FATCA Discussion Thread (Ask your questions) Part Two
Please ask your questions here about FATCA.
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Daniel, your advice doesn’t work for everyone.
Honesty is the best policy — I thought so too.
Seek professional help — I did at a cost of over $42,000 in US tax lawyers, tax accountants, US immigration / nationality lawyers.
Lawyers and accountants can give advice based on their expertise — they did, three of my family have renounced — one Canadian-bornson cannot because he does not have the *requisite mental capacity* and a parent, a guardian or a trustee cannot renounce on such a person’s behalf, even with a court order. They did not have the expertise to make renunciation for one more happen.
Don’t be guided by strangers’ opinions. You are a stranger. Are you also a US tax compliance professional?
Gather as much knowledge on the subject as possible, listen to experiences of others and weigh those, along with professional advice if one can afford and trust that, to make one’s own decisions based on their own level of risk tolerance. Here is an account of an option (that even some lawyers unofficially seem to agree with): http://isaacbrocksociety.ca/2016/01/24/notice-to-readers-irrelevant-and-political-or-anti-irs-comments-will-not-be-approved/comment-page-2/#comment-7117788.
HI Calgary,
Your comment to my statement, “Seek professional help.” states, “I did at a cost of over $42,000 in US tax lawyers, tax accountants, US immigration / nationality lawyers.” That’s a hefty bill, but I am curious about what an itemization would include. That is, did you pay to unravel the tax issues? Were they complicated, involving large sums over many years? Nipping these issues in the bud are less expensive than waiting until later when they only grow, tending to get more involved. Also, did your payments to professionals include advice on renunciations and for the renunciations themselves?
As regards the link that you provided in your comment, I read the sad story of that American woman who, after living 35 years in France, discovered that she hadn’t done as required by the US citizens based taxation laws. I wonder why she owed so much. Expats who retain their US citizenship, but are residents of other countries, are afforded protection from double taxation by taking EITHER the Earned Income Exclusion (now over $100,000/year) OR the Foreign Tax Credit. This woman is either getting some bad advice or is or was very rich or had large amounts of unearned income. The French tax rates are amongst the highest in the OECD so I imagine that she shouldn’t have to pay more to the US than to France. Perhaps she was self employed which might have caused a problem as regards the US Self-Employment Tax. I don’t know what the tax treaty between the US and France says as regards payments to Social Security. In any case she felt that she was between a rock and a hard place. She was one of those small fishes that I often referred to in my blog, IRS vs EXPATS, that got caught in the net that they threw out to catch the tax evaders, ALL OF WHOM LIVE IN THE UNITED STATES AND USE OFFSHORE BANKS TO HIDE THEIR MONEY FROM THE IRS.
And lastly, your casting aspersions on my suggestion, “Don’t be guided by strangers’ opinions.” is, IMHO, misplaced. You say, “You are a stranger. Are you also a US tax compliance professional?” Obviously, I am a stranger and I never purported to be a tax compliance professional. But you flossed over that fact that I WAS IN NO WAY SHAPE OR FORM GIVING PROFESSIONAL ADVICE to that person who identified themselves as “confused.” I WAS NOT TELLING HER THAT SHE SHOULD DO, but merely that she needed help to solve her dilemma. This was, as opposed to what Medea Fleecestealer said on January 22, 2016 at 3:31 pm, “@confused, nope. What the IRS doesn’t know won’t hurt you.” Granted, there is a fine hair of a difference between a suggestion to consult a tax professional and telling someone to forget it and walk away, only to find themselves some time down the line, in court facing prosecution by the United States Department of Justice. What I said was like telling someone who asked you what to do about pains in their arm to go to a physician as opposed to someone else responding that it was not a problem and they should just ignore the pain.
Hello Daniel,
please do your homework on your facts and circumstances here or on a couple of other blogs which requires imo. at least 50 hours of study time. What I have been reading so far from you here shows me that unfortunately you have still many misconceptions and are a bit naive about the IRS in general and SFCP or OVDI in particular.
“…Nipping these issues in the bud are less expensive than waiting until later when they only grow, tending to get more involved….”
With regards to FBARs,SFCP or OVDI/P this general statement does not hold water.
