I was very surprised to receive the following email on Friday evening. I cannot recall ever getting anything like this before. I will not identify the author because it is not proper to publicly share an email without the permission of the sender. It is not anyone I have ever heard of before and I doubt any of you have either. It took me a while to decide if I would answer or not. I tried to put my reaction aside after all, why be surprised that a tax compliance professional would demonstrate so little awareness outside of his/her experience. In the end, I simply could not ignore how I felt. I replied and have decided to publish the email without naming its author and my response.
I wish I had pointed out to this person that technically, due to the Canadian IGA (or likely any Model I agreement), that there are no harsh penalties that have been implemented. A professional who is truly conversant with this situation should have stated this better. Does such a statement show a conscious attempt to confuse the expat, assuming penalties from FBAR, OVDP etc will come to mind? Could it be a reference to the idea that Form 8938 is a harsh penalty all on it’s own? (As a matter of torture, most definitely….) Or is the practitioner just sloppy? (Maybe we could get this person to rule on all the “plain language” misapplications we hear of….retroactive 877A, anyone?).
I also wish I had challenged the statement that “the program is working.” There is nothing to suggest that the majority of non-resident (or resident, for that matter) Americans have become compliant. The numbers quoted in the statistics for the OVDP are nowhere near 9 million and we know some of those who came forward are Homelanders. For some interesting figures regarding compliance please see Professor William Byrnes’ “Is FATCA Much Ado About Nothing“? . Prof. Byrnes states “The IRS War on the FBAR is simply not working.” (“The IRS received 807,040
FUBARS FBARs in 2012; compliance with FBAR filing appears to be declining.”) Every tax compliance professional should be required to read this report. It would go a long way in curtailing the inflammatory language we experience, intended to confuse & frighten and assumes we are all idiots.
I also should have challenged the nonsense about ICE not allowing visas of former citizens being allowed to enter the U.S. This amounts to the usual threat of the Reed Amendment. Does ICE have the power to override the State Department?
I am simply astonished at the arrogance of this person. What to say of the obvious limited exposure of such an “expert.” (I have never heard anyone suggest that there are bank problems in Canada). Mentioning OVDP and not Streamlined. Who on earth does this person think he/she is?
My USC/resident-CPA sister strongly suggests I complain to the appropriate accountancy board.
And the unmitigated gall of implying I should send clients………good gawd………
(emphases are mine)
If this is the Patricia Moon who has given up her US citizenship because of FATCA, then this is for you. I have seen your “protests” regarding FATCA and filing US tax returns. You stated that you were delinquent in your filings, and that you caught yourself up and then renounced your citizenship.
You are one of the very reasons that FATCA with its harsh penalties was implemented. I have been practicing in the international tax area, specializing in US expatriates, for over 31 years. I am the chairman of a state CPA Society’s International Tax Committee, and have an international reputation in this area. Over my 31 years’ time I have prepared and/or reviewed several thousand tax return. I have seen dozens of people such as yourself , people who are American citizens, and enjoy the benefits of being an American citizen, while failing to fulfill the obligations that come with citizenship – namely filing a US tax return and paying any tax due. One cannot enjoy the benefits of American citizenship without complying with the responsibilities.
Since FATCA has been implemented, there have been citizens such as yourself who have renounced their citizenship. I understand from a couple of US Customs & Immigration attorneys that I work with that ICE often won’t allow visas to come back to the US, sometimes even for vacations, to former US citizens. However, a much larger number of persons have come forward and are now filing tax returns and complying with the responsibilities of being a US citizen.
So the law has worked. It is accomplishing its intended goals. I personally have worked with several formerly noncompliant individuals to “get them legal” through the Offshore Voluntary Disclosure Program.
Staying legal is not a difficult process. It requires filing a US tax return every year. Often there is no tax due from it, as the foreign tax credits and the foreign earned income exclusion will reduce or eliminate the tax on all but US-sourced income.
