Americans in Canada face complex situation
Just Me suggested a separate post of this Star Phoenix (Saskatoon) article that badger highlighted.
I was happy to see the acknowledgement of the problem with account and asset reporting:
…”The problem is not in-come tax. The problems are the punitive IRS penalties and criminal prosecution threats for failure to complete the many required annual information returns.”…
Starring Douglas Shulman as Police Chief Tolliver and MEP Sven Giegold as Police Lieutenant “Donny” Donaldson
I thought it might be nice to post about something other than FATCA and tax for a change. I don’t know if everyone will like this movie it has some good reviews and bad ones too. I do think it has a certain symbolism for out present predicament even though the movie is over the top on occasions. I would try to take note to societal references to pot, the Chicago Seven, third marriages etc. I am not sure it is explicitly mentioned but the movie is most definitely supposed to take place on either Martha’s Vineyard or Nantucket the two ultra rich, ultra elite, and ultra Liberal islands off the coast of Cape Cod(All of the cars have Massachusetts license plates and the cars of the BMW and Mercedes Benz variety). Both Martha’s Vineyard and Nantucket are also the playground of the Hollywood “elite” so for this reason the movie was not heavily distributed back in 1993. Nor are all cultural references that emphasized in the trailer.
You can rent it for $3.00 US on Amazon.
http://www.amazon.com/Amos-and-Andrew/dp/B001PSOQ2E/ref=cm_cr_pr_product_top
Starring Nicholas Cage and Samuel L Jackson
The theatrical trailer isn’t that good but I will post it anyways.
A tale of two Green Parties
The Green Party is not a monolith. Different Green Parties take different positions on different issues. There is no such thing as a United Green Party. This is good news. It allows for different Green Parties to take positions that are appropriate to local needs and local constituents. It also allows for and a open and transparent debates on the issues of the day.
The principle of “open debate” is surely welcome (open debate is not permitted within the ranks of Canada’s Harper Government). Only through open debate will understanding be encouraged. Interestingly the Green Party of Europe’s hasty response to the the recent discovery of numerous offshore financial accounts is at odds with the Green Party of Canada’s carefully considered position on FATCA.
I occasionally cross paths with someone in my neighbourhood who loves to golf in the Palm Springs area. For the last couple of years she and her husband have been checking out the real estate down there. In the course of our conversations, I told her about our trials and tribulations in our effort to get square with the IRS, and she seemed grasp the gravity of it all. A few weeks ago, she told my husband and me about a house they were negotiating on in the Palm Springs area, what a bargain they were getting and were quite excited about being able to spend half the year there. I suggested that before they get too deep in that they seriously look into how long they can stay down there before they are considered to be US persons for tax purposes. I also mentioned that the realtors down there may not necessarily know about these matters. The next day I sent her an email that covered the Substantial Presence Test. Apparently that email was ignored, because last night when we ran into this couple again, they were happy to announce to us that they had in fact finalized the purchase of the house and are looking forward to spending “half the year there”.
As difficult as it was to rain on their parade, I had to flat out tell them they were wrong and then listened as both of them insisted that the 183 days per year stands because “we know hundreds of Canadians down there who stay that long”, “our realtor says it’s so”, and “Canadians down there really are a boon to the economy, why would the US government want to dissuade us from spending time there?”, and mumbled something about how the tax treaty protects them. I let my iphone be the decider. I brought up and showed my friend a web page that described in detail how the Substantial Presence Test works:
“The IRS considers non-residents to be U.S. residents for tax purposes if they meet the substantial presence test. A non-resident who was physically present in the United States for a total of 183 days during a calendar year clearly meets this test and will be taxed as a US resident.
A non-resident who has spent more than thirty days in the United States during a calendar year will be deemed to have a substantial presence in the US if the sum of the following calculation of the cumulative number of days spent in the US over a three-year period equals 183 or more:
The IRS considers you to be present in the United States on any day that you are physically present in the country at any time during the day.”
I know now how I must have looked when I experienced my “OMG moment”, because her face turned white. “Surely we must qualify for an exemption”, she said. “Not unless you’re e a professional athlete or diplomat”, was my response. Still not believing me, she immediately texted someone (presumably her Canadian realtor friend who sells real estate in Palm Springs) and told me that the person at the end of the text line wrote “it’s 183 days”. She next took my suggestion to ask her advisor about the ‘substantial presence test’. Response: dead silence. I can only imagine the chain reaction of OMG moments in sunny California right now.
Moral of the story is: “If a million people do a stupid thing, it is still a stupid thing”.