Many will not have the luxury of being able to “nip problems in the bud”. As I understand it, many Canadians were told they would no longer be US citizens if they became Canadian citizens in the past — then the US changed the rule on them — after they had already invested in the dreaded PFICs and tax advantaged retirement plans. Elsewhere, I’m sure there are many who emigrated years/decades ago when the US was not enforcing CBT on long-term expatriates. If you had taken up a second citizenship and weren’t planning on returning, why spend time on a return with zero balance due? Or maybe you moved as a child and had no idea of your US tax obligations. Fast forward a few decades, and these people have gone native with their finances. They probably had no idea about PFICs or how the US treated “foreign” retirement plans. Sure, anyone moving “overseas” from the US now would be silly not to keep up with their US tax filings and avoid problem investments (as much as legally possible). But the long-term emigrant (I hesitate to use the term expatriate as many of these people have either permanently emigrated to their new homes, or moved back to their ancestral homeland) is already entrenched. For them, (re-)entering the US tax system can be VERY expensive. Add in a small business (incorporated or not), or a retirement plan, or normal investments, or a home in one of the many cities where prices have soared, and entering the US tax system can be financial suicide.
Mike,
1. In my opinion, your comment is derogatory and has innuendos casting aspersions on my veracity. You say that I have ” have still many misconceptions and are a bit naive about the IRS in general and SFCP or OVDI in particular.” Would you please point out my misconceptions?
2. What is SFCP? I have looked this up on the internet and cannot figure it out.
3. Why do you comment incognito? This is your right, but if you scroll over my avatar, you will see my profile and my email address, as well as a link to my Facebook page. I have nothing to hide. Your avatar does not reveal any profile and your identity is hidden from public view. Who are you and why do you hide?
4. As regards my comment that these problems are best nipped in the bud, have you ever heard the old saying that an ounce of prevention is worth a pound of cure? Perhaps you also refute this?
5. A law is to be obeyed. In our democratic society, one person’s opinion as to a law being unfair does not give one the right to ignore or disobey it. One must comply at the same time as one is actively voicing an opinion as to why the law might be wrong. That’s one of the things we do here on this forum. That’s why we write letters to our representatives to enlighten and influence their decisions. That’s why we actively support organizations that express and lobby for new laws which we deem fair. FBAR, FATCA, OVDI, and CITIZEN BASED TAXATION BY THE UNITED STATES ARE, UNFORTUNATELY, LAWS OF THE LAND. They are to be obeyed while we do what we deem necessary to influence change towards what we consider equitable and just.
SFCP is an abbreviation for the IRS programme “Streamlined Filing Compliance Procedures”. There are two parts to it: one for US Persons living abroad and one for US Persons living in the US. Please google for more information.
Ask Boris Johnson how he could have nipped things in the bud.
@Daniel Kovnat
A big problem is that the U.S. is going after people who haven’t considered themselves part of U.S. democracy for a long time (the U.S. knows about the “accidental citizen” problem, but hasn’t act on it; but there is also a problem with the U.S. retrospectively restoring U.S. citizenship to certain former relinquishers). There are also substantial numbers of U.S. citizens without any vote or representative because they don’t fit the voting rules. And, if you have ever written to your representative, what kind of reply have you received? My senator, Senator Elizabeth Warren, said sorry to hear your account has been closed, but we need the money. It was five months after I wrote to her and I hadn’t even written to her about a closed account. It turned out to be a form letter. I was shocked that she was sending out such a heartless reply to people whose accounts had been closed. At least one recipient has since renounced.
@Daniel Kovnat
I’m totally for people flouting the law if the law is bad. That said, like many, I’ve chosen to comply. There are many ways to fight this injustice – and an injustice it is – all of which have a price. Mine happened to be money. Others will take a difference course, and I have full respect for their decision if they are willing to accept the consequences. Your insistence that people obey the law would treat us all as children.
Along with appeals to legislators, passive resistance is a completely acceptable means of protest. Until the US introduces a total amnesty that eliminates ALL back taxes and penalties for the non-wilful, non-compliance will not go away. People simply will not destroy their lives in order to be able to voice their concerns to US legislators. Get real.
