Category Archives: Issues regarding US persons abroad

In a new “Special to the Financial Post” advertorial that makes Barrie McKenna look like Woodward and Bernstein, über compliance condor Max Reed attempts to reassure “American citizens in Canada” that they have nothing to fear, except perhaps some red-herring nightmare of IRS goon squads swarming across the border to seize their homes.  It is a tour de force of utter nonsense and, sadly, another disheartening example of what now passes for journalism in Canada.  Here are a few tidbits, displaying all the comforting factuality of a PMO press release:

Don’t panic, American citizens in Canada: The IRS is not coming to seize your house

To get on the IRS’s good side, take advantage of the amnesty program called “Streamlined Foreign Offshore Procedures” (which you can find on the IRS site). It will help you catch up on overdue tax returns without fear of penalties.

U.S. citizens in Canada are only subject to U.S. federal tax. (The Canadian taxes you pay are credited against your U.S. taxes.)

Unless you have U.S. source income, you will not owe anything.

The deadline for filing a return in the U.S. is April 15, but can be extended to June 15 for those outside the U.S.

Intriguingly, this is just part one of a spring series of helpful articles for “One million American citizens in Canada.”  It is difficult to imagine just how much more useful advice Max Reed can offer than he does in his first instalment.

Comments are wide open.

http://business.financialpost.com/2015/03/06/dont-panic-american-citizens-in-canada-the-irs-is-not-coming-to-seize-your-house/

If you have information about how FATCA will affect green card holders in your country, or a question about FATCA and your green card status, or an experience to share, please comment here.
The idea for this thread comes from News, who posted the following FAQ from Canada Revenue Agency’s website, regarding FATCA and Green Card Holders, as a comment on the “Terminating a Green Card” thread.

Canada Revenue Agency:  Information for individuals with accounts with Canadian financial institutions

“I hold a U.S. green card. How does this affect my tax residency?
If you are a green card holder (that is, a lawful permanent resident of the U.S.), the U.S. considers you to be a U.S. resident.
However, if you are a resident of Canada for tax purposes and do not hold U.S. citizenship, you should not identify yourself as a U.S. person to your Canadian financial institution.”

I am happy this morning to cross-post today’s ADCS-ADSC blog entry…

“Repealing “Citizenship Taxation”: The difficult we do today, the impossible takes a little longer”.

which starts out with:

The Alliance For The Defence of Canadian Sovereignty is prosecuting a lawsuit against the Government of Canada. The lawsuit is for the purpose of “striking down Canada’s FATCA IGA”. The Canada FATCA IGA lawsuit is providing citizenship leadership and FATCA education for the world.

The primary purpose of FATCA is to enforce U.S. “citizenship taxation”. In reality, U.S. “citizenship taxation” is taxation based on the immutable characteristic of “place of birth”.

Although “citizenship taxation” may have always been U.S. law it has NOT always been U.S. practice. In fact, the U.S. made no attempt to enforce “citizenship taxation” until sometime after the 2008 financial crisis. The reasons for the enforcement are not entirely clear, but the enforcement of “citizenship taxation” has been a “life altering” event for Americans abroad. For Americans abroad, “citizenship taxation” is NOT a theoretical concept.  It is a reality that impacts on virtually every aspect of their lives. It directly affects their career opportunities, their retirement planning and (for those Americans with an “alien spouse”) their marriages. This has led to cries of anguish and pleas for change. It has led to a huge surge in the “relinquishments” of U.S. citizenship. On March 2, 2015 I participated in a session for U.S. citizens in London. A comment about the about the session and the recent enforcement of U.S. citizenship taxation included…

I would add that it was evident that some people at the meeting have suffered significant mental anguish, either now or in the past. These are good people, who had tried as US citizens to do the right thing, but who have been stymied by rules and complexities of the IRS code which, to paraphrase John, “no rational person would ever have suspected or guessed would remotely be true”.

I find the damage to mind and body to be one of the most heart-rending things about this whole mess. Someone wrote to me recently, “So I’m not alone in my panic!! Yeah, there’s been plenty of sleepless nights. Just can’t get it out of my head.” Many reading have had that experience.

I am waiting for the day that someone in government finally notices and apologies, perhaps admitting, “We tortured some folks.”