Giving up citizenship is a drastic step when compliance is so easy. It is like amputating your arm because you have a hang nail.
And, from my experience, most larger banks WILL continue to work with Americans abroad. Very few are closing American accounts. In Canada, for example, I know that BMO Harris actually promotes accounts for Americans. I have several clients in Canada who bank with them. RBS Bank, Banque Scotia, TD Mortgage Corporation, Canadian Imperial Bank of Commerce, and many others.
Just my thoughts. Feel free to give my name to any individual who wants to become legal, but does not want to go to the extreme that you did.
Your email is extremely offensive and demonstrates that you understand this situation from one point of view and one only.
Perhaps you are unaware of the fact that the large majority of expats living outside the US for decades were simply unaware of any requirement to file taxes and information returns. The U.S. made no attempts to educate or notify people of these requirements. Surely you have known people who were “non-willful.” I certainly hope you did not put any persons such as these in the OVDP/OVDI.
Your comment “You are one of the very reasons that FATCA with its harsh penalties was implemented” is curious, given I did not owe any tax. I was a stay-at-home mother with an annual income that never exceeded $11,000 CAD from doing the books for my husband’s company. An annuity inherited from my parents was transferred at a later time and I most certainly paid the tax that was due.
As to “I have seen dozens of people such as yourself, people who are American citizens, and enjoy the benefits of being an American citizen….”
- I had not lived in the United States for thirty years and was/am a law-abiding, tax compliant citizen/resident of Canada
- I was not “enjoying the benefits of being an American citizen”
- If you are referring to having the right of return, there is nothing particularly unique there; the majority of countries on earth allow their citizens to return
- And I certainly am in no need of the Marines coming to save me in Canada (a “benefit” that one would have to pay for, were it even relevant to those living in first-world countries).
If by “benefit” you mean having access to “the greatest country on earth” I will tell you that a component of renouncing involved my observations about Abu Gharib, Guantanamo, the assassination of American citizens by drone without due process and other actions that frankly made me ashamed to have ever been an American citizen. In other words, your assertion that my renunciation was “like amputating your arm because you have a hang nail” simply does not cover all that was involved. Not the least of which, was my Canadian family and how they felt about the effect of U.S. policy on their lives. My husband resented any account information being turned over to FINCEN (given the fact it was his money)and it was a huge issue in the marriage.
I have remained active in this movement having renounced over 6 years ago. I don’t gain anything personally by volunteering a huge portion of my life to this. I am fully conversant with what is required regarding compliance. It is not always simple and it is very expensive. You fail to mention facts such as:
- the U.S. would expect capital gains tax on the sale of our personal residence for a gain greater than $250k
- the U.S. treatment of Canadian mutual funds as PFICs is particularly punitive and would require 8621 every year
- the U.S. insistence that my country’s tax-deferred vehicles designed to help save for education, disability and non-RRSP uses are foreign trusts requiring 3520 and 3520A every year; all of these plans mirror similar programs in the US (529s, ABLE and Roth IRAs)
- had I been signed on my husband’s company (I wasn’t) we could have found ourselves subject to an annual 5471 and the particularly abusive Transition Tax
I personally have no desire whatsoever to go to the United States. I don’t care what CBP and ICE do. It doesn’t frighten me at all. A Canadian does not need a visa to visit the U.S. anyway.
None of us have ever claimed that obtaining bank accounts or mortgages is difficult in Canada. This is a situation that primarily affects Europeans and it is very, very real. I know many people who have been severely impacted by it. It was perversely disingenuous for Judge Rose claim in the Bopp FATCA ruling, that this was not due to FATCA but to independent action of the banks.
Over the years I have encountered many people such as yourself, who seem to think they are entitled to inflict their opinions and judgments about character based upon presumptions made about U.S. expectations. I wonder if it could ever occur to you that there are other places and people in the world who do not base the value of their existence upon opinions such as you have expressed. I find it difficult to believe you would end asking me to send you clients. I trust this will be the end of any communication.
