FATCA Discussion Thread (Ask your questions) Part Two
Please ask your questions here about FATCA.
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What’s interesting is if Nick was subject to the exit tax, he may prefer to choose to be a Canadian citizen at birth instead, which would exempt him for the exit tax (providing he certifies 5 years of tax compliance).
He would not be subject to the exit tax as his expatriation predates. See Did you relinquish before February 6, 1995?
For those who expatriated before June 3, 2004
What these posts show is that he wouldn’t have to file anything because he wasn’t a citizen for all these years.
Petros,
What’s your opinion of a person who worked for the government in 1999? I understand the pre-1995 date isues but I’m unclear of the pre-2004 date. Would my sister still have to file 5 years with the IRS? The pre-2004 post you wrote seems geared more to covered expat / 877A issues, not actual filing requirements?
I think that the post is clear that the IRS will not be expecting an Form 8854. And if you don’t need to file an 8854 then you don’t need to do five years of tax returns. I would do nothing except obtain the CLN at a US Consulate.
Besides, there is no requirement to file for five years in any case. There is only the requirement to certify on Form 8854 that you’ve met all your tax obligations. But that would be for people who expatriated after 2004. By the way, the instructions for the Form 8854 don’t even envisage someone who expatriated before 2004, so the IRS isn’t even giving instructions for people who expatriated that early.
OMG, what great news. What a roller coaster ride for my sister over the last 2 years after I’ve given her cycles of good news and bad about her situation as I’ve learned more over time.
On
One other question, does anybody know if government employment as a contractor (not a direct employee) will be accepted? It was with Canada Post, a crown corporation.
Thanks, Petros. I’m sure that information is a big relief to a lot of people.
I was talking with my boss today, who also happens to be an American Citizen and he heard on the radio in Calgary another media interview done today. It was on NewsTalk 770 in Calgary.
http://www.newstalk770.com/audio-on-demand-2/
Go to the following page and then select today’s date January 14 at 8:00 time on the audio vault and press listen. Once the section loads up go to the 47:15 minute mark and that is when the interview starts. It is a seven minute or so interview with someone from H and R Block.
Cheers.
@nick,
Your government of New Brunswick employment could also get you a back-dated CLN, but your naturalization at age 18 is a slam-dunk. Both of these acts will go on your 4079 form. They’ll likely use the earlier one, your naturalization.
I assume you have the certificate in your hand? For sure, you were over 18? What’s the title on it?
For so many new readers it’s worth repeating this link on the right side of the page! Caution to U.S. Citizens and U.S./Canada dual citizens who are residents of Canada regarding Offshore Voluntary Disclosure
http://isaacbrocksociety.ca/2012/01/10/press-release-isaac-brock-society/
#1 — this H&R person is warning people about the FBAR that kicks in July of 2014. She comes across like, but surely isn’t, an expert.
@MedeaFleecestealer
Just a correction to something you said to @Nick here
A clarification,… I think you will find, under an IGA agreement, the account closing provision that IS in the 544 pages of regulations for direct reporting FFIs WILL BE DONE AWAY WITH. It is replaced with just a requirement that the IRS is notified about the refusal to provide information. That is one of the small advantages for banks under the IGA. They don’t have to close accounts. You can read the Model I IGA to see this change.
and again, for @Nick, you must learn to read and discover some of this information for yourself, and not just accept what I or anyone says in comments on a blog, as we could be wrong! 🙂
@Just Me, I haven’t gone through the version of Swiss IGA Model 1, but I did find these parts on the US Treasury website Model 1 pages which are relevant:
“2. Suspension of Rules Relating to Recalcitrant Accounts. The United States shall not require a Reporting [FATCA Partner] Financial Institution to withhold tax under section 1471 or 1472 of the U.S. Internal Revenue Code with respect to an account held by a recalcitrant account holder (as defined in section 1471(d)(6) of the U.S. Internal Revenue Code), or to close such account, if the U.S. Competent Authority receives the information set forth in subparagraph 2(a) of Article 2 of this Agreement, subject to the provisions of Article 3 of this Agreement, with respect to such account.