…

In the short term, the implementation of FATCA will exacerbate the “pain”. On the other hand, the “pain” may be the necessary impetus for change. In order for there to be “change”, there must be some discussion and analysis of the issue. In order for there to be analysis, there must be awareness of the problems of “citizenship taxation”. That’s the reality of what has been unleashed by FBAR, FATCA, PFIC, CFC and the whole “Alphabet Soup” list of provisions which have changed the lives of Americans abroad.

The good news is that awareness of “citizenship taxation” is growing. The awareness is “growing” largely because of the efforts of Americans abroad (including those who identify as Americans abroad and  “accidentals” who simply do NOT regard themselves as Americans). The following groups (working independently) have been responsible for this awareness:

…

John Richardson also introduces a new voice in commentary by Professor Daniel Shaviro:

9. It is encouraging to see that “citizenship taxation” is being considered in law school classes. Two recent examples include:

A. The tax policy and law workshops at the Peter A. Allard School of Law – University of  British Columbia. On Friday February 27, 2015, Professor Ruth Mason discussed her recent paper on “citizenship taxation”.

B. The Tax Policy and Public Finance Colloquium and Seminar run by Professors Daniel Shaviro and Alan Viard of NYU law school. On Tuesday March 3, 2015 Professor Ruth Mason was in attendance to discuss “citizenship taxation”.

Professor Daniel Shaviro commentary on the Ruth Mason presentation – March 4, 2015

Professor Shaviro’s perceptions of “citizenship taxation” (based largely on the Mason presentation) appear as a separate blog post here.

His post identifies (and categorizes) many of the “theoretical concerns” of “citizenship taxation”. He begins by saying:

Yesterday at the colloquium, Ruth Mason discussed her paper, Citizenship Taxation.  I enjoyed reading it enough to conclude that I may want to write about this topic as well.  (I generally agree with the paper, but it’s a rich topic and perhaps a fruitful area for me to deploy some of my interests and approaches.)

His post contains 10 interesting points. I would like to identify what I consider to be the most interesting and important two…

The John Richardson, ADCS-ADSC Co-Chair and Legal Counsel, ADCS-ADCS entry ends by saying:

U.S. “citizenship taxation” is a problem for:

1. The individuals affected by it.

2. The countries where U.S. citizens reside which are required to accept the capital outflows inflicted by “citizenship taxation”.

In 2009 few would have imagined that the problems of “citizenship taxation” would be given the attention that they are today.

As they say in the Marines:

“The difficult we do today. The impossible takes a bit longer.”

Keep up the great work! Keep the faith!

John Richardson

 
INNSBRUCK

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— U.S. Expat Canada (@USExpatCanada) March 2, 2015

MAP

 
 
VIENNA

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— Patricia Moon (@nobledreamer16) February 27, 2015

MAP
 
 
BUDAPEST

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— ADCSovereignty (@ADCSovereignty) March 5, 2015

MAP
 

As submitted by two Brock commenters.   Our thanks to them …

and, once again, to Senator Rand Paul.

March 5, 2015 (Sputnik International) “Senator Rand Paul said that the Foreign Account Tax Compliance Act violates privacy rights of US citizens as well as has a bad effect on the American economy.”

*********************

This story is confirmed on Senator Rand’s website.

Mar 4, 2015

WASHINGTON, D.C. – Sen. Rand Paul today reintroduced S.663, a bill to repeal certain provisions of the Foreign Account Tax Compliance Act (FATCA) and put an end to a defective bill that does not accomplish its objective of ending tax evasion.

…

“FATCA is in complete violation of every Americans’ constitutional right to privacy and adds burdensome regulations that negatively impact our economy. It is a defective law which disregards  the mutual respect of sovereignty among nations and drains money from the federal treasury, on top of discouraging overseas investment in the United States. My bill will reverse the negative aspects FATCA has on the economy, prevent the government from bulk collecting U.S. Citizen’s financial data, and preserve the constitutional rights for all Americans,” Sen. Paul said.

******************

UPDATE: March 5, 2015

AARO @aaro

AARO team met Wednesday with Senator Wicker (R-MS) who will co-sponsor Senator Paul’s “Repeal #FATCA” bill.

LM and her husband, while helping a green card holder deal with his situation, came across the following on the Montréal Consulate’s website, which contains this excerpt:

“If you wish to file for the Abandonment of Lawful Permanent Resident Status you may visit the U.S. Consulate General in Montreal without an appointment on any Wednesday between 2PM and 3PM.
Please bring the following documents:
• Proof of identity;
• Your green card and a copy;
• A reentry permit (even expired), if applicable, and a copy;
• A completed I-407 (601KB PDF) form and a copy.”

