Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions) Part Two
Ask your questions about Renunciation and Relinquishment of United States Citizenship and Certificates of Loss of Nationality.
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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 Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions) Part One
@ Blaze says Yes Revenue Canada does not collect but what about our banks, can they just give the money to the IRS? Or do we go to court and fight with the IRS? Because much of my income is considered interest by the US tax treatment is much harsher than for people earning money. Finding out about my situation only a few days ago, my finances with my husband are in jeapardy and he earned most of the money in the accounts , a fully Canadian citizen. This amounts to theft if we are penalized. One article referenced said they were not after the grannies and their life savings, in my case that is exactly what will happen if I have to file taxes to comply. And the income being taxed will be my husbands because we set up joint accounts and there is no provision for less than 50/50 split. The question is do we still have time to act on making some changes before we get caught?
@heartsick,
There is no indication that the banks or the CRA will give an individual’s money to the IRS. That’s putting it mildly. There’s no way that will happen. They just notify the IRS that you exist and all your account details. Then you might get nasty letters from the IRS.
I’m not sure that I understand the IRS FEIE well enough, but I _think_ that even though the FEIE doesn’t apply to your interest income, the Tax treaty with the US should, and since you paid more tax here on that interest income you would not owe more to the US on it. This needs to be verified though!
I read somewhere that the US has to honour our local provincial and federal rules for the ownership of joint assets when it comes to _tax_ filing and income. I’m not sure what sort of assets this applies to, or if it includes the level of attribution rules that the CRA has. Those attribution rules work in your favour in this case if it can be said that the joint funds are your husbands even though they are in your name. This does not apply to FATCA or FBAR reporting. This needs to be verified.
@heartsick
As you see, there are varying opinions. Some here said for 2 years to do nothing because FATCA will never pass in Canada. Now that we’re close to it passing, some still say do nothing because the banks won’t ask if you’re a US person even after June 30th, and they won’t report you. (I don’t personally believe that). Others say do nothing because the IRS cannot collect from you in Canada anyway. (I do personally believe that). Some people can do nothing and sleep at night, some can’t. Of course, doing nothing certainly means never going to the US again. Some people still argue that crossing the border with a US birthplace on a Canadian passport will never be a problem. I don’t believe that. I don’t know how they can believe that when there are many first-hand accounts already of being pulled aside at border crossings due to this.
Heartsick. Slow down. Think! Your bank can’t just turn over your money to the US. The IRS doesn’t know you exist and won’t know unless you make the mistake of telling them.
Your bank doesn’t know where you were born. They don’t consider you a so called US person. They won’t report your accounts under FATCA .
You aren’t going to ‘get caught’. If, after thinking about this long and hard, you feel you need to do something then it is a simple matter to put any non registered accounts over 50k in your husband’s name.
However I truly think that is unnecessary.
heartsick –
You’ll hear a lot of things from a lot of pseudonymous people at Brock who think they know a lot. You usually get what you pay for (nothing so far, right?) and even that you can’t trust. We’re all fated to navigate the uncertainties with no guarantees, including no guarantee that Canada is forever locked in to “protecting” certain special people from US collection efforts. Just look at the history of US citizenship to see how much things can change. One more possible bit of even worse news on your case. Possible. Possible. It sounds like you may have been engaged long-term in illegitimate income-splitting with your spouse, and therefore could also be in hot water right now with the Canada that some think will protect you forever. This is conveyed from the perspective that ignorance is worse than knowlege, and that phony reassurances may feel good right away but eventually produce chronic nausea. Do the dreadful drudgery. Sauve qui peut.
The Streamlined file 3 years and become compliant deal the US is offering is only beneficial to those earning income as in a salary or has only interest income. If your income is derived mostly from investments including mutual funds and dividends, you will likely owe back taxes. The problem with our investments is that Canada treats our Canadian dividends more favourably than interest, the US treats everything as interest because Canadian dividends are considered foreign income to them. There is a similar policy regarding Canadian Mutual funds. Thus the tax I paid here is well under what the US will charge. Add that to the fact that you must report earnings from the TFSAs which is not recognized in the US and you have another problem. I have only scratched the surface. RRSP income is taxed, if filing late, by the US – Canada’s rules don’t apply unless you can take advantage of the Streamlined method. So much for the tax treaty. . .
