Liberty and justice for all United States persons abroad

MUST READ for *US Persons* in their OMG Moment (cross-post from MapleSandbox.ca)

OMG! IRS Wants Me!

We have all had our OMG Moment. Now that the FATCA rollout has begun, there will be many more “OMG Moments”. This past weekend, I heard about a particularly egregious, frightening and unfair situation (yes, some are worse than others). In response to this,  John Richardson suggested that I post the following:

If you are newly in your OMG Moment, we hope this will help.You are among friends here. Thanks John!

OMG!

Have you just been told that you are required to file U.S. tax returns?
I am hearing more and more reports of people having their OMG (“Oh My God”) Moment where they are hearing for the first time that they may be required to file U.S. tax returns.

You are experiencing one of the most terrifying, confusing and disorienting moments that you will ever have in your life. The range of emotions you are feeling are so difficult to manage that you are having difficulty responding.

Some simple advice.

1. You are NOT in a position to make any quick “commitments” which are NOT REASONED decisions but are REACTIONS to a frightening and confusing situation.

2. Only “U.S. persons” are required to file U.S. tax returns. You may NOT be one. Your first step is to take steps to determine  your citizenship status.

A. Being born in the U.S. is NOT conclusive proof of U.S. citizenship. You may have relinquished it along the way.

B.There is NO presumption whatsoever that somebody born outside the U.S. is a U.S. citizen.

3. Since you have not been in the U.S. tax system you do NOT have a tax problem. Therefore you do NOT begin by calling an accountant/tax preparer/tax lawyer. (Once you are in the U.S. tax system you will be rewarded with “tax problems”. At the moment you have a “possible compliance” problem (if it determined that you are a U.S. person).

Accountants, tax preparers, your bank and the vast majority of lawyers are NOT qualified to advise you on the starting question:

“Are you in fact a U.S. person?”

4. The advice “What To Do Before Contacting A Lawyer” is important and applies to to contacting accountants as well.

5. You are NOT alone. Estimates are that there are at least one million  Canadian citizens affected by this injustice and unfairness. Remember that you are NOT alone.

6. You have done NOTHING WRONG. The U.S. has never made any effort to educate Canadians of U.S. origin that their laws levy taxes on the basis of citizenship and those born in the U.S. begin life as U.S. citizens.

You did NOT choose where you were born.

Being born in the U.S. means that you started life as a U.S. citizen. You may have relinquished U.S. citizenship.

7. Information sessions are available to you that you can attend anonymously at a very small fee.

35 thoughts on “MUST READ for *US Persons* in their OMG Moment (cross-post from MapleSandbox.ca)

  1. Thank you for headlining this, Lynne, Calgary411. Hopefully Brock and Sandbox will turn more than few OMG moments into ‘TG I’m not a US citizen anymore’ ones!

  2. An old post on this topic:

    https://renounceuscitizenship.wordpress.com/2011/10/24/you-may-not-be-u-s-citizen/

    Includes:

    2011 will be remembered as a frightening time to be an expat U.S. citizen. The IRS through the over administration of tax laws and information reporting requirements has terrorized hard working U.S. expats. In some cases they have made rash and uninformed decisions (encouraged by some legal and accounting firms who smell blood) which are sure to have a major impact on their futures. In some cases these decisions have included handing over their life savings to the IRS. It is possible that some did this because they believed they were U.S. citizens when in fact they were not. The plight of Canada U.S. dual citizens has been the subject of a media frenzy featuring inconsistent information. The target of this witch hunt is U.S. citizens who: – do not live in the United States; and – have in their day-to-day lives, made use of one or more of the following in Canadian financial institutions: bank accounts, RRSPs, TFSAs, RESPs, life insurance policies, mutual funds, brokerage accounts and Canadian Controlled Private Corporations. In other words, they made use of the incidents of day-to-day life and attempted normal retirement planning. It is unclear whether lines of credit, ownership of U.S. real estate (did you invest in that condo in Florida?) and ownership of shares in public companies (does anybody own shares of EXXON?). The simple fact is that any U.S. expat (many of whom are also Canadian citizens) are – in the eyes of the U.S. government – presumptive criminals and tax evaders. As Canadian Finance Minister Flaherty points out:

    “Most of these Canadian citizens, many with only distant links to the United States, have a very limited knowledge of their tax reporting obligations to the United States. These are honest and law-abiding people, including many senior citizens now caught in a nerve-wracking situation. Moreover, because they work and pay taxes in Canada, they generally do not owe any taxes in the United States in any event. Their only transgression is failing to file the IRS paperwork they were never aware they were required to file.” http://business.financialpost.com/2011/09/16/read-jim-flahertys-letter-on-americans-in-canada

  3. See any parallels between the Salem Witch Trials and the hunt for offshore tax evaders?

    “The episode is one of the nation’s most notorious cases of mass hysteria, and has been used in political rhetoric and popular literature as a vivid cautionary tale about the dangers of isolationism, religious extremism, false accusations and lapses in due process.[3] It was not unique, being an American example of the much larger phenomenon of witch trials in the Early Modern period. Historians have considered the lasting effects of the trials to have been highly influential in subsequent United States history.”

