Tag Archives: U.S. tax compliance

UPDATED
The video links are hopefully fixed. I neglected to acknowledge that the transcripts were made by pacifica and calgary411. Any emphases are mine.

@Carolyn_Bennett #FATCA Forum TORONTOSat Dec15-UofT-MakeYourVoiceHeardToGovOfCAN: STOP US INVASION of CDN SOVEREIGNTY http://t.co/z4OYSznD

— Patricia Moon (@nobledreamer16) December 12, 2012

I had intended to write something for Brock’s 4th birthday (December 10) but when I got up and looked at the calendar I noticed I had missed it. But then I realized, today was the 15th and that the FATCA Forum was exactly 3 years ago today. I actually feel as if it were 10 years ago, probably because so much has happened since then and it has been so intense.

Brock was certainly the start of our section of the expat movement. Absolutely no doubt about it. But the FATCA Forum was the beginning of something else equally important – Brockers coming together and becoming active in other ways. I definitely think without the Forum, things would not have taken shape in the way they have.

Likely a lot of you have never seen the videos/read the transcripts of that day. Some people seemed to think that since there weren’t hundreds of people there, it wasn’t effective. But they couldn’t have been more wrong.

Technically, if I remember (and someone please correct me if they know otherwise), the meeting was sponsored by the Progressive Canadian Party, headed by the Hon. Sinclair Stevens. I remember being quite impressed by him; such a gentleman but no-nonsense about the shenanigans that had taken place when the Conservative Party voted to dissolve the party and merge with the Canadian Alliance to form the modern-day Conservative Party of Canada. I had absolutely no idea what he was talking about. But then he started to talk about the Charter. Up to that point, I don’t recall focusing on the idea that Canada would be/could be involved in helping us out of the miserable situation we all found ourselves in which at that point was mostly about FBAR and renunciation. When he said the Charter didn’t apply just to citizens, it included permanent residents, visitors, in fact anyone who happened to be in Canada, he planted the seed for the CDN lawsuit (at least in my mind).
 

…. in the sense that I think it’s very appropriate today. Canada needs representation at the national level.
And what you are considering today – and I’m looking forward to some of the experts that are here to discuss it is the fact that a foreign nation is attempting to levy taxes against people who are still technically citizens of the United States – and there are over a million of them in Canada – and we say that’s just wrong. It’s just inherently wrong not to acknowledge the sovereignty in this case of Canada.

And to that extent there will be three headings that you will be told about today. But the heading that I’m most interested in is the Canadian Charter of Rights and Freedoms. I was in Parliament when that was passed in 1982. I remember the debate. I remember the significance that was felt, not only in Parliament but throughout the country, that we were getting our own Charter, a Charter that would identify what is uniquely the Canadian rights and freedoms.

Now, the reason it’s relevant to today, as I’ve indicated what we’re living with is this threat from the United States, who wish to become extra-territorial in the sense of tax collection – I think it’s interesting to bear in mind some of the wording of the Charter of Rights and Freedoms.

In order that there is no doubt that a permanent resident of Canada has a say and it must be protected, I would refer you to s. 6 of the text of the Canadian Charter of Rights and Freedoms. It says:

“Every citizen of Canada and every person who has the status of a permanent resident of Canada has the right” and that section deals with certain things.

But the most significant section of the Charter is s. 15(1) – and put yourself in the context when I say “individual,” put yourself in the context of a US citizen, according to the Americans, being referred to. That section says:

“Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and in particular without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.”

That catches the so-called US citizen. Certainly if he’s been here longer than six months, he’s a permanent resident. And this Charter and coming out of today, if you agree, we will be making a representation first to Finance in Ottawa, who have requested comments on this subject. We will be making a representation among other things pointing to the need to obey the Charter of Rights that is thirty years old in Canada.

I thank you for coming. I hope to hear your input as we go ahead. But by all means, you are doing a great service for Canada and the citizens and permanent residents of Canada.

Thank you very much.

