Category Archives: Issues regarding US persons abroad

Hi.  I have been meaning to do a post on so called Competent Authority Services office of the CRA in Ottawa. I do suspect there are some limitations in what the CRA can do under the treaty; however, I suspect for those that have renounced (such as Petros) or have lapsed Green Cards I suspect this office can be of some assistance. The CAS office is technically a free service of the CRA; however, it has a reputation for only providing services to the very wealthy and large corporations (something I think is due to the fact they are the only ones that know of its existence). I have linked to several information sheets the CRA has published regarding these services below. The key document to read is CRA information circular IC71-17R5.

http://www.cra-arc.gc.ca/tx/nnrsdnts/cmp/wh-eng.html

http://www.cra-arc.gc.ca/E/pub/tp/ic71-17r5/ic71-17r5-e.html#P124_23977

I also linked below to the annual report of CRA CAS below that shows a staff directory of the people who work in this department in Ottawa.

http://www.cra-arc.gc.ca/tx/nnrsdnts/cmp/mp_rprt_2010-2011-eng.pdf

The other key thing to note since 2007 is the US and Canada have a binding arbitration mechanism in their tax treaty. (Historically the US hasn’t liked binding arbitration and Canada is the only country the US has such a mechanism with).

I am making what you could call a “noisy” non-disclosure. I have stated that I do not plan to file FBAR. I am no criminal, but because I’ve not done FBARs in the past, and I plan never to file one, actually filing an FBAR creates a substantial hazard because of its criminal penalties.  This is the fatal flaw in the FBAR requirement.  If there were only draconian civil penalties, no one could invoke the Fifth Amendment in refusing to file it.

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Please note the following comment by Michael J. Miller:

3. Re: collection in Canada, I’m not sure what would possess a person to sign a closing agreement with the IRS if s/he did not intend to pay, so I’m not sure when it would be relevant. Having said that, if you signed a closing agreement providing for a 20% or 25% (or other) miscellaneous penalty, ostensibly under Title 26, then in my view it would be reasonable for the US to ask (and for Canada to agree) to treat it as a tax penalty.

If you ask me, our government has done a lot to assure Canadians and residents of Canada protection from FBAR penalties. But to enter an OVDI program and agree to penalties voluntarily is perhaps something that the Canadian government won’t or can’t protect you from. Please do not enter an OVDI program without taking into consider the possibility that the government of Canada will not protect you from the penalties. Credit goes to RenounceUScitizenship for pointing this possible problem. Thanks.

In rereading the letter written by the Institute for International Finance on January 25, 2012 to the G20 Ministers and Governors there is one sentence that stood out.  Emphasis is mine.

Furthermore, if the data privacy issue and inability to legally withhold ‘passthru’ payments prohibit financial institutions from entering into FATCA agreements with the IRS the objective of FATCA to combat tax evasion is not likely to be met.

As of the latest figures there are deemed to be 196 countries in the world. Now because of U.S. based taxation and the Foreign Account Tax Compliance Act, U.S. citizens will be unable to live and work in all but one of those countries the U.S.

It is forbidden by the U.S. government that it’s non-resident citizens be allowed to live the same lives as those of their compatriots.  How this cannot be seen as a violation of the Human Rights of U.S. citizens by the U.S. government is hard to fathom. When restrictions on your life abroad are so onerous as to discourage you from seeking to live outside of the jurisdiction of the land of your birth then surely you are the victim of oppression.

For those in doubt about whether they may claim Canadian charitable gifts on their US taxes, there can be no doubt that the answer is a resound: “Yes!”  Thanks to the generosity of my wife, I have been able to zero out my 2010 tax liability in the United States with our donations to my church and other Canadian registered charities.

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I finally figured out how to zero out my taxes using TaxAct.  I consider doing a tax return a game that expensive accountants and their clients play in order to create either a zero tax return or even better, to get a refund.  I figured that I just needed to continue playing with TaxAct until I owed zero tax.  That way I could just send my 2010 and 2011 retunrs with the completed Form 8854 and be done with the IRS, once and for all time.  My problem is that nearly half of my income is unearned, passive income that is not counted in the Foreign Earned Income Exclusion (FEIE).

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