not surprisingly, the court would refuse Pierre’s request on the grounds that the imposition of the tax lien was proper under the terms of the treaty.
The reason for my surprise was that it is a well-known fact not only in Canada, but among expats in general, that Canadians are lucky because Canada will not collect tax for the U.S. on people who were Canadian citizens at the time the tax was incurred. Nor will the CRA collect FBAR penalties as they are not a tax, falling under Title 31 of the U.S.C. Most of us had become aware of that when our-then Finance Minister, the late Jim Flaherty had stated unequivocably that Canada would not collect for the U.S. under these two circumstances. So I decided to post a comment.
Patricia Moon
2016-10-26 18:51:10
Thanks for this article, particularly for outlining the limits of what can/cannot be done with regard to the border. While the officers can be bullies, along with knowing very clearly, the limits of the Reed Amendment, this is good information to have. Canada and Denmark both have provisions that state they will not collect for that US citizens/persons that are also, their own citizens. In the case of the US-CDN Treaty: Article XXVIA 8) No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that: a) Where the taxpayer is an individual, the revenue claim relates either to a taxable period in which the taxpayer was a citizen of the requested state …………. So the CRA would not collect for the US in Pierre’s case, since he is dual and a citizen of Canada. While the boundaries for the revenue rule may be fading, it is still alive and one which the late Finance Minister, Jim Flaherty, reiterated many times while voicing his shock that the US would expect FATCA to be implemented in Canada. It is very clear that FBAR penalties, which are not part of Title 26 and therefore not covered under the Treaty, also would not be collected by the Canada Revenue Agency. The Canadian courts have refused to enforce claims of the US against Canadian citizens. I presume the Canadian government would honor XXVIA for US citizens/persons who are permanent residents of Canada who are not Canadian citizens. What I am afraid we will see, in spite of past rulings, is that the IRS will attempt to collect from Canadian bank branches in the US with corresponding branches in Canada. I have been told that this does happen by compliance people in spite of court rulings etc. However, it seems to me a bank would be liable to be sued, since presumably, PIPEDA (privacy laws) would in this case, apply to the US citizen/person even though it is overridden by the IGA when the bank sends info to the CRA. We have all seen how the compliance industry tends to enforce the “law” even when the IRS etc, has not provided guidance (which also, is not necessarily, the “law”). An example of this is putting someone who relinquished US citizenship decades ago, into the system according to 877A. Tax lawyers have tended to dismiss past citizenship laws that as far as can be seen, are not automatically changed retroactively. This is completely unacceptable. It is largely useless to Canada to have the right to collect on Canadian citizens resident in the United States due to the fact that once a Canadian is a permanent resident of another country, they are no longer liable for tax in Canada. This is also the reason that FATCA is of very little value to Canada.and
Patricia Moon
2016-10-26 23:10:13
You may be interested in a few of the court cases mentioned (indirectly) above: United States of America v. Harden (1963), 41 D.L.R. (2d) 721 Supreme Court of Canada https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/7322/index.do 68 O.R. (2d) 379; 1989 Ont. Rep. LEXIS 206 RE VAN DEMARK ET AL. AND TORONTO-DOM http://uniset.ca/other/cs6/68OR2d379.html Chua v. Minister of National Revenue, 2000 DTC 6527 (FCTD http://ca.vlex.com/vid/chua-v-minister-of-national-revenue-38618242
I received a message asking if I could confirm the information concerning Canadians at this post on the CitizenshipTaxation FB group.I became involved in the conversation and remembered that I had recently learned that Denmark also had such a clause protecting its citizens in the US-Denmark Treaty. So I wondered if it could be the same for the other three countries that have a Mutual Assistance in Collection clause in their treaties with the U.S. namely, Sweden, France and the Netherlands. It didn’t take too long to find that they do indeed have the same type of clause. I was dumbfounded. Why had we never heard this before? I was careful to look at the Protocols because some of the Treaty dates are over 20 years old; there was nothing to suggest the conclusion was incorrect. I also had a couple of professionals take a look and they agreed.
So this is A VERY BIG DEAL. If you are a dual citizen of DENMARK SWEDEN FRANCE the NETHERLANDS or CANADA and were a citizen at a time when the U.S. claims you owe U.S. tax, your country WILL NOT ASSIST THE U.S. in collecting U.S. tax. !!!!!!!!
