cross-posted from citizenshiptaxation.ca
Last week in my email was a link to an article by Michael J DeBlis (unable to determine whether it was the father or the son). It runs in my memory that prior to the launch of the Tax Connections website, the younger Michael had started a blog that was specifically about expatriate issues and many of us joined and took part. He seemed particularly sympathetic and supportive of our plight and one who I would never have labelled a “condor.” And this post is in no way meant to be demeaning.
Imagine my surprise to read this:
Consider the following example. Pierre is a dual citizen of the U.S. and Canada who presently resides in Montreal. He has fastidiously filed U.S. and Canadian tax returns for the last ten years. Following an audit of his 2012 U.S. tax return, the IRS determined that there was a $ 20,000 deficiency and mailed him a notice of deficiency. Pierre timely filed a protest but Appeals found in favor of the IRS. Having failed to file a petition with the tax court, that deficiency soon became a $ 20,000 assessment.
The IRS now seeks to collect on its claim by imposing a tax lien on real estate owned by Pierre in Canada. Essentially, what the U.S. government is attempting to do is cajole collection officials from the Canadian Revenue Agency (Agence du revenue du Canada) to do its dirty work for it: namely, to collect Pierre’s unpaid U.S. taxes by enforcing an IRS tax lien on property located within Canada.
As incredible as this might sound, reliance upon a foreign taxing authority for assistance in collecting a tax judgment against a citizen of the requesting country is entirely permissible under the terms of the U.S.-Canadian Treaty. Of course, such a request must be accompanied by documents firmly establishing that the taxes have been finally determined.[ix]
Therefore, the Canadian Revenue Agency would have no choice but to enforce the lien and to collect the unpaid taxes. But what if Pierre filed a motion in a Canadian court to have the tax lien imposed by the Canadian Revenue Agency, at the behest of the IRS, set aside? Not surprisingly, the court would refuse Pierre’s request on the grounds that the imposition of the tax lien was proper under the terms of the treaty.
The reason for my surprise was that it is a well-known fact not only in Canada, but among expats in general, that Canadians are lucky because Canada will not collect tax for the U.S. on people who were Canadian citizens at the time the tax was incurred. Nor will the CRA collect FBAR penalties as they are not a tax, falling under Title 31 of the U.S.C. Most of us had become aware of that when our-then Finance Minister, the late Jim Flaherty had stated unequivocably that Canada would not collect for the U.S. under these two circumstances. So I decided to post a comment.
Patricia Moon
2016-10-26 18:51:10
Thanks for this article, particularly for outlining the limits of what can/cannot be done with regard to the border. While the officers can be bullies, along with knowing very clearly, the limits of the Reed Amendment, this is good information to have. Canada and Denmark both have provisions that state they will not collect for that US citizens/persons that are also, their own citizens. In the case of the US-CDN Treaty: Article XXVIA 8) No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that: a) Where the taxpayer is an individual, the revenue claim relates either to a taxable period in which the taxpayer was a citizen of the requested state …………. So the CRA would not collect for the US in Pierre’s case, since he is dual and a citizen of Canada. While the boundaries for the revenue rule may be fading, it is still alive and one which the late Finance Minister, Jim Flaherty, reiterated many times while voicing his shock that the US would expect FATCA to be implemented in Canada. It is very clear that FBAR penalties, which are not part of Title 26 and therefore not covered under the Treaty, also would not be collected by the Canada Revenue Agency. The Canadian courts have refused to enforce claims of the US against Canadian citizens. I presume the Canadian government would honor XXVIA for US citizens/persons who are permanent residents of Canada who are not Canadian citizens. What I am afraid we will see, in spite of past rulings, is that the IRS will attempt to collect from Canadian bank branches in the US with corresponding branches in Canada. I have been told that this does happen by compliance people in spite of court rulings