Global News has the following report:
U.S. sues Vancouver dual citizen for over $1M for not reporting accounts
This is big news. And it reveals and confirms my prediction of what FATCA would be used for: To go after the bank accounts of “US persons” living in foreign countries by using FBAR fines and FATCA information. I called it the Master Plan.
A few observations on this article:
(1) Clearly this lawsuit should help the ADSC lawsuit. Here is a case of real hazard that failure to protect Canadians from IRS intrusiveness will result in.
(2) This case is not based on tax owed, and so this is purely an FBAR matter. But IRS code has no jurisdiction in this matter.
(3) The article doesn’t say where the lawsuit is taking place, but then says that the papers were deposited in Seattle in Federal court.
(4) The fine of $100,000 or 50% of account is wrong: Or did it go up from $10,000?
(5) President Donald Trump has made no difference in the persecution of so-called “Americans abroad”.
(6) This is a Canadian living in Canada. He is therefore an innocent person being sued by the government of the USA, for small money. I.e., he is a minnow, and what Nina Olsen has called a benign actor.
(7) The lawsuit shows that QI provisions are not sufficent for the USA government to seize Canadian accounts in Canada.
(8) The Justice Department is not suing this person in Canadian court. But perhaps that will come next.
See also:
U.S. government suing Canadian resident for $1.1M over bank form
Looks like he got on the DOJ’s radar in Switzerland. From Elizabeth Thompson at CBC:
http://www.cbc.ca/beta/news/politics/taxation-canada-u-s-irs-1.4025880
One of the out growths of FBAR is the states are now discussing openly, ways to extract money from people who have worked and earned the basis of their wealth in their state and as soon as they retire, have moved to a state where they keep taxes low, so they can have a standard of living, comparable, to before retirement. If one state gets a SUCCESSFUL shot the others will jump on board the gravy train.
TOTAL REPEAL OF THE U.S.TAX CODE, DISBANDING THE IRS, AND GOING BACK TO THE CONSTITUTIONAL REQUIREMENT FOR THE U.S. GOVERNMENT TO GET THEIR INCOME FROM TARIFFS AND EXCISES. Repeal of the 16th amendment that the Marxist’s got passed in 1913 when Marxism was sweeping the world. Its failure was preordained because most people won’t work unless they have to to survive. The communes failed, the Socialists failed, the Communists failed and the Marxist income Tax has been a failure from inception in 1913.
@Bubblebustin, the articles give the impression that Pomerantz is being sued for Canadian accounts, and then one wonders if the IRS knows about these accounts because of IGA–information on 300,000 accounts handed over to the IRS by the CRA.
This shows real harm. It helps the ADCS lawsuit big time.
@Petros
What’s to stop the IRS from using the info it receives from FATCA? Nothing that I know of, except perhaps budgetary constraints.
This is the proverbial sh!t hitting the fan.
you are correct :
(4) The fine of $100,000 or 50% of account is wrong: Or did it go up from $10,000?
There seems to be some confusion. If he is being attacked based on FBAR alone that would be strange. The IRS says you can file them retroactively if you owe no tax. Legally they could come after you though and what they say in their documents holds no legal power for taxpayers.
>In the case filed in the United States District Court in Seattle, the U.S Justice Department is seeking
> $860,300 US in civil penalties, late payment penalties and interest.
Are these later payments for FBAR fines? Sounds more like tax penalties.
I didn’t expect them to use just FBAR fines alone as I figured that was maximizing the chances that a court finds the fines excessive.
This will no doubt be useful for PR reasons, but after reading the CBC article it’s clear that he doesn’t totally fit the “accidental” or “minnow” profile, having various ties to the US and having also various nefarious-sounding “offshore” accounts.
It’s still good news for us, albeit shitty news for him. With no way to collect (except any US assets or social security) then he might as well ignore the whole thing and save on legal fees.
Donald Trump has other issues to contend with. As I predicted before the election, he underestimated just how dysfunctional Congress are. He got behind the Republican Obamacare replacement as any CEO would have, only to find, surprise, surprise, surprise, it was prepared by a bunch of rank amateurs, who got just as much ‘help’ from organized medicine as Obamacare did. Then there’s the tax reform for homelanders — this has to appear as a minor sideshow for him.
The IRS are under serious budgetary duress — any additional funds they can ‘harvest’ from the unwary mean they can delay laying off people a bit longer. They’ve become just like those Soviet soldiers stationed in East Germany after the change — no funds from home, so they had to resort to robbing people just to eat. So it’s understandable that they’d go after people like this guy, who even founded a PFIC in Turks and Caicos.
If it can be shown that the guy did nothing wrong, then that would be teeing up the case for a simple slam dunk by the president. Remember 26 USC 891 is there waiting for him to (threaten to) use. Were he to use it, there would be rioting in the streets. Were he to threaten to use it, Congress would simply block on all the other ‘important work’ in the hopper for them to screw up (even though their screwing up is sadly almost a foregone conclusion). So he has no choice but to sit back and watch things develop.
In the mean time, as Nononymous alludes, the best thing would be to insure such actions are seen as the sort of extraterritorial overreach that puts Americans at a disadvantage. Even better is to cast things so simply that even the US mainstream media can understand it.
