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.
Calling KalC
As the only 2 member of the beat the system sub group I want to point one thing on RRSP,
from credit union of Canada
“Moderate levels of reporting if at least 98 per cent of accounts (dollars, not by number of accounts)
are held by residents of Canada. Please note that this test is not about identifying American
taxpayers–it simply calculates accounts held by all residents of Canada(including Americans
resident here)vs.members who are non-resident of Canada. As credit unions already track
resident vs. non-resident status of accounts for purposes of reporting to CRA
interest and dividends on a T5(to residents)vs. NR4
(to non-residents), this may be a relatively straight-
forward exercise. All accounts should be included in this test, even accounts that may be FATCA
-exempt such as RRSPs and RRIFs and those accounts with balances less than $50,000”
http://www.cucentral.ca/Connections/Connections%20FATCA%20July%202013%20FINAL.pdf?Mobile=1&Source=%2F_layouts%2Fmobile%2Fview.aspx%3FList%3D90136837-906b-44bb-b693-3a88b0e17451%26View%3D0ae362af-43d6-405e-855d-11791cd3d9b8%26CurrentPage%3D1
Me. Do NOT do anything precipitate. As far as you are concerned, you are not a US cit. don’t do anything to belie that fact.
If you feel you must, make an appointment and inform the consulate that you relinquished your US citizenship when you obtained your Canadian cert. and swore the oath. They may tell you that’s not good enough. In which case you might choose to renounce.
At that point you would have 2 choices with respect to taxes. a). File 5 years or b). Ignore. If you file 5 yrs worth you would not be liable for any penalties if there was no tax owing.
Or better still, carry on, don’t do anything .
Everyone on this site says ‘ you HAVE to do this and you HAVE to do that’. In many cases you don’t have to do anything.
Me also read the British Facta agreement the worst so you know how to hide. The French Facta may be better.
http://www.treasury.gov/resource-center/tax-policy/treaties/Documents/FATCA-Agreement-UK-9-12-2012.pdf
http://www.treasury.gov/resource-center/tax-policy/treaties/Documents/BilateralAgreementUSFranceImplementFATCA.pdf
@Me
You have to be a Canadian Citizen already to get a citizenship card, and to get a SIN number. I can’t imagine what oath you are referring to. The Certificate of Registration of Birth Abroad was only issued up until 1977, before you were born. I’m not sure what the deal is for people born abroad starting in 1977. Having Canadian parents should have givin you Canadian citizenship since birth anyway.
Regardless, even if the oath you refer to was the naturalization process at age 16 to become a Canadian citizen, the experience of @Benedict Arnold Be Me is that the DoS ignores all the old rules and goes by current (1986) rules and will not accept the naturalization of a minor as an expatriating act.
The only success for back-dated relinquishment of Brockers who were born dual citizens that I am aware of is of people who worked for some level of the government. Everyone else has had to renounce.
I have heard of people having devastating financial issues as a result of playing catch-up with the IRS, but they were probably all covered expats. There have been no reports yet of problems (penalties) with the streamlined procedure for non-covered expats. I assume they simply claim they didn’t know they were US citizens, or they didn’t know they had filing obligations.
@WhatAmI, the exact question on inheritance reads as follows:
19. During any of the above-listed tax years, did you receive income from any of the following income sources in your country of residence: rental income, sales of property, inheritance?
I think it’s really just one of the many questions on the form to help decide whether you qualify for Streamlined or not. Bear in mind that question 2: Have you filed a US tax return for tax year 2009 or later? is one of the Eligibility questions which if answered yes excludes you from the Strealined process. Presumably any inheritance should be reported on a US return so to my mind it’s simply a double check question that you’re not excluded, in the same way that the other Tax Position questions are. Here’s the Streamlined Questionnaire if anyone wants to have a look at it:
http://www.irs.gov/pub/irs-utl/non-resident_questionnaire.pdf
I don’t know how others using the Streamlined process feel, but to me it does seem to be geared up for those of us who didn’t realise we should have been filing.
I received my first FATCA-related communication. It was from a former employer (an FFI) who told me that I was suspected of US personhood and needed to provide a W-9 or a W-8 if I wasn’t a US person. The W-9 was needed to provide information to the US on all transactions through my employee “account” which would have included share based compensation, employee stock options, shares purchased through the employee share plan, dividends on unvested shares etc. I filled out the W-8 and later received another message saying that they think I made a mistake and that I should be, according to their records, providing a W-9. In the event that I felt a W-8 was appropriate, I was to provide a certified copy of my passport and an “original written explanation”. Both the original message and the follow-up indicated that if I failed to provide the required documentation (W-9, W-8 and the additional information), I would be banned from undertaking any discretionary transactions in my “account” and that all non-discretionary transactions (mandatory distributions of vested shares or dividends for instance) would be subject to 28% US backup withholding (in addition to the local deductions for tax in the UK of up to 45% plus the social deductions ie up to about 80% total withholding).