Alliance for the Defence of Canadian Sovereignty &
Alliance for the Defeat of Citizenship Taxation
Are there now extensions for FBARs? I thought that there no extensions.
“…stated publicly that to file US taxes he just wrote “taxes paid in Canada” across a 1040 and sent it to the IRS?”
I had a friend here, US citizen only but working in Canada, who just wrote “0” at the bottom of a 1040 and stapled it to a copy of his Canadian return, and sent it in by regular post. Worked fine for him. Similarly, when I filed my first US tax return after moving south in the 1990s, I received a letter enquiring as to the whereabouts of previous years’ returns. I wrote “was living in Canada” on the letter and sent it back. Never heard another word.
Point is, really, fear of the IRS is overrated, they have little or no ability to deal with taxpayers outside the country. I would still however not provoke them by sending something silly, and just remain off the radar, particularly as a dual citizen.
“a canadian is a canadian is a canadian”
no need to have any further interactions with any other countries out dated laws
very well written response. much better in fact than my 2 word response would have been
keep up the fight………………
Excellent retort. Thank you for the trouble you went through to enlighten.
Above all, the individual you dealt with sounds extremely defensive. It’s a sure bet that underneath his cocksure veneer, he’s been feeling that his bread-and-butter is threatening to dwindle considerably and even disappear. It’s why he resorted to insults and threats. And for the cherry on top –absurdly and hilariously– he tried roping you into helping him garner more business. Can we say more?
I’m out of the system for years already. But I can confirm that the right hand doesn’t appear to know what the left hand is doing. They’re also “cutting down” their workload from 10-20 years ago. Documentation that would’ve been forwarded as a matter of course is no longer attached. Even if they owe you money, they’re now just forwarding a check saying you overpaid. No calculations as to where you made a “mistake” — and to be able to check whether the “mistake” was theirs.
If it’s going on at this level, calculate exponentially for more complicated situations.
Btw, interesting entry by Anthony Parent’s here. (It also speaks to above comments by @Nononymous):
Parent notes (rather indignantly and with good reason): “Assume they don’t know the first thing about you.”
@ Norman Diamond
“Yeah, I would have told him to multiply with himself.”
You made me spit fruit smoothie onto the keyboard. 🙂
Possibly a silver lining to all of this? If this guy feels he has to resort to this sort of sleaziness to drum up business, perhaps the efforts being made here at Brock and elsewhere are actually starting to work! Maybe people are getting the message that there are alternatives to stepping forth into the full glare of the IRS headlights.
Umm @ Norman Diamond and @ Embee … “Multiplying with oneself” might soon be an actual “thing” ! Beware ! Such a “thing” would likely concentrate evil to an even greater degree.
Agreed. As the saying goes, “Evil is as evil does.” And one certainly doesn’t want evil to multiply in any manner whatsoever.
Hey guys, look at this. This from the legal bibliography recently posted at IBS.
“A notable recent case of Canadian enforcement of severe penalties against a U.S. citizen resident in Canada for non-submission over a number of years of FBARs and Forms 5471 is Dewees v. United States, Case No. 16-cv-01579 (D. D.C. Aug. 8, 2017) Discussions (John Richardson).
Peter Muto, “A cautionary tale: How Canada Revenue Agency helps U.S. collect taxes” (Oct. 2017).
Hale Sheppard, “Assessing Tax Liabilities is One Thing, Collecting Them Abroad is Another New Case Shows International Reach of the IRS”.
Mondaq comment (Under the US-Canada tax treaty, the mutual collection provision does not apply to persons who were Canadian citizens when the tax or penalty accrued, and it does not apply to FBAR penalties).”
Hey, I like this. Been trying to say this forever. Again, no need to fear the IRS, they aren’t even looking for you. They are forcing your FIs to do the hunting.