etc. However, it seems to me a bank would be liable to be sued, since presumably, PIPEDA (privacy laws) would in this case, apply to the US citizen/person even though it is overridden by the IGA when the bank sends info to the CRA. We have all seen how the compliance industry tends to enforce the “law” even when the IRS etc, has not provided guidance (which also, is not necessarily, the “law”). An example of this is putting someone who relinquished US citizenship decades ago, into the system according to 877A. Tax lawyers have tended to dismiss past citizenship laws that as far as can be seen, are not automatically changed retroactively. This is completely unacceptable. It is largely useless to Canada to have the right to collect on Canadian citizens resident in the United States due to the fact that once a Canadian is a permanent resident of another country, they are no longer liable for tax in Canada. This is also the reason that FATCA is of very little value to Canada.and
Patricia Moon
2016-10-26 23:10:13
You may be interested in a few of the court cases mentioned (indirectly) above: United States of America v. Harden (1963), 41 D.L.R. (2d) 721 Supreme Court of Canada https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/7322/index.do 68 O.R. (2d) 379; 1989 Ont. Rep. LEXIS 206 RE VAN DEMARK ET AL. AND TORONTO-DOM http://uniset.ca/other/cs6/68OR2d379.html Chua v. Minister of National Revenue, 2000 DTC 6527 (FCTD http://ca.vlex.com/vid/chua-v-minister-of-national-revenue-38618242
I received a message asking if I could confirm the information concerning Canadians at this post on the CitizenshipTaxation FB group.I became involved in the conversation and remembered that I had recently learned that Denmark also had such a clause protecting its citizens in the US-Denmark Treaty. So I wondered if it could be the same for the other three countries that have a Mutual Assistance in Collection clause in their treaties with the U.S. namely, Sweden, France and the Netherlands. It didn’t take too long to find that they do indeed have the same type of clause. I was dumbfounded. Why had we never heard this before? I was careful to look at the Protocols because some of the Treaty dates are over 20 years old; there was nothing to suggest the conclusion was incorrect. I also had a couple of professionals take a look and they agreed.
So this is A VERY BIG DEAL. If you are a dual citizen of DENMARK SWEDEN FRANCE the NETHERLANDS or CANADA and were a citizen at a time when the U.S. claims you owe U.S. tax, your country WILL NOT ASSIST THE U.S. in collecting U.S. tax. !!!!!!!!
Then I wondered about FBAR and where that might be confirmed since it is not specifically stated in the Treaty. I googled and found a link to a comment of mine that I have no memory of posting:
25 July 2012 T.I. 2011-0427221E5 – FBAR penalties
Principal Issues: Whether US FBAR penalties are included in “revenue claims” defined in Art.XXVI-A(1) of the Canada-US Treaty.
Position: No.
Reasons: FBAR penalties are not civil penalties in respect of taxes covered under Art.II of the Treaty.
https://www.taxinterpretations.com/tax-topics/treaties/article-26a#node-326646
25 July 2012 T.I. 2011-0427221E5 – FBAR penaltiesXXXXXXXXXX
2011-042722
P. T.
(613) xxx-xxxx
July 25, 2012Dear XXXXXXXXXX:
Re: Civil Penalties and Article XXVI-A
We are writing in response to your letter of November 7, 2011, in which you asked for our comments in respect of the application of Article XXVI-A of the Canada-United States Tax Convention (1980) (Treaty).
You have described a hypothetical situation involving an individual who is a citizen of the United States (U.S.) by right of birth, and a Canadian citizen by way of naturalization prior to 1995. The individual is a resident of Canada for purposes of the Income Tax Act (Act) and the Treaty. We are to assume that the individual has failed to file Form TD F90-22.1 Report of Foreign Bank and Financial Accounts with the U.S. Department of the Treasury as required under the U.S. Bank Secrecy Act. As such, the individual has been assessed a civil penalty (FBAR Penalty) in the U.S. for the failure to file Form F90-22.1.
In this regard, you have asked whether the FBAR Penalty could be considered a civil penalty that is included in a revenue claim as defined at paragraph 1 of Article XXVI-A of the Treaty, and if so, whether paragraph 8 of Article XXVI-A would preclude the collection of the FBAR Penalty by the Canada Revenue Agency (CRA) on behalf of the U.S. Government.