Daniel,
In answer, I won’t itemize. My total bill was over quite a few years, three firms — work done improperly that had to be redone. I started before 2010 and before the realization of many in Canada in 2011. I still did not realize even then that there was an actual relinquishment / renunciation process. I learned that I would be considered still a US citizen and learned of the consequences of that though I had been told (better word – warned) when I became a Canadian citizen in 1975 that I would lose my US citizenship. I was young, naive and made many mistakes along my way. I knew nothing about US CBT — my public US education never covered that. Neither did my US husband. We came for work opportunity and because we had family here after a major government project in our city was cancelled and Seattle and area was economically crippled. We loved Canada and decided this was where we wanted to live, work, raise a family, becoming Canadian citizens to be a full part of this society — our choice, including losing our US citizenship. If we knew what I know now (my then-husband is deceased), I wish to think we would have delayed having children (with their *acquired* US citizenship based on our US facts) until after we had become Canadian citizens. Would that have changed the problems we brought our children, I don’t know. I do know that one of my children cannot renounce — though born in Canada, raised in Canada, never lived a day in the US, never had any benefit from the US, only from Canada. He was never registered as a US Birth Abroad – makes no difference. Part of the amount of money spent was also for advice on how my son could renounce that acquired citizenship he was entrapped in — with immigration/nationality lawyers in Calgary and in Washington, DC. It was confirmed with Department of State, Legal. Part of the problem with mistakes in my first US returns were to do with one specific account I held for my son, the Canadian Registered Disability Savings Plan. You can see the way that such *US foreign trusts* (also the Registered Education Savings Plan) are taxed by the US: http://isaacbrocksociety.ca/2015/09/20/we-need-69521-by-january-1-2016-to-pay-the-canadian-fatca-lawsuit-legal-bills-and-keep-our-litigation-moving-forward-il-nous-reste-69-521-a-ramasser-pour-notre-poursuite-judiciaire/comment-page-54/#comment-7085596.
I’ll add other links you might read or this comment will go on forever.
http://isaacbrocksociety.ca/renunciation/comment-page-214/#comment-6937776
http://isaacbrocksociety.ca/renunciation/comment-page-214/#comment-6938659
Thanks for answering my question regarding whether or not your capacity of advice was that of a US tax compliance professional. Your view and mine differ. I am old, retired and as well as just plain tired. I made many bad choices along the way — but it was my choice to both become a Canadian citizen and finally, in 2012, officially renounced my *clinging US citizenship* to be able to have a CLN to be able to show my local Canadian *foreign financial institutions*. We will have to disagree as I will never swallow…
I made so many mistakes that I want others not to make in their decision regarding these matters. But, I had choice; my son does not — nor does any other *Accidental American* have fair choice. In my mind, both types of *Accidental Americans* should have the CHOICE to make an informed CLAIM to US citizenship (or any citizenship) at age of majority and with requisite mental capacity to understand all consequences / requirements that go along with such an extraneous, non-meaningful acquired citizenship. Why is it OK to instill an *acquired US citizenship* on either type of *Accidental American* when there are such CBT consequences of that citizenship? Common sense and my sense of justice tells me that neither should be entrapped without consent. If their CHOICE is not to make the claim based on their birth facts, such option should be NULL & VOID until and if such a person gives informed consent — an OPT-IN, not an OPT-OUT.
My apologies to others who have me go on and on AGAIN about my family’s issues, which just will be the issues of many others.
“FBAR, FATCA, OVDI, and CITIZEN BASED TAXATION BY THE UNITED STATES ARE, UNFORTUNATELY, LAWS OF THE LAND”
Fortunately all the above are NOT the laws of MY land; Canada. They are foreign laws of a foreign land, and as far as I am concerned, I WILL ignore them.
If ANY other county in the world tried to pull this bullshit, it would be deemed illegal. The only reason the US gets away with this, and everything else they do, is because they are the biggest bully on the playground. Well, I refuse to give them my lunch money. I’m fighting back and so should everyone else in the world.
Don’t go like lambs to the slaughter like some would have you do, because it’s “safer” or “legal”, stand up and fight the injustice, goddamn it!
Hi Karen,
Thank you for your measured response without ranting and raving. I, along with my wife and our 6 year old daughter, acquired our foreign citizenship 24 years ago with every intention to stay in our adopted country permanently. I don’t remember how I was aware that I would still be responsible for filing an income tax report to the IRS, but I knew even back then that reporting of income taxes was mandatory even if no tax was due. We were not told by anybody that assumption of the foreign citizenship precluded remaining citizens of the USA, with all its rights and responsibilities. The issue of maintaining American citizenship gets a bit confusing when the person serves in the foreign military. Back then, we were told it made a difference if the person was drafted or volunteered for foreign military service. I can’t remember which of the two resulted in a loss of US citizenship. Thus, my frame of reference and personal experience is different from others who moved to Canada and were led astray with misinformation. Because of this difference, I don’t identify with them, but I do feel sorry for them. As is said, “There, But For The Grace of God, Go I.”