Then I wondered about FBAR and where that might be confirmed since it is not specifically stated in the Treaty. I googled and found a link to a comment of mine that I have no memory of posting:
25 July 2012 T.I. 2011-0427221E5 – FBAR penalties
Principal Issues: Whether US FBAR penalties are included in “revenue claims” defined in Art.XXVI-A(1) of the Canada-US Treaty.
Position: No.
Reasons: FBAR penalties are not civil penalties in respect of taxes covered under Art.II of the Treaty.
https://www.taxinterpretations.com/tax-topics/treaties/article-26a#node-326646
25 July 2012 T.I. 2011-0427221E5 – FBAR penaltiesXXXXXXXXXX
2011-042722
P. T.
(613) xxx-xxxx
July 25, 2012Dear XXXXXXXXXX:
Re: Civil Penalties and Article XXVI-A
We are writing in response to your letter of November 7, 2011, in which you asked for our comments in respect of the application of Article XXVI-A of the Canada-United States Tax Convention (1980) (Treaty).
You have described a hypothetical situation involving an individual who is a citizen of the United States (U.S.) by right of birth, and a Canadian citizen by way of naturalization prior to 1995. The individual is a resident of Canada for purposes of the Income Tax Act (Act) and the Treaty. We are to assume that the individual has failed to file Form TD F90-22.1 Report of Foreign Bank and Financial Accounts with the U.S. Department of the Treasury as required under the U.S. Bank Secrecy Act. As such, the individual has been assessed a civil penalty (FBAR Penalty) in the U.S. for the failure to file Form F90-22.1.
In this regard, you have asked whether the FBAR Penalty could be considered a civil penalty that is included in a revenue claim as defined at paragraph 1 of Article XXVI-A of the Treaty, and if so, whether paragraph 8 of Article XXVI-A would preclude the collection of the FBAR Penalty by the Canada Revenue Agency (CRA) on behalf of the U.S. Government.
Our Comments
The CRA has previously indicated that Canada would assist the U.S. Government in the collection of interest and penalty in respect of U.S. taxes owing pursuant to Article XXVI-A of the Treaty. However, paragraph 8 of Article XXVI-A provides that Canada will not assist in the collection of a revenue claim from the U.S. Government in respect of an individual who is a Canadian citizen, such as the individual described in your hypothetical situation.
In addition, we are of the view that a civil penalty, such as the FBAR Penalty, which is imposed under the U.S. Bank Secrecy Act, is not a penalty in respect of U.S. taxes owing. Therefore, it is our view that an FBAR Penalty is not an amount that would be considered a revenue claim pursuant to the definition at paragraph 1 of Article XXVI-A.
We trust that our comments will be of assistance.
Yours truly,
Robert Demeter
Section Manager
for Director
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
Then I started wondering about FATCA. The “reassurance” we receive constantly from the Canadian government is that FATCA does not result in any new tax etc, that it is just an information exchange. Which begs the question, why is the information being collected if there won’t be any “new” taxes? In this regard:
Andrew Bonham, “FATCA and FBAR Reporting by Individuals: Enforcement Considerations
from a Canadian Perspective” (2012) 60:2 Canadian Tax Journal 305-54, at 345.
Still, as noted above, the minister has the discretion to refuse assistance in collection. Certainly from a public policy standpoint, it must be relevant that the Crown, in providing collection assistance on a FATCA revenue claim, would in many cases be acting against its own taxpayers in the enforcement of a claim founded upon information obtained in a manner that may not be constitutional under the laws of Canada. The Crown is not obliged to do anything contrary to the public policy of Canada in collecting a revenue claim under the treaty. This last point is analogous to the common-law public policy defence discussed above.
However, it is also quite possible, and perhaps probable, that FATCA is in equal part both an information-gathering tool and a revenue-generating tool. It is for this reason that FBAR will never go away. With information garnered from FATCA FFI reports, penalties can be levied under both FATCA and FBAR if an individual fails to file. However, as we have noted, the long arm of the IRS cannot reach Canada with respect to FBAR, and as further posited, it is likely that FATCA penalties would also be unenforceable in Canada. From the US perspective, the best-case scenario would see all financial institutions around the globe complying with the strictures of the disclosure requirement. Armed with the massive list that would be generated from such compliance, the IRS would merely have to check names against received disclosures and levy fines against those individuals who had not complied. Carrying this scenario further, the IRS could then, after the exhaustion of all administrative appeal periods and recourse, approach the minister of national revenue with a list of individuals owing FATCA penalties and ask that those penalties be enforced by the CRA under the terms of the Canada-US tax treaty. It is assumed that in a large number of cases, a notice from the IRS to an individual noting lack of FATCA compliance would not be responded to, and in those cases, a penalty of $50,000 would be levied, thereby raising a very significant amount of revenue.