In this case, my former employer is an FFI so that may explain it. However, there could be a broader interpretation that the subsidiaries established by employers to administer share based compensation, employee stock options, employee share plans etc. are covered by FATCA and will be reporting all of these transactions to the US. So even if your employer isn’t an FFI, the specific subsidiary that administers the plan might be. Very disturbing
Curiously, that they didn’t ask for my CLN since that is the prescribed method required to “cure” my US personhood according to the UK IGA.
@Edelweiss, you didn’t send a copy of the CLN with your W-8? That’s the first thing I would have done.
@Medea
It was an online form where you just ticked W-9 or W-8. The follow-up email also didn’t request the CLN although it is mandatory according to the procedures in the UK IGA. I will probably send it anyway since, although they apparently don’t know it, they will have to have it. But it’s tiresome to have to pay £10 each time I have to get a copy of my passport and my CLN certified.
@KalC I’m confused…what do you mean file 5 years of taxes? I have been looking at the streamlined process, which is 6 years.
Forbes: Obama Selectively Implements More Than Just Obamacare, At Great Taxpayer Expense
Lost in the bewilderment about the Obama administration choosing which parts of Obamacare it would apply to which people and when, has been that it has been doing the same thing with the Foreign Account Tax Compliance Act (FATCA).
…
And, as with the rollout of the Obamacare website, it appears the implementation of the systems FATCA requires has wasted millions of taxpayers’ hard-earned and under-penalty-of-law-collected dollars. This is the news in the September 27, 2013, report the Treasury Inspector General for Tax Administration released last week.
@GeorgeIII Britian and France are in very different situations when it comes to FATCA, it will be far more politically problematic for Canada to do the same. First, the % of so-called U.S. persons in Canada is far higher: 1 million or more for a population of 34 million as opposed to under 200,000 in the UK out of a population of 63 million. Huge difference in terms of how much of an impact this would have. Plus, Canada has a Charter of Rights that our courts has generally done a good job at upholding.
@Nick, KCal, Streamlined requires 3 years of delinquent tax filing and 6 years of FBAR’s.
http://www.irs.gov/uac/Instructions-for-New-Streamlined-Filing-Compliance-Procedures-for-Non-Resident-Non-Filer-US-Taxpayers
@Nick
5 are the number of years of tax certification for renouncing. Lots of numbers and acronyms to familiarize yourself with, I know. The US really likes to complicate things.
@calgary, thanks for posting that.
also the Forbes article notes (what Allison Christians had pointed out much earlier http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2280508 http://taxpol.blogspot.ca/2013/02/the-dubious-legal-pedigree-of-fatca.html http://www.compasscayman.com/cfr/2013/04/12/What-You-Give-and-What-You-Get–Reciprocity-under-a-Model-1/ );
…….”To entice foreign governments to enter into these agreements, Treasury has been promising to reciprocate, to the extent allowed by law.
The catch is that the reciprocation is not presently allowed by U.S. law. This is clear from the Administration’s budget request for 2014, the “Analysis and Perspectives” for which asks, on page 202, for the authority to reciprocate.
Rep. Bill Posey, R-FL, wrote to Treasury Secretary Jack Lew last summer, asking him to stop negotiating FATCA-implementing intergovernmental agreements with foreign governments, because his promise of US reciprocation is one on which he cannot deliver. ….” http://www.forbes.com/sites/realspin/2014/01/17/obama-selectively-implements-more-than-just-obamacare-at-great-taxpayer-expense/
@MedeaFleecestealer,
I was referring by memory to Roy Berg’s question-by-question analysis of the questionnaire, where he wrote:
That one stuck in my mind so I mentioned it in my post above. Here is his entire post about the questionnaire. It would be nice to get an update from him about the procedure and the questionnaire.
http://www.moodysgartner.com/do-you-qualify-for-irss-new-streamlined-procedure-to-bring-us-tax-returns-current/
Speaking of the Streamlined Procedure questionnaire, I have a question that I ask every chance I get. It would be great if Brockers who have recently or plan to do the streamlined procedure ask their accountants about this and report back what the accountants have been doing and plan to do going forward.
The Streamlined Procedure was announced in Sep, 2012. It specifies 3 years of taxes and 6 years of FBARs. There are 3 blanks in the form to fill in the 3 applicable years of taxes. Today, that would be 2011, 2012 and 2013.