Despite having filed my yearly income tax report as an Expat (I have no qualms referring to myself as an Expat, but always capitalise the “E” for some reason or other.), I only discovered the need to file the FBAR when the Department of Justice started to enforce that requirement. I am not sure, but I think it was approximately 2007, at which time articles first started to appear about this reporting requirement. It had been law since 1970, but never enforced. Since approximately 2006 this has all changed, IMHO, for the worse. The first time I filed the Form TD F 90-22.1, I had to back file something like 4 years and write a full explanation why I hadn’t reported before. This caused me great anxiety as there was a lot of publicity about the severe fines people were being subjected to. Nevertheless, I heard nothing bad from the IRS, and added that to my yearly tax reporting responsibilities.
I don’t like these laws making me liable for taxes based on citizenship rather than on residence, but I comply, as it is law. I have never seriously considered relinquishing my US citizenship, certainly not because of taxes. On another personal note and not the least of the influences in my decision, is that I am quite sure that citizen renunciation would also force me to relinquish my US government annuity called Social Security. This has been the backbone of my retirement income. You can tell me that greed has entered into my decision. But I like to think of it as vested self-interest. And I wouldn’t, for a moment, wish anyone to have to commit financial suicide.
By the way, what is CBT?
“I am quite sure that citizen renunciation would also force me to relinquish my US government annuity called Social Security.”
No, Social Security is not based on citizenship but rather on paying into it.
It’s okay if you were confused about this – the US Ambassador to Switzerland said the same in a recent interview.
CBT: Citizenship Based Taxation
@Daniel
CBT is citizenship-based taxation, practiced only by the US (the 2% Eritrea military-funding tax for expat citizens doesn’t count). The rest of the world does RBT – residence-based taxation.
You absolutely do NOT lose US SS when you renounce.
American Citizens Abroad has a helpful FAQ on Social Security, including:
Q: Do you lose your Social Security if you abandon your green card (permanent resident) status or renounce US citizenship?
A: Once you have renounced US cotizenship, you become a non-resident alien (NRA), and the rules for NRAs apply. While it is your responsibility to notify authorities of your changed status, this is generally asked in the questionnaire that Social Security beneficiaries have to submit annually.
As an NRA, it depends on your place of residence whether you can continue to collect Social Security in the long run. Depending on a combination of US bilateral agreements (or lack thereof), the your current citizenship, and your country of residence, it can range from only a minor tax difference to having Social Security payments discontinued after more than six months outside the US.
If you have not been in the United States at any time during the six calendar months before your first month of entitlement, then to get your benefits started you must come to the United States and stay every hour of a full calendar month. For example, if you came to the United States on April 24, you could not leave the United States before June 1. This means that you would be present in the United States the entire month of May.
After you complete this visit for a full calendar month, there are two ways to continue receiving benefits. You can choose one or the other:
• You must spend any part of one day in the United States at least once every 30 days or less; or
• If you do not do one-day visits (or if you fail to make a visit in a 30-day time period), then you must come to the United States and stay every hour of 30 consecutive days. For example, if you came to the United States on April 24, you could not leave the United States before May 25. This visit for 30 days must be completed no later than the end of the six-month period that started with your first full calendar month outside the United States.
There are a couple of countries to which Social Security cannot make payments. US citizens can accumulate unpaid payments while in these countries and receive them after departing the country; NRAs lose those payments.
Note that dependents and survivors benefits may also be affected by change of status of the individuals or the worker concerned from citizen to NRA.
In any case, keep your Social Security card. What you have in your Social Security account always remains there, and your Social Security number is unique to you. It’s just a question as to whether Social Security will pay out under specific conditions.
Full details can be gleaned from the publication http://www.socialsecurity.gov/pubs/10137.html on “Your Payments While You Are Outside the United States”. Best advice is to check with Federal Benefits Unit serving the country where you live (or via the American embassy website).
https://americansabroad.org/issues/social-security/social-security-faq/
@ Daniel
A couple things. Thanks for sharing your thoughts and your personal experience as an Expat (self identified). I identify as solely a Canadian.
I do find it inappropriate to chastise anyone who does not use their actual name on this forum though. I use mine of course, because as a plaintiff I am able to do so. Few people are hiding their names just so they can appear as trolls, not that you said that. We do get that here on occasion. Many people remain anonymous as a consequence of fear or perceived fear. Just because personally I am not fearful, doesn’t mean I should be less than empathetic to those that are. Just spend some time at Brock and read as many personal stories as you can and you will see that fear expressed.
