FATCA Discussion Thread (Ask your questions) Part Two
Please ask your questions here about FATCA.
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NB: This discussion is a continuation of an older discussion that became too large for our software to handle well. See FATCA Discussion Thread (Ask your questions) for earlier discussion.
How about the word “FATCA” and written within a bullseye below it “TSFA, RDSP, RESP, PRPP”.
I don’t see the US reneging on the RRSP however.
I’ve lost track of what we’re talking about here. Are you closing TFSA because you don’t want to report the amount to fatca, or because you don’t want to pay taxes to the IRS? Or both? Under what circumstances would anybody actually have to pay tax to the US on a TFSA? Or is the issue just the filing burden?
Northernstar, this is not informed professional advice, but I don’t know if they could really go through with confiscating or penalizing RRSPs. It looks too bad. They even had to reconsider how they were treating them in the OVD programs if I remember correctly? They will demand the treaty election and the 8891 for those filing to be compliant, and demand that they be reported on the FBAR, but I wouldn’t dissolve an RRSP due to fear. It would trigger Canadian and US tax consequences that could make the situation far worse.
This has a good explanation of some of the thinking around FATCA and registered savings, but it is from April 2012 – and I don’t know enough about the many changes since then in the FATCA details – to know how that touches on your RRSP concerns. Maybe someone else does.
I did see this:
from
March 15, 2013
CONNECTIONS, A NATIONAL PERSPECTIVE
Credit Union Central of Canada.
‘FATCA Details Slowly Emerging’
Gary Rogers,Vice President, Financial Policy, Credit Union Central of Canada
http://www.cucentral.ca/Connections/FATCA%20Final.pdf
“Members’ accounts less than $50,000 in aggregate are exempt from any review and reporting.
Also, all registered accounts such as RRSPs and RRIFs will be exempt.”
They seem to think that some Canadian credit unions will have to comply with FATCA – depending on size of the credit union assets:
See this newsletter http://www.cucentral.ca/Connections/Connections%20FATCA%20July%202013%20FINAL.pdf
July 9, 2013
Credit Union Central of Canada.
CONNECTIONS, A NATIONAL PERSPECTIVE
‘FATCA: UK Guidance assists Canadian preparations’
Gary Rogers, Vice President, Financial Policy, Credit Union Central ofCanada
Also I didn’t like this statement in the newsletter:
“…While no recent news or update has come from the Canadian government, we are assured by officials that negotiations with the U.S. are continuing. They express confidence that a FATCA Inter-Governmental Agreement (IGA) will result…”
Credit Unions are for the benefit of their members, unlike banks and other private financial institutions. If anyone has an AGM coming up for their Credit union, perhaps now is the time to attend, and to ask about FATCA. Although those who do not want to out themselves as US persons might not feel they can. Those of us who are unaffected, ‘compliant’ or who have renounced/relingquished may be able to do this on behalf of all their fellows.
Even if FATCA is applied to all Canadian credit unions, I still would rather put my savings in a credit union, because the CBAnksters are not even trying to resist, but I am not sanguine or confident that even the small credit unions will be or remain exempt. The Banksters no doubt are treacherously urging Harper and Flaherty (and perhaps the IRS and Treasury( not to give the credit unions any advantage or attractiveness to would-be depositors – as possibly conferred by any FATCA exceptions. I see that the Harper government has started taxing credit unions as if they are chartered banks http://www.cbc.ca/news/canada/saskatchewan/sask-credit-unions-face-higher-tax-bills-1.1959675 .I see also that US Banksters are urging the taxation of US credit unions http://www.aba.com/Issues/Pages/Tax-Credit-Unions.aspx . No doubt Canadian banksters will seek to do the same in order to disadvantage credit union competition for depositors.
@Badger
I guess I read it wrong…RRSPs were treated as taxable and now are. But I don’t trust the USA at all anymore
WhoAmI;
re; “Under what circumstances would anybody actually have to pay tax to the US on a TFSA? Or is the issue just the filing burden?”
My short answer is: BOTH!!!
But this is NOT advice.
The long answer is:
See ex. : http://uscrossbordertaxblog.com/us-tax-consequences-of-tax-free-savings-account/ or http://www.ctf.ca/CTFWEB/EN/Newsletters/Canadian_Tax_Focus/2013/1/130102.aspx
And this is a big problem for those who tried to become compliant in a ‘noisy’ way (ex. OVDI) , or who contemplate coming forward. Because as usual, non-reporting is punishable with a draconian penalty structure even when zero US tax is owing.
