Prologue – Today as reported by Elizabeth Thompson at CBC
Stakes getting higher for Canadian residents with U.S. citizenship and could include fines or bank accounts being closed. https://t.co/icLTbKUrjU #cdnpoli #FATCA #tax
— Elizabeth Thompson (@LizT1) March 3, 2020
Introduction – About the background to this
1. Article 2 of the Canada U.S. FATCA IGA includes an obligation to report the U.S. Social Security Number of the U.S. Person. Here is what Article 2 of the IGA says:
Article 2
Obligations to Obtain and Exchange Information with Respect to Reportable Accounts
1. Subject to the provisions of Article 3 of this Agreement, each Party shall obtain the information specified in paragraph 2 of this Article with respect to all Reportable Accounts and shall annually exchange this information with the other Party on an automatic basis pursuant to the provisions of Article XXVII of the Convention.
2. The information to be obtained and exchanged is:
a) In the case of Canada with respect to each U.S. Reportable Account of each Reporting Canadian Financial Institution:
(1) the name, address, and U.S. TIN of each Specified U.S. Person that is an Account Holder of such account and, in the case of a Non-U.S. Entity that, after application of the due diligence procedures set forth in Annex I, is identified as having one or more Controlling Persons that is a Specified U.S. Person, the name, address, and U.S. TIN (if any) of such Entity and each such Specified U.S. Person; …
2. Early on the implementation of the IGAs it became clear that many people deemed by the United States to be it’s taxable property (AKA tax residents of other countries who were born in the United States) didn’t have a U.S. TIN (Social Security number). Why would they? They didn’t consider themselves to be American and were tax paying citizen/residents of other countries. But, why let a does of reality interfere with the FATCA myth?
3. The banks were scared of FATCA noncompliance and realized that they now would be in breach of their FATCA obligations by not providing a U.S. Social Security number to the CRA (and therefore the IRS).
4. U.S. Treasury in an act of unprecedented kindness, wisdom and understanding gave non-U.S. banks until December 31, 2019 to provide U.S. Social Security numbers.
5. Oh My God! Time flies. It is now 2020. The Treasury grace period and is over. U.S. Social Security numbers must be provided or the banks will be “non-compliant”. This is a worldwide problem with most of the publicity coming out of the Netherlands where (as reported) banks are closing the accounts of Dutch residents with a tint of “U.S.Ness”.
6. As some commenters have noted, an non-compliant (bad, bad, bad) bank actually has 18 months to cure the non-compliance from the date of notification of non-compliance by U.S. Treasury. Interestingly, in October of 2019 the IRS made clear that the failure to supply the Social Security Number after December 31, 2019 would NOT necessarily trigger a notice of non-compliance from the IRS. But, the problem is that nobody really trusts U.S. Treasury and the IRS. (An excellent post summarizing the problem from Dr. Karen Alpert is here.)
7. As a result, there is heightened pressure, coming from non-U.S. financial institutions to force those pesky people (who chose to be “Born In The USA”) with a Social Security number (even though they don’t have one).
8. It appears that consciousness of this new problem (like the recent virus coming from China) is beginning to spread around the world. The most recent spread of consciousness appears to be in Canada itself.
In any event, a very important question in the life of an individual is now:
“Are you or have you ever been an American citizen?”
Those in the business of compiling passport indexes, really should “come clean” and state that:
A U.S. CLN is now the Number One Passport in the world today!
For those who want to read up on the IGA, here it is …
FATCA-Agreement-Canada-2-5-2014
And now on to the today’s news …
The problem that appeared to get the most publicity in the Netherlands, …
The primary obligation of US citizens is reporting to the U.S. Government and to the non-US banks that act as IRS agents – starting with Social Security Number: "U.S. Treasury remains silent as bank accounts of EU 'accidental Americans' still being frozen" https://t.co/oB2Gdmb88B
— U.S. Citizen Abroad (@USCitizenAbroad) March 3, 2020
Described by Helen Burggraf as …
The U.S. Treasury is continuing to maintain its silence with respect to the issues European banks have been struggling with for months over their perceived need to report to the U.S. – under the tax evasion law known as FATCA – government tax information details on certain of their American account-holders that they don’t have, European banking sources, expat groups and others report…
This is in spite of the fact that so-called “accidental Americans” in Europe are continuing to have their non-U.S. bank accounts frozen in cases where their banks say they have failed to provide “Tax Information Numbers” (TINs, typically Social Security numbers) as the banks say FATCA requires them to have as of the end of last year, according to sources in the accidental American community.
More from Helen Burggraf here.
May (as reported by Elizabeth Thompson) be poised to come to Canada.
Those who HAVE BEEN or WILL BE identified as "U.S. Persons" under the #FATCA IGA and do NOT provide a Social Security Number, "The Canada Revenue Agency, not the U.S. Internal Revenue Service, will be enforcing the requirement and levying any fines." Problem of USNess continues. https://t.co/Ph6HfCQ676
— U.S. Citizen Abroad (@USCitizenAbroad) March 3, 2020
Ms. Thompson’s article includes:
CRA has authority to fine
If the social security or taxpayer identification number is missing or invalid, the IRS would flag it to the CRA and the CRA would notify the financial institution, which would have 120 days to get the information. The CRA has the authority to levy fines for non-compliance, although it can also exercise discretion. Officials said that there would be an 18-month delay before the CRA issued a notice of non-compliance to a financial institution.
