Liberty and justice for all United States persons abroad

Full Disclosure Needed: Just What is US Tax Compliance Requirement for American Workers Being Recruited for Alberta’s Oilsands?

Alberta to recruit American war vets to work in oilsands

The question is — with working in Canada for long periods of time, what are tax return and reporting responsibilities for these workers — both for Canada CRA and US IRS?

CALGARY— Alberta is seeking to recruit an army of oilsands workers — literally.

The province is on the march to attract thousands of demobilized U.S. military personnel to help develop what’s been touted as Canada’s economic engine for coming decades, the oilsands.

The project’s success would also act as a goodwill gesture for Canada’s controversial oilsands, said Alberta Energy Minister Ken Hughes.

“We’re trying to understand how we could produce employment opportunities for American service people returning from overseas,” Hughes said Friday. “I’ve detected some interest in the States.”

The mission has attracted the attention of U.S. Ambassador to Canada David Jacobson and the encouragement of the U.S.’s former consul general in Calgary, Laura Lochman, said Hughes.

Hughes said there are a half-million unemployed or underemployed younger military veterans in the U.S. — a force that could be tapped to satisfy a chronically-hungry energy industry in Alberta.

. . .

48 thoughts on “Full Disclosure Needed: Just What is US Tax Compliance Requirement for American Workers Being Recruited for Alberta’s Oilsands?

  1. @*Mark Twain, or treasurer of the local church you attend outside of the United States, a foreign charitable organizaion, Boy Scouts, Girl Scouts, chamber of commerce, etc.  unliess of course you are free to divulge the financial information of that organization to the US Treasury Department and are prepared to consider the cost of preparing these reports paid for by the organizaion as personal “in kind” income to you, and therefore subject to US income tax.  Such reports are your responsibility to submit and therefore if not available in the regular course of the organizations’s business your responsibility to have prepared.

  2. I believe that the glass ceiling that citizenship based taxation and the associated FBAR, 8938’s creates deserves it’s own thread, don’t you? How many USP’s are sitting on these boards and in contravention of US tax law by not filing the proper forms? I would think perhaps hundreds of thousands world-wide? There’s a subject that the press might sink their teeth into, but would it inspire outrage at FATCA or serve to make us pariahs?

  3. *We actually have a detailed article on the US/CDN tax and filing obligations for workers migrating to work in Canada. It is not yet on our website, but I would be happy to make it available directly or via hyperlink to anyone interested.

  4. @Roy Berg,

    We will welcome another Moodys article — this is an important subject for Alberta and for Canada to make sure US citizen recruits are fully cognizant of their US (and Canadian) tax obligations.

    Those being recruited from other countries need Canadian tax information as well and I’m sure yours will be an excellent resource for HR of Canada’s companies, as well as for the potential worker thinking about a big move to Canada.

    If you could place a comment here with a link when the article is available, there will be readers interested. Thanks very much!

  5. @roy berg- I personally think that it would be nice if that link were to be avaiable on this site. It may help some of our visitors.

    If that isn’t possible I would like to have a copy of the link so that I can send it out to others.

  6. I did not put the account number nor the account balance of the organization I volunteer for, on FUBARs. It runs in my mind that Peg had posted something suggesting that but I’ve no memory of what it was.

  7. I’ve come to the realization that I have applied a number of times (unsuccessfully) for jobs as Business Manager, which could have put me in a tight spot.

  8. @roy berg, it would be most helpful, and  provide a needed cold dose of reality if those prospective workers were told upfront approximately how much firms like yours might charge them to prepare a ‘typical’ ‘simple’ ‘crossborder’ US return plus associated FBAR form and like forms from abroad here in Canada. No point in them thinking they’ll pay the going US rate they’re used to, or the going rate for a typical Canadian only return. 

    And, they’d also be forewarned about what they can expect to forfeit if they fall behind and need to pay for catchup filings.

  9. @badger

    …and the perils to your progeny if born on Canadian soil? Or disclosing to prospective mates your yet uncured disease of citizenship based taxation? 

    Mama don’t let your babies grow up to marry Americans…

  10. Pingback: Roger Conklin on the stupidity of US tax law « Freedom from the tyranny of U.S. citizenship-based taxation for U.S. and dual citizens outside the U.S.

  11. *It is important that such information incude the out-of-the-ordinary kinds of Canadian income that is taxed by the IRS, like the value of in-kind benefits provided by a Canadian employer, obligatory employer payments to Canadian Social Security on the earnings of the US person employee, reimbursements for double taxation, etc.  These include kinds of income that may not normally reported or even revealed to a non-US citizen employee so the employee has to on his own find out what and how much they are in order to comply with US tax law and report them to the IRS.

  12. Good points Roger and bubblebustin. There are likely to be marriages, children and other ‘US taxable’ complications of entirely legal and ordinary life events (joint accounts, Canadian home buying, estates, gift tax, etc.) when people move across borders from and to the US – as many of us already know – and which has enormous costs in plenty of LCUs and expensive cross-border tax and legal fees here in Canada – now, and for life, or as as long as we are confined in the ‘US taxable person’ trap .