The TFSA, like the RESP and the RDSP are punitively taxed and forced to be reported to by the IRS/Treasury as a ‘taxable’ ‘foreign trust’. And worse, the US severely penalizes them as one if not reported properly at the right intervals, by the right dates, on the convoluted 3520 and 3520-A. Which are due at different times http://uscrossbordertaxblog.com/us-reporting-obligations-for-canadian-resps-and-tfsas/ . With very specific filing instructions and different mailing addresses. Which of course are incomprehensible forms and procedures because the requirements and instructions assumes our simple TFSA is to be treated like a massive offshore secret trust that someone is using to stiff the US on taxes and hide true ownership. The trust reporting is onerous and costly. That and the US tax eats up the principal.
See the price the storefront chains charge: http://www.hrblock.ca/services/US_tax_pricing.asp
This is NOT tax advice. Just describing my experience: some Canadian professionals do not agree that the TFSA, RESP and RDSP are to be reported on 3520s/3520-As, and as ‘foreign trusts’, but are reportable as savings accounts – but most seem to advise the foreign trust treatment. This year, when I called around for help with my last form for the defunct small TFSA, the Canadian professionals I called said variously: ‘we don’t do 3520s/3520As ever’ because of liability, complexity, time, and what they’d cost the client in hourly fees. One said they advise the client to treat them like a savings account – but on the FBAR only. One said they ‘don’t touch those’ and they advise clients not to hold them (didn’t answer when I asked what to do if the clients already have one). Another said I’d have to sign an agreement with unlimited terms before they’d even look at it.
I was able to dissolve my TFSA – only held for a short time – which hadn’t earned much. Shortly after I got it – on the advice of my financial institution! I was shocked to discover this horrific US crusade against us included my legal local Canadian government blessed registered savings.
Imagine what is involved in reporting our ‘foreign’ estates via the 3520 and 3520-A, and the size of the potential penalties – which as usual, the IRS asserts the right to levy even when NO tax is owed – due to being far far under the very high taxable threshold, yet we are still theoretically penalizable for non-reporting or errors in reporting http://www.equisi.ca/faq/faq-16-some-u-s-estate-tax-considerations-for-a-canadian-who-is-a-u-s-citizen-or-is-a-non-u-s-citizen-with-investments-in-the-united-states/ .
I had to dissolve my TFSA and tried to figure out the last reporting on my own, but it didn’t make any sense. Many people are struggling with it. See examples of the confusion http://forums.serbinski.com/search.php?mode=results . At one point that site had an announcement that the IRS had invited them to appear and make a presentation for Treasury – in aid of simplifying Canadian ‘foreign trust’ requirements, but then the notice disappeared, and nothing happened that we can see. This is what the notice said ““NEW Development: 3520/3520A Filings and Penalties: We have recently been invited by IRS to present cases in which clients have been subjected to large penalties or other sanctions when filing compliance forms for TFSA and RESP accounts. We have been advised that IRS will take our position before congress to see if the foreign grantor trust rules can be streamlined in the same way that RRSP filings have been simplified. ””
That was in December 2012. Thank goodness I copied it and appended it on Phil Hodgen’s site for posterity. There must be some IRS and Treasury backstory, but no-one is telling. See discussion at bottom of Hodgen post here: http://hodgen.com/is-an-isa-a-foreign-trust/
The US does not recognize the tax deferred or tax advantaged or non-taxable treatment that the Canadian government and CRA gave these savings when they created them.
The US-Canada tax treaty does not exempt TFSAs, RESPs, and RDSPs from US extraterritorial taxation and penalties for non-reporting.
