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FATCA Discussion Thread (Ask your questions) Part Two

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Please ask your questions here about FATCA.

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3,498 thoughts on “FATCA Discussion Thread (Ask your questions) Part Two”

  5. From the last Twit to Just Me

    Now you too can make $7,197/month at home working part-time, just by researching Canadian family trees for IRS!

  6. @ Mark Twain
    They can go ahead and search my family tree. It’s got United Empire Loyalist and Irish roots on one side and Scandinavian (Norway and Denmark) on the other.

  8. Can someone clarify something that I read in today`s Toronto Star? Ellen Roseman writes that banks won`t have to report to the IRS on RRSP`s , RESP`s, TFSA`s etc., but then in the next paragraph seems to contradict herself by saying: ” While the exemption sounds like good news, U.S. citizens in Canada still have to report to the IRS on these tax-sheltered accounts if they hold $50,000 or more and may have to pay tax, as well” . Does this apply to “accidental Americans” as well? I thought an exemption was an exemption, or isn`t it?

  9. rob,

    It appears that what we are being told is deceiving. We need to have more legal analysis re the IGA on this, but my reading is that “the exemption” refers to what the banks will have to turn over to the US IRS. It does nothing for the US Person in Canada responsibility to report such accounts to the IRS as they are, according to the US, “foreign trusts” and require OUR reporting to the IRS, with all the complex forms like 3520, 3520A and, for many the new FATCA Form 8938. As I see it, there is NO Canadian government protection or the “Accidental American.” Others may read it differently and will advise so if they see your comment.

  10. @rob

    It’s a trap. The government of Canada wants the banks to keep selling us financial products that other ‘regular’ Canadians can still buy, knowing full well that the US will tax us on them later when they hand us over to the IRS. US treasury must be rubbing their hands in glee.

    To make things more confusing, the Canadian government says it won’t collect tax and penalties against Canadians for the IRS.

  11. Can the banks withhold from us in the future when we begin drawing our RRSP`s ? I was feeling ok after the IGA was announced , but am beginning to get stressed again. I am the Canadian , my wife is the accidental American. She was born in the U.S. to Canadian parents who registered her as a Canadian born abroad. She returned to Canada with her family when she was 4 years old, in 1960. She is completely unperturbed and I am freaking out. I think I better go see a lawyer, but who to choose?

  12. @Rob,

    There is no indication anywhere that a Canadian bank will ever withhold money from your wife. There is every indication that the IRS will not only tax everything they can, but also try to collect penalties for failing to file the paperwork that shows she owes no taxes.

    However, the Canadian government will not help the IRS collect any of the above.

    Did your wife ever work for any level of government? If so, she could claim a back-dated relinquishment for that.

  13. I’m repeating this post I made in another thread. I’m surprised it has gotten no comments there.

    http://isaacbrocksociety.ca/2014/02/05/the-canada-united-states-fatca-intergovernmental-agreement/comment-page-16/#comment-1090383

    OMG, has nobody noticed this Easter Egg in the IGA? Annex II, Section III, page 40.

    My interpretation: If a Financial Institution sets and enforces a policy that refuses accounts for US citizens not resident in Canada, and closes such preexisting accounts, the FI becomes a Deemed-Compliant, Non-Reporting Canadian FI. I think that means they don’t have to report anything to the CRA. No account thresholds, nothing. Verifying residence would be cheap and easy to do compared to citizenship verification, would not violate anybody’s privacy, and there is no IT cost to develop reporting systems to the CRA.

    Sounds like residence-based-BANKING to me! No wonder it took 2 years to negotiate this IGA. Who knew? Only in Canada? Pity!

    Yes, the section says the FI could choose to report non-Canada-resident account holders under normal FATCA procedures instead of closing their accounts, but that just puts them back into the normal FATCA-land anyway.

    Canada could do what Switzerland did, and set up just one FI that caters to US citizens (but in our case, we’d only need it specifically for non-Canadian-resident US citizens), and every other bank can ignore implementing FATCA reporting.

    I don’t yet understand the definition of a “Financial Account” on page 4 to know if this Annex Section III includes just simple depository accounts or if it includes investment accounts such as holding Canadian mutual funds. Generally, exactly what such a FI can offer in the way of services. Obviously, this is a crucial detail.

    There is a lot more to say about this but I won’t waste the space or time if people think I’m interpreting this incorrectly.

