reposted from MapleSandbox
by Lynne Swanson
#FATCA Americans overseas: Do NOT allow US tax pros scare u into entering US tax system. Many have no business entering!
— Keith REDMOND (@kredmond_global) January 19, 2017
Backing up the above tweet, Keith Redmond posted the following on Facebook:
Dear Members: I just had a lengthy, robust call with an individual who spent 25 years in upper management with the Department of Treasury IRS Criminal Investigation. He confirmed what I thought about the IRS. There is more bark than bite. He stated that there are many, many Americans overseas ho have no business in entering the US tax system and that Accidental Americans UNDER NO CIRCUMSTANCES should enter the US tax system. He confirmed that there are MANY US tax pros who prey on Americans overseas and Accidental Americans through fear and falsehoods. (e.g. you will get arrested, etc.). Any US tax professional who pushes and scaremongers these individuals to comply are not professionals and should not be used! He confirmed that the IRS is NOT going to go after you in your country of residence (most especially if you are a citizen of that country) and the IRS is NOT going to arrest you at the US border. The IRS does not have the resources to do this plus they go after those who have committed a crime not the average American overseas. He stated that Americans overseas need to not succumb to the fear. Excellent conversation and I am glad my views have been validated.
This reflects what I have long believed. Unfortunately, there is still the nightmare of FATCA to deal with. In some countries, anyone born in the US cannot even get bank accounts. We are treated as criminals just for banking where we live.
I asked Keith how his contact explains and justifies this.
Keith replied:
He can’t. He finds the whole situation abhorent…
@Nononymous
“In pragmatic terms, FATCA is primarily an access-to-banking-services problem, not a US tax problem.”
Umm, Don’t take it so lightly, that’s the one that KILLS.
@iota
“American extraterritorial fiscal/financial laws aren’t enforced in Britain, to the best of my knowledge.”
Then why have British nationals had to answer questions on their connections o the US under threat of having their accounts (shares) in GB frozen if not answered and file with the IRS if “yes” was the answer to any of the questions?
“The US State Department is not going to work with the IRS to revoke passports on Americans overseas. It is not going to happen.”
How can that be? It’s the law.
@shovel
“Talk of the 30% withholding can be called what it is… fear mongering.
30% a big stick? It’s entirely reasonable to suggest it’s too big a stick to wield. Mutually assured destruction.
Some laws supposedly we should fear, and some we should wink at. Well, why not wink at the big stick? Again, how do you choose which laws to fear monger about, and which to ignore?”
We can blink to the cows come home, but if our banks don’t, we’re done.
@iota
“AIUI FATCA does not require banks to detect when their customers are lying.”
That’s not the point. If/when (as things are going, when for many) any are found out by the IRS, then wouldn’t the bank be exposed to the fine?
@Duality
““CONSEQUENCES OF FAILURE TO PROVIDE INFORMATION: Failure to provide the information requested on this form may result in Passport Services’ refusal to accept your application or result in the denial of a U.S. passport.””
“No U.S. Passport? Good riddance…”
That means saying goodbye to my family, home, employment…everything here in Japan.
@iota
Why would you say that? Godwin’s law is described here:
https://en.wikipedia.org/wiki/Godwin's_law
@USCitizenAbroad
Let’s not forget another pocket of resistance – Trinidad and Tobago.
Speaking of PFICs, can you translate in layman’s terms what these recent changes/clarifications from Treasury and the IRS mean?
Under the PFIC Regulations, the following categories of U.S. persons are not required to file annual reports with respect to their ownership of PFIC stock:
* U.S. persons who are beneficiaries of non-U.S. pension funds holding PFIC stock where, pursuant to a U.S. income tax treaty, the income of such pension fund may be taxed to the U.S. person only when and to the extent the income is paid to, or for the benefit of, the U.S. person, even if such non-U.S. pension funds are not treated as “foreign trusts” under Section 7701(a)(31)(B) (which classification had been a requirement to qualify for the exclusion under the prior temporary regulations);
* Non-resident alien taxpayers with respect to the U.S., as determined under U.S. income tax treaty “tie-breaker” rules, who are otherwise resident aliens under the Code for reporting purposes (so-called “dual resident” taxpayers)
http://www.mondaq.com/article.asp?articleid=562232&email_access=on&chk=1512428&q=950196
@JapanT
Sometime between 1809 – 1865, Abraham Lincoln said:
“The best way to get a bad law repealed is to enforce it strictly.”
Interestingly, CBT originated during the Civil War under Lincoln.
@ Japan T
“That means saying goodbye to my family, home, employment…everything here in Japan.”
Speaking from personal experience, it was a blessing never having to rely on that booklet again. Unfortunately, for many others like yourself, it can be a matter of survival. This is a consequence of American public policy having gone catastrophically wrong. So my comment is insensitive in this context, apologies.
@Bubblebustin
The form they are referring is Form 8621. In general “U.S. persons” with more than $25,000 USD in say Canadian mutual funds are required to file one or more of these “God auwful” expensive forms for each mutual fund owed.
