@all
I’ve been away for a couple of weeks backpacking in the Rockies — no wireless, no newspapers, no email, no cell phones — heaven.
Many of you are asking about credit unions. I have written a 2000-wd magazine piece on how credit unions in BC (and nationally) are dealing with FATCA. I can’t share details with you now, but the piece will be published in BC Business magazine on Oct. 1. The magazine is hoping this will spark significant reader comment, and everyone at IBS is welcome to go online and submit a letter to the editor. Here’s what the BCB Editor said in a note I got this morning:
“You can just let them know to look for your story in our October issue, which will be out first week of October. It should be online by Monday, Oct. 8. If they want to send a letter to the editor, they can address it to:
bcb@canadawide.com
and put “letter to the editor” in the subject line.
Thanks — Here’s hoping for a lively discussion!”
So — go for it Brockers. And don’t hesitate to take a shot at the piece if it doesn’t meet your expectations. After 40 years of doing this, I’ve got a very thick hide. My one almost-daily panic is that magazine deadlines are such that the story must be submitted at least two months before publication — and a lot can change on a file like this in a couple of months. I’m praying the whole thing isn’t irrelevant by the time it sees the light of day.
BTW — on our backpacking trip, met a couple from Virginia. They were astounded when we filled them in on FATCA, FBARS, citizenship-based taxation etc. — they knew NOTHING about this issue and were horrified that their government is inflicting this kind of pain on expats.
*Your experience in the conversation with the couple from Virginia is most typical. Unless an American has lived overseas or has close friends or relatives who have or do currently live abroad, chances are then know nothing about citizenship-based taxation, FATCA, FBARs, etc. Having no experience in this area, it just does not resonate with them. Unfortunately this I fear is also true of members of Congress in Washington. Since it does not affect those who elect them, they pay little or no attention to it.
@Arrow…
I have been doing a lot of hiking in the Cascades the past month, and have run into a LOT of Canadians doing the same. My wife always shuts me up when I start to talk about tax matters, so haven’t gotten much feedback from those that are dual citizens. But, as Roger says, my conversations with homeland Americans finds total ignorance on these issues. Look forward to reading your piece when it is published.
BTW, next time you are in the Pacific NW area, I really recommend Skyline Divide at Mount Baker, or Sunrise on Rainier. Don’t think it gets more spectacular than that anywhere!
@Roger
Unfortunately many Americans with a close relative/friend living overseas, believe that person is perhaps over-reacting or they might even believe those living abroad should ‘pay their fair share’.
@Arrow
I’m looking forward to your piece. I’ve been after ‘Business in Vancouver’ to cover FATCA, but they’ve done nothing. It appears their competition may beat them to the punch. You snooze, you lose.
*@Tiger, you are so right. “paying your fair share” are words that resonate with the general public, and they tend to think that Americans living abroad are really just trying to evade taxes.
It takes a long and detailed explanation to make most homelanders understand how really unfair this really is. You have to choose your words carefully and it takes time to really explain this to anybody who has not gone through this in the flesh.
Since it doesn’t really affect them, not many are really interested in taking the time to listen to something that does not even remotely affect them. Some of my luncheon old timer buddies just roll their eyes if I bring it up.
That is one of the reasons why getting this changed is so hard.
*@Tiger, exactly!
@Roger
I think resident Americans, for perhaps reasons of pride, misconstrue our words to believe we’re saying that it’s US citizenship that’s the burden, rather than citizenship based taxation. You are right, it takes patience rather than anger to drill through all of that. Look how long it took of whoaissteve to understand. It takes a lot to get the penny to drop, but when it does…
Your experience in the conversation with the couple from Virginia is most typical of most people living OUTSIDE of USA. 75% of corporate expats have had their taxes done professionally. Many others have been outside the system for years, don’t care, and are voting for Obama. A lot of people in 51%-marginal-tax-countries have so much debt and so little savings it doesn’t matter. None of the immigrants are aware of their obligations to report their home income. None of the rest can believe that anything so ridiculous could actually be enforced.