RRSPs and RRIFs are also deemed by the US to be ‘foreign trusts’, but after Canadian protests (see this 2008 discussion ‘When Bygones Aren’t Bygones: Exploring Tax Solutions for U.S. Persons with Undeclared Canadian Retirement Plans and Accounts’
By Hale E. Sheppard https://www.chamberlainlaw.com/assets/attachments/Bygones%20Article%20-%20Canadian%20RRSPs.pdf). I think that the IRS eventually backtracked on their 2003 demand that RRSPs and RRIFs be reported on forms 3520 and 3520-As, and invented the form 8891 and required an annual ‘treaty election’. They refused to simplify further for Canadians, and I gather refused to do the same for many similar/parallel retirement savings plans held by people in many other countries. And at one point the IRS took away the more simplified method to retroactively catch up with past failures to make the annual election, then required people to pay individually for an exemption ruling via a PLR – Private Letter Ruling – a very expensive thing to pay a lawyer to prepare and submit. They also included a way to do this via the Streamlined Compliance process, but I don’t know about the potential pitfalls of using that for the sake of past failure to file 8891s for RRSPs. Here is an update to that 2008 article by Hale Sheppard that I cited above. See; January–February 2013 Hale E. Sheppard ‘IRS Introduces Two Unique Remedies for U.S. Persons with Unreported Canadian Retirement Plans and Accounts’ from http://taxblawg.files.wordpress.com/2013/02/sheppard_intertaxjrnl_2-4-13.pdf ). I really don’t know/understand much more about it (see discussion here; http://hodgen.com/new-official-easy-fix-to-unreported-rrsp-situations/
This also dogs those who were seeking advice re the Streamlined process because the IRS refused to define what a ‘simple’ return was, and there was speculation that having a ‘foreign trust’ made returns not simple, and made them higher risk.
There are ‘foreign trusts’ like my tiny TFSA, and then there are ‘foreign trusts’ like the one belonging to Obama appointee as Commerce Secretary Penny Pritzker – a US resident http://www.bloomberg.com/news/2013-05-21/pritzker-s-54-million-family-trust-fee-seen-as-unique.html http://www.democracynow.org/2013/5/28/obama_taps_billionaire_fundraiser_penny_pritzker But, apparently my tiny simple TFSA was more of a threat to the US tax gap than hers, even though she enjoys full US benefits and I do not. Apparently she pays her ‘fair share’ despite having a deliberate offshore family trust, but my simple Canadian TFSA GIC was just as suspect as if I had an Ugland House account. Except for if I was the new Treasury Secretary Lew http://billmoyers.com/2013/03/08/jack-lew-citigroup-and-the-ugland-truth/
And just to add icing on the cake, the IRS Daleks and Cybermen were busy sending out robotic erroneous threatening 3520 penalty notices at random, which were difficult to understand and correct. So much so that the AICPA had to step in http://www.aicpa.org/press/pressreleases/2012/pages/erroneous-irs-letters-to-taxpayers-filing-foreign-trust-form-is-widespread-problem-aicpa-tells-irs.aspx http://www.aicpa.org/advocacy/tax/trustestategift/pages/aicpaeffortsonerroneousirsform3520letters.aspx This is an estimate of the size of the problem: “We have been told that the IRS was not aware of the situation until our letter and is taking action. AICPA continues to hear from members with clients who received and are receiving such IRS erroneous letters, including letters assessing millions of dollars of penalties and intent to levy. ”
Apparently the AICPA and other US tax professionals have been trying to get the IRS to simplify the trust filings and requirements for years, but the IRS and Treasury do nothing – as usual.
And even those of us abroad trying to ‘comply’ suffer needlessly – the target of IRS threatening letters, potential for confiscatory penalties, and IRS incompetence – all despite having paid one full set of taxes to Canada. Examples of the auto-generated threatening letters to wouldbe compliant individuals abroad http://forums.serbinski.com/viewtopic.php?p=28026&sid=9b0a08190837a9901d6dcd7ba617581d
Canadians were even mentioned specifically here: http://ataxingmatter.blogs.com/files/aicpa-letter-to-irs-on-erroneous-form-3520-letters-to-taxapyers.082812.pdf
@bubblebustin, I like the image of the FATCA red hand over our TFSA, etc.
@northernstar, I don’t trust the US either. We can’t. They change things without any reasonable notice or rationale (ex. the saga of the RRSP treatment by the US) and punish even people who try to do what they want. They refuse to make it easier to comply. They refuse to simplify or clarify. They refuse to acknowledge that we most often owe them zero, and if we do, it is because of the conflict between their tax system and our home country one, or currency fluctuations, etc.
We can’t live with that. There is no real recourse. The US didn’t even bother to tell Canada – with which it has the most extensive tax treaty, that it was imposing an adjunct Obamacare investment tax that would apply to those abroad, and which our treaty doesn’t cover. The US doesn’t care about treating all our local legal Canadian accounts as criminal ones before the fact. It doesn’t care about our inability to save for our children’s education with an RESP or saving to keep dependents with disabilities out of poverty.
These are not reasonable fair people. They don’t care what the consequences are for ordinary people like us outside the US.
@badger
Very True….But you know, good ole America is Exceptional!!!!!! yep one of 2 countries with CBT and it is doing exceptiional bullying to all the other 193 countries in the world…..