Our Comments
The CRA has previously indicated that Canada would assist the U.S. Government in the collection of interest and penalty in respect of U.S. taxes owing pursuant to Article XXVI-A of the Treaty. However, paragraph 8 of Article XXVI-A provides that Canada will not assist in the collection of a revenue claim from the U.S. Government in respect of an individual who is a Canadian citizen, such as the individual described in your hypothetical situation.
In addition, we are of the view that a civil penalty, such as the FBAR Penalty, which is imposed under the U.S. Bank Secrecy Act, is not a penalty in respect of U.S. taxes owing. Therefore, it is our view that an FBAR Penalty is not an amount that would be considered a revenue claim pursuant to the definition at paragraph 1 of Article XXVI-A.
We trust that our comments will be of assistance.
Yours truly,
Robert Demeter
Section Manager
for Director
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
Then I started wondering about FATCA. The “reassurance” we receive constantly from the Canadian government is that FATCA does not result in any new tax etc, that it is just an information exchange. Which begs the question, why is the information being collected if there won’t be any “new” taxes? In this regard:
Andrew Bonham, “FATCA and FBAR Reporting by Individuals: Enforcement Considerations
from a Canadian Perspective” (2012) 60:2 Canadian Tax Journal 305-54, at 345.
Still, as noted above, the minister has the discretion to refuse assistance in collection. Certainly from a public policy standpoint, it must be relevant that the Crown, in providing collection assistance on a FATCA revenue claim, would in many cases be acting against its own taxpayers in the enforcement of a claim founded upon information obtained in a manner that may not be constitutional under the laws of Canada. The Crown is not obliged to do anything contrary to the public policy of Canada in collecting a revenue claim under the treaty. This last point is analogous to the common-law public policy defence discussed above.
However, it is also quite possible, and perhaps probable, that FATCA is in equal part both an information-gathering tool and a revenue-generating tool. It is for this reason that FBAR will never go away. With information garnered from FATCA FFI reports, penalties can be levied under both FATCA and FBAR if an individual fails to file. However, as we have noted, the long arm of the IRS cannot reach Canada with respect to FBAR, and as further posited, it is likely that FATCA penalties would also be unenforceable in Canada. From the US perspective, the best-case scenario would see all financial institutions around the globe complying with the strictures of the disclosure requirement. Armed with the massive list that would be generated from such compliance, the IRS would merely have to check names against received disclosures and levy fines against those individuals who had not complied. Carrying this scenario further, the IRS could then, after the exhaustion of all administrative appeal periods and recourse, approach the minister of national revenue with a list of individuals owing FATCA penalties and ask that those penalties be enforced by the CRA under the terms of the Canada-US tax treaty. It is assumed that in a large number of cases, a notice from the IRS to an individual noting lack of FATCA compliance would not be responded to, and in those cases, a penalty of $50,000 would be levied, thereby raising a very significant amount of revenue.
Finally, although the revenue rule and the penal/public-law rule would currently preclude Canadian courts from assisting in collection, the ever-expanding role of judicial comity may one day see a repeal of these rules, or at least a relaxation of their strictures. Should that occur, the United States would be in a position to resort to principles of public international law as a basis for enforcement, even against dual citizens. In such a case, it may well be open to defendants to argue that the mere fact of their US citizenship should not, in and of itself, be enough to satisfy the real and substantial connection test—especially in cases where the defendant has had little or nothing to do with the United States and has certainly derived no benefit from his or her US citizenship.
A lot of interesting possibilities are discussed in the article above and it is definitely worth reading. While there are no guarantees that these Treaties will not change in the future, the advantage of this information now is:
- if you are in an unsure situation at the moment, this is something that is as much a part of your situation as your “U.S. Person-ness” and can be a great help in deciding what your risk level is
- if you are not compliant & not yet a citizen of the 2nd country, you might consider applying for citizenship now
- you can help get this information out to other members of your expat community
Lastly, here are the actual wordings in the treaties involved; I am only including the Article/paragraphs that pertain to this idea.