 
John Richardson was one of the first people to make us aware of the fact that FATCA et al, was NOT about taxes. People often miss his point when he says “You don’t have a TAX problem, you have a COMPLIANCE problem. They haven’t filed their taxes, how is it they don’t have a tax problem? They don’t understand what he means when he says it’s a myth that Americans abroad won’t owe any taxes. Of course what he means is that once you have dealt with the compliance problem by filing, THEN you will begin to have tax problems. He was the first person I can remember who made us understand that it wasn’t about owing income tax; of course, many do not due to the FEIE, FTC etc. I believe nobody understands better than he, where we WILL owe:

• when we sell our homes
• when we invest in tax-deferred savings accounts that the US will not recognize
• when we invest in non-US mutual funds
• when we file a US tax return as MFS (incurring AMT & Obamacare tax)

Understanding tax is not the point, it is understanding how it affects peoples’ lives. And one of the reasons he gets this better than anyone else could not possibly be demonstrated better than the following explanation:
 

 

Now the US is a country that really doesn’t like anything that they call ‘foreign’. In fact, if you were actually to look at the Internal Revenue Code in theUS, you would see that the word ‘foreign’ wherever the word ‘foreign’ is, the word ‘penalty’ is sure to follow. Now what this means is that a number of day-to-day activities that people in Canada and other countries engage in, which by the way are heavily promoted by government policy, things as unimportant in life as retirement planning for example, are in fact subject to US tax laws and are taxed in very, are not recognized, as tax-saving vehicles. Now I’m going to give you one example. I could give you more but I just want to give you one example to demonstrate the point. As you know, the Government of Canada in 2009 introduced something called a TFSA, Tax-Free Savings Account. How many have heard of that? And, it is, I think this is very important to understand that this is part of what is considered to be desirable domestic Canadian policy to assist and encourage people to save for retirement. Agreed?

Well, let me tell you what that is from the point of the United States Government. First of all, it is not recognized as anything, but remember that US Persons are required to file tax returns accordingly to exactly the same laws that people in the United States are and because there are no TF(S)A’s in the US, therefore there are no TFSA’s anywhere in the world, but under US law for example, these are considered to be a ‘foreign trust’. Now, so what you ask? Well, in theUStax system on the one hand there’s the issue of how much tax is owing. But, there’s another dimension to it, which is used which I think also, I suspect, to raise revenue and this has to do with the filing of information returns.

OK? So, in other words, it’s OK to have a foreign trust, but what’s not OK is to not report it to the IRS. Well, you might think, OK, so what, so let’s, we’ll call them up and drop them a line. Not so simple. Very complicated reporting requirements, very complicated forms. For those of you who areUStax geeks, you might recognize the Form 3520 for those who have been thinking about this. You say so what, give me the form, I’ll fill it out. You will not be able to fill out this form without professional help, totalling thousands of dollars, if you can even find that kind of professional help in this country. And, the penalty for non-willful, $10,000. How many think that’s absolutely outrageous? You do? Well, you’re not going to believe what I’m about to tell you next then. Because, it’s a foreign trust and the one thing theUStax system is based on a system of complete distrust, they want verification from what is called the Trustee. Now in people talk that means if you have a TFSA at, say, the Toronto Dominion Bank, the Toronto Dominion Bank would be the Trustee and the Trustee, under US (imagine this, OK), under US law, the Trustee, the TD Bank, is required to file with the IRS a form which essentially duplicates your form to essentially just validate that in fact you’re telling them the truth. You think the TD Bank is going to do that; how many imagine they’re going to do that? No, they’re not.

Well, the problem is this. Two problems. The first is, your tax return if you’re living in the USis due April 15th. For people outside the US, it’s June 15th and you can get an extension until October (OK, if you don’t owe them any money. We’ll get to that – I see you’ve had some problems here – I’ll be interested in hearing later.). If this form is not filed by March 15th, which by the way is well before the due date of your tax return, then you, not the TD Bank, you are subject to another $10,000 penalty. OK? Now, I’m going to just continue the discussion of the forms and the penalties in a specific way, but what you need to understand, and for the purpose of this whole discussion today, is that when we’re dealing with theUS tax system, we have taxes, which you understand. I mean there’s nobody inCanada who could not understand taxes. How many think they are high? Oh, you don’t? OK, but what you don’t understand and what’s left out of this discussion is the information returns which are actually the bigger problem, a) because nobody knows about them and b) because I guarantee you, and I’m going to stand by this word (I would rarely use the word, guarantee) that nobody except a person who does not own anything except the shirt on their back could afford to file a US tax return for under about $3,000, and I don’t care who you are. If you have anything, OK, if you have anything, it’s going to be much more and I know somebody personally who filed aUS tax return in 2011 that was almost 200 pages of information returns. Very middle class person as far as I can see unless there’s some stash that he hasn’t told me about, in which case I don’t think he’d be telling to the US government either. But my point is that we are dealing with a tax system of enormous complexity. I’ve heard it referred to when it’s applied to US Persons abroad as simply nothing more than a tax and penalty club.

 
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