Update from BB / Bubblebustin
Those in Canada who are potentially affected by the Transition/Repatriation Tax (or not but care about Canada’s sovereignty) need to contact their government representatives and Ministers. As suggested by our MP’s office, start with:
Your Member of Parliament, and
Minister of Foreign Affairs,
chrystia.freeland@parl.gc.ca,
chrystia.freeland@international.gc.ca
House of Commons
Ottawa, Ontario
K1A 0A6
Telephone: 613-992-5234
Fax: 613-996-9607
Minister of International Trade of Canada
Francois-Philippe.Champagne@parl.gc.ca
House of Commons
Ottawa, Ontario
K1A 0A6
Telephone: 613-995-4895
Fax: 613-996-6883
Minister of National Revenue
Diane.Lebouthillier@parl.gc.ca
House of Commons
Ottawa, Ontario
K1A 0A6
Minister of Finance
bill.morneau@canada.ca
The Honourable William Francis Morneau
Department of Finance Canada
90 Elgin Street
Ottawa, Ontario K1A 0G5
House of Commons
Parliament Buildings
Ottawa, Ontario K1A 0A6
Send a message to the Minister
Daniel Lauzon was quoted in the CBCNational News segment.
Daniel Lauzon works as Dir. Communications for Finance Canada.
Daniel can be reached at 613-369-5696
Should you PM me or post here with the efforts you’ve made, I would like to take them to the reporters with the CBC covering this story in developing the government action (or inaction) side of the story. The press needs to know how Canadians are getting treated by our government and maybe the additional coverage will cause the government to take action.
UPDATE: Here is a direct link to the segment.
Trump’s tax reform affects Canadian residents The National
This aired on Monday, April 30. CBC News – The National Interview with Evan Dyer
@portland
In that case why is the bank information of Americans abroard being gathered, to what purpose?.
As far as we know yet….
How do we know what will transpire.
I would be cautious of stating, ‘nothing to fear’ for those who chose to remain in the US tax system.
“…why is the bank information of Americans abroard being gathered”
The IRS has explained that they’re using FATCA information to build a database in order to track USCs’ contributions to their non-US retirement plans, as the retirement savings are often the USC’s biggest asset.
I think that would be the FATCA form that gets filed by the USC though, not the information reported by the bank.
@plaxy and Portland
Gains on property in places such as London, Paris, Vancouver etc are ripe for the picking too.
Of course.
Personally I agree with you that trying to conceal the sale might not succeed. I would love to see a USC just not report the sale as US-taxable, and put the ball in the IRS’s court as to whether they would risk pursuing it, thus allowing the USC the opportunity to sue his/her government over their complicity. But it’s understandable, to say the least, that people aren’t queuing up to stick their neck out.
As far as I’m aware, FATCA still only reports year-end balances. So if you sell your little bungalow in Vancouver, just be sure to dispose of the $10 million lump before New Year’s Eve and the IRS ain’t never gonna know.
@Nononymous
That’s the contradiction. FATCA asks US citizens to report the max amount on their account during the year, but Banks are asked to report year ending balance, why not the same demand?
@heidi
Indeed. It’s silly. So use it to your advantage!
We are talking about the IRS here! They have their budget cut every year. Their computers are so old they are rusty. They handed out billions in phony refunds. They are owed billions by US residents, privatized collection and it cost more than they collected. They have the most complex rules in the world to deal with and it gets worse every year. Obamacare added a few yrs ago, Trump tax cuts this year- no increase in resources. Don’t tell me they can compare the year end balance of Joe Smith in Elbonia from one year to the next. I won’t believe it til I see it.
But a $3,000,000 deposit in a Fatca reported bank account from the sale of that bungalow in Elbonia or flat in Camden town may ring an electronic bell and arouse their curiosity enough to do a comparison.
I wouldn’t like to test it out.
@heidi
” FATCA asks US citizens to report the max amount on their account during the year, but Banks are asked to report year ending balance, why not the same demand?”
Because the US government is stupid. If you want some evidence to back up that assertion, no need to look any further than their President. Nononymous has the right idea.
@Maz57
Agree the stupid part, but it may have more to do with the Banks negotiating doing only a year end report, it’s much simpler to write the program for a one day scan than to troll through all US account for the whole year.
At the very cordial request of Chrystia Freeland’s constituency office, when addressing email to Chrystia Freeland as Minister of Foreign Affairs it is better to use the following email address: chrystia.freeland@international.gc.ca.
Perhaps the post could be edited with that information.
@MNM
That interesting because our MP gave us the email I posted. Thanks.
Trish, would you mind posting the correct one?
Congressman Posey’s office told me that the National Taxpayers Union will take up the #TransitionTax issue. We need to express urgency. Contact Nan Swift at nswift@ntu.org.
Amidst all this theoretical discussion about the wisdom and consequences of not reporting a house sale for capital gains tax, here’s a real one: a friend of mine is currently stuck in a real-life dilemma of exactly this circumstance. He’s come to me for advice and I don’t know what to give.