SWEDEN
• Income Tax Treaty – 1994
• Protocol – 2005
ARTICLE 27
Administrative Assistance
1. The Contracting States undertake to lend assistance and support to each other in the collection of the taxes to which this Convention applies, together with interest, costs, and additions to such taxes.
4. The assistance provided for in this Article shall not be accorded with respect to the citizens, companies, or other entities of the State to which the application is made, except as is necessary to insure that the exemption or reduced rate of tax granted under this Convention to such citizens, companies, or other entities shall not be enjoyed by persons not entitled to such benefits.
• Income Tax Treaty – 1994
• Protocol – 2004, 2009
19 ARTICLE XII
Paragraph 5 of Article 28 (Assistance in Collection)
of the Convention shall be deleted and replaced by the following:
“The assistance provided for in this Article shall not be accorded with respect to citizens, companies, or other entities of the Contracting State to which application is made.”
ARTICLE 28
Assistance in Collection
1. The Contracting States undertake to lend assistance and support to each other in the collection of the taxes to which this Convention applies (together with interest, costs, and additions to the taxes and fines not being of a penal character) in cases where the taxes are definitively due according to the laws of the State making the application.
5. The assistance provided for in this Article shall not be accorded with respect to citizens, companies, or other entities of the Contracting State to which application is made except in cases where the exemption from or reduction of tax or the payment of tax credits provided for in paragraph 4 of Article 10 (Dividends) granted under the Convention to such citizens, companies, or other entities has, according to mutual agreement between the competent authorities of the Contracting States, been enjoyed by persons not entitled to such benefits.
8. No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that (a) where the taxpayer is an individual, the revenue claim relates to a taxable period in which the taxpayer was a citizen of the requested State,
Article XII of the Protocol replaces paragraph 5 of Article 28 (Assistance in Collection) of the Convention. The change revises paragraph 5 so as to remove the now obsolete reference to the provision of paragraph 4 of Article 10 (Dividends) of the existing Convention prior to amendment by the Protocol related to the “avoir fiscal.”
ARTICLE 31
Assistance And Support in Collection
1. The States undertake to lend assistance and support to each other in the collection of the taxes which are the subject of the present Convention, together with interest, costs, and additions to the taxes and fines not being of a penal character.
4. The assistance provided for in this Article shall not be accorded with respect to the citizen, corporations, or other entities of the State to which application is made, except in cases where the exemption or reduced rate of tax granted under the Convention to such citizens, corporations or other entities has, according to mutual agreement between the competent authorities of the States, been enjoyed by persons not entitled to such benefits.
INCOME TAX TREATY 2000
ARTICLE 27
Administrative Assistance
1. The Contracting States undertake to lend assistance to each other in the collection of taxes referred to in Article 2 (Taxes Covered), together with interest, costs, additions to such taxes, and civil penalties, referred to in this Article as a “revenue claim.”
8. No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that a) where the taxpayer is an individual, the revenue claim relates to a taxable period in which the taxpayer was a citizen of the requested State, and b) where the taxpayer is an entity that is a company, estate or trust, the revenue claim relates to a taxable period in which the taxpayer derived its status as such an entity from the laws in force in the requested State.
Article XXVI A
Assistance in Collection
NOTE: S. (8) is still in effect, though with different wording. It currently reads: “8. No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that where the taxpayer is an individual, the revenue claim relates to a taxable period in which the taxpayer was a citizen of the requested State”
1. The Contracting States undertake to lend assistance to each other in the collection of taxes referred to in paragraph 9, together with interest, costs, additions to such taxes and civil penalties, referred to in this Article as a “revenue claim”.
