Petros responds to Steven J. Mopsick, 30-year IRS veteran latest comment, that some Canadians have probably found that the Overseas Voluntary Disclosure Initiative penalty of 27.5% is actually quite a good deal, since these Canadians are tax cheats and frauds. UPDATE: Steven J. Mopsick responds with a Jack and Jill scenario of a wealthy montréalais couple with a Swiss Bank account.
Are you planning to buy that condo in Florida? Don’t. If you have one already, sell it, even if you have to take a loss.
Are you planning on taking that company transfer to the United States? Politely tell your boss, thanks, but no thanks.
Steven J. Mopsick explains to us why certain Canadians would gladly hand 27.5% of their wealth, including real estate, over to the IRS, who obviously needs the money more than us filthy rich Canadian tax cheats:
To all. I would respectfully ask that you read my post today on the 2% Payroll Tax and what I wrote about the IRS Manual and penalty administration particularly, the duty the IRS has to administer the FBAR penalties in a reasonable manner.
@Petros: may I suggest a change of perspective. You don’t know every Canadian who may have entered into one of the OVDI programs. In fact for some of them, and some Canadians who may be signing up to make one right now, would be embarrassed to talk to you about it because FOR THEM IT WAS A GOOD DEAL! THEY HAD BEEN FILING FALSE TAX RETURNS. In some cases, they would have done jail time had the IRS come to them first. Again, OVDI is not for everyone. Sadly, some people receivd bad advice about OVDI and did not properly weigh their options. I guess some tried to do it themselves. That said,
It’s one thing to be listed in a computer data base. It’s quite another for a government program to hunt for your name and spit it out for special abuse.
If you haven’t had any reason to think of the IRS for a period of the recent ten or twenty past years, you probably don’t have anything to worry about..
Respectfully submitted,
30 Year IRS Vet
If the IRS thinks it is ok to raid the RRSPs of Canadians, the War of 2012 really has begun. I think these two paragraphs tell us more about what is going on inside of the heads of the IRS than anything I’ve ever read; it reveals the mentality of Mordor.
Our Canadian friend, IJ, who made the mistake of moving to the states a few years ago, asks for clarification:
@Steven,
“FOR THEM IT WAS A GOOD DEAL! THEY HAD BEEN FILING FALSE TAX RETURNS. In some cases, they would have done jail time had the IRS come to them first.”Can you be more specific what facts would lead to jail time ?
Filing incorrect return with incorrect perception is not filing false return which IRS has to prove 1. affirmative act, 2. tax due, 3. acting willfully.
Did Tim Geithner file false return ? And so did Charles Rangel ?
IJ, is a Canadian in the 2011 OVDI, and he doesn’t think its a good deal at all. He is a minnow.
Unfortunately, there may be some other Canadians who live in the United States that have taken US citizenship there, but who find the OVDI a good deal. That I may grant. But they live in the jurisdiction of the United States. I just don’t know anyone like that. I don’t frequent the same country clubs.
As for those of us who are actually living in Canada, I can’t think of anyone who would see it as a good deal. I hate the extra-territorial tax reach of the United States. I believe its is evil and wrong. I believe any Canadian resident who pays an FBAR fine is inadvertently weakening the Canadian economy, and that it is a casus belli (Steven, casus belli is Latin for, “a reason to go to war”). Last I checked, Canada was a much needed ally of the United States: so why the hell are you raiding our retirement accounts? That is not the act of a friend but of an enemy.
I have much more to say to Steven, but I am absolutely tongue-tied, because the fury that I feel is keeping me from thinking straight. So I am going to take this to the Isaac Brock readership. Does anyone out there know of any Canadian residents and/or Canadian citizens, who think that the OVDI is actually a good deal because they are tax cheats and they have been filing fraudulent returns?
Originally published 7:33 am February 20, 2012
Sorry, where is S. Mospick’s reply that you are referring to.
Tim said: “While this is getting to be a long winded thread there is an important point I think should be made. Since the early 1990s Canada has been sharing information on US “residents” with accounts in Canada.”
I didn’t know that, and thanks for pointing it out. It puts the lie to the argument that the IRS needs more tools (e.g. FATCA) to root out US citizens who are hiding money — at least in Canada. It makes it doubly clear that Congress and the authors of FATCA had no inkling that they already had an information-sharing agreement with Canada that would make it impossible for a resident American to hide money here.