Finally, although the revenue rule and the penal/public-law rule would currently preclude Canadian courts from assisting in collection, the ever-expanding role of judicial comity may one day see a repeal of these rules, or at least a relaxation of their strictures. Should that occur, the United States would be in a position to resort to principles of public international law as a basis for enforcement, even against dual citizens. In such a case, it may well be open to defendants to argue that the mere fact of their US citizenship should not, in and of itself, be enough to satisfy the real and substantial connection test—especially in cases where the defendant has had little or nothing to do with the United States and has certainly derived no benefit from his or her US citizenship.
A lot of interesting possibilities are discussed in the article above and it is definitely worth reading. While there are no guarantees that these Treaties will not change in the future, the advantage of this information now is:
- if you are in an unsure situation at the moment, this is something that is as much a part of your situation as your “U.S. Person-ness” and can be a great help in deciding what your risk level is
- if you are not compliant & not yet a citizen of the 2nd country, you might consider applying for citizenship now
- you can help get this information out to other members of your expat community
Lastly, here are the actual wordings in the treaties involved; I am only including the Article/paragraphs that pertain to this idea.
SWEDEN
• Income Tax Treaty – 1994
• Protocol – 2005
ARTICLE 27
Administrative Assistance
1. The Contracting States undertake to lend assistance and support to each other in the collection of the taxes to which this Convention applies, together with interest, costs, and additions to such taxes.
4. The assistance provided for in this Article shall not be accorded with respect to the citizens, companies, or other entities of the State to which the application is made, except as is necessary to insure that the exemption or reduced rate of tax granted under this Convention to such citizens, companies, or other entities shall not be enjoyed by persons not entitled to such benefits.
• Income Tax Treaty – 1994
• Protocol – 2004, 2009
19 ARTICLE XII
Paragraph 5 of Article 28 (Assistance in Collection)
of the Convention shall be deleted and replaced by the following:
“The assistance provided for in this Article shall not be accorded with respect to citizens, companies, or other entities of the Contracting State to which application is made.”
ARTICLE 28
Assistance in Collection
1. The Contracting States undertake to lend assistance and support to each other in the collection of the taxes to which this Convention applies (together with interest, costs, and additions to the taxes and fines not being of a penal character) in cases where the taxes are definitively due according to the laws of the State making the application.
5. The assistance provided for in this Article shall not be accorded with respect to citizens, companies, or other entities of the Contracting State to which application is made except in cases where the exemption from or reduction of tax or the payment of tax credits provided for in paragraph 4 of Article 10 (Dividends) granted under the Convention to such citizens, companies, or other entities has, according to mutual agreement between the competent authorities of the Contracting States, been enjoyed by persons not entitled to such benefits.
8. No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that (a) where the taxpayer is an individual, the revenue claim relates to a taxable period in which the taxpayer was a citizen of the requested State,
Article XII of the Protocol replaces paragraph 5 of Article 28 (Assistance in Collection) of the Convention. The change revises paragraph 5 so as to remove the now obsolete reference to the provision of paragraph 4 of Article 10 (Dividends) of the existing Convention prior to amendment by the Protocol related to the “avoir fiscal.”
ARTICLE 31
Assistance And Support in Collection
1. The States undertake to lend assistance and support to each other in the collection of the taxes which are the subject of the present Convention, together with interest, costs, and additions to the taxes and fines not being of a penal character.
4. The assistance provided for in this Article shall not be accorded with respect to the citizen, corporations, or other entities of the State to which application is made, except in cases where the exemption or reduced rate of tax granted under the Convention to such citizens, corporations or other entities has, according to mutual agreement between the competent authorities of the States, been enjoyed by persons not entitled to such benefits.
INCOME TAX TREATY 2000
ARTICLE 27
Administrative Assistance
1. The Contracting States undertake to lend assistance to each other in the collection of taxes referred to in Article 2 (Taxes Covered), together with interest, costs, additions to such taxes, and civil penalties, referred to in this Article as a “revenue claim.”
