Are you a Canadian citizen and resident and have you renounced U.S. citizenship and have paid or are subject to the U.S. Exit Tax (IRS 877A)? [No, I do not mean the $2350 fee.]
If so, we ask you to consider being a Witness in our Canadian FATCA IGA lawsuit.
You might have renounced U.S, citizenship but own, for example, a now valuable house (i.e., Canadian-made IRS asset eagerly waiting to be confiscated) in Toronto/Vancouver/London etc. and have (because interest rates are now very low) a very valuable IRS-asset-company pension (IRS wants percentage of cashed out total value of your CANADIAN pension)— and had/have to pay a U.S. exit tax.
From the Toronto Star: “In a sign that Toronto’s real estate market is off to a hot start this year, a home on Palmerston Ave. north of Bloor St. near Bathurst St., has sold for 62 per cent more than the sellers paid two years ago. The three-bedroom semi went for $1.375 million on Tuesday. In December 2014, it sold for a mere $851,750 — $523,250 less.
— The value in U.S. dollars of your CANADIAN house, plus CANADIAN company pension, plus a few CANADIAN investments, might put you into “covered” territory where you, a CANADIAN, will be be punished for your success.
Information on the exit tax and examples of the exit tax can be found at the citizenshipsolutions.ca site.
We are specifically seeking as a possible Witness in our Canadian FATCA IGA lawsuit a person who:
— Has renounced and has paid an exit tax (the ideal witness);
— Has renounced and will be subject to exit tax;
— Is intending to renounce and know that they will have to pay exit tax; and
— Cannot afford to renounce because they have no way of paying the exit tax
If interested, and perhaps a little bit feisty like our Plaintiffs and Witnesses, email me at: Stephen.Kish.Chair@adcs-adsc.ca Your name and situation will be made public in a submission to the Federal Court of Canada.
@Bubblebustin
I can move my daily banking to a credit union has opted out for FATCA, and have no good excuse for not doing so other than inertia and inconvenience. With investments, however, it’s more difficult. Credit unions themselves rarely offer anything more sophisticated than a savings account with a very low interest rate. Even for RRSPs and other tax-protected vehicles exempt from reporting under the IGA, credit union customers wishing to invest in mutual funds or whatever need to deal with partner firms that are, alas, FATCA-compliant. Even VanCity, which entirely admirably makes a selling point of its having opted out of FATCA, handles basic investments of this type through a subsidiary firm that does follow the FATCA rules. So, to make a long story short, it’s not easy to avoid lying to your bank.
There are those who would hesitate to renounce/relinquish because they can’t afford to pay the exit tax.
“Cannot afford to renounce because they have no way of paying the exit tax “
@Bubblebustin @Nononymous
Credit unions which do not report on Canadian resident US persons are a great resource. However,
associated investment entities all seem to be FATCA compliant. I would have to agree that lying to one’s financial institution is sometimes necessary if one could be considered a US person.
@PatCanadian
Renunciation is a separate process from tax compliance. You can renounce, and obtain your CLN to wave at any banks who object to your birthplace, without ever filing a single tax form. The IRS will have your name and address, and possibly be a little offended, but there’s no evidence I’m aware of that they can or will do anything about it. (If continued access to the US is a consideration this might not be a smart course of action.)
So we are entitled to those higher yielding investments private banks offer, so much so that we are justified in lying to them in order to personally gain from them.
@Nononymous
True, one can renounce without tax compliance and have more freedom in Canada, for example. I filed because I didn’t owe tax and have very elderly relatives living in the US who can’t travel anymore. Travelling to the US is more risky if one hasn’t been tax compliant. If one doesn’t need to travel there, so much the better.
“So we are entitled to those higher yielding investments private banks offer, so much so that we are justified in lying to them in order to personally gain from them.”
No, the point is ALL investment entities appear to be FATCA compliant. So whether one goes to Vancity or to TD or RBC, they will ask for your US person status when it comes to dealing with the associated investment firm. For example Credential, which is associated with Vancity, is totally FATCA compliant.
@PatCanadian
Access to the US changes the calculation entirely. I don’t need it, so I can risk losing it – I’m fine with that. If you are not a citizen, access is a privilege not a right. If you are a citizen who chooses not to fulfill the obligations of citizenship (however stupid you think they might be) then you accept the possibility of future grief. No huge deal, for me.
