Monthly Archives: May 2013
Tax Guide for “US Persons” in Canada
At an NDP event last night I met a fellow whose son has written this.
Do not take this as an endorsement as much as potentially useful info for those who wish to “not remain hidden.”
American citizens abroad have always had an obligation to file U.S. income tax returns. In recent years the IRS has stepped up enforcement of this obligation against U.S. citizens who live in Canada. For the first time, many American citizens in Canada who have little or no connection with the U.S., other than their citizenship, have become aware of their U.S. tax responsibilities. Filing dual tax returns can appear daunting, but need not be difficult. Most people’s tax situations are not complicated. But instead of completing their returns themselves, they pay financial professionals hundreds of dollars.
This book provides an alternative solution. This plain language guidebook helps American citizens in Canada complete and file their U.S. tax returns.
Judicially-denaturalised ex-Americans are subject to exit tax but do not have names published in Federal Register
Here’s a small extra piece of the puzzle for those of us trying to figure out exactly who gets listed in the expat honour roll Federal Register “name-and-shame” list of ex-citizens. There are indeed some people who have to pay the exit tax but don’t have to have their names published: naturalised citizens who are stripped of their citizenship by U.S. courts, usually for naturalisation fraud or war crimes committed prior to naturalisation.
This post is not particularly useful to most Isaac Brock Society readers contemplating relinquishment or renunciation — unless you’re in need of some comic relief and would like to read about a mildly amusing drafting error in the exit tax statute.
Bulletin from Shadow Raider – You will want to read this
Shadow Raider says
YES! YES! IT WORKED!!! The Senate Finance Committee had its meeting on international competitiveness today (instead of May 23 as scheduled), and it included notes about individuals! It’s considering the proposal in Bernard Schneider’s paper!
Excerpts from the meeting notes (my comments in bold):
“The United States income tax rules applying to cross-border income are based on two core concepts: the residence of the taxpayer and the source of the taxpayer’s income.” (Are they abandoning the concept of citizenship now?)
“Nonresident citizens: U.S. citizens living abroad are generally taxable as residents of the foreign country where they live. They are also required to file U.S. federal income tax returns annually and pay tax to the U.S. on their worldwide income, subject to the foreign tax credit and an exclusion for a limited amount of foreign-earned income. Other countries generally tax their nonresident citizens only on income their citizens earn in their country of citizenship. Some believe certain employers overseas are reluctant to hire U.S. citizens because of the associated tax burden and compliance costs.”
“NON-RESIDENT U.S. CITIZENS
1. Provide an election to citizens who are long-term nonresident citizens to be taxed as nonresident aliens if they meet certain conditions (Schneider, “The End of Taxation Without End: A New Tax Regime for U.S. Expatriates,” 2013; similar to the law in Canada) (You read it right, they mentioned Canada!)
a. Require a minimum period of residence abroad
b. Impose an exit tax on electing taxpayers where deemed to sell all assets at the time of election
2. Repeal the foreign-earned income exclusion (H.R.2 (108th Congress), Jobs and Growth Tax Relief and Reconciliation Act of 2003, sponsored by Rep. Thomas)”
I can’t believe it! feel like jumping around right now!
The enduring mystery of US #offshore cash
The enduring mystery of U.S. #offshore cash https://t.co/mbZjIUyJk1 – Fascinating explains why cash rich companies borrow to pay dividends
— U.S. Citizen Abroad (@USCitizenAbroad) May 9, 2013
This is a fascinating article. It explains why companies keep a higher percentage of their cash outside the United States and why they are likely to continue to do so. The U.S. is “cash strapped” and printing money. Yet, it won’t allow its corporations to bring its money back to invest in the U.S. How can this not be bad policy?
Excerpt includes:
“US Citizens are not reporting Canadian trusts.”
This has just been posted on the Moodys Tax Advisors blog.
IRS says hundreds of thousands of US citizens are not reporting Canadian trusts
This week the IRS released statistics on the number of returns it received in 2010 from US citizens with foreign trusts. The results are startling (you may find the report by clicking here). In all of Canada only 324 returns were filed that report ownership in a non-US trust, which likely means hundreds of thousands of US citizens residing in Canada had not filed the appropriate returns. This is important for two reasons: first, the penalties for not filing are draconian (but waivable); and second, last week the US Government Accountability Office (GAO) issued a report that encouraged IRS to pursue those taxpayers who file late returns using a technique known as “quiet disclosure.”