“The principle of FATCA and the Intergovernmental Agreements is to privatize enforcement by forcing foreign financial institutions to report the activities and assets of U.S. Persons. It is considered by the U.S. Government that constitutional, international law and privacy issues are bypassed through the recruitment of foreign governments and foreign financial institutions to undertake implementation. Whether this is a long-term viable solution or not remains to be seen. At the time of writing there is litigation under way in the U.S.A., Canada, France and Israel.”
#1 – You’re referencing the Dewees case, which has be discussed here at great length. The victim’s great mistake was not taking Canadian citizenship after arrival in Canada, because that would have protected him from collection. (The collection assistance provision applies only to US citizens without Canadian citizenship, and those provisions only exist in a handful of countries.) He also, thanks to the world’s dumbest lawyer, made every other possible mistake to cost himself money. For dual citizens in Canada, Dewees isn’t a cause for concern. You however might be concerned by the note in that long article about the US negotiating a similar tax treaty provision with Japan, whereby the Japanese authorities would assist the US with collections against US citizens without Japanese citizenship.
#2 – I’ve accepted your point forever, but with two caveats. First, FIs in some countries don’t try as hard as FIs in other countries. (FIs in Canada barely try at all.) Second, if they find you, so what? Not like the IRS can do much with the information, provided you aren’t subject to a collection provision like poor old Mr. Dewees.
I suspect the meta-data that the IRS is collecting through FATCA will be similar to the information provided in FBARs – they only mine it if they want to build a case against you.
“A notable recent case of Canadian enforcement of severe penalties against a U.S. citizen resident in Canada for non-submission over a number of years of FBARs and Forms 5471 is Dewees v. United States, Case No. 16-cv-01579 (D. D.C. Aug. 8, 2017) Discussions (John Richardson).”
Not FBARs. As far as I’ve read, there hasn’t been a case of a US treaty partner collecting FBAR penalties.
BB. exactly. Like Manafort who might have got away with money laundering until Mueller came along.
Yep, saw that about Japan.
The constant, “hasn’t been” comments concern me. None of this had been not all that long ago. Where are they going with it? Has it stopped progressing? No, it continues to get worse.
What can they do with the data? Revoke passports.
Passport revocation is an empty threat for dual citizens who don’t need to visit the US. Please, take mine, I don’t use it anyway.
As for where is it going, well, it could get worse, or if Canada is any guide, it could wither on the vine – a law still on the books but utterly ignored, like CBT prior to FATCA. That is also a possible outcome. Doubtless different outcomes in different countries.
Yes, of course, passport revocation is meaningless for duals and expats, but not here at Brock are.
Also, as pointed out in the piece, the US HAS reinstated citizenship upon some who renounced and gained a new citizenship. In some cases, this has resulted in them losing their newer citizenships as their new nationalities do not allow dual citizenship. Not a passport issue, but the US still has the power to muck up the lives of at least some of its expats.
What a nauseating email to have received. Agree with every syllable of your excellent reply Patricia – you are a master of understatement.
BUT don’t agree that US-based accountants are uniquely condor-like. I was driven over the edge by a woefully misinformed Europe-based US compliance condor. My US-based accountant (recently found) has actually been brilliant (I am not someone looking to renounce, much as I would like to!).
“I have been practicing in the international tax area, specializing in US expatriates, for over 31 years. I am the chairman of a state CPA Society’s International Tax Committee, and have an international reputation in this area.”
In which case he should definitely be reported to said committee for gross negligent practices.
“Feel free to give my name to any individual who wants to become legal,”
Feel free to publish it here since there are people visiting the site who do want to “become legal”. Then they’ll know who to avoid like the plague.
I lov reading of all the methods of filing. I had my omg moment when a co-worker told me about filing requirements and he told me “every year he mails a copy of his Canadian tax forms to the irs”. He thinks he is compliant. Never heard of a fbar. I wish i was blissfully ignorant. I long for those days lol.
Even better are all the methods of not filing!
Nononymous – including, apparently, sending a Canadian tax return instead. 🙂
Should have published his name. If he was going to turn around and slander you like that. Might as well open him up to the wrath of 9M+ expats.