Re the other consulates in Canada, only Toronto mentions green card abandonment. Toronto’s instructions offer the options of appearing at the consulate or mailing it in.  I note that Toronto says, “We will return a copy of your completed I-407 to you as your receipt.”

I checked a few consulate websites worldwide – the first three that came up were:
London:  appear at embassy or mail to embassy
Athens:  appear at embassy
Canberra:  mail to embassy

So, it varies from place to place (what else is new?), but if you live relatively near a consulate or embassy, it may be worth checking with them to see if you can bring in your I-407 in person and get a receipt on the spot.

Also at LM‘s suggestion, I’ve created a link-list to all Brock posts regarding green cards, which is in the sidebar under “List of Links by Subject.”

I’ve learned from the American Expatriates group on Facebook that those seeking German citizenship may obtain it before renouncing a citizenship when the cost for renunciation costs more than a month’s gross wages (Note:  Brian Gaber says this is completely false; a lawyer says it is not the law, but an interpretation of the law, so go ahead and try it anyway). This in a list of other Ausnamen (exceptions) from those who must renounce their citizenship before become a German citizen:

wenn der andere Staat unzumutbare Bedingungen für die Entlassung aus der Staatsangehörigkeit stellt, z. B. überhöhte Gebühren (mehr als ein Brutto-Monateinkommen, aber mindestens 1.280 €).

This means that Americans may obtain German citizenship without having to renounce US citizenship in advance, if the $2350 renunciation fee is higher than 1280 € and also higher than a month’s gross wages. It also makes it clear that the reason is that any fee a person’s monthly wage is exorbitant (unzumutbare Bedingungen) .  Immigration Germany (the Ausländeramt) is showing both compassion and flexibility. This is exemplary pragmatism and should be imitated by bureaucrats around the world. It is the opposite of the current State Department approach, which is tyrannical. The current exchange rate 1.11. 1280 €=US $1421.

Attn: Former U.S. Citizens: Are you STILL or have you EVER BEEN a U.S. “Tax Citizen”? http://t.co/IsmbLzUjQL

— Citizenship Lawyer (@ExpatriationLaw) March 4, 2015

My first reaction to the recent letter to IRS Commissioner John Koskinen from the Section of Taxation was excitement, as it seemed a good idea to get the issue of whether 877A is retroactive or not, solved once and for all. For over five years now, many expats have been in agony, knowing they lost their citizenship decades ago and yet many have been told that without a CLN, they might as well accept that they still are US citizens. This is simply intolerable. Now more than ever, we need to understand this as completely as possible.
 
I want to bring to your attention some posts that John Richardson has written over the last several months on this same subject. Trying to make this intelligible to those of us unused to the language of taxation and law is no easy feat. If we are to make reasonable assessments of our situations before choosing a course of action and/or tax adviser, lawyer or accountant, we need to understand what is involved. That is exactly the reason Brock was started; to read, research and share as opposed to simply allow others to take charge.
 
#1 “Attn: Former U.S. Citizens: Are you STILL or have you EVER BEEN a U.S. “Tax Citizen?”
“This post is long and I (John) wish to summarize the purpose and possible (but not certain) conclusion of the post in a few simple sentences.
Here goes:
If you were born in the United States (and became a U.S. citizen at birth) who moved to Canada and:

1. Relinquished U.S. citizenship (likely by becoming a Canadian citizen) prior to June 3, 2004, without informing the U.S. State Department or applying for a Certificate of Loss of Nationality; and

2. Are hearing from the media and some members of the tax compliance community that you are either still a U.S. citizen or are somehow liable for U.S. taxes; then

You should NOT believe that you are still a U.S. citizen and/or are that you are subject to U.S. taxation without getting proper counselling. In other words, you should neither apply for a Certificate of Loss of Nationality nor file U.S. tax returns without a thorough investigation of your situation. You may or may not be a U.S. citizen who is subject to U.S. taxation.

Extreme caution is warranted. Please note that this post is NOT legal advice of any kind whatsoever. You meed to discuss your specific circumstances with a competent adviser of your choice.”
You can read the rest of this post here.