    Otherwise, doomed to be caught between the tender mercies of ‘professionals, and the IRS forever – each contending for a drumstick or a thigh? Each client/taxable person a tasty morsel, whose interests and assets are laid bare and laid to waste under their hungry gaze. Both of these opposing diners needs the company of the other to make a festive meal – when the judicious application of threats and lack of transparency and information make the meat fairly leap right onto the fork, and lies there paralyzed, once trusting, but now full of fear, under both of the knives.

    And, there is an inexhaustible supply of food, as the US creates more and more laws designating those ‘taxable persons’ living outside to be fair game for dinner. If it wasn’t punitively taxed by the US, we could start investing in shares of the businesses providing US crossborder tax and legal services to us – and try to recoup some of the fees our status generates annually. After all, it’s a ‘growth industry’ I think we can count on.

    As reliable as the funeral services sector.

    And, maybe instead of coming here to look for work in the Alberta oil-patch, those unemployed US workers could come up and train as enrolled agents to help us come into and stay in compliance.

  13. @badger

    How sinister. One could always make a living at being a “whistleblower” too. And we could start businesses teaching how people to speak with a Canadian accent, eh?

  14. @bubblebustin:

    I think the reality is truly sinister. I’m not entirely joking. The US Embassy in Ottawa notes that: “The information on this page is intended especially for taxpayers residing in Canada. Note: Owing to budget cutbacks, the Internal Revenue Service will not/not be providing any in-person assistance or tax seminars at the U.S. Embassy and certain of the Consulates General in Canada.”

    So, continuing in the sinister yet entirely consistent and deeply hypocritical vein, it provides no IRS assistance or US taxpayer services here in Canada, however, it helpfully and cheerfully enlists whistleblowers, and enthusiastically notes the existence of a ” reward! ” – noted with the exclamation mark. In an earlier search for information last year, I saw that there was an IRS attache there, though they provide no actual help to us – and as noted above, any in-person IRS information sessions were cancelled due to IRS budget cuts. http://canada.usembassy.gov/about-us/embassy-offices/irs-tax-fraud.html.

    If FATCA and the US juggernaut continues to roll over us, Immigration Canada will no doubt start a new preferred class of immigrants to fill a sudden unfilled employer need – the IRS enrolled agent and US crossborder tax specialist.

    How does the saying go? And I paraphrase; ” in this world nothing can be said to be certain except death and double-US extraterritorial citizenship taxation” ?

    (Benjamin Franklin: “Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.”

  15. @all- in the end it is up to the U.S. government and the employer to inform the potential employees/emigrants of these unique to the U.S., tax burdens. Unfortunately neither of them will. The U.S. doesn’t even have the decency to inform its immigrant applicants of the tax consequences of U.S. green card status.

    Would it make a difference to them if the U.S. did? Who knows but it is only fair that the U.S. fully disclose the liabilities along with the advantages. This is the same thing that U.S. investment law expects that publicly traded companies give to potential investors. Truth in advertising should be modelled and not just preached.

  16. *@recalcitrantexpat,

    The IRS has Pub 54 which provides the information on the tax responsiblilities of US persons who live and/or work abroad.

    http://www.irs.gov/pub/irs-pdf/p54.pdf.

    It describes Gross Income as follows: “This includes all income you receive in the form of money, goods or property that is not expressly exempt from this tax.”  It a very general statement, but it is left up to the US citizen who lives abroad to employ whatever expertise he may require to determine the extent of ALL in this statement.  It is, I can assure you, very broad. Rest assured that the IRS publishes nothing about the detals of what ALL includes. That is where a doucument which describes in detail what is taxable is so important for the foreign employer recruiting Americans to relocate to Canada and for the US citizen who is contemplating accepting employment in Canada  or any other country. And for each country it needs to contain a detailed list of the kinds of non-monetary compensation that a person working there receives.  Otherwise they will never realize that things like obligatory employer payments into a foreign social security system on behalf of the US-person employee are considered as income in kind to the US citizen.

    The US publishes nothing that even address, let alone even encourage a US person to live and work abroad. But those who go abroad dearly need to know these specific details before they make a decision to fold up their tents and move abroad.  Otherwise a beautiful dream is destined to become an unbelievably terrible nightmare.

  17. http://blog.ustaxonline.com/2012/11/11/important-what-expats-and-americans-who-invest-offshore-need-to-know-about-us-based-tax-advisors/

    could be considered “advertisement” but is, more importantly, critical information: preparing your US expat tax returns with a US-based accounting firm — or not.

    If you are an American expat or an American who invests offshore, here are some things you absolutely need to know and consider.

    A number of our clients moving to or from the United States have a US based tax compliance firm prepare their income tax returns. We also have a number of clients who live in the United States but have offshore investments for all the right reasons: asset diversification and security.