@northernstar,
US is an exceptional practitioner of ‘might makes right’.
It is just one big global corporation – Buy and Large. Buy or Else….
All for the benefit of the few.
@badger
I think I read somewhere the USA has over 730 bases around the world.
@northernstar,
I guess between the bases and the NSA, they’ve got the globe cornered.
And they’re busy assimilating Canada with Harper’s help:
http://www.thestar.com/news/canada/2013/11/04/ottawa_to_assess_canadaus_data_sharing_project.html
Alex Boutilier Staff Reporter, Published on Mon Nov 04 2013
‘Ottawa to assess Canada-U.S. data sharing project
An independent review is being sought for a program to track people traveling over the Canada-U.S. border.’
“OTTAWA – The federal government is commissioning an independent review of a data sharing project with the United States that aims to track every man, woman and child travelling across the border.
The Canada Border Services Agency said Monday it will require an independent assessment of the Entry/Exit Initiative, a $139-million project announced as part of the 2011 Beyond the Border agreement with the U.S. The review is required before moving to the next phase of the initiative.
The Entry/Exit Initiative is meant to establish a shared system between CBSA and the U.S. Department of Homeland Security for biographical data on those travelling across the border……….”
And when will they be fingerprinting all of us and using biometrics to share with the US?
See: “…The U.S. and Canada have made significant progress in advancing the Beyond the Border deal and continue to implement various perimeter security initiatives. Without much fanfare, they have signed an immigration agreement that would allow them to share biographic and at a later date, biometric information. http://www.globalresearch.ca/police-state-north-america-u-s-canada-border-security-agreement-sharing-biographic-and-biometric-data/5321860 http://www.thestar.com/news/canada/2012/12/07/biometrics_data_collection_canadian_visa_applicants_from_29_countries_will_be_fingerprinted.html http://www.dhs.gov/obim-biometric-procedures-applicability-canadian-citizens
@Badger…
This is giving new meaning to FATCA It is just part of the bigger mission… Foreign Alien Tracking to Control All
Meaning, not meanding… duh… Where is that Edit function at IBS?? grrrr 🙂
Volunteers step forward. The US needs you. Or specifically, your registered Canadian savings, to pay for the 4 billion it issued in fraudulent tax refunds:
http://ca.news.yahoo.com/report-irs-issued-4-billion-fraudulent-refunds-2012-204023044–finance.html
“The Internal Revenue Service issued $4 billion in fraudulent tax refunds last year to people using stolen identities, with some of the money going to addresses in Bulgaria, Lithuania and Ireland, according to an inspector general’s report released Thursday.
The IRS sent a total of 655 tax refunds to a single address in Lithuania, and 343 refunds went to a lone address in Shanghai.
In the U.S., more fraudulent returns went to Miami than any other city. Other top destinations were Chicago, Detroit, Atlanta and Houston.”…
..”Florida is a big target of identity theft in part because of the large number of older residents living there. Older and younger people can be targets for identity theft because many don’t meet the income requirements to file a federal tax return.
Nearly 38,000 potentially fraudulent refunds, totalling $147 million, were sent to addresses in Miami, the report said.
Among individual homes, one address in Orlando received 580 tax refunds totalling $870,000, the report said. Another Orlando address received 291 refunds totalling $466,000….”
This edit functioner just takes a little longer.
@calgary,
: )
@Calgary… Thank you for covering me stupidity! 🙂
Could there be anything more damning then the growing list of TIGTA reports that issue forth from Treasury without notice, rage or comment by those on the Left who think the American Government can be a force for good? It is so good for those in Miami who got their refunds and then returned to Cuba to live the good life, as that is where a lot of the thieves have now gone.
http://www.miamiherald.com/2013/11/02/3728532/fbi-tracking-down-medicare-fraud.html
I Think one of our authors will want to make this into a separate post:
Roger Villere: As Chairman of LAGOP I agree we need to introduce a RNC resolution during our winter meeting to address this ! I will be looking to make this resolution on behalf of the 7.5 million Americans living overseas.
https://www.facebook.com/republicansoverseas
http://blogs.rollcall.com/moneyline/republicans-overseas-inc-established-to-speak-on-public-policy/
Republicans Overseas Inc. Established to Speak on Public Policy
A new political organization has been formed to facilitate the involvement of Republican citizens overseas in the political process of the United States.
Republicans Overseas Inc. was registered at the IRS on Sept. 18 as a Section 527 organization. The officers include Bruce Ash (chairman), Solomon Yue (vice chairman), Helen Van Etten (secretary) and James Bopp Jr. as treasurer and custodian of books.