Canada Revenue Agency officials held a meeting Jan. 29 with more than 200 representatives of financial institutions to discuss a proposed guidance document on how they should proceed. Some industry insiders said they expect that guidance, which should be out by the end of March, to say financial institutions can close accounts if they can’t get the information after making reasonable efforts.
Those inclined could go over to the CBC article referenced in the above tweet and comment directly.
A closing thought …
At a bare minimum, the well researched article by Elizabeth Thompson, shows that it is a mistake to assume that tomorrow will always be like today (the Transition Tax problem comes to mind). FATCA and the IGAs are not problems that should be ignored. The FATCA IGA has resulted in the Canada allowing the U.S. to essentially plant an IRS flag on Canadian soil. The provides the mechanism for a serve escalation of U.S. taxation in Canada and a continuing erosion of Canada’s sovereignty.
In conclusion …
The ADSC-ADSC.ca lawsuit still needs funding. FATCA is a live issue. The IGAS are a live issue. Jenny’s FATCA lawsuit in the U.K. needs funding. And speaking of Jenny, here are her thoughts on today’s bulletin from Elizabeth Thompson.
Thank you Elizabeth for the continued coverage. Again, the reference to Americans who are only “residents” of Canada, giving the impression that Americans are fleeing the US to avoid paying US tax. Many of us are Canadians at birth and have never worked or lived in the US. Others did not know about the requirement when leaving the US. Otherwise, why would the IRS provide Streamlined for those who didn’t know?
How real is Kevin Nightingale’s prediction that Canadian residents are going to start hearing from the IRS, and if recalcitrant be potentially banned from entering the US? For the latter to happen, I think only if the US starts enforcing its law that US citizens must enter on a US passport.
Can Canadian banks actually prevent Canadians from opening or maintaining accounts here? Canadians have a right to open a bank account in Canada. No mention of US citizens needing a US ITIN to open one. I suppose that the CRA can fine the customer though.
https://www.canada.ca/en/financial-consumer-agency/services/banking/opening-bank-account.html#toc0
@BB “Can Canadian banks actually prevent Canadians from opening or maintaining accounts here?”
From the link you provided…
“A financial institution doesn’t have to open a personal account for you if:
•it believes you knowingly made false statements in the information you gave”
Yet some here still advocate that people affected should just hide and lie and not work for change.
Nice bit of product placement by Mr. Nightingale. I’m sure he’ll get lots of business from this.
It will however be interesting to see the revised CRA guidance when it is released.
John Richardson should be the go-to man for these articles not a nightingale who is really a condor.
Some comments on the CBC site show intolerance to “US persons abiding in Canada” and this after 10 years of trying to educate people about the unfairness of FATCA. However it’s good to see that other Canadians do resent ceding our sovereighty to the USA. When CBC went to real name only commenting I quit. I know that makes it harder for Brockers to comment but maybe some with CLNs will wade into the discussion — if you can call it that since so many people turn everything into Con vs Lib whereas this is really about privacy and sovereignty — at this point it doesn’t matter who did what 10 long years ago.
Second class Canadians have no privacy or protection here in Canada. This is all clearly about money and the theft of money from Canada period! The Americans have pushed and threatened Canada to give up it’s citizens period! Unfortunately, you are nothing to Canada and this is clear proof of that. I guess everyone must fight this injustice any way they can. Canada is not a “free” country at all. It is in fact not even a country at all anymore. The kangaroo court that “judged” you a;ll based on your birthplace clearly fears the USA. The so called “judgment” was flawed and we all know that. It seems the USA runs the world for now. Sorry, we can’t beat them they are too powerful and are now turning their power to force countries that cannot fight them to pay their ransom. I never in my life thought I would hate the USA this much, incredibly terrible!
There is no mention of any SS/ITIN requirements in opening a canadlian account on the canadian gov website and for the CRA to start fining people for lacking a foreign SS/ITIN seems a bit beyond the fringe as no other country has gone that far . As for Elizabeth, I wouldn’t thank her for what seems to be scaremongering to drum up business for US tax condors in canada. I am waiting for next shoe to drop, that being that the CRA will start arresting people for not having SS /ITIN. Maybe, Elizabeth will be the first to inform us .
Is there any evidence that any of this is likely to happen, or is she just quoting more speculation from the legal and accounting industry? It would be interesting to learn more about this meeting prior to updated guidance.
The CBC comments are, per usual, an intellectual cesspit. Not worth the time and trouble.
@RR – It’s not clear from the article who any purported CRA fines would be aimed at – banks or their customers.
Re: “for the CRA to start fining people for lacking a foreign SS/ITIN seems a bit beyond the fringe”
I don’t know much about the details of the IGA, but I believe that Bill C-31 contains provision for a fine and that its implementation has been waived for a period of time. Others would know more, so someone else could clarify or correct this.