8. No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that
(a) where the taxpayer is an individual, the revenue claim relates to a taxable period in which the taxpayer was a citizen of the requested State, and………
8. No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that
- (a) where the taxpayer is an individual, the revenue claim relates to a taxable period in which the taxpayer was a citizen of the requested State,
Article 22
1. Subparagraph 8(a) of Article XXVI A (Assistance in Collection) of the Convention shall be deleted and replaced by the following:
(a) Where the taxpayer is an individual, the revenue claim relates either to a taxable period in which the taxpayer was a citizen of the requested State or, if the taxpayer became a citizen of the requested State at any time before November 9, 1995 and is such a citizen at the time the applicant State applies for collection of the claim, to a taxable period that ended before November 9, 1995; and
2. Paragraph 9 of Article XXVI A (Assistance in Collection) of the Convention shall be deleted and replaced by the following:
9. Notwithstanding the provisions of Article II (Taxes Covered), the provisions of this Article shall apply to all categories of taxes collected, and to contributions to social security and employment insurance premiums levied, by or on behalf of the Government of a Contracting State.
“No one can predict the future.”
A criminal points a gun at you and demands your money. You don’t have any idea of what will most likely happen? If you have been in such a situation, you know your thoughts are in the past (Why did I take this route instead of my usual?) and the future (Will I see my family again?) not the present. Nothing you do “now” changes the present, it can only effect the future. You are powerless to change the present. The only possiblity you had to avoid the current situation was to do something differently in the past, too late now.
Focusing only on the now with out an eye on the future can render you futureless.
Everything we do in present is done for the future. When behind the wheel do we look at the hood of the car or down the road ahead. If we wait untill we are upon the stopped vehicle ahead to react to it, we will rear end it. Is the legal world so far removed from reality that is can ignore the fact that the only way to affect the future is to act before it becomes the now?
“As regards Weill the significant facts in his dituation are the extradition and the acquittal. But his case does not match the focus of this post.”
Sure it does. Those with whom we trust our deposits will certainly be looking at the personal risk of having US tainted clients. Who in their right mind would want the real possiblity of having their vacation or business trips interrupted at great personal expense to deal with the issues of having such clients.
Additionally, if a Canadian banker could be arrested while attending a conference or vacationing overseas and extradited to the US, Canadian law offers the banker no protection what so ever. So, they must decide which county’s law is the scariest and either follow it or avoid US law by never traveling to the US nor any country which may extradite them to the US.
In others words, the threat for bankers of being arrested abroad and transported to the US for actions that are not illegal in their own lands will be of greater importance to those whose do not wish to be confined within their own country than whatever protections their laws offer while they remain in their own coutries. If those looking ahead believe they see trouble for them within their own countries if they break US law then they will take evasion action to avoid the trouble. We would well to consider what they may do.
Hi,
Long time lurker here in need of a little help. First some pertinent facts.
1) Wife, 50’s US citizen, came here in early 70’s when 4 years old. Permanent resident, not CAN Citizen. Has worked in Canada never in US. Has US Passport because she was told she had to have one to cross border.
2) Not “US Compliant” with tax returns, FBAR, etc, and don’t plan to be. She has always made under $40k per year.
3) Me, Husband, 50’s, free of AmeriTaint.
THE PROBLEM:
Wife’s Mom recently passed away (CAN Citizen). Wife is one of executors of estate and is listed as beneficiary on TFSA’s, life insurances, and estate.
Have TFSA releases coming in from MIL’s closed accounts. There will be cheques in wife’s name that add up to around $40k. For logistical reasons this money is coming to her but she wants to disburse equal portions to her siblings who live in the US. I have no problems with this but I don’t want to run through our CAN bank accounts for obvious reasons. We want to continue to stay under the radar. Legally (at least in Canada) of course.
Can someone here advise or point me to someone who can? Please don’t tell me to comply with extraterritorial US rules because we ain’t doin’ it.
Thanks for your help.
This is not a huge problem. MIL s money goes to your wife’s account. Her bank doesn’t know her citizenship.
Your wife is the beneficiary so she doesn’t have to account for where it is disbursed. She gifts it to you and you gift it to her siblings. You can make a wire transfer to the States for about $30.You don’t have to file anything. Your wife doesn’t have to file anything and her siblings don’t have to file anything.
P.S. Your wife should become Canadian. It increases her options. A friend who came here at 6 weeks of age recently became Canadian at age 50. He has never filed in the US and doesn’t intend to.
