(1) What the IRS can’t know unless you tell them can’t hurt you.
A common mistake in dealing with government bureaucracies is fastidiousness. This is more likely to happen if you engage a tax compliance condor than if you prepare your own taxes.
For example, the IRS requires that a US taxpayer in Canada report TFSA (tax free savings accounts) and RRSP (Registered Retirement Savings Accounts)–which have been excluded from FATCA reporting requirements in the IGA negotiated with the government of Canada. There is therefore no way that the IRS can know about these accounts, and I would not report them unless one has already declared them to the IRS.
If you engage a condor (a cross border accountant or lawyer), she will likely require a fastidious obedience to the most up-to-date IRS bulletins and Internal Revenue Manuel rulings, etc. You may have to argue with them in order to not report something. I recognize that this may create a war.
About: Petros is the pen-name of the founding administrator of the Isaac Brock Society. He has started this series of Petros Principles as a means of communicating the guiding principles which he believes have helped him and others deal with the United States’ world-wide tax invasion.
You can’t keep these accounts forever, and eventually the funds will have to go into accounts where they will be reported, will they not?
Leaving aside the question of “whether” to report things like TFSAs there is a separate and equally important question which is:
Assuming that they ARE reported HOW are they to be reported.
If they are reported as “Foreign Trusts” or anything that is subject to separate and specific reporting requirements, the problem of reporting them will be magnified. Once they are reported a certain way it is difficult to change how they are reported. To be clear, it is NOT clear that these things are “Foreign Trusts” (and I doubt that they are).
Petros is absolutely correct in implying that the interests of the tax preparers are NOT aligned with the interests of the taxpayer.
Can’t you get your FFI to send you in payments the proceeds of TFSA or RRSP in the form of cheques? A cheque can be cashed and not deposited into an account (I do this all the time). Furthermore, even if you did deposit a check into an account that the CRA reports to the IRS under FATCA–will there necessarily be an explanation that this cheque came from an unreported TFSA or RRSP?
Petros Happy to see you have been converted. There are a whole bunch of things for which the IRS computers have no information ‘slips’ and therefore can’t compute.
Bubbles.by then one should have renounced. Or, if not, see above. One needs to be imaginative
USCAbroad. IF you insist, report the income on an ongoing basis.
@Duke, Converted? To what from what? I don’t think I’ve converted over the course of these six years–I see these Petros Principles as a reiteration of past posts in pithy points.
“What the IRS can’t know unless you tell them can’t hurt you.”
I totally agree with the afterthought that one always has to use much caution where the IRS is concerned. If there is no paper trail for the IRS to follow this principle works quite well.
If one renounced or relinquished before FATCA (July 1, 2014) went into effect, this is the best case scenario. I renounced in December 2014, but I believe left nothing traceable. I filed 1040s and form 8854 but no FBARs. My funds had all gone into checking and savings accounts with an LCB FATCA exempt credit union prior to July 1, 2014. The result being that the IRS likely won’t be getting any info for me.
Unfortunately this is a highly complex problem and everyone’s situation is different. Petros Principles will undoubtedly help clear up some of the confusion out there.
or an individual could become one of what i suspect is a number in the 100,000’s if not more of the undocumented self relinquishers and renouncers.
i am peace with my decision to never cross the border in to amerika again.
the majority of my banking is done at a local client based credit union.
if i ever were to get a brown envelope with black lettering of a 3 letter amerikan agency on it said letter and its contents would be added to the news print at the bottom of the bird cage.
i am a canadian citizen resident in canada and have been so since 1980 when i obtained said citizenship.
i refuse to live my life at the whim of a foreign government. if you really want me uncle sam you are going to have to come and get me with hand cuffs and jack booted thugs.
after having found out about fatca 3 1/2 years ago and having run the entire range of emotions i am finally at peace with myself and my decision.
those of you who HAVE to travel back to amerika for business or family you have my empathy and understanding. i am lucky in that i don’t have to ever travel to amerika for business or family and that made my decision all that much easier.
i will never tell the IRS anything since i have zero reason to. i live and work in the country i am a citizen of.
a canadian is a canadian is a canadian…..or at least until the courts rule differently……
Mettleman, you are lucky to never have to cross the border to amerika. I have to cross on occasion due to my elderly relatives there who can no longer make the trip to Canada. Self relinquishment can work well for those who don’t have to cross the USA border.