When 99.95% of the iceberg lies underwater, there is absolutely nothing visible to worry about.
Other than in Canada or Switzerland, there is a majority of Obama and Bill Nelson votes overseas.
*I agree, @Mark! Even a fellow expat at work thinks I’m hysterical and was a mug to come forward…but as you mentioned, most either have their companies pay for their taxes to be professionally prepared or are below the radar because they haven’t even been filing in the first place!!
It’s what pisses me off so much: it’s people like me who had gone native but were still trying to be compliant as DIY filers/investors that are being screwed because we’re already in the system. I also agree that if someone is in complete debt, that they’re also less vulnerable in a perverse way….as one can’t draw blood from a turnip, etc. 😛
And furthermore, if I eventually choose to renounce in order to reduce the burdens, I’ll have the finger pointed at me…it’s hypocrisy….but life of course is not always fair. Sorry to rant but all this is making me both very bitter and cynical indeed. I know my worldview will never be quite the same.
I realise that I whine but it really does help me being able to vent on here…people in my ‘real life’ are sympathetic but can’t fully grasp it, plus the few who do have grown weary of me going on about it. I really do appreciate Brock! 😉
@Arrow Do please alert us when the article appears. That’s nearly a month away, long enough to forget. And thank you for your work.
Mark Twain, I’ve actually become rather infamous, annoying and disliked at the englishforum.ch. My main opponent is a CPA who likely profits from FATCA. All that I did was to express my views on FATCA according to how I see it in relation to Swiss and US laws, and their response to such is that I’m “extreme” or “over the top”. Yet, with all the groans, false claims and accusations, nobody has been able to refute or disprove anything that I’ve written:
http://www.englishforum.ch/finance-banking-taxation/155868-couldn-t-open-mietkaution-rent-deposit-account-thanks-fatca.html
http://www.englishforum.ch/finance-banking-taxation/149648-u-s-strikes-fatca-deals-switzerland.html
It is a fact that many Americans abroad are so shell shocked that we have become obsessed with taxes thanks to poorly thought out US policy. It is pathetic that it has impacted us so strongly that we would discuss it on the Pacific Crest Trail, in the Rockies, the Alps or wherever.
The fear and damage done reaches beyond those in Canada and Switzerland, who seem to be the most vocal about it. Yesterday, I was at a conference of my large international employer and two people from the Lebanese office told me about a position in their office (local conditions – not expat contract) that people were hoping that I would take on. I was less than enthusiastic and when they looked confused I told them, “Before I can even think about the job, I need to consider the financial implications, you see, I have an American passport…”, and before I could finish they both blurted out in unison “Taxes”.
They then explained that dual nationals in Lebanon now feel confused and terrorized by how the US is implementing its tax policy. The brother of one the people as well as the Office Manager have American passports and were just told by their banks that if they have over USD 50,000 in a bank account, they are going to be reported to the IRS and have to show proof that they are filing taxes or their accounts could be closed. These two people (who are not Americans) were well aware that many in Lebanon are now living in fear of having to pay huge penalties to the IRS as well as losing their bank accounts.
Eric reported on this in http://isaacbrocksociety.ca/2012/03/29/and-fatca-news-from-lebanon-too/ and this conversation verified it for me.
@Mark Twain – I agree totally with you that Americans OUTSIDE of the US still do not understand the tax issues and how the current administration refuses to address the collateral damage that is being caused. Recently, I had a conversation with a dual national in my country of residence that reflects a typical understanding of US tax law by US persons abroad. It is one that I have had in some form many times before.
This dual national is trying to realize her dream and just opened a tiny cafe. She works 7 days a week, 12 hours a day. When I brought up taxes, she innocently proclaimed, “I file all the appropriate personal and business tax papers with the local tax authorities and I have not earned enough yet to pay myself a salary, so I do not meet the US requirements for filing.” She also told me that she doesn’t see why people are so concerned about US taxes because she has never had problems with US taxes because
when she did work for a local employer she filed a 1040 and 2555 and that was
simple and she will file them again once she can pay herself a salary. I decided at this point not to mention how the US views income, nor mention Form 5471, or US social security tax for the self-employed. I suggested she talk to an international accountant with US tax knowledge. I do not want to ruin her dream.