I fear we won’t hear much more from Steven (hopefully I’m wrong, but …) because I suspect he’s finally beginning to realize that his “red herring” definition of our extra-territoriality concerns was rash and ill-considered. When he constructs an elaborate “Jack and Jill” scenario to defend why the IRS needs FATCA, he completely ignores the fact that Jack and Jill are Canadian tax cheats, not American tax cheats — and the IRS’ determination to bring Jack and Jill to (US) justice is, well, an extraterritorial application of US law in Canada.
I don’t think any of us can expect to be treated fairly by the IRS, because the law that the IRS must follow isn’t fair. I also don’t think the ACA’s vigourous campaign to convince Congress to abandon citizenship-based taxation has a snowball’s chance in hell of changing the mindset down there — at least not in our lifetimes. I think it’s far more likely that people like MA. Rep. John Tierney — who wants to take away the foreign tax credit for expats — will win the day. In a bizarre way that might not be so bad, because all those expats who cling to the hope that the US will come to its senses will suddenly realize that the price of their loyalty is going to be double taxation on every dollar they earn. That might produce a few long line-ups at the Consulate, and that might precipitate some change.
For us — it’s make an appointment at the consulate for a relinquishment, get the CLN, and the IRS can go to hell. My wife has already calculated that no matter which path she takes, crossing the border will eventually be very dangerous. So she might as well get that CLN with the 1974 date of expatriation spelled out, and at least be able to prove to the bank (if necessary) that’s she is not a “US Person.”
Steven — again, thanks for all your insights into the IRS — but I suspect now you are grasping that this isn’t really an IRS issue — it’s a US government wanting to control the world issue. The world doesn’t want to be controlled.
@KalC Scroll back up to 8:57pm Feb 20, as I indicated in my reply header. highjacked2012’s post to which he replied is a couple of posts earlier. All posts on this thread appear in chronological order by date/time of posting, earliest one at the top of the page.
@Schubert1975
In reference to your post of earlier today(11:02A.M.), I have to admit that I am still confused regarding tax reporting obligations when obtaining a back-dated CLN. Do you interpret that those of us who performed the expatriating act prior to 1994, are not obligated to file 5 or 6 years of tax returns nor the 8854? And what about FBAR’s; is that required of us? If that is the case, it certainly makes my decision easier. Thanks for your input, Schubert. I appreciate any and all information.
@steve Mopsick
I thank you very much for your opinion that I would have no obligation to file form 8854. As queried by Tiger and Blaze, does this include filing the 5 years of back tax returns and FBAR’s after the CLN is issued? So no tax obligations with the IRS at all at that point?
As others have said, we are struggling pretty much in the dark here, unable to get “official” information, and professional opinions vary greatly. I have talked to a bank manager who said to do nothing because I likely won’t show up when FATCA comes into effect; an accountant, who said file back taxes and FBAR’s because it is technically the law; and an immigration lawyer, who said go for the CLN because I probably won’t need to deal with tax issues. Meanwhile instructions for 8854 say nothing about the 1994 clause and that is worrisome – at least to me.
So needless to say I really appreciate your generosity in responding to our concerns. I have a little more confidence in going ahead and relinquishing citizenship and obtaining the CLN.
@hijacked 2012
Thanks for putting our concerns to Steven in your post. Now if only he will answer. Good to know there are a few of us with the same concerns – believed we had relinquished years ago, only to be told Uncle Sam might be wanting a piece of our “retirement pie”.
The immigration lawyer you spoke to – was he/she a Canadian immigration lawyer or a cross-border specialist?
@tiger
He is with an immigration law firm with offices in the US and Canada. He did stress that he is not a tax attorney but took the trouble to look into the 8854 dilemma and although he made no guarantees, it was his opinion that those expatriating pre-1994 would not have to deal with the IRS after relinquishing and obtaining a CLN.
Unfortunately, I would like all this written in stone and we’re not likely to get that until someone actually goes through the process.
@hijacked 2012
If I were you, I’d go with the advice of your immigration lawyer. Especially if the immigration lawyer is cross-border (licensed to practice law both in a Canadian province and a US state) and specializes in this area or says he/she has handled other cases like yours. (There are such lawyers around.) Accountants aren’t qualified to advise you on citizenship law, nor are bankers. Nor am I for that matter, but I do know where to get advice if I need it for myself or on behalf of my wife or a friend.