What is being described are exceptions to the 8621 requirement:
In practical terms this means that mutual funds held in RRSPs would not be subject to the Form 8621 requirement. It would also mean that mutual funds held in pension plans would not be reportable on the 8621.
This means that Green card holders who are living in Canada, and are pursuant to Article 4 of the tax treaty treated as tax residents of Canada, are NOT required to file form 8621. By the way the same rule applies to Form 8938 for Green Card Holders. So, more benefits to not being a U.S. citizen.
By the way, what is absolutely shocking is that U.S. citizens owning more than 25,000 USD in Canadian mutual funds are as a general principle required to file Form 8621 EVEN IF THEY ARE NOT REQUIRED TO FILE the 1040!
_______________________________________________________________________
If you can stand reading the actual regulations on PFIC reporting see:
https://www.law.cornell.edu/cfr/text/26/1.1298-1T
Re: being worse off if the IGA is struck down.
If this actually happens (and I hope it is struck down) the solution is simple. If the Libs are still so keen on it they can “renegotiate” it, something Donald Trump should be able to relate to. The second time around they should grow a pair and insist on carving out Canadian citizens, which is not that much of a concession for the US because the Canadian government doesn’t collect for the US on Canadian citizens resident in Canada anyway, so what’s the point of reporting them? As for US citizens who reside in Canada who are not Canadian citizens, there is not much the Canadian government can do to protect them from the US government.
The second thing they should insist on is real reciprocity from the US, as opposed to the vague promises in the present IGA. This is something the US is unwilling/unable to deliver on and is a potential deal-breaker right from the get go. No reciprocity=no deal. This whole thing has reached the point of ridiculous anyway because the banks on both sides of the border make no real effort to determine the citizenship of their customers and only take action if they are hit in the face with it. (The banker’s version of “don’t ask; don’t tell”.)
Failing coming up with a new IGA that passes legal muster, I think the 30% threat is actually a hollow bluff. It is inconceivable to me that the US would attack its nearest neighbor and closest friend with economic sanctions (in effect arguing that Canada is a tax haven). Such sanctions would ignite a trade war and would hurt US investors both private and institutional just as much as they would hurt the Canadian banks and Canadian investors. It is obvious to the US and the rest of the world that Canada is not a tax haven and people don’t move themselves or their assets to Canada to evade US tax. What would the US gain from imposing such sanctions? Answer: nothing, instead they would lose credibility and look like idiots. Trump and the Republicans are on record as wanting to repeal FATCA anyway. Its not likely they would attack Canadian banks with something they are sworn to get rid of. (And with a little luck, maybe they will dump it before the lawsuit even gets its day in court, making the whole thing moot.) My $0.02.
@Maz57
I agree with you completely.
I do want to highlight your suggestion that Canadian citizens resident in Canada should NOT be subject to FATCA rules. This would be consistent with the spirit of the tax treaty.
Also, there is almost NO discussion about FATCA any more that suggests that FATCA is actually related to tax evasion. Everybody knows it is not. The idea of a U.S. tax evader moving to Canada to evade tax is absolutely comical.
@maz57
That’s a pretty astute analysis.
Renegotiation to exclude Canadian citizens makes a ton of sense, particularly since there’s no collection mechanism anyway. I would worry that the US might not like the precedent, however, since every other country would demand the same.
I ultimately hope the lawsuit succeeds, though as I’ve said, I’m nervous of the consequences. I think in the Canada case the withholding threat is probably too big and self-destructive to be credible, nor is denying financial services to 2 or 3 percent of the Canadian population ever going to happen. I suppose one can look at the lawsuit as bomb-throwing disruption – akin to certain arguments in faver of Trump – in the hope that something better emerges from the wreckage.
What is pretty obvious is that Americans abroad are in a very weak position if they don’t have a second citizenship, and that the relative level of misery depends on banks behaviour in their country of residence.
I was bored yesterday and followed a link to a report on Dutch TV about FATCA impacts there. They interviewed three accidentals, two born in the US to Dutch parents but who returned as small children, one born in the Netherlands to a parent with US citizenship; all three were Dutch citizens. One had her bank account frozen until she could produce an SSN or ITIN, which took some effort. The other two both became compliant, and paid $40k and $80k respectively in US taxes and penalties. What shocked me was their attitude of quiet resignation. They acted as though this was something unfortunate, like a bad investment decision, but of course one has to pay. Who in their right mind would be that law-abiding? (The Dutch bourgeoisie evidently.) It was absurd. Fine, let your balances be reported to the US, do what you need to do to keep your banking services (sign the W9 or renounce) but for the love of god, don’t write the US a cheque if you’ve never lived in the country nor intend to do so.
AIUI ,if the suit goes through the CRA and the banks would be restricted from complying with information aspect of the IGA and only for those US persons with Canadian citzen.The IGA would still be valid for temporary US residents and US landed immigrants.The IGA would still be in place til further notice.The rest will be between Trump,God,and our flower child Justin. Am I correct up to this point ?