@Bubblebustin
The way I see it is, lying is a price I’m willing to pay for slightly better ROI – it has nothing to do with entitlement. Sure it would be nice if I didn’t need to lie, but as I’ve said, I don’t find the price of lying to be very high. Or you can look at this as civil disobedience of a sort, since you’re also messing with the banks and making them assume risk.
@Patricia Moon
>actually NOBODY is subject to the Exit Tax unless they relinquish/renounce.
Not true. One reason I became a US citizen was that I was a long term green card holder. The US could just at any time kick me out of the US and force the exit tax on me. They essentially renounce the citizenship forcefully that you never had.
After all, we have the example of our Canadian Prime Minister on following the rules, being transparent and not honouring Liberal statements, including the boast *A Canadian is A Canadian is A Canadian*, we took as promises before helping vote the Conservatives out of leading this country:
http://www.ctvnews.ca/video?clipId=1036899
More — from Phil Hodgen re the US Exit Tax: https://hodgen.com/planning-for-expatriation-in-2016/, etc.
Payment of said exit tax bill is still voluntary for as long as Canada does not assist with collections.
@Calgary411
Thanks for the Phil Hodgen info on US Exit tax.
“If at all humanly possible, you should avoid being a covered expatriate.” This says it all in a nutshell. And let us hope it continues that Canada does not assist with collections on this or any other USA IRS tax.
@Nononymous,
…and also providing the renunciant or ex-green card holder does not have investments such as a 401k or IRA that remain ‘trapped’ in the US, no claim to US social security payments, and so on.
Indeed. I make the assumption that any dual citizen in Canada will only be untouchable they have no financial ties to the US – no assets, income, pension, property, expectation of inheritance, or whatever – nor compelling personal reasons to visit regularly. If you do, well, your life becomes more complex, and the decisions you make are different. I still think the classic “accidental” with no ties to the US can safely ignore this without fear of consequence. The only injustice is possibly feeling required to lie to your bank, but apparently that was not difficult for me to do – came rather easily.
@Neill
You wouldn’t face the Exit Tax before leaving, regardless of the cause.
Why would you worry about such a thing? I am not aware of any big move to get rid of permanent residents.
@Nononymous
Yes that’s the thing: all those variables. We are not all in the same boat, which is why the law suit is for all of us, despite our variances.
Which is why we are now seeking a witness who fits the criteria Dr. Kish outlined.
And for the last time ( hopefully) we three plaintiffs do not consider ourselves brave. What we are is defiant and determined. We know we can do this and we strongly believe in the merits of our law suit.
If you have met any of us or were to someday, you would note than commonality. Of the three of us, you have heard most from me lately, which may not necessarily be a good thing, but here I am. The other two are just as feisty, but busier as they aren’t retired like me. I don’t know how they do it actually. There’s a lot of behind the scene work that goes on as you can imagine, and they don’t have the same luxury of time as I do. If I were to use tha tB word however, I guess I would have to apply it to our husbands who have supported us throughout this. Mine often teases me that I have lost my mind or a few brain cells in my old age. I wouldn’t have it any other way. I am grateful for the support of many, but none more than his. ( Sorry for the personal verbiage, just need to say that.)
I don’t disagree with any of the points you have made, btw. You are in a fortunate position as many of us are compared to others. My theory is: we do this for all, not just ourselves. I could have remained a little more hidden based on similar attributes to you and others. In another life, I might have but I just have the particular kind of personality that compels me to do this or else I wouldn’t be able to live with myself. And I sincerely hope there is another witness that is very much needed who feels the same.
Can I get a witness, as the song goes?
@Patricia Moon
>You wouldn’t face the Exit Tax before leaving, regardless of the cause.
They make you leave. They can take the green card from you and make you leave and trigger the exit tax.
You telling me that having a big price tag on you that the USG can see wouldn’t make you worried that the exercise it to get the money?
I don’t trust them.
This is not the only reason we became citizens. We have the unlimited maritable deduction and of course the right to vote.
One they legislate you can’t leave without a massive tax you decide to avoid the possibility.
@Neill
I am not trying to tell you anything-you are misunderstanding me.
I am merely being technical. The Exit Tax does not come into play unless you leave.
As to understanding the rest of what you say, I can certainly understand now that you have explained. I don’t trust them either.I guess we are just opposite ends of the pole. You couldn’t pay me any amount of money to have remained a US citizen.
Question – what brought those worries on for you? Were they doing this to people?