2. The information to be obtained and exchanged is:
a) In the case of [FATCA Partner] with respect to each U.S. Reportable Account of each Reporting [FATCA Partner] 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) the account number (or functional equivalent in the absence of an account number);
(3) the name and identifying number of the Reporting [FATCA Partner] Financial Institution;
(4) the account balance or value (including, in the case of a Cash Value Insurance Contract or Annuity Contract, the Cash Value or surrender value) as of the end of the relevant calendar year or other appropriate reporting period or, if the account was closed during such year, immediately before closure;”
http://www.treasury.gov/resource-center/tax-policy/treaties/Documents/FATCA-Reciprocal-Model-1A-Agreement-Preexisting-TIEA-or-DTC-11-4-13.pdf
Now this may be an old model that hasn’t been updated but my reading is that if you’re happy to sign a W-9 and provide the info required then your account won’t be closed. But if you refuse as far as I can see it will. And that is certainly the message coming from the Swiss banks. The letter I got from UBS last year stated:
Consequences of failure to sign and return the authorization and IRS form W-9
If you decide not to sign and return the required documentation, UBS will no longer be able to maintain a business relationship with you.
Imho if Nick lies about his citizenship, the bank finds out and he’s not prepared to sign a W-9 his accounts will be closed. It will of course depend on any IGA that Canada signs and what provisions it contains.
http://www.americansabroad.org/issues/taxation/your-suggestions-tax-reform/
You have til end of this week to tell Senate Finance what to do with US taxation.
@MedeaFleecestealer
That was the article of the IGA I was referring to, and I suppose the devil is in the details, but the black and white, close the account provisions of the 544 pages of Direct FFI reporting have been modified, it would seem. I am not the expert, so that is why I always qualify that “I could be wrong.” 🙂 There is also the issue of Swiss bank policy vs actual diktats of an Canadian IGA, and for that we all wait! I suppose under any circumstance and for any reason, if a bank finds you have made any untruthful statements, they have the option of closing an account just like an insurance company can cancel a policy if you lie. Point taken.
@Just Me, exactly. What the provisions in a Canadian IGA as far as reporting obligations go could be different. For one thing Canada isn’t seen as a tax haven in the same way that the US views Switzerland so may be more lenient in its reporting requirements.
I would also add this info, as Switzerland seems to be leading the way in all this. I hadn’t informed Swiss PostFinance of my change of citizenship status and got a letter strongly recommending that if not tax compliant I join a VD program. I replied by sending back a copy of my CLN and the Streamlined Questionnaire to show I was becoming compliant as required. Now I and my OH have both been asked to sign W-8BEN forms. So signing the W-9 isn’t likely to be the end of things on the banking side should a Canadian IGA be agreed.
@MarkTwain, wrap it up in one big package and shove it up their backsides comes to mind. That’s the politest way I can put it.
from the Republicans Overseas Facebook page
GOVT against the People:
“Is there a reason for the U.S. Stat Dept. to remove this webpage one week before the RNC takes upon the repeal FATCA resolution?
We have been using the statement that 7.6 million U.S. citizens live overseas a lot on this site and in our proposed RNC Resolution to repeal FATCA based on the State Dept May 2013 Fact Sheet titled Who We Are and What We Do: Consular Affairs by the Numbers with this link: http://travel.state.gov/pdf/ca_fact_sheet.pdf as a reference. We had to provide this link to the RNC Legal Dept. for facts check in order to have the RNC Resolutions Committee to consider our proposed resolution. Now you click the link and you will get a 404 error message.”
7.6 million people caught in the orchestrated global traffic jam
7.6 million people caught in the orchestrated global traffic jam
@WhatAmI Unfortunately, I don’t think my Canadian citizenship oath at 18 will work because I did request an American passort years later while I was living in Canada. I didn’t want to, but was told by the border people when going to the U.S. for a conference that it was illegal to enter the U.S. on a Canadian passort (he could see my birthplace on the passport). The passort is expired by now and I never actually used the U.S. passort to travel, but I assume that would be enough for them to reject the citizen oath as intended to given up U.S. citizenship (even though it really was what I wanted at the time…I should have renounced at 18 but was young and didn’t know about any of this). My government of NB employment was after requesting the passport, however but I don’t know if that will work.
@calgary411 She also said people who know they are U.S. citizens must file tax returns and FBARs. That isn’t true for people who came to Canada as children or teenagers having never worked in the U.S. I was aware of my dual citizenship because I never formally gave it up, but I have spent my adult life as a Canadian. Nobody ever told me that I was expected to file tax returns (how would this even occur to someone if they have only worked in Canada) and I had never heard of FBARs until two days ago.