Thanks dod. The only issue I have is the $10000 FBAR rule. Although we are not complying, are you sure the bank won’t rat us out?
@Bucky Brown
Welcome! I’m sorry I don’t have the knowledge to help you with your problem, but I have to say as someone who’s chosen to comply, it puts a smile on my face to hear people like you say they will not.
I don’t know what my life would be like today if I hadn’t, and don’t really care to know. I also don’t care to say whether those who have and haven’t complied are more fortunate than the other, because neither are in an enviable position. I hope you can find the answers you can live with.
Does the bank know your citizenship? FBAR is not a bank issue. FATCA can be. Under FATCA the bank reports to CRA who report to IRS. They are supposed to exempt any account under 50K although this rule lhas apparently been ignored. There are gazillions of these things coming in. The IRS has no extra resources. S ome local based credit unions do not report anything. Van city is one. Open a new account. Use a drivers licence for ID. Tell a fib about her citizenship. Use your imagination but laugh at authority.
van city does not ask citizenship nor place of birth when opening an account.
it took me a couple of days and a lot of educating my local assistant and branch managers but finally got them to understand just what “local client base” meant under fatca
most of my banking is done through van city for the past couple of years and never a problem
For what its worth here are my thoughts about your situation. (I’m no pro but I do have some familiarity with this in my personal life.) Your wife is dealing with the entirely Canadian estate of a Canadian citizen. As such it is absolutely no business of the IRS. Any tax due will be paid to the CRA by the estate before the the remainder is distributed to the beneficiaries. The executor(s) have a responsibility to properly file Canadian returns and pay all tax due before distribution occurs.
The fact that some of the beneficiaries are US citizens isn’t relevant because on both sides of the border the estate first pays the tax then the heirs receive their inheritance tax free. (The only exception to this no tax owed by the heirs rule that I know of would be if the deceased were a US covered expat, obviously not the case here.)
I’m not sure why you are concerned about running the money through your Canadian accounts but one way around that would be for the estate to open its own checking account with the executor(s) having signing authority. It sounds as if there are several executors; perhaps one with no US taint could do the cheque signing just for extra peace of mind? I’m with you 100 on non-compliance with US extra-territorial tax bulls—t, but in this case there really are no US rules to run afoul of. A US citizen resident in the US can inherit tax-free from a long lost relative anywhere in the world with no IRS issues or even a reporting requirement that I know of. (Except for the covered expat scenario that I mentioned above.)
P.S: Your wife would be wise to apply for Canadian citizenship ASAP just as an added measure of protection and insulation from the bully to the South. Who knows how this situation will develop in the long run but getting Canadian citizenship can’t possibly hurt. (And also is an opportunity to relinquish US citizenship if she so desires.)
@Buckybrown If your wife was born from a Canadian mother on US soil, she is automatically a CANADIAN from birth. My wife was in the same situation and we never knew. My wife has her Canadian citizenship proof from her birth date. Your wife only has to apply for proof of Citizenship. She can tear up and throw away her PR card, it is useless.
@Buckybrown With the proof of citizenship dated from my wife’s birth date, she has her Canadian passport as well. The passport office accepted the citizenship proof and the bank likely would as well. Our bank has never asked, but, if they do, they will be told my wife is Canadian with proof of that from her birth date. The USA can go to hell for trying to claim her as a taxpayer. Call Citizenship and Immigration Canada and explain your wife’s birth circumstances and who her mother is, you will see that she already has Canadian citizenship. All the best to you my friend…
“A criminal points a gun at you and demands your money.”
Allow me to bring your story back on topic for this blog.
A criminal points a Notice of Federal Tax Lien at you and demands your money.
“You don’t have any idea of what will most likely happen? If you have been in such a situation, you know your thoughts are in the past (Why did I take this route instead of my usual?)”
Yeah, like Why didn’t I renounce earlier when maybe I should have had a clue about what was coming? Why did I take my usual route when all routes should lead to renunciation?
“and the future (Will I see my family again?)”
Will I see my money again? No, not when courts favour embezzlers and punish victims.
