128 thoughts on “Ending U.S. Citizenship-Based Taxation”
“CBT is enforceable against people who only have a US passport.”
‘Americans living outside the US can’t be forced to pay US top/up taxation on their non-US income/assets.’
Maybe. I think you remember CRA collecting for the IRS though that was US penalizing Dewees’s form filing not taxation on income/assets. People who only have a US passport also have to worry about it being revoked — maybe without even being informed about the revocation, though the biggest example was the location where Fischer played chess not taxation on income/assets.
“the FATCA IGAs did not bring US tax problems or a need to lie.”
I think we’ve figured out that Canadians have to lie to their banks, the same as the Qualified Intermediary system made it necessary for me to lie to TD Waterhouse but unfortunately I didn’t know that at the time.
ND: “I think you remember CRA collecting for the IRS though that was US penalizing Dewees’s form filing not taxation on income/assets.”
I think you remember Dewees volunteered for US taxation, including an obligation to allow his Canadian corporation to be taxed by the US as an American corporation, and an obligation to file yearly US tax forms reporting the corporation’s earnings to the IRS.
“I think we’ve figured out that Canadians have to lie to their banks, ”
No – If they don’t want their US citizenship they can relinquish it, self/documenting their relinquishment of their US citizenship.
I note with interest that the government of Canada in 2014 claimed responsibility for first suggesting to the US government that FATCA could be implemented extraterritorially by hanging it on the exchange of information article in the tax treaty.
“The Government is pleased that the U.S. accepted this principle, which led to the development of the IGA approach and its application worldwide as an alternative to FATCA. This approach fulfills the U.S. objective of enhanced information collection, without entailing the risk that a unilateral U.S. approach could conflict with foreign laws.”
Yes, because this approach requires that any foreign law that conflicts with US objectives of enhanced information collection must be bypassed or overridden.
Yet Canada seems to be the only IGA1 country where it’s reportedly easy for a US-born individual to certify as non-US without showing a CLN?
They are right though. International law trumps national law, except in the US. Keep the international law non-reciprocal and ditch the withholding penalty, and no bank or US-born individual has any road to redress. 🙁
Let’s hope that eventually that state of affairs will be overturned, and rights restored.
@Jules
“Young people will avoid the traps their parents fell into and get in line with compliance from the start or will renounce.”
I would define “get in line with compliance” as the biggest trap one should not fall into.
Young people may also: (i) remain completely ignorant of the situation and suffer no consequences, if they have a non-US birthplace or live in countries like Canada where self-certification (i.e. saying “no”) is possible with banks; (ii) learn that non-compliance is perfectly easy and safe, under the same conditions as (i) above.
I would expect the vast majority of younger dual-citizen Canadians will go forward through life following one of those two approaches, and will neither become compliant nor renounce.
@ND
You don’t *have to* lie to your bank. You can check “yes” on the US citizen box and nothing will change in terms of your access to banking services, the financial products you can buy, etc. This unlike many countries that do not want US citizens as customers.
Of course if you check “yes” you might have some bank info sent to the IRS, though all the tax-protected accounts like RRSP, RESP, RDSP, TFSA etc. are excluded from FATCA reporting under the terms of the IGA. That doesn’t mean you need to worry about tax compliance if you have Canadian citizenship, and don’t do anything stupid like talk to Moodys.
Still easier to check “no” and avoid the silliness, however.
Does anyone know when this is going to be voted on?
Supposed to be in early September sometime. Will be interesting to see who votes against it.
They will be too busy running for office. Nothing happens after labour day. I will be quite pleased if I’m proven wrong.
‘You don’t *have to* lie to your bank. You can check “yes” on the US citizen box and nothing will change in terms of your access to banking services, the financial products you can buy, etc.’
If you check “yes” and if your banking services or financial products produce income such as interest or dividends then the payer will deduct US withholding for which you have to file a US return to get a refund. Filing an honest US return will bring penalties from the IRS. You have to figure out what lies to tell to the IRS and you still might not get your refund. To avoid this problem, you do have to lie to your bank and check “no”.
A canadian bank doesn’t deduct US withholding tax on interest or dividends earned in Canada. doesn’t matter which citizenship box you check. The withholding rates on US investments are different depending on whether you file a W8 or W9.
For god’s sake Norman, enough with the withholding nonsense. Whatever weird-ass thing apparently happened to you 20 years ago has never happened to anyone else. There is no US withholding on Canadian income, period. It’s not part of FATCA. Give it a rest.
ND:
“If you check “yes” and if your banking services or financial products produce income such as interest or dividends then the payer will deduct US withholding for which you have to file a US return to get a refund. ”
Eh?