Background
The US State Department knows of more than 687,000 US citizens residing in Canada but most experts agree that the actual number is several times that number. Many common Canadian retirement and savings vehicles are considered foreign trusts under US law. These vehicles include registered education savings plans (RESPs), tax free savings accounts (TFSAs), registered disability savings plans (RDSPs) and the like. Of course, typical Canadian trusts used for income splitting and succession are also considered foreign trusts and carry the same reporting obligations. Any US citizen who owns, contributes to, or receives a distribution from any of these trusts must report that interest on the appropriate form at the appropriate time or face severe penalties.
Penalties for Failure to File
Contributions to or distributions from any of these trusts triggers the obligation to file US tax form 3520 on or before the due date of the US income tax return (form 1040). The failure to file penalty for the form 3520 is a minimum of $10,000. In addition, an ownership interest in any of these vehicles triggers the obligation to file the US form 3520-A on or before March 15. The failure to file this form triggers a minimum $10,000 penalty. Both of these penalties can be waived if the taxpayer has “reasonable cause” for not having filed.
…
Again, Comments on Tax Reform are requested. Ways and Means and Senate Finance Committees lauch TaxReform.gov.
Shadow Raider has brought this to our attention and asked that it be posted:
The Ways and Means and Senate Finance Committees have just launched the website TaxReform.gov and are asking for the general public to submit comments on tax reform again. This time, they even said they want “horror stories”, and many Americans abroad and immigrants have such stories to tell.
The form on the website asks for a US address, but, as Shadow Raider points out, “I suppose you could use your voting address (or perhaps try to input a foreign address using one of the obsolete postal abbreviations at the end of the list)”.
U.S Credit Unions Endorse Sen Rand Paul’s Bill to Repeal Portions of FATCA:
CUNA U.S. industry threatened by “extraterritorial diktats of a European FATCA and other FATCA-inspired foreign laws”
James George Jatras for RepealFATCA.com
May 8, 2013
Washington, DC
Following yesterday’s introduction of a bill (S. 887) by Senator Rand Paul (Republican, Kentucky) to repeal burdensome mandates and privacy violations under the “Foreign Account Tax Compliance Act” (FATCA), the powerful Credit Union National Association has declared its support. Continue reading
Senator Rand Paul Introduces Bill to Repeal FATCA!
May 7, 2013
Washington, DC
by James Jatras
Treasury Department’s Promises of U.S. FATCA IGA ‘Reciprocity’ Dead
In a major game-changer, Senator Rand Paul (Republican of Kentucky) today introduced a bill (S.887) to repeal mandates of the “Foreign Account Tax Compliance Act” (FATCA) on financial institutions and individual American citizens as a “violation of sovereign nations’ laws and privacy matters.” In a letter to his Senate colleagues, Dr. Paul pulled no punches about the destructive effects of the FATCA law and the unsupportable claims that FATCA is a legitimate tool to combat tax evasion: Continue reading
Q1 2013 Federal Register list of ex-citizens published; numerous names missing
Looks like I’m losing my edge — AnonAnon wins the prize for being the first to notice the Q1 2013 Quarterly Publication of Individuals, Who have Chosen to Expatriate, which has been placed on public inspection for printing in tomorrow’s Federal Register. Grammar and spelling aficionados will note that the list’s title no longer contains the awkwardly-placed relative clause “As Required by Section 6039G”; unfortunately, the misspelling of HIPAA as “HIPPA” has now entered its eighteenth year.
This quarter’s list appears a mere eight days later than required by law, and with about 680 names — a far larger number than most of us would have expected, though well short of the 850 people renouncing under INA § 349(5) whom the FBI entered into their NICS gun control database during the same quarter. And that’s not even mentioning the people who relinquished citizenship under INA § 349(1)–(4), who are not subject to gun control and so don’t show up in NICS but do belong in the Federal Register — or the backlog of thousands of others who renounced last year and also showed up in NICS but never had their names added to Treasury’s list.