Any IRS mail arriving in Canada makes great bird cage liner. Should I ever get mail from the IRS, at this point it would be used as liner for kitty litter pans for my two cats. I don’t have any birds. Then cease to cross the border for any reason.
Everyone has their own level of tolerance for uncertainty, and their own facts. I have recently renounced and I want to get out of the system cleanly. I am near retirement and have retirement savings both in the US and in Australia. Even though the IRS has no way to know my superannuation balance/income/contributions unless I tell them, the required amounts have been disclosed on my US returns (even where it resulted in double taxation).
Am I a wimp? I don’t think so. I have weighed up the risks (if the IRS should audit my returns, they will expect to see superannuation on the return of an Australian employee, I can provide statements that back up the numbers in my return). Most important to me is ensuring that, if the returns are audited the chance of my being deemed non-compliant (and therefore a covered expatriate) are as close to zero as possible. I realise that the chance of an audit is very low (haven’t heard of it happening), but the cost of being deemed a covered expatriate is very high, so the expected value of complying now exceeds the cost of compliance (spoken like a true economist!). Even more important, I can sleep at night.
Everyone must do what they can live with!
IRS agent in Austin I spoke to about my recently processed streamlined filing said tfsa and resp do not require 3520 and 3520a according to their guidance. I believe it’s the condors perpetuating this confusion.
Richard Pound and Max Reed agree with this interpretation.
I discovered decades ago that one should never tell ANY government anything they don’t already know. Governments are voracious gatherers of information and need to be starved whenever the opportunity arises. Never mind the IRS; our own CRA has shown itself to be nothing more than IRS-lite. These people are not our friends.
It is not just the IRS but any information provided to nay US agency, not just taxes but any plans to travel to or transit the USA. On another thread a family commented that their born son was ‘inventoried’ by a US border agency and told to register the child and get a US passport. Taxes are not the immediate issue, any obnoxious border agent can prevent the next visit to grandma or Disney world because he believes a family member is trying to enter without a US passport. If you have no obvious US taint never tell a border agent your going to visit grandma
Needless top say that Banks in the US share with us a copy of form 1099 showing the exact amount of interests/dividends etc that was reported to the IRS, and this obviously help make our tax filing easier and avoid unnecessary contradictions between what we report as Owners of the accounts and what has been reported by the Bank.
However, anyone has any idea whether foreign banks will share (or be willing to make available) a copy of Form 8966 submitted by the Bank to the IRS (in relation to our own accounts..)?
As an australian/US dual citizen who does not intend to comply and assuming I never intend to visit the US ever again how does the IRS collect on its punitive penalties?
Hi John – the IRS can’t collect. The best course for an Australian/US dual citizen who does not intend to visit the US again, and doesn’t want to comply, is to do nothing.
If there are FATCA problems with banks, it’s easy (though expensive-$2350) to renounce. It’s not necessary to file any US tax forms in order to renounce.
On another forum, Plaxy, I have numerous US tax professionals telling me that thee is no option but to comply because FATCA will out them to the IRS and the consequences of not complying are horrendous.
Click here for a complete list of Petros Principles
A propro to your comment, see:
(4) Those most hurt by the IRS’s persecution of expats have engaged the services of cross-border compliance condors.
(5) Those least hurt have done nothing.
John Patrick – Saw your post on the other thread.
If all of your wife’s assets are in Australia, the ATO will not help the IRS collect from someone who is compliant in Australia and not involved in more serious crimes like money laundering, etc. And they certainly won’t help the IRS raid someone’s super account. If the IRS ever decides that your wife owes US tax, they will first attempt to locate and levy any assets inside the US. If there aren’t any (and if there aren’t likely to be US assets in the future due to inheritance), then there’s really not much they can do other than send notices and perhaps revoke her US passport.
After retirement, if most of her financial assets are inside super, the IRS isn’t getting enough information to know whether she has a filing requirement. Super funds do not report under FATCA. Funds outside of super might be reported (if her bank knows she’s a US citizen and asks her to complete a W9), but at current low interest rates, bank deposits are not likely to throw off enough income to be of interest to the IRS.
And as to why condors lie about how long the arm of the IRS is, see:
@Mike, if the Petros Principles had existed before I had my OMG moment my own situation would have been much much less painful and stressful. They’re still relevant even years after Petros created and shared them with us.
this reminds me to say thanks again, for everything you and the others at IBS have done to help others.