I had a funny feeling this kind of thing was going to happen: the US suing a Canadian for over 1 million Canadian dollars. FBARs are a trap. In this case, not filing them. However, Mr. Pomerantz case is more complicated than most. The CBC news article indicates that he had a corporation in Turks and Caicos Islands and several Swiss bank accounts. This likely makes him a bigger target than most of us. Although I wouldn’t put it past the IRS to go after minnows for FBAR penalties.
I quickly held my nose and scanned the CBC comments and, predictably, there was far more outrage about the offshore accounts than about the IRS action. So I would exercise caution rather than make this guy the poster boy for US government injustice.
@nononymous,
Poster boy? I never said that.
Look at the CBC article, it sounds like the violation of FBAR took place quite some time ago:
I am trying to do the math here, but those years are all beyond the Statute of Limitations (six years after June, 2010).
And here I thought I might go to the USA again after June 2018.
I’m not sure that this will be much help to the ADCS case. The Gov’t of Canada could say that it is not requiring Mr. Pomerantz to pay the IRS for FBAR fees. The fine, should he choose to pay it, is a demand from another country (US) which the Gov’t of Canada will not collect from someone who was a Canadian citizen when the taxes or fines were levied.
@Queenston,
The claim of damage however is not about whether Canada will make you pay it. It is about Canada giving information to a foreign country which will damage the citizen and resident of Canada. I.e., that person does not receive equal protection (from foreign governments) nor does the person benefit from the principles of justice with regard to their private information.
And further to that point, if Canada is going to kiss US butt on FATCA, how do we stop that same government from collecting the fine if the USA asks for it? Flaherty said that FATCA was unjust to Canadians, and yet, he signed the IGA.
@Petros
I realize you didn’t call him a poster boy, but others might. If he was living and working in the US on and off for a couple of years, and set up offshore corporations and Swiss bank accounts etc. then he’s not the archetypical lifelong Canadian resident about to lose his or her retirement savings, and will likely be perceived with less public sympathy.
New Amounts Involving Penalties
https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar
So they adjust the penalties for inflation but do they adjust the reporting thresholds for accounts?
@Fred (B)
I see no mention of raised thresholds…..
@Petros
It doesn’t seem to me that FATCA was responsible for this guy’s troubles. We don’t know the whole story, of course, but we’re talking about FBAR fines dating back to 2007-09 and an audit in 2010, so it seems more likely that he disclosed the existence of the accounts himself – in which case Canada did not pass any information.
As to the point about how do we know that Canada won’t one day help the US collect – we don’t, which is why I always use the “currently” disclaimer. All manner of strange things could happen against which there is no defence – in a worst-case world the US could retroactively reject past renunciations and send us all huge tax bills and our governments could assist in collection. Not likely, but theoretically possible.
While the description says $860,300 for civil penalties, late payment penalties and interest, it can be for FBAR only. Once a figure is given to the taxpayer, the clock starts ticking. There will usually be a cap on these kinds of penalties…I am looking for that info now.
It was confirmed by one of the reporters it only included FBAR penalties.
Interesting how there are some different pieces of info in each article.
@Nonononymous:
Then really the question of Statute of Limitations applies, if the violations are now 8-10 years old.
However, this remains germane to FATCA–because FATCA will now give the IRS/Justice department all the info they need to do similar lawsuits on thousands of Canadians living in Canada (300,000 accounts were reported to the IRS by the CRA).
First of all, this is a CBC article, so accurate and factual reporting takes a backseat to sensationalism.
There are so many missing pieces to facts of this situation, that we cannot even begin to try and speculate what’s really going on in his particular case.
“This has been a friggin’ nightmare,” Yes, my sentiments exactly, Mr. Pomerantz.
@Petros
And if the US has no ability collect in Canada, maybe the IRS won’t recover its legal costs and this will set a useful precedent for them that these cases are not worth pursuing unless there are US assets available to seize.
One last note, after my scan of CBC comments, which I normally avoid because reading those things is worse than dental work without anesthetic.
Just as there is a certain ”homelander” bias among US residents, refusing to understand the problems US law creates for expats, there is a similar popular bias against dual citizens in Canada. The perception is that duals have enjoyed (or potentially could enjoy) the advantages of US citizenship, so why should they not comply with its obligations?
I encounter this view constantly, in various fora, comments along the lines of “ten years ago you were all boasting about being able to work in the US, but now you’re pretending you didn’t know that you had to file taxes” etc.
In my case I did take advantage of my dual citizenship many decades ago, was able to work easily during and after grad school in the US, and obtain a green card for my wife to do the same (yes she got rid of it properly). Those were definitely benefits. When confronted with the argument that I’ve exercised the rights and should meet the responsibilities, I don’t really have much of an answer beyond “nah, don’t want to, it’s stupid and they’ll never catch me.” I suppose the only thing I could expect sympathy for is the cost and hassle of renouncing and exiting the US tax system, which is not insignificant.
So the point is, much easier to generate public support for the true “accidentals” who acted no differently than Canadians without dual citizenship (never living, studying or working in the US) than for folks like myself or the guy being sued, who are more difficult to defend.