    Other parallels include the suspected witch having to actually die to prove her innocence.

    Especially interesting is the use of “spectral evidence” in the convictions of some, which is evidence that’s come to the witnesses as dreams or visions.

    http://en.m.wikipedia.org/wiki/Salem_witch_trials

  4. Great post. Alas, I had to renounce as I voted in several US elections. Figured that was the nail in the coffin.

  5. @bubblebustin,
    Apt parallel. We are being forced to undergo trial by ordeal as our rite to mark the ‘coming into compliance’ and in order to stay in that oh so holy but impossible to achieve state – all of us, annually …… just in case we were witches, er, I mean 6-7 million moneylaunderingtaxevadingterrorfundingdruglords living ‘abroad’ . Guilty until the trial by ordeal shows we’re not. Except the ordeal is hard to survive, and innocent or guilty – all must submit to the torture.

  6. General warning for future expats/nopats;

    The following are serious, not tongue in cheeks.

    When you leave the United States, _______________ .

    1.) Never ever vote in a US Election. Mail your voter registration card back to the issuing authority.

    2.) Get a drivers license where you live within 12 months and return your old license to the issuing authority.

    3.) If you have another nationality, it needs to become dominant. Do not renew any US passport, better yet send it in to get cancelled, far better yet renounce and get a CLN.

    For an expat that has committed a relinquishing act such as taking on a new nationality;

    1.) Immediately cancel your US voting registration.

    2.) If you have a valid US drivers license, return it immediately to the issuing authority.

    3.) In conversations and all other private/public interactions DO NOT allow anyone to refer to you as an American. That is not only racist it may be damaging to you, you are Canadian/Irish/French/Insert.

  7. In line with the above.

    this morning someone innocently said to me, “We were just visiting your Country?”

    To that I replied, “Where did you go?( then I listed locations where people would holiday here)”

    Other Party replied, “We were talking about America.”

    My last response, “I am not an American, ________ is my Country.”

  8. @USCitizenAbroad and any other person able to address this question.

    I believe that I am not a US citizen. After I became a Canadian citizen in 1982, I have
    – voted in every Canadian election for which I was qualified
    – carried a Canadian passport
    – lived and worked in Canada
    – had Canadian pension, savings, and investment accounts
    – drawn CPP and OAS in Canada
    – donated to Canadian charities and political parties
    – paid taxes in Canada

    I have done none of these things with respect to the US

    At an information session I attended, John Richardson on hearing my story affirmed his opinion that I was not US.

    That being the case, how do I get this recognized (if necessary) by Canadian financial institutions, CRA, and the US government?

  9. NorthernShrike,

    I, too, would say you are a sole Canadian citizen. Why wouldn’t any Canadian bank official think that as well?

    It’s too bad that we can’t have some notarized form to say what you have just said. The US has a “Closer Connection to Canada” IRS Form 8840 http://www.irs.gov/uac/Form-8840,-Closer-Connection-Exception-Statement-for-Aliens for snowbird to prove to the IRS (not the DOS) that they should not be subject to US tax compliance.

    In fact the IRS Email Tax Law Assistance has stated in an email to another Brocker:

    The Answer To Your Question Is:

    Thank you for your inquiry and we do apologize for the delay in responding to your questions.

    The Internal Revenue Service (IRS) does not make the determination of who is, and establishing U.S. citizenship.

    However, we can provide information regarding the filing requirements for U.S. citizens and aliens for U.S. tax purposes.

    The following discussions and references are found on our website at http://www.irs.gov

  10. @Nortternshrike

    That being the case, how do I get this recognized (if necessary) by Canadian financial institutions, CRA, and the US government?

    U.S. Government recognition = CLN

    Canadian Financial Institutions and CRA = CLN (because that is a statement from the USG) or if you don’t have a CLN then proof of your naturalization in Canada which meets the definition of a U.S. expatriating act and the reason you don’t have a CLN (you were not required to get one because loss of U.S. citizenship is not dependent on having a CLN). You would then “self certify” that you have no “USness”.

    That would seem to me to be the answer.