    III. Deemed-Compliant Financial Institutions
    The following Financial Institutions are Non-Reporting Canadian Financial Institutions
    that shall be treated as deemed-compliant FFIs for the purposes of section 1471 of the
    U.S. Internal Revenue Code.
    A. Financial Institution with a Local Client Base. A Financial Institution that
    qualifies as a local FFI as described in relevant U.S. Treasury regulations,
    applying subparagraphs A(1), A(2) and A(3) of this section in lieu of the relevant
    paragraphs in those regulations:
    1. Beginning on or before July 1, 2014, the Financial Institution must have
    policies and procedures, consistent with those set forth in Annex I, to
    prevent the Financial Institution from providing a Financial Account to
    any Nonparticipating Financial Institution and to monitor whether the
    Financial Institution opens or maintains a Financial Account for any
    Specified U.S. Person who is not a resident of Canada (including a U.S.
    Person that was a resident of Canada when the Financial Account was
    opened but subsequently ceases to be a resident of Canada) or any Passive
    NFFE with Controlling Persons who are U.S. residents or U.S. citizens
    who are not residents of Canada;
    2. Such policies and procedures must provide that if any Financial Account
    held by a Specified U.S. Person who is not a resident of Canada or by a
    Passive NFFE with Controlling Persons who are U.S. residents or U.S.
    citizens who are not residents of Canada is identified, the Financial
    Institution must report such Financial Account as would be required if the
    Financial Institution were a Reporting Canadian Financial Institution
    (including by following the applicable registration requirements on the
    IRS FATCA registration website) or close such Financial Account;
    3. With respect to a Preexisting Account held by an individual who is not a
    resident of Canada or by an Entity, the Financial Institution must review
    those Preexisting Accounts in accordance with the procedures set forth in
    Annex I applicable to Preexisting Accounts to identify any Financial
    Account held by a Specified U.S. Person who is not a resident of Canada,
    by a Passive NFFE with Controlling Persons who are U.S. residents or
    U.S. citizens who are not residents of Canada, or by a Nonparticipating
    Financial Institution, and must report such Financial Account as would be
    required if the Financial Institution were a Reporting Canadian Financial
    Institution (including by following the applicable registration requirements
    on the IRS FATCA registration website) or close such Financial Account;

  14. One more cross-post:

    http://isaacbrocksociety.ca/2014/02/05/the-canada-united-states-fatca-intergovernmental-agreement/comment-page-16/#comment-1090412

    Following the above Annex section, the following describes another FATCA-free FI, but looks to be restricted to simple deposits and not investments. However, again, there is no $50K limit on the account holdings. This doesn’t mention anything about citizenship, so I don’t really understand why the IRS lets such FIs off the hook for reporting.

    B. Local Bank. A Financial Institution that qualifies as a nonregistering local bank
    as described in relevant U.S. Treasury regulations, using the following definitions
    where applicable:
    1. The term “bank” shall include any Depository Institution to which the
    Bank Act or the Trust and Loan Companies Act applies, or which is a trust
    or loan company regulated by a provincial Act; and
    2. The term “credit union or similar cooperative credit organization that is
    operated without profit” shall include any credit union or similar
    cooperative credit organization that is entitled to tax-favored treatment
    with respect to distributions to its members under Canadian law, including
    any credit union as defined in subsection 137(6) of the Income Tax Act.

  15. @ whatami . She did not work for the government. She does remember her Canadian father telling her ( he is no longer with us) that when she turned 18 , under the citizenship act of the U.S. , she would have to claim her U.S. citizenship , or it would be relinquished. She did not want anything to do with it so she did not step up to claim it. I am not sure what it was that she would have had to do at the time to “regain” that citizenship. She worked in Canada , paid taxes in Canada,and only used a Canadian passport. We were shocked to learn a couple of years ago that the U.S. may still consider her a U.S. person. I should clarify, the IRS, not the U.S.

  16. @WhatAmI @Rob

    Did you first establish whether or not the wife had reached 25 before the Oct 10, 1978 change to the residency rule 3year deadline?

  17. @whatAmI @Rob..

    Sorry, I just noticed the age 4 in 1960..meaning she was born in 1956 ..thus didn’t complete the age 25 by Oct 10.1978 rule change…

  18. @Benedict @ WhatAmI
    Unfortunately she was only 22 years old on Oct 10, 1978. Does that mean her citizenship did not in fact lapse? She did begin voting in Canadian federal and provincial elections at the age of 18.