@usxcanada,
You graciously spend a lot of time posting here, mostly posting sentiments similar to your last post. You seem to mostly tell people not to believe anything they read here, but I don’t recall you offering any alternative. I don’t recall you describing your own situation or what you have or will do about it. Why spend so much time posting comments? What does “Do the dreadful drudgery” mean? It sounds like you’re telling people to figure it out themselves, but that’s why they’re here reading this website.
A person either does nothing, or something. Doing nothing is suggested here all the time, so I assume you include that idea in the untrustworthy advice column. That leaves doing something. I can only think of two things: one is to figure it out yourself, but you advise people not to do that here. You can’t figure out much that’s useful by reading official government websites. I think that only leaves going downtown and paying $750/hour to the compliance industry. Is that your advice?
@usxcanada
No, I have been very careful to keep track of our investments, that’s the problem. Very little in the joint investment account belongs to me, I have created a complicated spreadsheet to track my investments and keep them separate from my husband’s. I did have savings from before we were married and some employment income that has grown over the years. There is nothing illegal about it. Revenue Canada does not care if the investments are in one account. We set up the RESP and the Investment account jointly so that both of us could deal with the transaction and for eventual estate planning purposes. Of course I never dreamed that I would be dealing with US tax laws.
@heartsick,
Are you saying that very little of the money in the joint accounts is yours (originally earned by you), and that the income from those joint accounts is claimed on your husband’s CRA tax return, and not yours? If the accounts are somehow tagged with your US-ness, they have to be reported under FATCA, that’s clear. But as I posted above, it may be that the IRA has to honour the attribution to your husband under Canadian law and this income would not factor into your US tax return. That is worth finding out. I may be confusing this with net-worth reckoning of joint assets for the Form 8854.
@Heartsick: USxCanada like most people here post under pseudonyms. I don’t see why that is a problem.
However, my real name is Lynne Swanson. Anyone who has been following Brock for about a year is very aware of that. At Maple Sandbox I now post under that name. I tweet under that name. My photo appears both at Sandbox and on Twitter.
I have written several published articles under that name. I testified before Parliament’s Finance Committee under that name and with my city of residence (London Ontario) identified. That video is now available and my name and city is in the public transcript. Along with Dr. Stephen Kish, I retained legal counsel to provide a legal opinion on the constitutionality of FATCA under my real name.
I have not updated my name here simply because haven’t been bothered to do it administratively–but I am also not trying to hide my my identity with Blaze. It’s just a name to which I have become somewhat attached.
I’m not sure what USxCanada’s problem is with pseudonyms. If that is a problem, he or she could take leadership and begin posting under a real name. .
I’m not sure you will get peace of mind by hiring expensive lawyers. I spoke with a lawyer before Brock was established. He gave me massive inaccurate information, His advice would have created created a huge nightmare for me if I had followed it. If you do decide to hire one, be very selective.
As I said, I am not a lawyer or accountant and my information is simply intended as friendly advice. I am not trying to show I think I “know a lot.” I’m just sharing what I have learned and hope it may help you and others in some small way.
@ Blaze says, thank you for your comments. I note that you live in London, Ontario, I lived there for a time and went to University there. I also do not have a problem with pseudonyms. I am not sure a lawyer can do much for me at this point, my status as a US citizen has become clear. I may need a good accountant however. I have been wading throught the IRS ( keep wanting to type IRA which brings to mind the Irish Republican Army-maybe an unconcious thought trying to push through) site and trying to get an idea of my tax situation. What to do about it will be a decision I have to make.
@Heartsick: The answer to your question about whether banks can take your money and turn if over to the IRS is simple: No.
Be equally selective about what accountant you choose if you decide that is what you will do.
Everyone,
It’s very early in the discovery and research process for @heartsick, but it may be that her finances are such that she won’t qualify for Streamlined Filing. I don’t even know what her filing process would then be in that case.
If she can get a good government employment confirmation letter, I think she has just as good a chance as anyone else with such a claim for a back-dated CLN to 1981. If she is willing to file anyway, does anyone see a problem with her first trying to claim the past relinquishment?