    We work with a number of US based compliance firms, and we have the greatest of respect for these firms, but our experience is that they are usually not familiar with the international aspects of the US system. This often means they are not actually aware of the questions to ask, with respect to your international affairs, or of the compliance requirements relating to your international assets and income.

    The expat’s lifestyle decisions primarily relate to the fact they live and work in another country and often for a non-US employer. For example, their investments will often be investments that “make sense” in the country where they live. These investments may be “tax favored” in the local country or, foreign mutual funds for example, which offer good returns plus a means of diversifying their investments.

    Local country tax favored investments almost never offer the US taxpayer the expected benefits. This is because such investments are virtually never tax favored by the US system. As a result, for each dollar of local tax savings the expat receives there is a corresponding increase in the US tax they owe.

    Foreign mutual funds can also result in unexpected US tax. These funds fall within the definition of a Passive Foreign Investment Company (often referred to as PFICs). Such investments are highly taxed by the US and often result in double taxation. Further a separate return must be filed for EACH PFIC!!!! The compliance costs alone can be substantial.

    Working for a non-US employer can also raise unexpected US tax implications. Most employees will elect to participate in their company’s pension plan if one is offered. Most jurisdictions allow favorable tax treatment for such plans. In particular, employer contributions are not taxed; earnings in the plan are not taxed; and employees may often make tax deductible contributions to the plan. There arrangements are similar to plans offered by employers in the US—in essence all tax is deferred until the employee retires or takes a distribution from the plan. Unfortunately, for US taxpayers these tax deferral benefits are not available when the expat participates in a non-US pension plan. Employer contributions are taxed to the employee; earnings in the plan are taxed to the employee; and no deduction is allowed to the employee for contributions to the plan.

    Finally, many long-term expats have established non-US trusts or are beneficiaries of non-US trusts. Like other non-US structures the US tax on such structures is often extremely unfavorable. This treatment can often be addressed with proper planning. But, as with other foreign structures, there are substantial informational returns that must be completed with respect to foreign trusts. Failure to file these forms can result in substantial penalties.

    The international related forms that may be required include:
    Forms 3520/3520A—with respect to foreign trusts—including your foreign pension plans.
    Form 5471—with respect to your interest in foreign business enterprises.
    Form 8938—relating to your interest in foreign financial assets
    Form 8865—with respect to your interest in a foreign partnership
    Form 8621—relating to foreign collective investments (Passive Foreign Investment Companies—PFICs)
    Form TD F 90-22.1 – The FBAR—relating to your interest in foreign financial accounts.

    As noted above, the penalties for failure to file these forms are substantial. For example, the failure to file Form 3520 has a minimum fine of $10,000. Failure to file Form 5471 is $10,000. And the failure to file the FBAR can have a penalty of $10,000 per account.

    While we appreciate the desire to use a US based accountant while living in the US, and in fact we often encourage such use, you must make sure your accountant understands the importance of these forms and the consequences for failure to file.

    A very important form for (Canadian) RRSP / RRIF Holders is missing — Form 8891. Another critical for Canadian snowbirds is Form 8840 http://snowbirds.org/tax-forms.

  18. *@Calgary411:
    This is an excellent reference link.  I have posted the following comment on that website:

    “This statement is filled with truthful information.  For every dollar you save in foreign taxes by taking advantage of incentives for foreign tax savings, yyou can expect to pay a dollar more in US taxes.  What you do not pay to the foreign government the IRS will requre you to pay to the US Government. 

    Don’t try to do it yourself. You absoolutely must have expert advice from a competent accounting firm wich fully understands the tax laws of the foreign counttry as well as the unique tax laws of the US as they appliy to US persons living and working outside of the US. You can expect to pay several thousands of dollers for this advice (which is not a tax deductible expense) but trying to do it all on you own will likely result in tens of thousands of dollars in US tax penalties for seemingly insignificant errors which have absolutely no effect on your US tax obligatoin.  US tax law is very unforgiving. 

    Do not be surprised if, when you evaluate the numbers, that you come to the conclusion that you cannot survive living in a foreign country and being simultaneously subject to both the US and foreign tax laws on that same income.   If the numbers show that you can survive, then you had better contact another firm and get their advice, because the likelyhood of survival is most unlikely.  Remember that the real purpose of US taxation of Americans abroad is not to generate tax revenue, but to punish US citizens who have the adaucity to accept employment outside of the US.  This automatically classifies you as a tax evading traitor for which you will be punished accordingly.

  19. @Roger Conklin

    “If the numbers show that you can survive, then you had better contact another firm and get their advice, because the likelyhood of survival is most unlikely.”

    SO TRUE!

  20. *@JustMe, if he is deported I presume he still has to pay the US exit tax in order to be able to cancel his green card.   There are no provisions in the law imposing this tax which would exempt foreign persons being deported from the Exit Tax. And as long as the exit tax remains unpaid, his green card cannot be cancelled and so to the IRS he is still subject to US income tax on his world-wide income, as if he still lived in the US.

    Deportation does not provide a loophole through which foreign green-card holders can escape US taxes when they are no longer residing in the US.

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