Which brings me to another point. I no longer wish to do viral marketing for the IRS. I no longer wish to see that look of hurt and confusion in uninformed US persons who live abroad when I tell them about US tax policy. I do not want to be an IRS tool for ruining people’s lives. On the other hand, making people aware is a good thing. It gives them an opportunity to make a choice and makes more people cry out for change.
So currently, I provide information about FATCA and US filing requirements to US persons abroad if someone asks for it, but for my own sanity, I am no longer breaking the news to potentially non-compliant Americans residing abroad.
*If the business is owned by a person who has US nationality and is required to file tax returns in the country where it operates then it is also required to file tax returns with the IRS. As a matter of fact such a business owned or controlled by a US citizen must establish and maintain 3 sets of accounting records: One in local currency to comply with the laws of that county, a second set in US dollars under the US generally accepted accounting procedures with foreign currency values converted to US dollars in accordance with extraordinarily complex IRS rules (these are not “average” exchange rates) and a third set of books in US dollars in order to comply with IRS Revenue Code Section 6038 even if there is no business need or the business to maintain records in accordance with US GAAP and for which a $10,000 penalty can be imposed for failing to comply with these rules. One set must be in accordance with US GAAP rules for US tax purposes.
And unless there is a Social Security Tax equalization agreement between the US and the foreign country, (there are very few of these agreements) the self-employed citizen abroad is subject to Social Security taxes of both countries with no US tax credit allowed for foreign social secuity taxes paid. All US taxes, including the social security “self employment” tax must be paid in US dollars. If the foreign country has currency controls which prohibit its currency from being exchanged for US dollars to pay US taxes on income in that country, then it is the problem of the US person to obtain the dollars by whatever means in order to pay taxes due to the IRS, even though obtaining such dollars and removing them from that country may be a criminal offense under the laws of that country.
This has nothing to do with whether the person pays himself or herself a salary from this business.
It is these rules that tend to discurage US citizens from starting businesses or being self-employed in a foreign country.
Just the costs of establishing ad maintaining three different accounting systems constitutes a heavy financial burden that competing businesses ownd by persons who do not have US citizenship do not have. It is like trying to win in a race with a heavy fiscal ball and chain attached to your anklie. that non-Americans do not have.
*The rules in my prior post apply to businesses abroad that are either fully owned or are controlled by US persons. And it must be remembered that if banks accounts of such business exceed $10,000 for even one moment during the year that FBAR reports must be filed with the Treasury Department.annually.
Lisa – I think you’ve given first solid expression to a thought that has kicked around in my head for a long time:
I no longer wish to do viral marketing for the IRS. I no longer wish to see that look of hurt and confusion in uninformed US persons who live abroad when I tell them about US tax policy.
Deserving of elaboration. Many of us will have a mental gallery of the ostriches that we have traded comment with over the past year, or heard about at second hand. Imagine what the future may hold if snitching becomes more widely viewed as an unsavory profit opportunity. On one of the Globe and Mail comment streams in fall 2011 I noticed remark from an aggressor calling attention to the dual (reward or nonreward) snitch possibilities, with links to the forms.
@usxcanada
the thought that this may happen has crossed my mind and I’ve often expressed concern that FATCA will pit Americans against each other in Canada, especially if one is ‘out’ while another remains undetected and thus unpenalized. Frightening prospect really.
(sorry, bad a proofreading)
Arrow: I don’t live in BC, but rather ON. Is there an etext version you can share now that the publication date has passed?