From my notes re Bill C-31 in 2014,
Further to the information you have provided, this is what I got last October from the Finance Minister’s Office:
“With respect to the reporting of the tax identification numbers for pre-existing accounts, a transitional period was provided by the IGA to allow time for FIs to obtain this information. As you noted in your correspondence, this transitional period is scheduled to end by December 31, 2019. It is therefore expected that any accounts reported after that period would be reported with a tax identification number. In response to the challenge for Canadian FIs to obtain this information, Parliament amended subsection 162(6) of the Income Tax Act to impose penalties on account holders who fail to provide their tax identification number to their Canadian FIs on request. However, the Canadian FI must inform the CRA that the account holder has failed to provide their tax identification number in order to impose this penalty.”
It’s circulating:
https://www.internationalinvestment.net/news/4011705/canadians-us-citizenship-account-closures-fatca
To Nightingale’s credit, he did suggest lying as an option. Something that may not have occurred to some otherwise.
Ms. Thompson should know better than to listen to K. Nightingale. Nothing has changed. The whole article is speculation.
My bank asked me if I was a US citizen or not after I closed one of my accounts 3 years ago. I answered no to the question, even though I believe my US citizen (USC) parent (born in the US but moved out of there 20-25 years ago, and is also a citizen of our country of residence) registered me at the local consulate 15 or so years ago. I’ve been a university student for the past few years and just didn’t want any more issues in my life. I believe I had a SSN but can’t find it.
Oddly enough, my USC parent has never yet been contacted by the bank with a FATCA letter despite their birthplace. This seems strange, since online I heard a lot of people have been getting them in the last 10 years. In fact, I haven’t even mentioned the subject of FATCA to either of my folks. However, I did ask them both (on one occasion a good while ago) if US citizens have to pay taxes on their overseas income (while living outside of the US) and they told me (in no uncertain terms, and in a rather confrontational manner, as if I was asking a silly question) absolutely not!
More recently, I looked on my bank’s website where it says that the consequences of providing false or misleading information about my US citizenship or overseas tax residency could be very serious.
So, a few questions (the third is purely my own speculation):
1. Do you think my USC parent will eventually be contacted by the bank with a FATCA letter, given their birthplace?
2. Am I likely to eventually be suspected by my bank of being a US person, given my parent’s birthplace shown on my birth certificate used to open up my first bank account 10 years ago?
3. Might the US ¢on$ulat3$ one day be instructed by the USG to release a list of names of citizens (along with DOB, parent who registered them, etc.) to the local revenue agency in my current country of residence (outside the US) as a means to ‘track down’ and ‘inform’ the remaining US persons (especially those who haven’t checked in to a ¢on$ul@te to renew their passport for years)?
(As I said before this is purely speculative, but I worry that simply never setting foot on US soil or visiting a ¢on$ul@te again in my lifetime might not be enough to keep the IRS away from me (in the long run). Especially if the USG decides to point a virtual financial gun toward the tax authority like they did with the banks…)
For what it’s worth, no, no ,and no.
If they haven’t contacted him so far it’s possible but unlikely.
The odds of you being affected approach zero.
They have better things to do with their very limited resources.
This recent video indicates otherwise. As of November last year, it sounds like the US is sending IRS agents around the world to Singapore, Netherlands, Australia, Dubai, etc.
@Robin
The IRS are masters of using these scare tactics with the help of their compliance condors as they know they cannot collect from bona fide dual citizens living in their citizenship country.
http://isaacbrocksociety.ca/2016/11/01/dual-citizens-of-sweden-france-netherlands-denmark-canada-take-note-your-country-will-not-collect-for-the-u-s/
No other countries have collection agreements with the US for bona fide dual citizen residents.
The IRS have a finite budget and are realists and know collection or extradition is expensive and not worth their while for minnows. They concentrate on US resident citizens hiding money abroad …or frightening the rest of us to comply with threats of penalties.
@Robin
Utube video by…EG
Esquire Group is an international tax and wealth advisory firm that’s been providing US international tax preparation, consulting, and corporate services (USA & UAE) to discerning clients throughout the world since 2005.
I echo Heidi. Note this is a promotional video from a business in the tax field. Some tax firms videos are reliable and informative, but you have watch out for the scare tactic genre — vague, exaggerated, frightening, no citations.
Whether intended to be promotional or not, on March 16, 2020 the “Lawyers Daily” published an article written by a lawyer at a Toronto tax firm that reiterated the content of the Elizabeth Thompson article that is the subject of this post – specifically that Canadian banks will be looking for TIN numbers for those who have been identified as Americans.
Grace period for U.S. citizens is over: Big Brother is watching
https://www.thelawyersdaily.ca/articles/18140/grace-period-for-u-s-citizens-is-over-big-brother-is-watching-
The article is behind a paywall, but includes in relevant part:
Obviously this is speculative and far from certain. The banks would have to know or suspect that someone was a “U.S. Person”. But, this does suggest that the waters may be (or perceived to be) choppier going forward.
Overtaken by events, I’d say.