“not the present.”
And how many presents did you get for trick or treat? Only tricks? Oh well. They’re up to their usual tricks.
“Permanent resident, not CAN Citizen. Has worked in Canada never in US. Has US Passport because she was told she had to have one to cross border.”
Unless Canadian law has changed while I’ve been away, she has a bigger reason for having a US passport. To live in Canada as a permanent resident without Canadian citizenship or ministerial permit, she has to have a passport from a country other than Canada.
“Me, Husband, […], free of AmeriTaint.”
You have no joint accounts with her? Neither of you can sign for the other on financial transactions?
“Wife’s Mom recently passed away (CAN Citizen).”
As Native Canadian suggested, maybe your wife should apply immediately to have Canadian citizenship recognized retroactively to her birth. (Or did her mother acquire Canadian citizenship after giving birth to your wife?)
That doesn’t eliminate the Ameritaint, though it makes future elimination easier.
“she wants to disburse equal portions to her siblings who live in the US […] Please don’t tell me to comply with extraterritorial US rules”
My feeling was that with that combination, she’d better stop being executor. After reading maz57’s explanation, I partly agree with maz57, but not completely. The IRS might have power to seize money transferred from an FBAR violator before the money reaches the siblings.
Bucky Brown. Forget about Norman D’s ‘advice’. How in hell can US seize money from an ‘FBAR violator’ when they a) don’t know who she is and b) she lives in Canada. Give me a break.
“A criminal points a gun at you and demands your money.”
Allow me to bring your story back on topic for this blog.
A criminal points a Notice of Federal Tax Lien at you and demands your money.
“You don’t have any idea of what will most likely happen? If you have been in such a situation, you know your thoughts are in the past (Why did I take this route instead of my usual?)”
Yeah, like Why didn’t I renounce earlier when maybe I should have had a clue about what was coming? Why did I take my usual route when all routes should lead to renunciation?
“and the future (Will I see my family again?)”
Will I see my money again? No, not when courts favour embezzlers and punish victims.
My point exactly.
I fear we can’t see the woods for the trees.
“How in hell can US seize money from an ‘FBAR violator’ when they a) don’t know who she is and b) she lives in Canada.”
Because they do know who she is and she’s going to be sending wire transfers to her siblings in the US.
How is it, in this day and age that there remain people who think they are not known or at least can not be known to anyone, especially a gov. agency? Are they not aware that the IRS monitors social media to see if those they suspect of whatever tax crime are posting things that may help the IRS collect? Do they believe that no one from the IRS takes a look here, from time to time?
For the woman involved here, she has a US passport. The IRS either knows of her or will very shortly when/if she renews it.
Thanks for all of the responses.
She is not “automatically” entitled to be a CAN Citizen thru her mother. We have tried. When she applied they wanted documentation on her father, which no one has or could seem to find. So we gave up.
Yes I do have some “AmeriTaint as we have a joint account, so that is an issue. Since I can’t say for sure if the bank knows if she is a US citizen or not, I was just worried about FBAR rules as I thought all accounts over 10k were reportable to the IRS. If the upset limit is $50k we have no worries.
Thanks for the advice about a local CU. I had thought of that after asking my questions and will look into that.
PS- I did speak to my wife and her brother who also lives in Canada and is a US Citizen and we are leaning toward “getting right” with the IRS. Her brother claims to have filed US TAXES the last 3 tax years and says he has yet to hear anything (which to me is weird). Don’t they send out some kind of Notice of Assessment?
I’m really torn on this.
“Don’t they send out some kind of Notice of Assessment?”
The IRS word for that is transcripts. Each taxpayer should file two Forms 4506-T every year, to get two transcripts.
File one to get proof that the return was filed.
File one to get a transcript of US withholding (from Forms 1099, 1042-S, W-2, etc.).
https://www.irs.gov/uac/about-form-4506t
https://www.irs.gov/pub/irs-pdf/f4506t.pdf
The US’s use of the the word “assessment” is different from Canada’s use. Don’t use that word with the IRS unless you have legal problems with them. The US’s word “transcript” is what you want.