  19. @Rob

    This was debated by WhatAmI and I, in great length, under the Renunciation and Relinquishment thread in July 2013…Apparently on Oct 10, 1978 the rule was repealed prospectively (ie going forward) for DUAL NATIONALS. (you had to have completed the 3 years)

    § 1482. Repealed. Pub. L. 95–432, § 1, Oct. 10, 1978,
    92 Stat. 1046
    Section, act June 27, 1952, ch. 477, title III, ch. 3, § 350,
    66 Stat. 269, provided that an individual with dual nationality
    who voluntarily claims the benefits of the
    foreign state nationality loses his United States nationality
    by having continuous residence in the foreign
    state for 3 years after having attained 22 years of age
    unless prior to the 3 year period he takes an oath of allegiance
    to the United States, or his residence in the
    foreign state was for a reason specified in section
    1485(1), (2), (4), (5), (6), (7), or (8) of this title or section
    1486(1) or (2) of this title.
    EFFECTIVE DATE OF REPEAL
    Section 1 of Pub. L. 95–432 provided that repeal of this
    section is effective Oct. 10, 1978.

    http://www.gpo.gov/fdsys/pkg/USCODE-2010-title8/pdf/USCODE-2010-title8-chap12-subchapIII-partIII.pdf

  20. @Rob

    The 1978 change also repealed voting as an expatriating act. From all accounts, the DoS will not use pre-1978 voting as an expatriating act even though the change was prospective only. Regardless, both my sister and I are including voting as voluntary and intended acts of expatriation in our letters accompanying our 4079 relinquishment submission. I figure it can’t hurt.

    Being born a dual citizen, I fell under the stricken INA 350 that @Benedict quoted above. Being naturalized in Canada as a minor, he fell under a part of INA 349 that pertained to minors that was also stricken. The DoS would not entertain his claim. Fortunately he had provincial government employment which was ultimately accepted. Although I list many expatriating acts in my submission, I suspect that my municipal government employment will be the only possibility for acceptance. Another thing @Benedict and I share is that we were both told by US consuls back in the 1970s that we were no longer US citizens. This seems to garner sympathy from the interviewers, but probably does not sway the DoS in DC.

  21. Sen. Rand Paul on Wednesday officially filed his class action lawsuit against the Obama administration over National Security Agency data collection
    Read more: http://www.politico.com/story/2014/02/rand-paul-national-security-agency-lawsuit-103423.html

    “There’s a huge and growing swell of protest in this country of people who are outraged that their records are being taken without suspicion, without a judge’s warrant and without individualization,” Paul said.

    Looks like it perfectly applies to FATCA as well. Maybe one of Rand Paul constituent could suggest him to sue over FATCA as well.

  23. @ EM,@Badger those all simply linked back to the Demonic FATCA page. They didn’t use short enough shortcuts, so the full URL works as a shortcut in twitter but doesn’t get copied.

    https://t.co/dPf8IVBqxo

    These little bots are hell bent on their goals.

    Why would voters not want to vote for the party with pictures of children and the dog named after the president, whilst, when you think of the other party, you think of the pitbull face of John Boehner standing behind President Happy.

  24. Jerusalem Post, by ABRAHAM KATSMAN 02/12/2014: “Pushing back against ‘the worst law you never hear of”

    …
    The extraterritoriality of the law will lead to foreign-relations friction. Once implemented, FATCA will allow the US government to impose regulatory costs and penalties upon foreign financial institutions even if they otherwise have no dealings with the United States. Forcing foreign financial institutions or governments to collect data on American citizens and transmit it to the IRS – at their own expense, yet – does not go over well in foreign capitals. It has already drawn the ire of Canada’s Finance Minister Jim Flaherty for requiring Canadian banks to become unpaid extensions of the IRS and jeopardizing Canadians’ privacy rights.

    The US proposes dealing with the foreign relations issue by compounding the problem, offering reciprocal reporting to countries who sign special intergovernmental agreements. However, even besides the additional complexity and cost created by such agreements, the prospect of the US government providing foreign governments private information on American citizens is disturbing.

    …

  25. OECD proposes data exchange norm in tax evasion crackdown:
    http://www.globalpost.com/dispatch/news/afp/140213/oecd-proposes-data-exchange-norm-tax-evasion-crackdown-0

    Here is the most relevant information:
    “The OECD’s top official for financial issues, Pascal Saint-Amans, said the OECD’s proposed standard is in effect a multilateral version of the US FATCA, or Foreign Account Tax Compliance Act.
    One major difference, however, is that the OECD standard will be based on a residency test rather than nationality, according to OECD officials.
    It will cover not only bank deposits, but interest paid and capital gains.
    It will also require reporting of the ultimate beneficiary, which should hinder the use of trusts and shell companies to evade tax liabilities.
    Saint-Amans acknowledged, however, that gold and other precious metals will escape the system as banks aren’t forced to open their vaults and safe deposit boxes, and this could pose a problem.”

    The US needs to scrap FATCA and adopt the OECD system. As long as FATCA lives, with the withholding threats, discrimination of Americans will continue, even with a global OECD GACTA.

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