Nick,
And, there are those like me who didn’t know and didn’t pass that on to my children who were born in Canada. I don’t think I am the only one who came to Canada and remained unaware of US citizenship-based taxation (which I didn’t learn about in my US public education). I know they say that ignorance of the law is no excuse. But it is ignorance of this law that is criminalizing many in Canada and other countries outside the USA. I was WARNED when I became a Canadian citizen in 1975 that I would be relinquishing my US citizenship. I, too, and my children as I never ‘educated them’ grew up as Canadian. I’m sorry for all of the mistakes I’ve made, what I have not educated my children with and what I passed on to them by being born to me, but I maintain that the US did a piss-poor job of educating its diaspora. It is cowardly to blame the victims.
@Nick,
@calgary411 and others might be able to help on this point, but I __think__ I have read of people who successfully argued that they applied for a US passport only because a border guard insisted.
On your 4079, you can explain that you were intimidated/scared/bullied/detained by a border guard because of your US birthplace and told you must have a US passport. You naively applied for one even though you had intended and believed you gave up your US citizenship when you naturalized at age 18. Explain that you never even used the US passport after obtaining it and let it expire and did not renew it or behave as a US citizen in any other way since age 18. Have the passport with you (a requirement anyway) and show them there are no stamps in it.
Your 4079 will also record your NB government employment. Have a letter confirming that employment and be sure it has an exact employment start date on it. I’m just guessing, but maybe they’ll go with that due to the complication of having applied for the US passport. The age 18 naturalization is better because it was before 1995 and is an absolute act. It’s easy to say and be believed that you intended to give up US citizenship when you did it. What do you say if they ask you if you took the government job with the intention of giving up your USC when you have already said you had no idea that you were still a USC? I don’t know if they’d ask that though. My sister will find out in mid-Feb.
If all the above fails and they refuse to send your claim to Washington DC and say you have to renounce, then say “OK, let’s do it right now, today”. This is what my sister is going to do in Calgary mid-Feb, so I can report back to you what happens (assuming your appointment is later than hers).
Nobody has expressed any downside to the above plan, other than the possibility they will insist you return for another appointment since they have to prepare a new set of paperwork. This would mean travelling again if you don’t have a consulate in the city where you live. It’s a 5-hour drive for my sister to get to Calgary, but we think it’s worth the attempt at relinquishing instead of renouncing.
I have heard first hand of accounting costs of compliance costing between $5000 and $23,000, and the fellow who paid $23,000 said “so far”. He’s not done yet.
The cost depends on the complexity of your finances, your net worth, and who you get to do it. As has been suggested to you already, Canadian citizenship law changed in 2009 and you can apply for a certificate of Canadian citizen born abroad, making you dual since birth. A Brocker here has done this. You should get this in case you have to renounce and comply with filing. Even if your net worth is under $2 million, and your yearly tax bill is under $160,000, being dual since birth lets you skip some sections of the 8854 form where you would have to itemize your net worth.
BTW, I think you have expressed fears of FBAR penalties? These are waived if you give a reasonable cause. I’m hoping not even knowing you (and my sister and I) were US citizens let alone knowing about filing requirements let alone ever hearing of FBARs is reasonable cause enough. Of course, I’m hoping all three of us are successful in our prior relinquishment claims and all the rest goes away.
New from Roth & Company
Tax Roundup, 1/15/14: Serving society by shooting jaywalkers, sending billionaires to elementary school:
…”Meanwhile, the IRS an American woman who has lived her adult life in France is terrified that she will be financially ruined if she starts complying with foreign reporting requirements that she had no idea existed. A Canadian born of an American parent who has never been to the U.S. faces ruinous penalties because he never filed U.S. tax returns or FBAR reports — it never occurred to him that he might have to file U.S. taxes. A second-generation American who inherited a foreign bank account from her father faces a minimum of $40,000 in penalties after not paying a whopping $100 in income tax the account, which she didn’t even know existed.”…
Love the sarcasm.
http://rothcpa.com/2014/01/tax-roundup-11514-serving-society-by-shooting-jaywalkers-sending-billionaires-to-elementary-school/
Nick asks:
Admin, please forward my email address to Nick.
TIA
Nick, feel free to email me about this.
IMO, the Streamlined program is a decent way to get compliant. In theory at least, it is safer than the QD (quiet disclosure) route which some here have taken in the past, since the IRS is supposedly taking a dim view of QDs nowadays. Having said that I don’t believe there are any reports of Canadians being dinged by penalties for doing a QD. One advantage with Streamlined is that it only requires 3 years of back returns (plus six years of FBARs), whereas QDs are usually done for 6/6. If the goal is to renounce, then you likely want 5 years of returns in, so you can consider exceeding Streamlined requirements.