Norman-
Her brother has filed for the last three tax years and claims to have received nothing. He filed thru a US tax specialist in Canada and hasn’t even received any type of acknowledgement his forms were even received by the IRS. Are you telling me you have to file an additional form to get an acknowledgment that they receive your tax submission? That’s ridiculous!
Bucky. It isn’t FBAR, it’s the FATCA IGA that obligates Canadian banks to report to the US . If your bank doesn’t know your wife’s citizenship, THERE IS NO PROBLEM. Ask your bank to show you your file. It is your right. You don’t need to say why.
Your BIL may never hear a word. They only communicate when there is an issue. The letters are generated my computers. A very few minnows get a query and only if the return doesn’t match the slips. There are no slips from Canada so they have nothing to go on. The only people who get a real audit are suspected crooks like the Donald
If for some unfathonable reason your wife decides to jump into the net, the easiest way is to simply start filing from now on. She shouldn’t go back.
@Buckybrown I am sorry to tell you whoever told you your wife is not automatically Canadian is WRONG. I will tell you that my wife IS a Canadian based on those facts. Her mother is Canadian and she has Canadian citizenship since birth. You need to check again. My brother in law just got his Canadian citizenship proof 1 year ago. We had to provide my mother in law’s long form birth certificate and that was all from her mother and father’s side. Please read here as there have been recent amendments to the Citizenship act that will affect your wife….http://www.cic.gc.ca/english/information/applications/guides/CIT0001ETOC.asp
“That’s ridiculous!”
That sums up the whole issue.
May your family find your way clear.
Is your child already a citizen?
In general, a child born to a Canadian parent outside Canada before April 17, 2009, is a Canadian citizen. However, a child born to a Canadian parent outside Canada on or after April 17, 2009, is a Canadian citizen at birth only if that child is born in the first generation outside Canada, that is, at the time of their birth, their Canadian parent:
was born in Canada, or
became a Canadian citizen by immigrating to Canada (becoming a permanent resident) and being granted citizenship (also known as naturalization).
If your child is a Canadian citizen, use the Application for a Citizenship Certificate under section 3 (CIT 0001). This clearly says “parent” not Parents. Sounds like you got someone who is out to luch at Citizenship Canada. Try again and give them this link. Hopefully you get someone educated this time. All the best to you!
@Bucky “Since I can’t say for sure if the bank knows if she is a US citizen or not…”
You can easily find out what your bank has on record about your wife’s citizenship without arousing suspicion. You and your wife should ask your bank to provide a copy of the AML/KYC file for all your (and your wife’s) accounts. AML_KYC stands for Anti Money Laundering-Know Your Client. If the bank asks why you want it, tell them you want to make sure all the personal information in the file is correct.
The AML-KYC file has a whole array of all your personal information that the bank collects to meet government regulations. What the bank has on record about citizenship will be in that file, amid everything else.
dod says, “Ask your bank to show you your file.” AML-KYC is the specific file (per account) you want.
@Bucky Brown
I was also born in the US of a Canadian mother, non-Canadian father. A few years back I applied for an updated Canadian citizenship certificate to show that I was born a Canadian. I recall sending in a bunch of documentation re my mother, but nothing re my father other than a (certified) copy of their marriage certificate. I did have to fill in some very basic info on my father re nationality, etc; but I provided no supporting documentation IIRC.
If your wife’s mother was a Canadian citizen at the time of birth of your wife, then your wife is a Canadian citizen from birth. Your wife should be able to obtain a citizenship certificate by providing only supporting documentation for her mother. FWIW, prior to a change in law some years back, Canadian citizenship could only be transmitted by the father. Another later change in law (2009, I believe), recognizes derived citizenship as being from birth; so the citizenship certificate will list “effective date of citizenship” as being date of birth. This could make a difference if/when renouncing US citizenship (net worth and tax liability tests don’t apply)
Go to your MP for help if you feel the need. That’s what I did and his office was happy to help. They even certified the copies of documents for free and wrote a letter of support for my application.