However, the section that pertains to FBARs “FINANCIAL ACCOUNTS/ENTITIES” is hard-wired in questions 5 & 6 as “Since January 1, 2006, have you had…”. The year 2006 made sense in Sep 2012 when the form was first published since it was the beginning of the 6-year FBAR required period. Today, in 2014, surely that should read “Since January 1, 2008…”.
It makes no sense to answer YES to this question on the questionnaire for a 2006 account that no longer existed in 2008 and forward, since the account would not be included in the required 6 years of previous FBARs required to be filed in 2015 for people who renounce in 2014.
Again, could anybody with a relationship with an accountant ask about this?
In July 2013, I asked the accountant that my mother is using for her renunciation, and he said “It is not clear whether the Streamlined Process will ratchet forward as tax years pass, but that would be my expectation”.
@Edelweiss –
It’s very funny to have anyone expect a certified copy of a CLN, given how easy they would be to forge.
@WhatAmI, ah yes, I see your point. That makes it seem as if it’s another badly worded question in that an inheritance may subsequently yield up either rental income or be sold which would be taxable. Or maybe they’re thinking of people who inherited a business who would have income from that?
I’ll try and remember to ask my Swiss tax preparer what he thinks as I need to contact him about doing the final forms. I filed 2006 to 2012 last year, but it makes sense that it should roll on year by year – not that the IRS is sensible as we well know!
@bubblebustin So does this mean that if you renounce you can’t do the streamlined process but have to engage in another one that requires 5 years of filing?? Now I’m really confused, I thought one could renounce and do the streamlined thing…
Nick, If you renounce, you will be told to contact the IRS. You will be told to submit a form 8854. The goal of 8854 is to avoid being a ‘covered expatriate’ . Since you are a dual from birth, you only need to meet 1 of the 3 tests. You do not need to worry about the income or net worth tests. You certify that you have been ‘ tax compliant’ for 5 yrs. That’s it.
Streamlined is another route. As is their wont, the IRS makes everything difficult and confusing. 87,000 pages and counting!
@Nick,
Think of the Streamlined Procedure as existing for people who didn’t even know they had filing obligations to come clean and catch up with the IRS without penalty and to get back into the fold (and continue to file going forward). It requires 3 years of tax filing and 6 years of FBAR filing.
The 8854 form when renouncing requires 5 years instead of 3 years of back tax filing. People who want to renounce have been sending 5 years instead of 3 years to the Streamlined Procedure.
BTW, what city will you relinquish or renounce in?
For how long it might soon take to renounce, you may end up having to file an extra two years over and above the 3 for Streamlined!
There is a detailed post about the situation on New Zealand here: http://isaacbrocksociety.ca/2014/01/11/updated-analysis-and-comment-on-new-zealands-stealth-fatca-enabling-legislation/
Here is a short version that summarises:
1/ The NZ cabinet has already agreed to “negotiate” a Model 1 IGA with the US. This has not been subject to consultation or parliamentary process.
2/ NZ has extensive Privacy laws and Human Rights laws that would need to be broken for New Zealand FIs to adhere to FATCA.
3/ The NZ gov has introduced a bill to force NZ FIs to comply with the IGA. It does this by defining the IGA as a Dual Tax Treaty, which overrides domestic Privacy laws. It is not clear to me how this gets round the human rights issues.
4/ The FATCA section (called Foreign account information-sharing agreements) is buried in the bill which contains much unrelated legislation
5/ That bill has been referred to Select Committee and is open for public submissions, closing on 5th Feb. The link for submissions is here: http://www.parliament.nz/en-nz/pb/sc/make-submission/50SCFE_SCF_00DBHOH_BILL12926_1/taxation-annual-rates-employee-allowances-and-remedial
As far as I am aware, this is the only situation in the world at present where a government is calling for public submissions on FATCA. Anyone can make a submission.
@WhatAmI @KalC Thanks, this helps to clarify things somewhat. So ultimately 5 years instead of three if one wants to be rid of them. This just keeps getting better. I’m still going to try to relinquish first and see how that goes. Either way, it will be at the Toronto consulate.
I think it’s more a case that the 8854 form hasn’t been changed to reflect those who entered the newer Streamlined process. I renounced and went Streamlined so it’s certainly possible. Though as Bubblebustin points out, depending on how long it takes (Vancouver embassy comes to mind) you may well be filing more than 3 years before you’ve finished.
Still, I wonder if there might be a sea change on the horizon:
http://www.accidentaluscitizen.com/category/citizenship-renunciation/
Could we see the IRS being more open to changes that would help people caught in a net they knew nothing about? Any more info/sources on this? Given the difficulty of getting an SSN, an alternative would certainly be welcome.