  11. MapleSandbox.ca has Important points made in comments from Schubert and George:

    http://maplesandbox.ca/2014/omg-irs-wants-me/comment-page-1/#comment-51707

    Excellent post. However someone needs to tell the FFIs about Point 3 (that banks are not qualified to assess whether or not you are in fact a US person). Also Point 2 is rather important and not at all consistently interpreted by the media or probably by CRA and the banks. Particularly assuming the latter have any idea where your parent(s) was/were born, if they were born in the US and you weren’t. I’m not even sure State Department consular officials are consistently clear on that point (i.e., if you were born outside the US of one or two US parents, are you automatically a US citizen or are you only eligible to get a passport and exercise US citizenship and tax responsibilities IF YOU SO CHOOSE AS AN ADULT). This may or may not become an issue in some cases as FATCA gets implemented, depending on what indicia the FFIs have or on how much personal knowledge a small-town FFI clerk might have about your parentage, if you still live in the town where you were born. And obviously it is critical that FFIs give you an opportunity to demonstrate that you might have lost your US citizenship along the way, if you were born in the US, BEFORE forwarding your account information to CRA or other countries’ tax authorities for further forwarding to IRS. In Canada the enabling legislation says the FFI “may” explore that with you, AFAIK it doesn’t say they “must.” It should have said that, but it didn’t.

    http://maplesandbox.ca/2014/omg-irs-wants-me/comment-page-1/#comment-51926

    An addition to what Schubert just wrote as he is spot on with Point 3.

    Let me state I do not like nor think others should provide links on forums like this to FFIs. Why? It can make matters WORSE!

    Anyways, a FFI in the EU states the following on its account opening section.

    “________ regulations require us to keep a record of where you are resident for tax purposes. If you are unsure, please seek independent tax advice.”

    Lastly We are seeing in the EU that statements made concerning nationality and residency are “the best of my belief” and not “under penalties of perjury.”

  12. Just curious–how does the “OMG” moment typically happen for a so-called “US Person”? How do the banks find out about the “US personhood” of someone who has lived in Canada for years and isn’t opening a new account?

  13. @CanadianPerson

    Even if the US Person is not opening a new account, there may be something on his Customer File at the bank that indicates that the person is an American citizen. FATCA requires the bank to look for these indications, and if found, to follow up with the account holder. The onus is then on the account holder to prove he is not a US Person; otherwise, the financial information is then forwarded to the CRA who shares it with the IRS.

    The US Indica the banks are looking for includes:

    – US Passport used as ID
    – US address
    – US Phone Number
    – Standing Order to Transfer Funds to a US Bank
    – Power of Attorney Granted to a Person Who is a US Citizen
    – Unambiguous place of birth which is inside the USA

  14. @Canadian person. Some Canadian banks are asking where you were born. This was NOT supposed to happen. You can fight them if you have more money than they do for lawyers etc. Most are worried that the banks may try to play games and ask us to “update” our account information and ask the birth question then. At this point, I trust NOBODY in the bank business. I go to our bank to do ALL banking, Currently my wife will never set foot in a bank again. We need to protect ourselves from our own government any way we can. It is terrible it came to this, but it did,. Treason was committed against us and there appears to be nothing we can do as a single person. The ADCS is my only hope at this point. I am trying to take this matter to the Aboriginal courts to fight it there, but this will take some time. I will keep everyone posted on my work.

  15. @CaanadianPerson: If someone is “lucky,” they will have their OMG Moment long before their banks asks them where they were born.

    Most of us had our OMG Moment when we heard about the IRS, OVDP, FATCA, FBARs, etc. from various media. Many of us first thought “That’s not me they’ve talking about.” As we read more, we realized “OMG! The IRS Wants Me!

    The reason I say someone is “lucky” to have learned it before a bank or an accountant asks is because the person can prepare, check out their options and make decisions.

    The egregious example was an elderly widow who has been in Canada 55 years and a citizen 41 years. Her bank asked her where she was born, quickly referred her to a high-priced accounting firm that instilled terror in her and she is caught up in a huge mess.

    If she had her OMG moment earlier, she may have been prepared and would have understood what to do when the bank asked that question.

    The accounting firm never bothered to tell her she relinquished US citizenship 41 years ago, could get a CLN or that CRA will not collect for IRS.

    In this post,John Richardson is urging people to take a step back, think things through and learn as much as they can before making decisions or answering questions.

  16. The problem is the “Accusation of being a U.S. person” (whatever that is). Once faced with this “accusation” one must provide sufficient evidence to the rebut the presumption of U.S. Person/Criminality. Many are not even sure of their “USness”.

    The conduct of the U.S. Government has made U.S. citizens universally disliked. There will be those who will enjoy leveling the accusation of “USness” against people.

    Last week I met a young affluent couple. The wife comes from a wealthy Canadian family. The husband is a transplanted New Yorker. She had no idea of the problems of U.S. citizenship. Something tells me that this marriage won’t last.

    The U.S. Government has turned U.S. citizenship into a cancer.