8. No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that a) where the taxpayer is an individual, the revenue claim relates to a taxable period in which the taxpayer was a citizen of the requested State, and b) where the taxpayer is an entity that is a company, estate or trust, the revenue claim relates to a taxable period in which the taxpayer derived its status as such an entity from the laws in force in the requested State.
Article XXVI A
Assistance in Collection
NOTE: S. (8) is still in effect, though with different wording. It currently reads: “8. No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that where the taxpayer is an individual, the revenue claim relates to a taxable period in which the taxpayer was a citizen of the requested State”
1. The Contracting States undertake to lend assistance to each other in the collection of taxes referred to in paragraph 9, together with interest, costs, additions to such taxes and civil penalties, referred to in this Article as a “revenue claim”.
8. No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that
(a) where the taxpayer is an individual, the revenue claim relates to a taxable period in which the taxpayer was a citizen of the requested State, and………
8. No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that
- (a) where the taxpayer is an individual, the revenue claim relates to a taxable period in which the taxpayer was a citizen of the requested State,
Article 22
1. Subparagraph 8(a) of Article XXVI A (Assistance in Collection) of the Convention shall be deleted and replaced by the following:
(a) Where the taxpayer is an individual, the revenue claim relates either to a taxable period in which the taxpayer was a citizen of the requested State or, if the taxpayer became a citizen of the requested State at any time before November 9, 1995 and is such a citizen at the time the applicant State applies for collection of the claim, to a taxable period that ended before November 9, 1995; and
2. Paragraph 9 of Article XXVI A (Assistance in Collection) of the Convention shall be deleted and replaced by the following:
9. Notwithstanding the provisions of Article II (Taxes Covered), the provisions of this Article shall apply to all categories of taxes collected, and to contributions to social security and employment insurance premiums levied, by or on behalf of the Government of a Contracting State.
@Polly
It really makes me sad to hear you say:
I know it is difficult to keep one’s spirits up. There is SO much to suggest the U.S, will just run over anyone in its bizarre perception of its place in the world (or rather, what it determines other countries, individuals, etc place in the world is). But this reminded me of Brock early days – when we identified something that could free someone of some misconception about this mess. I was really rejuvenated by the idea that this could help people. That is what counts and that is what Brock is for (or at least, what it was formed for & was in the early years).
That said, I don’t think at any time in this process, that anything was crystal clear or without the qualifying phrase “depending upon what the U.S. will do in the future.” But what we have done has made a difference. There is NEVER going to be any aspect of this that is 100% irrefutable. But does that mean it isn’t worth communicating about? Does it mean we can never trust anything? My take is that for now, this is what these treaties say so anyone considering what to do now, can take this information into account. I am not saying this one piece of info will solve anyone’s problem 100%. Or that this is all they have to know. Its just a little piece of the puzzle for some people. I should think Accidentals in particular would find this reassuring…
As to Raoul Weill, I agree that there are more than one way to view a situation. I have no personal opinion about him whatsoever. But just from an observational point, while what he did may not have been illegal in Switzerland, what he enabled his clients to do was to evade tax owed to the U.S. It was a lot of people and a lot of money. Normally known as “aid and abet?” At least one can make some sense out of why he was arrested and tried.
A simple revenue claim would likely not be worth the effort for the U.S.-to go after minnows. That helps convince me this information is worth knowing and passing on.
Please don’t give up. You are a long-time Brocker and have been very generous to ADCS. What we have done, matters. At the beginning, no one knew it was not necessary to become tax compliant in order to renounce. Nevermind all the extra ins and outs. Even talking about renouncing was taboo. Pretty easy to say Brock’s influence on the entire expat community in this regard has been huge. Or relinquishment. Something which still is routinely denied by condors as a reasonable approach in this situation. The ONLY professional I have ever heard who was clear about relinquishing was John Richardson and I suspect we largely learned what we know from him. Oddly enough, in an email link I received today, was a lawyer talking about relinquishment as a valid road to take. Do you see what I am getting at? Long term, we have had an effect even though it may not have felt that way at the time. It has to continue…………
There is a lot of cluelessness about this issue in the States. Liberals are wanting to finally make education affordable, health care universal, and so on and so forth, and they see “tax dodgers” as getting in the way of that, so they want to mow them down, teach them a lesson about community obligations. In very few such discussions, do you see any mention of this issue.