You seem to be talking about lying about US citizenship in order to pay less US tax on US-source income?
The solution would seem to be, if you are a US citizen living outside the US and you want to invest in the US and pay the treaty rate on the interest/dividends, relinquish your US citizenship. Then you don’t have to file for a refund, and don’t have to lie.
“Filing an honest US return will bring penalties from the IRS. You have to figure out what lies to tell to the IRS and you still might not get your refund. To avoid this problem, you do have to lie to your bank and check “no”. ”
Yes, a USC would have to commit perjury to claim the treaty rate on US-source income, since a USC can’t claim the treaty rate. Much better to relinquish the US citizenship or ditch the US investments.
No, I think ND is saying that if you acknowledge US citizenship to a *Canadian* bank, they will deduct US withholding on any Canadian interest or dividend income. This is of course complete nonsense.
“complete nonsense.”
Indeed.
Utter bollocks, even.
Personally I can skim over the silliness, but it does bother me that someone coming here for advice would read that and think it to be true, and panic.
It’s certainly very confusing. It doesn’t really seem to have anything to do with FATCA or the Canadian IGA.
“If you check “yes” and if your banking services or financial products produce income such as interest or dividends then the payer will deduct US withholding for which you have to file a US return to get a refund. ”
‘Eh?
You seem to be talking about lying about US citizenship in order to pay less US tax on US-source income?’
At my level of income, filing US returns brought full refunds of US withholding in years when my US withholding was fully reported on Forms T-5 or 1042-S (in years when 1042-S was the wrong form to use because I was a US citizen — the IRS didn’t care that the payer used the wrong form). Filing US returns should have brought full refunds of US withholding in years when my US withholding was reported on Forms 1099, but didn’t because of Monica Hernandez and her colleagues.
If I had lied to tell TD Waterhouse “No” about US citizenship, US withholding would have been taken at the treaty rate from US sourced income but not from Canadian sourced income, and I still would have been able to claim US withholding on US returns. So, zero would still be zero. Also Monica Hernandez doesn’t seem to have been involved in embezzling from Forms T-5 or 1042-S.
‘The solution would seem to be, if you are a US citizen living outside the US and you want to invest in the US and pay the treaty rate on the interest/dividends, relinquish your US citizenship. Then you don’t have to file for a refund, and don’t have to lie.’
Well yeah my US tax has gone up after I renounced, because withholding is taken at the treaty rate and I’m no longer eligible for refunds. And yeah, I don’t have to file US returns for years after my renunciation. The only lying I still have to do to the IRS is when the IRS and/or US courts coerce me to lie on refiled returns for tax years when I was a US citizen. The only lying I have to do to US courts is to comply with an order from US District Court for the Central District of California and possibly in other cases to avoid contempt of court when courts told lies.
“Filing an honest US return will bring penalties from the IRS. You have to figure out what lies to tell to the IRS and you still might not get your refund. To avoid this problem, you do have to lie to your bank and check “no”. ”
‘Yes, a USC would have to commit perjury to claim the treaty rate on US-source income, since a USC can’t claim the treaty rate. Much better to relinquish the US citizenship or ditch the US investments.’
Filers of US returns have to commit perjury because of Internal Revenue Bulletin 2005-14. The IRS imposes penalties because honest declarations impede the administration of US taxes.
‘No, I think ND is saying that if you acknowledge US citizenship to a *Canadian* bank, they will deduct US withholding on any Canadian interest or dividend income. This is of course complete nonsense.’
Right, since we’ve discovered that TD stopped being a Canadian bank some time ago.
Aside from that, I still have the customer copies of Forms 1099 and T-5 that were issued to me by a TD Waterhouse branch that is located in Canada, showing US withholding from Canadian sourced income. The IRS let me see someone’s e-mail saying that the IRS lost the IRS’s copy of the Form 1099. Again no surprise, with Monica Hernandez and colleagues working on Forms 1099.
Honestly, ND, it’s gobbledygook to me. What has it got to do with FATCA?
Right, QI isn’t FATCA because QI existed before FATCA. Nonetheless a US citizen had better lie to their more-or-less-Canadian financial institution by saying that they’re not a US citizen, and also had better not make investments that produce US-sourced income.
“Right, QI isn’t FATCA because QI existed before FATCA. ”
Gobbledygook.
“a US citizen had better lie to their more-or-less-Canadian financial institution by saying that they’re not a US citizen,”
It’s not necessary to lie; relinquish the citizenship and FATCA goes away.
“… not make investments that produce US-sourced income.”
Certainly not, unless they understand how the US tax game works or can pay somebody who does.
and also had better not make investments that produce US-sourced income.