#2 – “The “plain language” of S. 877A – To whom does the U.S. Exit Tax apply?”
“Many Americans abroad are confused by the difference between “relinquishment” and “renunciation”. This post will explain exactly why the date of relinquishment matters. This post will make the argument that the “plain language” of the combined effects of S. 7701(a)(50) and S. 877A(g)(4) compel the conclusion that those with a “Relinquishment Date” prior to June 3, 2004 are NOT subject to the S. 877A Exit Tax.”

#3 – “The United States of America – One country two citizenships – Introducing the “Tax Citizen”
“What could be better than U.S. citizenship? Why not a second U.S. citizenship? The United States Congress rewarded U.S. citizens by giving them all a “Second U.S. Citizenship.” To be specific, on June 3, 2004 all U.S. citizens became U.S. “Tax Citizens.” Interestingly, the U.S. public never asked for “Tax Citizenship.” The status of “Tax Citizen” was simply conferred on them. “Tax Citizens” have no rights. They have only obligations. The obligation is pay taxes.”

#4 – “Renunciation is one form of relinquishment – It’s not the form of relinquishment, but the time of relinquishment”

“There is NO difference between “relinquishment” and “renunciation” (renunciation is just one form of relinquishment). For tax purposes, there is likely a difference between a “relinquishment” prior to June 3, 2004 and a “relinquishment” (including a “renunciation” after June 3, 2004.” Read here.
 
This is an extremely important subject. I do hope you take the time to read these posts and in the spirit of Brock, discuss and share ideas here. We are our own best assets!

ABA Section of Taxation Recommends Those who Relinquished under INA Prior to June 17, 2008 be Treated as Non-Citizens http://t.co/IqGYsexuJt

— Patricia Moon (@nobledreamer16) March 4, 2015

In our view, sections 877A and 7701(a)(50) should not be considered to apply to individuals who had previously ceased to be citizens, for both nationality and federal tax purposes, prior to the date those provisions were enacted. In particular these sections should not apply to individuals who relinquished citizenship on or before June 3 2004, and whose noncitizen status was deliberately grandfathered under the 2004 Act, or to individuals who relinquished their citizenship in accordance with the requirements of former section 7701(n) after June 3, 2004 and prior to June 17, 2008.

The “extra’ here is since 7701(n) was repealed in 2008, the writer also suggests those who relinquished after June 3, 2004 and prior to June 17, 2008, should also be considered non-citizens. IOW, 877A only applies AFTER 2008! NOT RETROACTIVE!
 

The American Jobs Creation Act of 2004 ( the “2004 Act”), however, created a disparity between expatriation for nationality purposes and expatriation for tax purposes. Specifically the 2004 Act enacted new section 7701 (n), which provided for the first time that an individual who ceased to be a citizen in accordance with the INA would continue to be treated as a citzen for federal tax purposes, until a specified notice requirement was satisfied.. Section 7701(n) was effective only for individuals who expatriated after June 3, 2004 so individuals who had relinquished citizenship on or before that date were not affected, even where they had never provided any noticed described in that provision.

Similarly, section 7701(a)(50) generally provides that an individual shall not cease to be treated as a U.S. citizen before the date on which the individual’s citizenship is treated as relinquished under section 877A (g)(4). Pursuant to section 301(g) of the 2008 Act, these provisions are effective for any individual whose expatriation date (defined as the date on which the individual relinquished citizenship) is on or after June 17, 2008.We therefore recommend that Treasury and the Service issue guidance, in any form that they deem appropriate, confirming that individuals who reliquished citizenship under the INA are not subject to sections 877A and 7701(n)(50) and thus continue to be treated as noncitzens of the United States for federal tax purposes following the 2008 Act.

I don’t need to point out how important this development is! This news is HUGE!

For the whole letter to Commissioner Koskinen, please see Here

Taxation #AmericansAbroad: Citizenship taxation vs. Residence taxation: M. Kirsch – B. Schneider May 2/14 Toronto https://t.co/KTe7wnQaNG

— Citizenship Lawyer (@ExpatriationLaw) March 2, 2015

Video also Here

 
“Revisiting the Tax Treatment of Citizens Abroad:Reconciling Principle and Practice” M.Kirsch
 
“THE END OF TAXATION WITHOUT END: A NEW TAX REGIME FOR U.S. EXPATRIATES”
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Bernard Schneider- April 15, 2013 letter to the Ways and Means Committee
B.Schneider2-Ways&Means
 
With thanks to Embee for the articles