There is RationalWiki, a wiki for skeptics and debunking myths. Unfortunately, there is no mention of FATCA or anything on the site, and its page on “tax” is all about debunking stuff put forth by tax protesters and people opposed to taxation, and talks about how tax “buys civilization”. For what it’s worth, I’ve added a section called “Who is taxed” and mentioned the issue, providing a good source: Ruth Mason’s “Citizenship Taxation” in SoCal Law Rev. I didn’t want to provide too much information, or that might just confuse/drive people off, but I wanted to provide a good intro:
http://rationalwiki.org/wiki/Tax#Who_is_taxed
I also sought to “burst their bubble” on the “tax haven” article. They quoted Obama at the beginning, and you can tell whoever wrote the article is quite pleased with themselves and the Democrats about taking down those tax havens and bringing tax dodging to an end. I put a paragraph at the end about how thanks to its shakedown of the competition and refusal to hold itself to the same standards, the U.S. is now becoming one of the world’s biggest tax havens:
http://rationalwiki.org/wiki/Tax_haven
It’s not much, but it’s a start, and given that they’re skeptics who under their philosophy are supposed to be willing to consider ideas that are inconvenient but may be true, they’ll have a hard time justifying wiping out either of these sourced additions.
Yes- it is disheartening. I was so sure that Bopp had a great case and would win as the first in a long line of wins. I was gobsmacked at the verdict of the judge. It just seemed to me the system is rigged. Maybe the election is now too. Maybe all of it is rigged. But somehow… along the line, there were changes made. Like the introduction of Streamlined which forgoes penalties. That is a huge accomplishment somehow, isn’t it? But even our friend John Richardson finally renounced and will pay up his taxes. I just don`t know if advising people to hide is still a good thing, unless it was an elderly couple with a pension to live off and America wanted to take that from them, rendering them virtually homeless or starving. I think things have changed but only minimally. Thats not to say that fighting these unjust laws and archaic tax systems isn’t worth while. But how to fight? It has really been like one punch in the nose after another. Just a few months ago we were all excited about TAX REFORM and Orin Hatch was in charge and they would do so much, they said!! Nothing. We sent thousands of letters with stories of such suffering. No reaction even though they were read- but maybe Streamlined grew out of them? About 2 years ago, they said that the White House would go back to the Republicans next election- that was SURE. Then we got Trump who has ruined the reputation of Republicans for decades to come. And even the idea of same country exception by the dems hasn’t gone through. It has just all been downhill for so long.
Sigh.
There was something in german news about an eye flu going around. I think I`ll go google that now.
If anyone wants to follow up on issues I have raised, I will be in Montréal Dec. 1-3 & 5-6 and in Stanstead QC Dec. 3-5 and would be glad to meet for coffee and exchange views. I do not seek and scarcely ever accept clients but like to exchange views as an academic lawyer with a view to nationality law, cross-border tax and conflict of laws. French or English ok.
Has John Richardson renounced?
@Patricia Moon; “I was really rejuvenated by the idea that this could help people. That is what counts and that is what Brock is for (or at least, what it was formed for & was in the early years).”
As an old timer…..hear hear…bravo…kudos….
Let me add to some of this Brock Collective assimilated wisdom.
It depends where you fit into the matrix as to how helpful this is. For some such as accidentals with non-usa dominant nationality resident outside the usa it is very helpful. For an “American Abroad” less so.
Using our friend Boris Johnson as an example this was less than helpful because he was high profile AND had USA source income that was easily garnished.
But you forgot one other important piece of information which is found in “EXPLANATION OF PROPOSED PROTOCOL AMENDING THE MULTILATERAL CONVENTION ON MUTUAL ADMINISTRATIVE ASSISTANCE IN TAX MATTERS” on Page 3.
https://www.jct.gov/publications.html?func=startdown&id=4550
The USA will NOT provide any tax collection to any country OTHER than the five cited countries which is very limited.
Other important factors? A person MUST always obey and respect the laws of the country they are resident in!! Ergo a Citizen of ______ resident in same country who is considered by the USA (a FOREIGN country) to be its citizen, MUST ensure full compliance with _____ whom they are resident in.
A citizen of Ireland, resident in the Republic of Ireland, with no USA income/assets, who is fully compliant with the ROI, IMHO has little to fear.
Anyways what you wrote about today means that the five cited countries can throw US Citizens under the bus while the rest of the world will not.
With respect to Polly, as we all feel we have become second class citizens and have been tossed under the bus, I think at some point we all face being thrown under the bus with regards to collection and that is regardless as to having a CLN or not!!!