“CBT is enforceable against people who only have a US passport.”
‘Americans living outside the US can’t be forced to pay US top/up taxation on their non-US income/assets.’
Maybe. I think you remember CRA collecting for the IRS though that was US penalizing Dewees’s form filing not taxation on income/assets. People who only have a US passport also have to worry about it being revoked — maybe without even being informed about the revocation, though the biggest example was the location where Fischer played chess not taxation on income/assets.
“the FATCA IGAs did not bring US tax problems or a need to lie.”
I think we’ve figured out that Canadians have to lie to their banks, the same as the Qualified Intermediary system made it necessary for me to lie to TD Waterhouse but unfortunately I didn’t know that at the time.
ND: “I think you remember CRA collecting for the IRS though that was US penalizing Dewees’s form filing not taxation on income/assets.”
I think you remember Dewees volunteered for US taxation, including an obligation to allow his Canadian corporation to be taxed by the US as an American corporation, and an obligation to file yearly US tax forms reporting the corporation’s earnings to the IRS.
“I think we’ve figured out that Canadians have to lie to their banks, ”
No – If they don’t want their US citizenship they can relinquish it, self/documenting their relinquishment of their US citizenship.
I note with interest that the government of Canada in 2014 claimed responsibility for first suggesting to the US government that FATCA could be implemented extraterritorially by hanging it on the exchange of information article in the tax treaty.
“The Government is pleased that the U.S. accepted this principle, which led to the development of the IGA approach and its application worldwide as an alternative to FATCA. This approach fulfills the U.S. objective of enhanced information collection, without entailing the risk that a unilateral U.S. approach could conflict with foreign laws.”
Yes, because this approach requires that any foreign law that conflicts with US objectives of enhanced information collection must be bypassed or overridden.
Yet Canada seems to be the only IGA1 country where it’s reportedly easy for a US-born individual to certify as non-US without showing a CLN?
https://www.fin.gc.ca/afc/faq/fatca-eng.asp
They are right though. International law trumps national law, except in the US. Keep the international law non-reciprocal and ditch the withholding penalty, and no bank or US-born individual has any road to redress. 🙁
Let’s hope that eventually that state of affairs will be overturned, and rights restored.
@Jules
“Young people will avoid the traps their parents fell into and get in line with compliance from the start or will renounce.”
I would define “get in line with compliance” as the biggest trap one should not fall into.
Young people may also: (i) remain completely ignorant of the situation and suffer no consequences, if they have a non-US birthplace or live in countries like Canada where self-certification (i.e. saying “no”) is possible with banks; (ii) learn that non-compliance is perfectly easy and safe, under the same conditions as (i) above.
I would expect the vast majority of younger dual-citizen Canadians will go forward through life following one of those two approaches, and will neither become compliant nor renounce.
@ND
You don’t *have to* lie to your bank. You can check “yes” on the US citizen box and nothing will change in terms of your access to banking services, the financial products you can buy, etc. This unlike many countries that do not want US citizens as customers.
Of course if you check “yes” you might have some bank info sent to the IRS, though all the tax-protected accounts like RRSP, RESP, RDSP, TFSA etc. are excluded from FATCA reporting under the terms of the IGA. That doesn’t mean you need to worry about tax compliance if you have Canadian citizenship, and don’t do anything stupid like talk to Moodys.
Still easier to check “no” and avoid the silliness, however.
Does anyone know when this is going to be voted on?
Supposed to be in early September sometime. Will be interesting to see who votes against it.
They will be too busy running for office. Nothing happens after labour day. I will be quite pleased if I’m proven wrong.
‘You don’t *have to* lie to your bank. You can check “yes” on the US citizen box and nothing will change in terms of your access to banking services, the financial products you can buy, etc.’
If you check “yes” and if your banking services or financial products produce income such as interest or dividends then the payer will deduct US withholding for which you have to file a US return to get a refund. Filing an honest US return will bring penalties from the IRS. You have to figure out what lies to tell to the IRS and you still might not get your refund. To avoid this problem, you do have to lie to your bank and check “no”.
A canadian bank doesn’t deduct US withholding tax on interest or dividends earned in Canada. doesn’t matter which citizenship box you check. The withholding rates on US investments are different depending on whether you file a W8 or W9.
For god’s sake Norman, enough with the withholding nonsense. Whatever weird-ass thing apparently happened to you 20 years ago has never happened to anyone else. There is no US withholding on Canadian income, period. It’s not part of FATCA. Give it a rest.
ND:
“If you check “yes” and if your banking services or financial products produce income such as interest or dividends then the payer will deduct US withholding for which you have to file a US return to get a refund. ”
Eh?