Thanks USCitizenAbroad for the explanation and the link, but if I can’t understand an article written in almost plain English, I doubt I’d get very far in the paper from Cornell
My turn for crystal ball gazing, and if anybody wants to accuse me of fear mongering, go right ahead.
All analyses above presuppose a legal status quo. Can we count on that? The TC in FATCA doesn’t stand for “Information Sharing” (the means, which is only Stage 1). What TC stands for is Tax Compliance (the end, including Stage 2 collection).
The U.S. achieved its Stage 1 amassing of information by bullying (a 30% withholding threat). These means include a blatant Tax Treaty over-ride against countries like Canada. Re-imposition of these means don’t seem to have dawned as a possibility on those who shudder at a 30% big stick, and at the same time offer the Tax Treaty as a sop.
Achieving Stage 2 was not intended to happen overnight. The other shoe is yet to drop. Consider that the U.S. has clearly proven it can manipulate the legal landscape in other countries for its own ends. If the Stage 2 end is Tax Compliance, and if the information shows it’s worth their while, what’s to stop the U.S. from pulling out the same (or a bigger) stick to further over-ride tax treaties and bully countries into changing their internal laws so they “legally” become IRS collection agencies… and not just for information?
@maz57
“The second time around they should grow a pair and insist on carving out Canadian citizens, which is not that much of a concession for the US because the Canadian government doesn’t collect for the US on Canadian citizens resident in Canada anyway, so what’s the point of reporting them?”
When “negotiating” the IGA, the US side stated that it was about the DATA, not the money. Sure, they are happy to have the extra funds to play with, but what they really want is the DATA.
Any chance we may hear anything about FATCA soon? From Reince, Rand Paul or Mark Meadows?
@Shovel
“All analyses above presuppose a legal status quo. Can we count on that? The TC in FATCA doesn’t stand for “Information Sharing” (the means, which is only Stage 1). What TC stands for is Tax Compliance (the end, including Stage 2 collection).
The U.S. achieved its Stage 1 amassing of information by bullying (a 30% withholding threat). These means include a blatant Tax Treaty over-ride against countries like Canada. Re-imposition of these means don’t seem to have dawned as a possibility on those who shudder at a 30% big stick, and at the same time offer the Tax Treaty as a sop.
Achieving Stage 2 was not intended to happen overnight. The other shoe is yet to drop. Consider that the U.S. has clearly proven it can manipulate the legal landscape in other countries for its own ends. If the Stage 2 end is Tax Compliance, and if the information shows it’s worth their while, what’s to stop the U.S. from pulling out the same (or a bigger) stick to further over-ride tax treaties and bully countries into changing their internal laws so they “legally” become IRS collection agencies… and not just for information?”
THANK YOU. This is another point that I have tried to make. FATCA is just another very early battle in a very long campaign. We must always keep in mind what their end objective is while acknowledging that they will keep this secret for as long as possible. But whatever the objective, FATCA is only a means towards it, not the goal itself.
@Duality
Insensitive, perhaps.
For myself and anyone so situated, over here we have our gov, the US Gov., telling us we must file this mountain of forms, report this to that agency and that to this agency and pay more than I have earned in the entirty of my life thus far for missing some or all of the requirements.
Over here we have those chanting “Renounce and Rejoice, Renounce and rejoice!” and for many that too is simply not possible, regardless of any suppossed attachment to the fatherland or lack thereof.
Then we have the “Do nothing” and the “live under the radar” choruses which are also impossible for many.
Every where we turn we find one group or another telling we must do what we simply can not do.
Not contemplating it for myself, but given this cacophony of impossible to meet demands, is it really any wonder that there are those who are thinking of suicide?
@iota
Thanks for your ideas. I am not sure elongating the process will hurt less people than what is feared will be produced should the IGA be invalidated in Canada.
What about if we succeed in Canada, other govts will reconsider their position and also refuse to go along with FATCA? Can the U.S. afford to apply the 30% sanction to multiple countries?
@Shovel
I have often thought this. Specifically, that the IRS will apply liens/levies through any US locale of a foreign bank subsidiary. The IRS apparently thinks it does have the power to do this and I have been told by various professionals that it has indeed, happened. That is one way. And yes, more bullying and forcing other govts to collect/remit it.
All the more reason to resist this as forcefully as possible, now. I can easily imagine this turning into a a massive and messy movement of civil disobedience. If that is what it takes………….???
“Specifically, that the IRS will apply liens/levies through any US locale of a foreign bank subsidiary. The IRS apparently thinks it does have the power to do this and I have been told by various professionals that it has indeed, happened.”
Note that CANADA is NOT collecting taxes. The banks are being forced to do so.
JapanT
Not yet.
@PM
Sorry for the error. But the mechanism is there and it bas been used.
Point is, even though the gov. of Canada may not get involved, the IRS has other paths to get what they want.
Feeling safe because of statements made by the Canadian gov. may be a false sense of security.