I find it interesting that when you emigrated to your new country you were familiar with obligations to file taxes with the US. I do know that it is often the case if people move to work in an overseas US company, they are informed and even are assisted to do so. Likewise if they are posted overseas while serving in the military. Be that as it may, the facts are you knew.
I was not so enlightened at the age of five when I moved to Canada.
Although we all have our own stories, and certainly have choices to comply or not, as Bubblebustin has outlined so well, this is really not about that, in the sense of looking at the root cause of our circumstances.
What is CBT? It’s what no country with the exception of the exceptional USA practices in terms of tax law: citizenship based taxation. I guess if you didn’t know that it may explain why you are very law abiding. The rest of us also think we are law abiding as we pay taxes in the countries where we live: RBT.
What we do not believe or recognize is the right of another country to extend and impose its laws on a sovereign nation. Just like the Colonies didn’t recognize that the British Empire had the authority to extract taxes from residents of the colonies. And fast forward, a war resulted and God Bless America was born. Fast forward again and the USG imposed CBT.
And here we are now launching a law suit in Canada as opposed to once again burning down the White House. Canadians are ever so polite don’t you know. Feel free to donate if your conscience permits.
Otherwise, spare us ‘it’s the law’ argument. This group rejects that as valid law in our country. Likewise as you are aware that law is also being challenged on US soil.
Well said, Ginny!
@Innocente, trust the US to have some convoluted system before you can start claiming your Social Security. Is that for people who don’t live in countries with bilateral agreements with the States or is that everyone who wants to claim SS? Are you seriously saying that to keep up the payments you have to return to the States for a month every year? Or is all this rigmarole just for the first 6 months? Whatever, it’s CRAZY! I just started claiming my UK State pension and all I needed to do was fill in a few forms in English (and French for the Swiss end) and it’s all done.
@Daniel Kovnat
CBT is citizenship-based taxation, although the usage seems to be shifting to citizenship taxation.
I read your blog. It does sound like you have been through the ringer with the IRS. Sorry the TAS wasn’t able to help. I think that people on this forum may have assumed that you worked for a tax accountancy company, instead of being a retired doctor. Not that there is anything necessarily wrong with tax accountants per se, but some of them have acted in ways that are not helpful (grossly overcharging, scaring poor people who can’t afford their fees). Not encouraging anyone to engage in financial suicide is a goal we can all support but sometimes accomplishing it is not easy.
24 years ago, people didn’t lose citizenship by obtaining a foreign one or voting in a foreign election, but before 1980 things were entirely different and many older relinquishers seem not to have gotten a bit of paperwork, the CLN, they now need to prove their non-U.S. status. So, the U.S. has ended up portraying as American tax evaders people who saw themselves as law-abiding, highly-taxed Canadians, with predictably explosive results.
@Daniel,
“4. As regards my comment that these problems are best nipped in the bud, have you ever heard the old saying that an ounce of prevention is worth a pound of cure? Perhaps you also refute this?”
As a Canadian born in the US to Canadian parents, returned to Canada in infancy, I find this laughable.
In the early 1990s, I DID use that ounce of prevention to contact the US government regarding citizenship status in the eyes of the US. They quite rudely informed me that I was NOT a US citizen. Almost 30 years later they decided they lied, and want to tax me. Screw that.
As a Canadian in Canada, I follow Canadian law, not Russian law, not Australian law, not Somalian law, and certainly not US law.
ps Daniel. My name is Ginny Hillis. I forgot that it now shows as Canadian Ginny.
@Daniel
Something that irritates on your blog is the ststement that US residents have no need of foreign bank accounts. That I believe was similar to a Schumer statement.
What about US resident citizens who have elderly parents in other countries who need help with their finances?
How about Green card holders who have left their residences behind until they decide wether to stay in the US or return to their home country?
How about US citizens who have vacation residences outside the US? ( The US is quite welcoming to foreigners investing in Florida and has no problem giving them bank accounts to pay their house related bills)….but when the boot is on the other foot, US citizen investing abroad are all suspect tax evaders.
What about just wanting to hedge ones bet and invest somewhere other than in the US dollar?
It’s not only expats who are prisoners of it’s cbt system. The word is out in the academic and medical world, if you have to go there, don’t stay, don’t get a green card, otherwise you will be a slave for life.
@Medea
Yep, you got it right.If no SS bilateral agreement then off to the states you must go for 30 continuous days a year otherwise its only 6 months they will pay you….go figure!
@heidi, pity the poor sods living in those countries then. What a pain to get something you’re entitled to.