We owe it to our Canadian snowbird friends to tell them about their potential tax obligations to the IRS when being seduced by those bargain real estate deals in the US. Being a Canadian real estate investor does not entitle you to special treatment. Advisor.ca has a very good web page on the Substantial Presence Test, the difficulties in establishing a “Closer Connection”, and Tax Treaty’s “Tie Breaker” rules.
http://www.advisor.ca/tax/tax-news/residency-rules-snowbirds-need-to-know-65336/2
It is good to see that the mainstream press is covering the FBAR / VDP issues surrounding foreign retirement accounts:
However, there is some misinformation, such as: “Americans who spend their entire career working abroad will probably not be eligible for much, if anything, from Social Security since they cannot contribute to it while working abroad.” This is not true if the country in question has a Social Security totalization agreement with the US. In such cases, it would be possible to draw Social Security benefits later in the US based upon what was paid in social security to the foreign country.
It does not appear to me that such foreign social security contributions are deductible under the Foreign Tax Credit. I believe that US Social Security contributions are (another form of discrimination). Mrs Serrato from ACA is quoted in the article as saying the same thing: “many wealth, social and value-added taxes in Europe were not eligible for credits or deductions on American taxes. ‘They could be a significant part of your foreign tax bill, but you can’t apply them to your U.S. taxes, so you just pay them,’ she said.” Yeah, right, just pay them… and give up the new refridgerator you need and cancel your vacation and your kid’s college.
What is lacking in the article is the extreme sense of outrage that many of us who are middle class and living abroad are feeling.
Please SWAT (Speical Writers and Theses) this article with comments. Thanks to Joe Smith for finding the comments page: http://bucks.blogs.nytimes.com/2013/04/05/financial-lessons-for-american-expatriates/?comments#comments.
There are already numerous comments and it seems that people that are commenting really understand the issues… and I haven’t seen any hostile trolls there yet!
Also, I mentionned the article in this Maple thread: http://maplesandbox.ca/2013/aca-blasts-fatca/#comment-6097
I haven’t watched this video yet. Its just been posted. I have heard it was argumentative and Grinberg very much thought the IRS needed to crackdown on Canadian “tax evaders” who weren’t paying their fair share to their country of birth. This video is a MUST WATCH but you might want to have something to punch other than your TV or computer when watching.
http://mediasite.law.wustl.edu/Mediasite/Viewer/?peid=45a195b97d0f40c388b2dbbc9031a1291d
Not all of it is about FATCA and Canada so parts may be a little boring for most IBSers. Happy Watching.
Form 8957 – FATCA Registration Process (DRAFT for public review and comment)
A DRAFT of the FATCA registration form for financial institutions is available by clicking on the following link: Draft Form
Registration Process: The draft form is released here for public review and comment and should not be printed and submitted by a financial institution in an attempt to register for FATCA. FATCA registration can be accomplished most efficiently and effectively through an electronic online process that will avoid the need to print, complete, and mail paper forms. The online registration portal will be available in July 2013. The questions that will be presented in the online process will look very similar to the questions shown on the draft form released here, but they will be presented differently to make electronic completion of the process as simple as possible. Financial institutions registering through the online process will receive notice of registration acceptance and obtain the Global Intermediary Identification Number (GIIN) needed to demonstrate FATCA compliance on an expedited basis.
Paper alternative: The IRS will also accept registrations that are made on paper forms. Financial institutions should not, however, use the DRAFT form released here to submit a paper registration. A final paper registration form that can be used for registration will be made available in July 2013. Financial institutions, however, are strongly encouraged to use the online registration process after it becomes available in July 2013. Paper registration forms will not be processed until October 2013 and financial institutions may experience a delay in receiving notice of registration acceptance and obtaining the GIIN needed to demonstrate FATCA compliance.
Page Last Reviewed or Updated: 05-Apr-2013
ACA: “FATCA is bad law on all fronts and should be repealed.”
April 5, 2013
Washington, DC
In an April 4, 2012, submission to the leadership of the International Tax Reform Working Group and the Financial Services Tax Reform Working Group of the Committee on Ways and Means of the U.S. House of Representatives,American Citizens Abroad (ACA) – the flagship association representing the interests of some seven million Americans residing outside the United States – has again called for repeal of FATCA (“the Foreign Account Tax Compliance Act”) as part of a comprehensive overhaul of the U.S. tax system. While focusing on the particular damage FATCA does to U.S. citizens living abroad, ACA pulls no punches in spelling out the broader harm this 2010 law (now pending implementation) threatens to inflict on the American economy as a whole, while failing in its stated purpose of curbing offshore tax evasion. Continue reading
http://www.youtube.com/watch?feature=player_detailpage&v=F-rsqi9IwoE
MEP Sophia In’t Veld speaking on FATCA in February.
http://www.uspirgedfund.org/sites/pirg/files/reports/USPIRG_State_Tax_Havens.pdf
5. States could withhold taxes as part of federal FATCA withholding. The Foreign Account Tax Compliance Act (FATCA) prescribes a 30 percent federal withholding tax on companies that transfer funds to foreign financial institutions that do not comply with U.S. disclosure and reporting requirements. States that collect income taxes could withhold state taxes on these funds at the same time.