@Patricia Moon,
They attacked me with FBAR, PFIC, 3520 and a bunch of other stuff. Up until this point I just assumed the IRS/USG wanted their tax money. I didn’t expect them to mount a campaign of special penalties to just take the principle.
I can’t leave. I would be subject to the exit tax. So I have to stay paying into the IRS until I am old and might have managed to spend an amount of money that would drop me bellow the limits. It’s not clear to me I will ever spend enough.
Having said that I was quite happy in the US. I have American kids. I felt everything was great until Obama attacked me then it really burned to find out Schummer passed legislation long ago to force me to stay here.
Though I’ve never had the problem of having too much, I can empathize with Niell’s thought train. We have all worked hard and honestly for what we have, be it little or much, and they have no right to take what is rightly ours without cause.
We all talk about “The Wall Obama Built”, well I believe the wall has a particular property in that you don’t see it until you have reached the other side. Also, it is described as keeping Americans (let’s say US persons) in, but in most of our cases, it is actually keeping us out, the exception being those forced to return (or have taken that option) and people like Niell.
Anti-immigration attitudes in the US is not a recent phenomenon, and all it takes is just one trumped up (no pun) charge (not that that could happen in the US, no way) to have one’s green card revoked.
His fears are ours: forced to leave where one is residing (usually called “home”), and have everything taken away. The only difference is the direction he passed through the wall before noticing it in his rearview mirror.
By charges I meant things like:
Jaywalking with intent to commit a terrorist act (10 to 20 + deportation)
Littering with intent to commit a terrorist act (20 to 30 with hard work + deportation)
Congratulating your grandmother in a foreign country over the phone with intent to commit a terrorist act (30 to life with hard torture + deportation)
@Neill
If I left Canada and wished to become non-resident, I would need to pay an exit tax on unrealized capital gains. (In fact I did this when we moved away for a few years right at the time when some stock options vested.) Similarly, as a Canadian tax resident I need to report foreign investment income and, for all I know, probably some sort of foreign account details.
It’s still a much better deal than the US – once non-resident I would have no further tax or reporting obligations. But the point is, reporting foreign assets to the country where you live and work, and paying an exit tax if you leave, is not unique to the US. Nor does it strike me as being particularly unfair.
What is unique and shitty is the scenario whereby the US wants a big chunk of an “accidental” dual citizen’s money when they have no connection to the country, either through voluntary payment if they are excessively law-abiding, or an exit tax if they renounce and decide to become fully compliant. However, I suspect that it’s a very small number of people who are both in this situation and willing to actually write the cheque, given that the US cannot easily collect beyond their own borders (Swiss bank arm-twisting doesn’t count). Boris Johnson is the only public example I know of.
@Nononymous
The part of the US ‘exit tax’ that taxes unrealised capital gains can be awkward to manage, but overall it’s at least something for which there is precedent, and it somewhat mirrors what Canada does. There are however two other parts to the US exit tax, and these are the worst bits.
The first is that it immediately taxes all your retirement savings as if distributed the day you leave. So all in a single year, then, putting you into an extreme tax bracket and with perhaps no access to the money inside the retirement savings plans to pay this tax. Moreover, this tax is treaty-breaking, so may well represent real double-taxation. Neill will have decent retirement savings plans, and won’t want to lose a massive chunk of these for, essentially, nothing.
The second is that it taxes gifts and bequests from covered expats to US citizens/residents at the highest estate tax rate in effect, so 40% of everything. Neill’s children are US citizens, so unless the entire family renounces as a unit there is further risk here. His children may currently be too young to be allowed to renounce.
As you see, then, the devil is very much in the detail. These latter two things have no analog in the Canadian exit tax. So… the US is not the only country to have an exit tax, but the exit tax it does have is one of the worst. And very likely the actual worst.
The fact that it also applies to accidental Americans is indeed shitty. But as the above indicates, that shittiness is not reserved purely for accidentals.
@Watcher
It doesn’t surprise me that the US version of the exit tax is extra-special-shitty in unique ways. But at the end of the day, if you move to live and work in the US, with or without taking citizenship, those are the rules you have agreed to play by (perhaps unwittingly, but caveat emptor).
I still maintain that the shittiness imposed on accidentals lies somewhere between inconsequential and nonexistent, simply because payment any payments made are voluntary. Stay off the radar, or buy a CLN without becoming compliant, but don’t pay a big fat tax bill unless you feel compelled by anxiety or misguided honesty.