You seem to be talking about lying about US citizenship in order to pay less US tax on US-source income?
The solution would seem to be, if you are a US citizen living outside the US and you want to invest in the US and pay the treaty rate on the interest/dividends, relinquish your US citizenship. Then you don’t have to file for a refund, and don’t have to lie.
“Filing an honest US return will bring penalties from the IRS. You have to figure out what lies to tell to the IRS and you still might not get your refund. To avoid this problem, you do have to lie to your bank and check “no”. ”
Yes, a USC would have to commit perjury to claim the treaty rate on US-source income, since a USC can’t claim the treaty rate. Much better to relinquish the US citizenship or ditch the US investments.
No, I think ND is saying that if you acknowledge US citizenship to a *Canadian* bank, they will deduct US withholding on any Canadian interest or dividend income. This is of course complete nonsense.
“complete nonsense.”
Indeed.
Utter bollocks, even.
Personally I can skim over the silliness, but it does bother me that someone coming here for advice would read that and think it to be true, and panic.
It’s certainly very confusing. It doesn’t really seem to have anything to do with FATCA or the Canadian IGA.
“If you check “yes” and if your banking services or financial products produce income such as interest or dividends then the payer will deduct US withholding for which you have to file a US return to get a refund. ”
‘Eh?
You seem to be talking about lying about US citizenship in order to pay less US tax on US-source income?’
At my level of income, filing US returns brought full refunds of US withholding in years when my US withholding was fully reported on Forms T-5 or 1042-S (in years when 1042-S was the wrong form to use because I was a US citizen — the IRS didn’t care that the payer used the wrong form). Filing US returns should have brought full refunds of US withholding in years when my US withholding was reported on Forms 1099, but didn’t because of Monica Hernandez and her colleagues.
If I had lied to tell TD Waterhouse “No” about US citizenship, US withholding would have been taken at the treaty rate from US sourced income but not from Canadian sourced income, and I still would have been able to claim US withholding on US returns. So, zero would still be zero. Also Monica Hernandez doesn’t seem to have been involved in embezzling from Forms T-5 or 1042-S.
‘The solution would seem to be, if you are a US citizen living outside the US and you want to invest in the US and pay the treaty rate on the interest/dividends, relinquish your US citizenship. Then you don’t have to file for a refund, and don’t have to lie.’
Well yeah my US tax has gone up after I renounced, because withholding is taken at the treaty rate and I’m no longer eligible for refunds. And yeah, I don’t have to file US returns for years after my renunciation. The only lying I still have to do to the IRS is when the IRS and/or US courts coerce me to lie on refiled returns for tax years when I was a US citizen. The only lying I have to do to US courts is to comply with an order from US District Court for the Central District of California and possibly in other cases to avoid contempt of court when courts told lies.
“Filing an honest US return will bring penalties from the IRS. You have to figure out what lies to tell to the IRS and you still might not get your refund. To avoid this problem, you do have to lie to your bank and check “no”. ”
‘Yes, a USC would have to commit perjury to claim the treaty rate on US-source income, since a USC can’t claim the treaty rate. Much better to relinquish the US citizenship or ditch the US investments.’
Filers of US returns have to commit perjury because of Internal Revenue Bulletin 2005-14. The IRS imposes penalties because honest declarations impede the administration of US taxes.
‘No, I think ND is saying that if you acknowledge US citizenship to a *Canadian* bank, they will deduct US withholding on any Canadian interest or dividend income. This is of course complete nonsense.’
Right, since we’ve discovered that TD stopped being a Canadian bank some time ago.
Aside from that, I still have the customer copies of Forms 1099 and T-5 that were issued to me by a TD Waterhouse branch that is located in Canada, showing US withholding from Canadian sourced income. The IRS let me see someone’s e-mail saying that the IRS lost the IRS’s copy of the Form 1099. Again no surprise, with Monica Hernandez and colleagues working on Forms 1099.
Honestly, ND, it’s gobbledygook to me. What has it got to do with FATCA?
Right, QI isn’t FATCA because QI existed before FATCA. Nonetheless a US citizen had better lie to their more-or-less-Canadian financial institution by saying that they’re not a US citizen, and also had better not make investments that produce US-sourced income.
“Right, QI isn’t FATCA because QI existed before FATCA. ”
Gobbledygook.
“a US citizen had better lie to their more-or-less-Canadian financial institution by saying that they’re not a US citizen,”
It’s not necessary to lie; relinquish the citizenship and FATCA goes away.
“… not make investments that produce US-sourced income.”
Certainly not, unless they understand how the US tax game works or can pay somebody who does.
and also had better not make investments that produce US-sourced income.