    How do you like that “hopy changy thing now”?

  17. @Native Canadian,

    The Canadian-US tax treaty covers all aspects of taxation between the two countries. The current treaty cedes Canadian sovereignty to the U.S. and permission to double tax by not specifying exemptions such as for retirement accounts, the family home, life insurance, mutual funds, outrageous noncompliance penalties for Canadian tax residents, etc.

    Everyone: there is a highly relevant new article here in regards to the injustice that has not had sufficient attention on this website: http://online.wsj.com/articles/kuenzi-american-expats-tax-nightmare-1404924705.

    Or, if you have paywall issues, the article is here: http://thunfinancial.com/american-expats-tax-nightmare/

  18. I am posting this comment for my friend “Ferfet” who posts at MSB but has not posted here before:

    There will be another OMG moment IF they know FOR SURE they are a U.S. person and make the decision to file. I have just recently called FIVE Accountants , some that I have heard of from friends, others using the list on the American Citizens Abroad website . The fee I have been quoted to file three years of tax returns and six years of FBAR forms In the NEW June 2014 Streamline Program is between $1500 to $5000 . Trying to find an Accountant that doesn’t try to scare me half to death when I’m talking to them on the phone has been a challenge! I think I would pay more money if they tried to “calm me” and not try to “scare me”.

    Since 1974 I have filed my Canadian taxes . I buy a Canadian tax program for $50 , years ago I did them manually, and file for the whole family. We have always had SIMPLE Canadian tax returns. Now to become compliant in this new 2014 streamline program , it is going to cost me a minimum of $1500! The $1500 fee is because I said I could submit the FBAR forms, but I will still need to pay them a consulting fee because I have no idea what type of accounts I’m holding. Are my CANADIAN accounts: GIC , RRSP, LIRA, Open RRSP mutual fund – Securities or Other!!

    I have zero income to report up to 2013, but Last year my Canadian husband of 37 years passed away so I am now receiving a Spousal Pension from the Canadian company where he worked for 35 years. Because of the money we saved In our Canadian RRSP’s , and money I invested in a Canadian GIC that I received from a
    SMALL life insurance policy he left me , there is another form that needs to be filed. OMG!!

    One accountant said he had 30 plus returns on his desk right now to be filed.
    There is a part of me that I wish all the millions around the world that the U.S. say should file because of U.S. Citizen Base Taxation would file their ZERO tax returns , and everyone would mail their three years of returns and six years of FBAR on the same day!

  19. There’s actually a third OMG moment, which is when you are in the system and you realize that the IRS is not the CRA, and are now subjected to the “treatment” of an over-powered organization in disarray for the rest of your natural life and beyond.

    “Come into my parlour, said the spider to the fly…”

  20. @ Tricia
    RE: Ferfet’s last paragraph
    I don’t think the IRS would worry about being flooded with paperwork. They would just stack it up and put all those filers in a very stressful limbo for many years to come. So I wish nobody would file and make them figure out how to extradite millions of expats to the USA. With 1000 US military bases around the world and troops trained to consider any land their boots are on as being property of the USA, the big roundup would be theoretically possible. That would make for an interesting conundrum at the US entry points — Reednuts pushing the expats (many would be renouncers) away for traitorous bad tax behaviour while the IRS tries to tug them in to face their punishment for non-filing. The USA is in the business of importing immigrants right now so why not haul in expats too? All this would be at the expense of American homelanders who are already picking up the tabs for the recent surge of importees. Sorry, but it seems like we are living in Bizarro World right now and everything that goes against all reason gets a free pass while everything else gets locked out.

  21. just helped 2 more people with their OMG moments.

    was chatting to a friend last nite who i had not seen in a while. i did not realize he lived and worked in the USA in the mid ’90s for 6 years with a green card nor that his daughter was born in the states during that time.

    he is just now activly searching out just what FATCA means for he and his daughter.

    i was quite surprised to find out he knew nothing about FATCA as he is quite an astute business person who does work around the globe and yet knew nothing about FATCA.

    check 2 more off the 1 million person list………

  22. I agree with your assessment, EmBee, the IRS already has mountains of tax returns they haven’t dealt with and they don’t give a damn. They must be laughing uproariously at the NTA’s Taxpayers Bill of Rights that states, among many fantastical things that we deserve to be dealt with in a timely manner. Well at least she’s offering a standard to strive toward even though the IRS is pretty much broken due to a combination of the US tax code and little accountability.

    Remember, the IRS considers you to be delinquent tax filers and that will be the angle they approach you from, no matter how ‘nice’ any of their entry programs sound. Mountains of paperwork just means they’re doing their job rounding us up and maybe even job security.

    The IRS doesn’t give one damn about saving anyone time or legal fees. Enter knowing that.

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