Here’s the long-awaited Don Whiteley article “US Tax Laws: The Long Arm of Uncle Sam” in October’s BC Business Magazine:
http://www.bcbusinessonline.ca/personal-finance/us-tax-laws-long-arm-uncle-sam
Fantastic article by Don Whiteley! Thank you, thank you for writing it, and thanks be that the BC Business Magazine published it – so comprehensive, and skillfully written – managing to cover and convey many of the issues we talk about. Glad that Professor Maury Williams got to have his story covered – and hope that this helps pressure the IRS into being ‘reasonable’ in his case and others. Perhaps all of us here can send the link on to as many people as we can think of, like that Queens prof. personally dealing with the IRS, and Arthur Cockfield, and those organizers out in New Brunswick, and our MPs and MPPS, US Senators and Congresscritters, other media outlets – anywhere we can think of. Phil Hodgen, Jack Townsend, …. AND, all log on and make comments on the story!
Very good article, Don Whiteley covered a lot of turf there! Like Maury, I’m still awaiting a response for our OVDI submission. I’ve corresponded with him a few times but had no idea he could have gotten a CLN and saved himself a lot of grief. Sad. Lesson be learned, get plenty of good advice before making any decision that puts you in the line of fire. READ ISAAC BROCK! Although it’s not legal advice, it may offer more information on the issue of citizenship based taxation than you’d get anywhere else and could at least better prepare you when seeking legal opinion. Don Whiteley’s reference to ‘jihad’ gave me a chuckle.
@Arrow,
Outstanding article. Thank you so much for getting the story told. I have already forwarded it to many and will continue to do so.
One of the first things I thought of as I was reading the story, was – too bad the fellow who wrote the essay for the Globe, earlier this week, had not read an article like this prior to spending so much time and effort to get a SSN.
Excellent article – points out the unbelievable damage that the US is doing to its citizens as human beings. Absolute destruction of people who are either law abiding or who try to be law abiding.
The most significant part of this article is here:
“Put aside the cost for a moment, and consider what this has done emotionally, psychologically and physically to this ordinary Canadian family whose only “crime” was that at one time they were U.S. citizens. Asked about the impact, Williams said, “Nightmare, unfairness — it goes further for me. I’m not quite sure how to put this, but my wife has an arthritic condition, and it’s gotten a lot worse. We’re both convinced that the stress associated with this has had some impact. It’s affecting our health. Linda and I have gotten to the point where we don’t talk about this anymore.” He adds that he and his wife are close friends with another couple, also dual U.S./Canadian citizens, who feel as though the U.S. government has violated their private lives. “We don’t even talk about it with them — and they’re into it for not quite as much as we are, but pretty close.””
Boldy Go: By combining the prison cell of citizenship-based taxation with the vicious prison guard of FATCA, the US has “boldly gone” where NO NATION has gone before!
Also, points out the effects of FATCA on the sovereignty of other countries.
One would think that the US would learn to play nicely in the sandbox. That said, it’s clear they won’t and are clearly a Rogue Nation.
Thanks for an article that is very well done!
Thanks for the very comprehensive article, Arrow. I’ve been trying to post a comment at BC Business but it would not let me and now I can’t even bring up the article (but may be my own computer problem). This is what I was going to say:
*I sent a link to John Weston. How about Margaret Wente and Jeffrey Simpson?
This Whitely article is your typical Progressive/Liberal bilge water. Take this:
“In May 2011 Williams and his wife Linda realized that their status as
U.S. citizens requires them to file U.S. income tax returns.”
I call bullshit on this. They expect us to believe that the “68-year-old history professor“, a US citizen, didn’t know that by not filing his US income taxes that he was precisely one of these “tax cheats” that the author seems to so despise? And history professors are part of the tax eating liberal establishment in the first place. Once one of his beloved welfare states treats him the way he would have them treat other “tax cheats” the professor squeals like a pig. Those who live by the sword shall die by the sword.
“only to find they owed no tax because Canada is a high-tax region. No one opens an account here to avoid U.S. tax.”
Noble Canada, where the welfare tit suckers would throw the entire low tax world under the IRS bus as long as they get a special deal with the IRS because “No one opens an account here to avoid U.S. tax“. If only the rest of the world was as enlightened as Canada and would just have income tax rates higher than the US then everything would be hunky-dory. Funny how you never hear the Canadians here complain about double taxation of dividends or through the death tax.