@Tiger I’m not about to express any opinion about FBAR or any other IRS form. See my reply to hijacked, or wait to see what Steven Mospick has to say, if he chooses to reply. Or get private legal advice.
The key is to get a CLN based on your expatriating act years ago. Pay careful attention to the items listed under Question 13 on State Department Form 4079, and in particular the question “have you been filing US tax returns yes/no IF YES PLEASE EXPLAIN.” Read that carefully, think about it and the context in which the question is posed, and be sure you act accordingly.
Only US citizens, green-card holders, and non-US persons with US-source income, have any need or requirement to file US tax returns. Filing a US tax return might (I say might) be interpreted as a claim to US citizenship, in a perverse way.
But I repeat again and again, I am neither a lawyer nor an accountant. Get professional advice. That’s the best advice I can give you. Just be sure you pick a professional who is appropriate and qualified.
@hijacked2012 didn’t see your reply until after I posted mine.
If you want something written in stone, you won’t get it now as far as I can tell, and you may be waiting a while, as you say. If ever — I can’t recall ever having a lawyer tell me ANYTHING was written in stone, on any issue. Lawyers, accountants and auditors don’t make absolute statements like that, because there’s always the risk of some court judgment later or that no one every heard of coming back to bit them on the behind and leave them open to a liability suit. You won’t get certainty on much of anything of this nature, in my experience anyway.
Weigh your options (all of them) and the odds, do what makes the most sense in your situation, and then get on with your life. That’s all anyone can do at this point.
To All: Please be reminded that Jack and Jill have been filing US income tax returns for their entire adult lives and FBARs since 2004. False and fraudulent documents sent TO THE US GOVERNMENT over a period of years. Extraterritoriality?
Now, as to the 8854 issue. Please re-read everything Schubert1975 wrote and think about it. The IRS hasnt hear from some of you since the 1960’s and you are worried about whether its a good idea to throw a bunch of delinquent returns at them? Talk about “Go ahead! Make my day!!”
Respectfully submitted,
30 Year IRS Vet
Thank you 30 Year IRS Vet, again.
I second, third and fourth his last two sentences. ‘Nuf said.
@steven mopsick
I’m not saying I want to throw delinquent returns at the IRS. I’m asking if, after coming to their attention after obtaining a backdated CLN, will I be REQUIRED to file delinquent returns.
There is another big wrinkle in this black black curtain that we stare at so hard. That is (1) the apparent wide variance among consulates in how they handle application to liquidate US citizenship (2) the wavering line that is drawn between concerns/responsibilities of Dept. of State [citizenship] and Dept. of Treasury/IRS [taxes, FBAR] (3) the discretion of the local consular officer in assessing DS-4079 (4) the utter black hole where forwarded CLN paperwork languishes for many uncertain months (maybe years?) Is there anyone out there besides accidental schubert1975 who now possesses a precious CLN? This all so reminds me of a directly known graphic personal story of people who sought a departure permit from the Soviet Union in the late 1920s – making uncertain requests to fickle officials month after month after month.
@usxcanada: “This all so reminds me of a directly known graphic personal story of people who sought a departure permit from the Soviet Union…”
The US has one of these too, just not for citizens (yet):
http://www.irs.gov/businesses/small/international/article/0,,id=97256,00.html
“Before leaving the United States, all aliens … must obtain a certificate of compliance. This document, also popularly known as the sailing permit or departure permit, must be secured from the IRS before leaving the U.S…”
I sounds as though it may be easier for a Cuban to obtain an exit visa to emigrate to another country than it is for a US renunciant to receive his CLN.
If Cubans applications for authorization to depart Cuba to live elsewhere are eventually approved, are required to leave all of their posessions behind and the key to their residence with the speciied government official. They are permitted to leave with the clothes they are wearing, but nothing else.That is somewhat like the Exit Tax the US imposes on persons who renounce their citizenship. The similarities between the US and Cuban policies are strikingly similar.
@Steven: Your answer, while not the Yes or No that we would like is actually a touch of common sense. The dilemma, of course, is FATCA.
If my bank has to demand where I was born under FATCA and report me my assets to IRS, that puts me in the sight lines of the IRS again. The alternative, of course, is I could refuse to confirm where I was born and then my bank must declare me a “recalcitrant” account holder and close my account.