He, like me, has been stupidly, honestly compliant with US tax reporting for over 20 years. He and his US citizen wife make a modest living through non-US companies, have never owed a penny in US taxes or social security tax. They do their own forms, and spend a full three days each year to prepare them (while the forms of the place they live take around 30 minutes).
In 2017 they decided to sell their one investment property in the same town they live to buy a retirement villa in Spain. Now, ex post facto, they are scared out of their minds about what to do. There is no capital gains tax where they live. The CGT to the US would more than wipe them out financially.
Of course the sales funds went into their local-country account, and was then transferred to their Spain account prior to the purchase of the new property. The clincher is: their newly-opened bank account in Spain is duly FATCA reported by the bank. Their local-country account is not (they were never listed as US citizens when they opened it 20 years ago). Yet out of misguided fear, they have been reporting that local account on their FBARs.
In their situation, they could get away (probably) with a lying FBAR on their local account, never reporting the sales proceed amount, since there’s no FATCA report to compare it to. That’s my hesitant advice to them.
The questions I can’t answer:
1) Report the maximum balance of the Spain account on the FBAR? If the Spanish bank is only reporting year-end balance, in their case it would be around $1200 rather than the $350,000 that was there for about one week mid-year.
2) Don’t report the sale to the IRS? Just report their normal income, and not raise any red flags? Or use this opportunity to stop reporting forever, and drop off the radar? In 3 or 4 years when they retire to Spain, the IRS won’t even know their address.
With the June 15 filing deadline nearing, he looks more haggard every day. I suggested perhaps filing for an extension until October 15, to take some pressure off, but he fears that such an extension request in of itself is a red flag, after 20+ years of never doing so.
There seems to be two factions here at IBS:
1) The “don’t worry be happy” faction that says the IRS has neither the motivation nor the resources to pursue small fish expats, so quit worrying so much;
2) The “doom and gloom to all those who’ve been compliant, who after all dug their own graves” faction, who start talking about possible red flags and putting two and two together over temporary windfall balances on FATCA/FBAR reports.
Anyone want to chime in? I have selfish motives in asking, since the same question looms for me in the near future.
Depends on where they live, do they have US assets or income and is the husband a USCitizen as well as his wife. Also do they have close ties such as children living in the US. If the CGT were to wipe me out, I know what I would do. I wouldn’t plan to live the rest of my life in penury.
OTOH the long term capital gains rate is 15%. Difficult to see how this would more than wipe them out.
‘The same question looms for me’
Can you transfer your property to a nonUS spouse? If so do it sooner rather than later. There are lots of possibilities.
@Portland: Both US citizens. Unsure whether they have US assets, but I doubt it. From what I know of their situation, their property cost them around $75,000 many, many moons ago, and they sold for around $350,000. Long term capital gain tax would be $41,250, which approximates a full year’s pre-tax income for one of them, and also exceeds their total savings. Plus they have no pension to speak of. They no longer receive rental income, having sold the property, and my understanding is they’re not yet receiving rental income for the Spain property, since it was bought off-plan is isn’t completed. So on top of everything else, this whole transaction has caused a temporary hit to their income. US capital gains tax would be a huge punch while they’re down. All together, that’s quite a wipeout, in my opinion.
I neither endorse nor not-endorse but this article is well written:
https://www.goldinglawyers.com/should-i-close-my-foreign-bank-account-or-respond-to-a-fatca-letter/
It seems it would not be a good idea to close the account in Spain. Let the account remain open and hope that only its year-end balance will be reported.
Are they eligible for Spanish citizenship by ancestry? If so, maybe get it now.
Make an appointment for relinquishment, and report that after opening the account in Spain but before selling the house they committed treason with intention to relinquish US citizenship, maybe by buying some oil that came from Iran.
If they have any assets in a country that has a collection assistance treaty with the US, move those assets now.
I envy someone who only needed 3 full days to do a US tax return. I used to need around 20 full days.
@Portland: I’ve already moaned at length about my own situation on other threads. Hubby and I are both US citizens, no chance of transferring a single cup or saucer to a non-US entity. No chance of taking on local citizenship, so we are US only. Hence our hesitation to take any big steps for going on three years since the OMG moment.
‘He and his wife make a modest living-they never owed a penny’
If their tax rate was 15% or less, they would owe no cpital gains tax. My source is Wikipedia-I’m certainly not a tax accountant. Just a thought.
If the rules for capital gains tax haven’t changed this year, they can estimate by calculating their hypothetical tax for 2017 using information they had for 2017 and pretending they sold the house in 2017.
@ Portland:
Say what? Never heard of this. Wish you had a specific source. They never owed US tax because of 2555 exclusions. Hence a net US tax rate of 0%. But capital gains is not excludable. And where they live, capital gains is not taxed, so no foreign tax credit possible. No Spanish or Sephardic Jewish ancestry with which to claim Spanish citizenship. They did sell the property and opened the Spanish account in 2017. Which is why D-Day is fast approaching to decide what to do.
@Barbara
If the IRS doesn’t know the initial cost of the house, how would they know there was a capital gain on the sale? Let IRS think if it is worth their time to ask where the money came from.