I relinquished boldly and proudly, do NOT have a CLN and debate in my mind if I am better off with or without that CLN in regards to future actions. Not having a CLN has not harmed my ability to get an ESTA or to return to the USA as a tourist.
@BB
Polly appears to have confused John Richardson with Stephen Kish.
@Polly, lets break some bread…….
I think the era of the Expat American is D-E-A-D.
What does that mean? The group American Citizens Abroad has a function and that is to represent those that leave the homeland for a couple years.
The renunciation industry will do well with decades of work in the pipeline.
Relinquishments in particular when taking up another second citizenship will remain strong. For many, they will OPENLY deny former US Citizenship and rightly state they relinquished when they became X.
PS. In regards to Trump…he is NOT a warmonger neocon!!!
And @Tricia, I just read this “……. for small nonresident taxpayers, the IRS will have limited abiltiy to enforce…..” …………Keep in mind that all of this is speculation, even if somewhat informed speculation.”………
http://federaltaxcrimes.blogspot.ca/2016/10/irs-release-on-offshore-compliance.html#comment-2971304578 from one of the US Homelander practitioners whose site we’ve been reading for several years now.
Hi George
There is no perfect solution. In addition to this being helpul to Accidentals in those 5 countries, a large majority of Americans Abroad are duals. So as long as they were dual at the time, they are protected.
One can see the glass as half empty or half full. I prefer the latter.
@badger
Thanks. All I was trying to do was add a small something to take the edge of of this for whom this idea applies.
I am really disheartened by the lack of support here………
@P Moon, “One can see the glass as half empty or half full. ”
Some see the glass as empty……
I too prefer half full.
Again when I stated US Citizens that you quoted, I meant SOLELY US Citizens. Sadly, I see few solutions for them and I am a glass half full guy.
@Badger @PM, from the link “Updated data shows 55,800 taxpayers have come into the Offshore Voluntary Disclosure Program (OVDP) to resolve their tax obligations, paying more than $9.9 billion in taxes, interest and penalties since 2009. In addition, another 48,000 taxpayers have made use of separate streamlined procedures to correct prior non-willful omissions and meet their federal tax obligations, paying approximately $450 million in taxes, interest and penalties.”
I would reckon that the OVDP would be largely homelanders and streamlined would be outlanders.
48,000 out of 8,000,000 expats…….that is not squat.
The super majority of outlanders are saying take this and smoke it.
@Badger, I agree with @PM in regards to “for small nonresident taxpayers, the IRS will have limited abiltiy to enforce…”
IF there are no US assets and you do not give a rats a__ about a blue passport there is ZIP they can do.
By way of example what can Uncle Sam do to Ginny or Gwen? The ONLY thing I can think of is FORBID them from making a Costco or Sams shopping trip on a cross border shop! They could also prevent them from changing flights in the USA. In my other life I was warned by higher ups that if I went to certain countries I would face grave problems and you know what I lost no sleep.
@George
Love to break bread with you George. You know I am wishing the best for you and all of us.
I think that the times are changing. I am in my 60s and that makes change hard. Like many older generation germans still think of America as their saviour after WW2. There was an old America – but how is this new America? How is even this new WORLD with the internet and globalisation? These are all fairly new things we are faced with, and I oftentimes think that somebody who is 20 can grasp it all better than I can, whose first TV was black and white. But maybe it is something we need to accept? I don`t think FATCA is going to go away. It is too entrenched in the meantime. Maybe Streamlined is the best we could have hoped for. And as long as no other nations stand up for themselves alongside of us – how can a handful of Brockers really make such a difference? Against that 800 million ton gorilla? The whole world has succumbed. And still – I wait with baited breath for the outcome of the Canadian lawsuit.
Yes- I guess I meant Kish. In Iceland? Ooops.
Polly,
Your question is one that has been addressed in legends and sci-fi/fantasy. How could a little insignificant person take down a giant?
I hope you take heart in the story of David and Goliath, where David knocked Goliath out by slinging a rock at his head, and then killing him when he was unconscious.
The Lord of the Rings, where little Hobbits from a backwater land took down Sauron, who had menaced the wise and the great for ages.
The first Star Wars movie, where a farm boy piloting a small one-man fighter fired 2 proton torpedoes which destroyed the Death Star, a moon-sized battlestation with the firepower to destroy an entire planet.