@Others: I’ve was out for most of the day. I just returned home to find a message from the President and CEO of the credit union which holds about 30% of my assets. He asked me to call him at his personal number as he did not want to leave confidential information on my voice mail or put confidential information in an e-mail.
The credit union CEO’s call was in response to an e-mail I sent to him on Sunday. He apologized for not calling yesterday, but it was a holiday in Ontario. His message was left at 9:10 this morning. Now, that’s customer service!
I have not yet contacted the President and CEO of my bank, but I doubt I would get such a quick and personal response from him.
I know for certain I won’t get that kind of quick and prompt response from Canadian Bankers Association. Schubert and I sent an e-mail to them on Sunday. No reply yet (It would have been impractical to expect it this soon).
@Watcher, Your comment with respect to the required sailing permit clearance that a resident alien must obtain before departing from the US is most interesting. I wonder what the permanent resident green card holder who resides abroad and therefore is not in the US has to do to comply with this requirement. There are good many such green card holders that have been deployed abroad, perhaps by their US employer and therefore do not actually reside within the US.
Does he have to travel back to the US in order to obtain this sailing permit?
@Steven,
Thank you for participating in this blog.
Like many of the others above, I have no plans to file past U.S.tax returns after having no contact with the IRS or any other U.S.Government agency for 50 years. However, like Blaze, I would like the peace of mind to be able to live out my remaining days in retirement and be able to have a bank who is able to provide financial services to me. Under FATCA, this could become difficult if the financial institution believes me to be American. Thus, I would like to be able to receive a back dated CLN from the State Department and not be “hounded” by the IRS to file 1040’s and other forms for the last 5 or 6 years. That makes no sense as I haven’t been filing for 50 years.
@Schubert1975
Thanks for all your input. I have read Form 4079 carefully and can answer Question 13 with emphatic NO to all parts of that question. Never voted, never filed tax returns (and no intention to start filing tax returns). My main concern is that when I file for the CLN (backdated to 1972), the IRS will start to hound me for tax returns.
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@roger: “Does he have to travel back to the US in order to obtain this sailing permit?”
No. He’s expected to have obtained it before ever leaving. It’s a report of any departure from the US. Deployment abroad, short business trip, vacation, returning to home country to visit family. Apparently they all count.
For what it’s worth, practically nobody bothers with this at the moment. No one at the airport ever checks for sailing permits. It’s a law that for decades has sat on the books unenforced (so far, anyway). The name alone gives away its age.
@Tiger: I’m going to make it easy. I’m not applying for CLN. We were told 40 years ago our decision was permanent and irreversible. If my bank kicks me out because I won’t tell t them where I was born, they will have a fight on their hands and a local credit union will have my business.
Failing that, I think there is probably an opportunity for an entrepreneur to set up a secure storage facility with secure individual safes. They very thing IRS doesn’t want–people hiding $$$$ is exactly what is going to happen by IRS targeting assets earned, saved, invested and taxed honestly and responsibly.
Roger, Watcher
Thanks for raising this. I’ve been focussing on getting my wife into a position so she can go down and relinquish her US citizenship — and am just beginning to wonder if I need to do something.
I had a green card (issued when I was 12), and blithely moved back to Canada in 1969 without doing anything in the US. I recall destroying the green card once I was satisfied that it had no value (that is, I had committed so many “sins” in the INA’s eyes that they’d snatch it from my hands anyway).
So the question now is — do I need to formally relinquish the green card? Obviously they won’t give me a CLN, but what will they do? And will they sent a note on to the IRS when I do it?
The lawyer we consulted with a few months ago indicated that I’d done so many nasty, permanent things so many years ago that the State Department would be very hard pressed to argue, 43 years later, that I was still a resident alien.
Anyone else got this problem? Maybe I need to make an appointment for myself as well.
@Everyone
I would say that if you became a Canadian citizen back in the 1970s(with the assumption you were renouncing) and have done nothing since(apply for a US Passport, vote in a US election etc, file taxes) that would imply you consider yourself a US citizen I would not do anything now or in the future any different that would imply that you accept that you are a US citizen. If you travel anywhere use your Canadian passport. In terms of applying for a CLN I suppose there are reasons in favor and reasons against. One risk is your request is denied and you show back up on the US’ radar screen. I am not saying this is likely its just you never now.
@ Tim The biggest risk is one of travel to the United States, since border guards have been, from time to time, insisting that people born in the United States travel on a US passport.
For me, that means never travelling to the United States on pleasure or even business.