It would delay her filing for a year because the wait to get an appointment and maybe 10 more months to hear the results. FATCA could report her ín that time but we don’t know when they’ll srart processing the data.
Heartsick I give up.
@ KalC says. I have spent the last few days trying to collect information. The “do nothing” approach is not something I can live with. It is my choice. There are too many unknowns. There are reports of Financial Advisors calling this month to ask about the dreaded “US Person” question and place of birth. I cannot lie, I do not consider myself a US Person but I was born in the US. For those that are doing nothing I hope your assets are protected. We do not know where this will lead. With knowledge comes power.
@heartsick
I too don’t want to spend the rest of my life looking over my shoulder, that’s why I entered OVDI. Had Streamlined existed I probably would have entered that instead, although the result in the end will likely be the same. The IRS keeps moving the goal posts closer, but not close and quick enough for the many. Too many people simply have way too much to lose under the current situation, which can only be resolved by changes to the tax treaty that would exempt our Canadian savings plans from US taxation.
I am sharing what I am learning about the differences in taxation between the US and Canada. The Streamlined taxation compliance approach will only work for people with employment and interest income. Anyone with a significant income derived from Canadian dividend income or Canadian mutual fund income or a TFSA (not recognized as a tax shelter in the US) will find themselves owing US taxes. For example $25000 incurs a tax of just over $3000 in the US. It appears that only $1500 owed per year is allowed. Do not forget that all dollar amounts must be converted to US$ for reporting purposes. It’s sad that it will probably be the seniors in this country that will be hardest hit in having to fork over large amounts of their hard earned retirement money to the US should they decide to become compliant. For our poorer newly discovered citizens the accounting fees alone to prepare the taxes are going to be a hardship.
@heartsick
There are some strong indicators that the IRS isn’t sticking to the maximum $1500 in tax annual threshold any more under Streamlined and that they are willing to look at a confluence of evidence in determining whether you qualify or not. Unfortunately, this and the lack of strong guidelines for entering Streamlined still worries a lot of people that they’d be opening a Pandora’s Box. There’s no chance of avoiding tax on as you say Canadian mutual funds, TFSA’s, etc under any option however, and unless one is willing to pay the tax owed under audit, compliance is not an option.
Heartsick. You don ‘t have to lie. Simply remove your name from any unregistered accounts that are over 50k. That should take about 2 hours on Monday morning.
@ KalC Yes we have been talking about moving investments. However our adviser is sure to question why we are doing it since he has encouraged us to put everything together for estate purposes. May prompt the dreaded question.
Heartsick, which is preferable, a world of hurt with the IRS or somewhat more complex probate of an estate when 1 of you finishes the back nine?
So what if your advisor questions your motive. Your assets will be protected.
According to the IGA, the $50K reporting threshold is optional. The FFI elects it or not.
WhatAmI So what? There is precious little they can do to a Canadian living in Canada. We are collateral damage to a law intended for americans resident in the US who moved money offshore. It is our right to limit the damage. They have no resources or time to go after Canadian minnows.
Heartsick: You are under no obligation to tell your advisor why you are doing anything with your funds.
Before you make a decision to go into Streamlined, you might find it useful to read the synopsis of one of John Richardson’s sessions. He advises against Streamlined.
http://maplesandbox.ca/2014/synopsis-solving-u-s-citizenship-problem-london-ontario/
Also, I don’t know what your Net Worth is, but if is over $2 million, that could be a problem with the Exit Tax if you renounce. As John has said, it is not unusual for people in their 50s and 60s in major urban Canadian cities to be at that level.
I agree that all the IRS can do to a Canadian living in Canada who is reported by FATCA is to send them nasty letters. I have no doubt that they will do that, at least with an automated system. Some people, @heartsick included, have already said they cannot live with that scenario. Some people can’t even live with the fear that nasty letters _might_ start arriving someday. These people should be aware that their FFIs might not use the $50K reporting threshold.
For 2 years people have been posting “Don’t worry, do nothing, Canada will never sign on to FATCA”, and “Don’t worry, do nothing, your bank will never ask you where you were born”. Well, here we are.