I hope you can take heart in these stories. 🙂
Thats sweet Beneficii. Thanks for writing those kind words. Bruno Bettelheim, a psychoanalyst, wrote a book called “Kinder Brauchen Märchen” (= children need fairy tales). In it, he analysed some of the content of fairy tales from the point of view of childhood inner conflicts. The fairy tale where the giant loses against the dwarf? He wrote that a father read this to his little son who was around 4. The son said “Daddy? There are no such things as giants are there?” And Daddy answered “No son. There are no giants.” And his son thought about it and then said “But there are grownups!” ( Wink )
@George,
I know, its nuts that there’s no protection for those who are permanent residents in their adopted country and are “just” American. The one thing they could take from this is to make a point of taking the 2nd citizenship (though that is now a long wait, at least in Canada).
They can’t do much to anybody it would seem. I don’t think they would DARE do anything to Gwenny or Ginny personally. They certainly are protected by the collection clause. And like badger pointed out, they are not going after the little guys. I think those of us who lived through the OVDP/OVDI periods before streamlined etc, still remember how utterly terrifying it was and it was not at all clear then, that they would not be coming at the little guys. Such horrid stories from the programs where people tried to come forward and do the right thing. It is something that just cannot really be explained to those who came to this later……
I think a lot of people have figured out ways to stay out-as you said, the numbers show doodly-squat are compliant. I am sure some have renounced with no intention of dealing with the IRS-will stay out of the country and not fly over US. Those who need to get in to see family will be compliant, at least for now. But if the current course continues, I don’t see how everyone can NOT renounce. There’s simply no way to be tax compliant with the Americans and be able to save for retirement. Sooner or later, people will have to realize it is an issue of practicality despite the emotional writhing…….
One irony- recently watched old videos of the Senate hearings back in the mid-90’s-Clinton’s time. And the point was made that really, the situation they were discussing centered around the grand total of 10 people. Ten. Of course that number is higher now but I bet it is still ridiculously low and certainly not worth what it “costs” the rest of us………..
“Are you saying that Canada has collected tax for the US on self-employed income?”
No not the CRA. Canadian BANKSTERS have collected tax for the US on Canadian sourced income.
“What does that have to do with penalties?”
I don’t know if Canadian banksters have collected penalties for the US but who knows if anyone can stop them. Van deMark might have been lucky because his deceased father was the delinquent. You and I might be able to blame our deceased fathers for making us US citizens but you and I ourselves bore the tattoo.
“A bank cannot on its own collect for a foreign governments. A bank cannot even be involved in exchange of information”
OK but I need your help to sue TD Waterhouse in Canada, for collecting for the IRS (from Canadian sourced income) and reporting it Form 1099. There wasn’t even a lien. There wasn’t FATCA yet either.
Where US Tax Court ruled that self-employed US persons in Canada had to pay quadruple tax, I don’t know if the IRS succeeded in collecting, or by what methods.
@Norman
I would like to understand what you are saying but I can’t quite follow it. May I ask:
1) How is it that a CDN bank has collected tax for the US? If someone owed tax on self-employed income, sourced in Canada and living in Canada, and they don’t pay, I would expect the IRS would contact CRA. How did the bank become involved?
Why would TD Waterhouse claim to be paying self-employed income on a 1099? That is just weird, weird, weird……..Why would TD Waterhouse be paying your self-employed income?
I share your perception that the banks may indeed, be pushed by IRS where there is a US branch of the CDN taxpayer’s bank. It will get very messy I would hope….
The USG will hit any Social Security payments in future owed. The IRS routinely docks SS payments. You might only get a few hundred bucks a month, but they’ll steal it from you.
Take heart @Tricia. I appreciate your efforts to allay concerns – and I think I understand what you were trying to convey, and probably others do as well. I really had to wrestle with that treaty speak though. Very convoluted to understand, couldn’t get a firm grip on it.
My comment with the JT quote was only added because I hadn’t seen JT make those type of comments recently, and for quite some time, so it seemed notable that he was repeating it. Not an endorsement by me of complying, or any particular path – just underscoring that for many, as @George said; “IF there are no US assets and you do not give a rats a__ about a blue passport there is ZIP they can do. ” . I do also loath the latest ominous sounding IRS descriptions of the ‘complete’ Streamlined ‘narrative’ they demand, which creeps me out, so was interested to see that ‘quiet’ complying going forward was still something he noted as potentially viable – depending on specific facts and circumstances.