The filing indicates the corporation was “organized to provide an organization, with chapters throughout the world and a headquarters in the United States, to facilitate involvement of Republican citizens overseas in the political process of the United States. In addition, the Corporation will voice the concerns of Republican citizens overseas in the public policy debates in the United States consistent with Republican principles.”
A spokesperson for the Republican National Committee stated Republicans Overseas was not affiliated with the RNC. The RNC already has a Republicans Abroad organization.
In bipartisan spirit:
https://www.democratsabroad.org/group/da-international/fbarfatca-task-force-page
Democrats Abroad: About the FBAR/FATCA Task Force
Although the requirement for Americans to report accounts held in foreign financial institutions (the FBAR report) has existed for many years, new and more invasive reporting requirements were imposed in 2009 with the passage of the Foreign Account Tax Compliance Act (FATCA). FATCA is the result of Congressional and IRS efforts to improve tax compliance among U.S. citizens, both living in the US and living abroad, with foreign financial assets.
The majority of us living and working around the world understands and supports our government’s efforts to close the loopholes that enable tax avoidance schemes. FATCA and the regulations established to comply with it do not, however, sufficiently distinguish between those Americans with foreign accounts that live within the US and those with foreign accounts who legitimately reside offshore. Overseas Americans have the same needs as stateside Americans for access to basic financial instruments of personal banking, business banking, investments, and savings, based in our country of residence. Living and banking offshore does not equate to tax avoidance.
I found the following on the ING Direct website. Note that ScotiaBank bought ING Direct Canada some months ago.
I didn’t realize that the FATCA reporting that starts in 2015 will include back-reporting of 2013 and 2014. Interesting that they say they are to report the year-end balance, not the highest balance throughout the year like FBARs.
https://www.ingdirect.ca/en/faq/fatca/information-to-report.html
https://www.ingdirect.ca/en/faq/fatca/what-will-fatca-mean-for-me.html
Not strictly about FATCA, but thought all might enjoy the irony that those in the OVD programs, or opting out, who owe zero US tax, or ‘owe’ only because of US exceptionality, face waits that can stretch to years, while the IRS offers this new innovation to small businesses:
“The IRS issued News Release IR-2013-88 on Wednesday, November 6, 2013 announcing the nationwide availability of the Fast Track Settlement Program (the “Program”).
The Program, which is designed to help small business under examination resolve their cases in 60 days, as opposed to in months or years…”
http://www.mondaq.com/unitedstates/x/274054/tax+authorities/IRS+Introduces+Fast+Track+Settlement+Nationwide
Someone’s take on the Maclean’s article:
http://quotulatiousness.ca/blog/2013/11/02/fatca-may-have-significant-negative-influence-on-canadian-law/
I am curious to know what this article is about:
‘IRS Officials Shed Light on FATCA’s Family Member Linking Concept, Tax Notes Today 87-1 (May 5, 2011)’ John M. Staples
Anyone have access and can summarize?
Saw it in this list:
http://www.bsmlegal.com/ourpeople-jstaples.asp
A bit:
http://www.wealthstrategiesjournal.com/2011/05/tax-notes-article-by-amy-s-ell-1.html
http://www.step.org/fatca-guide-trusts-and-companies
Does this mean to say that if only one account is shared with a USP, the non-USP spouse is required to report all of their singularly owned accounts?
Ok, that sounds far-fetched, but the comment is open to interpretation, isn’t it? One can’t be too paranoid when it comes to covering your keister with the IRS, can you.
What is the status of this issue in IRS notice 2011-34 regarding the status of mere “associated family member/s” of an accountholder?
ex.
…”…to determine whether a client (or any associated family member) is a US person, including both US citizens and US green-card holders. – http://www.step.org/fatca-guide-trusts-and-companies#sthash.PGFZWZ6I.dpuf…”
I think this refers to IRS Notice 2011-34,
and I saw this; “..The Notice also provides that, if the account manager is in a position to determine that a family member, who is a non US person, is acting on behalf of a ‘US’ member of that family, then the account must be treated as a US account or as a recalcitrant account. For example, a non-US resident spouse may open the account which is funded by the other spouse who holds US citizenship…”… from
http://www.bdo.lu/uploads/files/Notice%202011-34%20_UK%20translation_.pdf
Isn’t that even further in contravention of the Charter? It is discrimination based on merely being married to or related to the accountholder in question.
It would be useful to know if this is still contemplated.