There are no absolutely certain assurances of course, and I think people may be as horrified as I was to even find Canada in that list of 5, despite the carve out for Cdn citizens, and just overall shell-shocked in general, with a default position of not being able to believe in anything since Canada under the CONs has thrown them under the bus with the IGA and enabling legislation – with the Liberals unashamedly doing an aboutface to defend what they said they wouldn’t do – a stark betrayal made even more hateful because they are so ‘sunny’ and full of smiling bs posing while doing it – abusing our own Cdn taxpayer revenues to make the betrayal complete – apparently unfazed to now be defending the indefensible and unconstitutional – and throwing their own fellow Canadians under the US bus.
And perhaps after the events of the last 5 years, there is the tendency now to feel safer not taking anything for granted, and to try and be prepared and alert always for the worst. We don’t trust our government/s not to lie or betray us, as they have proved so untrustworthy and false. Even those experienced and able MPs who seemed sincere in their vociferous attacks on the FATCA IGA before the election, and who you’d think would be loath to look like liars and two faced hypocrites after the election – and all on the very public record for posterity ( ex. http://ipolitics.ca/2016/03/22/brison-garneau-endorse-deal-to-share-canadian-banking-records-with-irs/ http://ipolitics.ca/2016/03/17/trudeau-liberals-reverse-position-on-controversial-irs-information-sharing-deal/ ) – choosing to close ranks with the Cons who brought us FATCA in Canada, and avowing support for the likes of the new and dubiously qualified Minister of Revenue Lebouthillier parroting her memorized lines ( ex. https://youtu.be/nn4ukIyXTh4 ) rather than be true to their previously stated positions and their fellow citizens ( https://youtu.be/0XJoH3J5xOc ).
@George, I had to laugh while picturing this;
“The super majority of outlanders are saying take this and smoke it.”
And I hope that in some little way all of us together here have provided people with more perspective and much food for thought, just as Tricia has in this thread, which will make it easier for people to see more clearly all their potential options.
“How is it that a CDN bank has collected tax for the US?”
By withholding it and reporting it on a Form 1099.
“If someone owed tax on self-employed income, sourced in Canada and living in Canada, and they don’t pay, I would expect the IRS would contact CRA.”
I don’t know if the IRS contacted Revenue Canada (as it was before the 1984 social security treaty). I read four US Tax Court rulings.
“How did the bank become involved?”
I don’t recall any mention of a bank in the four rulings that I read.
“Why would TD Waterhouse claim to be paying self-employed income on a 1099?”
That sounds weird to me too.
“Why would TD Waterhouse be paying your self-employed income?”
They didn’t. Though if I had performed services for them instead of for a different unrelated company, then that would have been the answer to your hypothetical question.
TD Waterhouse in Canada deducted 10% Canadian withholding plus 30% US withholding from Canadian sourced interest in my account in Canada. The 10% Canadian withholding was correct because I live in Japan. TD Waterhouse didn’t answer my questions about the 30% US withholding and TD Waterhouse decided to close my account rather than answer. The IRS later answered that the reason is because TD Waterhouse had an affiliated company in the US. This interest income was not self employment income.
The four US Tax Court rulings that I read about, involving self employment income, were not about me.
Though by coincidence I also was subject to quadruple taxation on self employment income for the first part of 1984, I think 7 months. I paid it without liking it. After the social security treaty came into effect, the IRS refunded my US payments so that settled it for me. Though some years later I figured out that the IRS shouldn’t have refunded those and I really should have been subject to quadruple self employment tax for the period before the treaty became effective.
It’s been said before but everyone has to weight up their circumstances and risks. If I had been finding out about Fatca, Fbar and Citizen tax through the grape vine or a family member or associate, I too would probably not have done anything and taken a wait and see approach. Information like this from this post would have helped me make a decision especially if I had been an Accidental American without a US birth place living in a collection zone. But alas I was unfortunate enough to get a Fatca letter that made me realise I was probably already identified as a US person.
it’s all information sharing which precious little real helpful information is shared by the accountants. For me I had responsibilities for work with a job that actually has signage to accounts so renunciation was really the only safe option for me. But without a US birthplace, it would have been very possible to stay under the radar (I already was) and carry on in the land of the living. I would think it makes sense for the IRS to make their effort where they think there will be a reward. In the meantime, they can use the banks to do the dirty work for the small tax payers.