Liberty and justice for all United States persons abroad

The Isaac Brock Society

MUST WATCH VIDEO on Accidental Americans in Canada (including Mark Matthews)

Posted on by Posted in Issues regarding US persons abroad 19 Comments

Patrick W. Martin, Partner – Procopio, Cory, Hargreaves & Savitch, LLP
Lara Banjanin, Attorney Advisor – Office of Associate Chief Counsel – International (IRS)
Michael Welters, Partner – Bull, Housser & Tupper

Lara Banjamin is like ice woman however it is interesting to the Canadian lawyer next to see her discuss the legal obligations or lack thereof a Canadian lawyer has to the IRS. In Michael Welters seems to imply that under Canadian law a lawyer who happens to practice under circular 230 should recuse him or herself under certain circumstances

 

Mark Mathews, Steve Toscher, and Richard Harvey talk OVDI in second video below.(Two different videos)

Must watch, Must Watch, Must Watch

 

 

Here comes “DATCA” (FATCA reciprocity)

Posted on by Posted in Issues regarding US persons abroad 34 Comments

Provide for reciprocal reporting of information in connection with the implementation of the Foreign Account Tax Compliance Act (FATCA).—

In many cases, foreign law would prevent foreign financial institutions from complying with the FATCA provisions of the Hiring Incentives to Restore Employment Act of 2010 by reporting to the IRS information about U.S. accounts.

Such legal impediments can be addressed through intergovernmental agreements under which the foreign government agrees to provide the information required by FATCA to the IRS. Requiring U.S. financial institutions to report similar information to the IRS with respect to nonresident accounts would facilitate such intergovernmental cooperation by enabling the IRS to reciprocate in appropriate circumstances by exchanging similar information with cooperative foreign governments to support their efforts to address tax evasion by their residents. The proposal would provide the Secretary of the Treasury with authority to prescribe regulations that would require reporting of information with respect to nonresident alien individuals, entities that are not U.S. persons, and certain U.S. entities held in substantial part by non-U.S. owners, including information regarding account balances and payments made with respect to accounts held by such persons and entities.

This was found buried on page 202 of the Analytical perspectives of the President’s budget.

http://www.whitehouse.gov/sites/default/files/omb/budget/fy2014/assets/spec.pdf 

Additionally this request was NOT found in the Treasury Green Book where normally requests of this nature are made.

So, this Bitcoin we’re hearing about and trying to understand — what does it mean for IRS, FATCA (as well as taxation within all countries)?

Posted on by Posted in Issues regarding US persons abroad 17 Comments

The Bitcoin: Bubble or Bank — CBC The Current, April 11, 2013

If the Bitcoin becomes sometime in the near future the new “virtual?” currency as some think, will FATCA keep up?  Will any of us keep up?  Or, will it fail?  I’m trying to understand it all.

 

“Using a Sledgehammer to Crack a Nut: Why FATCA Will Not Stand” Frederic Alain Behrens, University of Wisconsin

Posted on by Posted in Issues regarding US persons abroad Leave a comment

Thanks for this, Just Me, and for Mark Twain, suggesting this work deserves its own post.   James Jatras has highlighted this article as well as has commenter, Joseph Zernik.

Con’s and Some Pro’s (why’s and why not’s) are given — good work and read!  Perhaps with its own post, more will see and read it.

Abstract to the downloadable paper: USING A SLEDGEHAMMER TO CRACK A NUT: WHY
FATCA WILL NOT STAND by FREDERIC BEHRENS

Frederic Alain Behrens, University of Wisconsin
April 9, 2013
Wisconsin Law Review, Vol. 2013, No. 1, p. 205

Several methods, used along with lobbying Congress, can achieve
the repeal of FATCA. “These include hearings, ordering [a]
cost/benefit stud[y] (which never was done for FATCA), withholding
[IRS] enforcement funding, freezing Executive Branch nominations, and
. . . most importantly, blocking implementation of [more Model 1 and 2]
IGAs as the ‘weak link’ in the FATCA enforcement plan . . . .”178 A
significant public relations campaign is also needed to educate the public
about FATCA. The financial industry should consider funding a
substantial Congressional lobbying and media campaign to avoid the
substantial compliance costs it will face once FATCA goes into full
effect.

…

In considering whether the movement to repeal FATCA will be
successful, it is important to consider some roadblocks that groups
lobbying for its repeal must face. First, FATCA was voted into law under
the HIRE Act, which had broad bipartisan support.185 The main purpose
of this Act was to get Americans back into jobs and bolster the American
economy through a significant stimulus package.186 Besides the FATCA
provisions, other parts of the bill create new tax credits that encourages
businesses to hire new employees.187

In the current environment, with voters not interested in raising
taxes, a repeal of FATCA, which is aimed at increasing tax revenue, will
not be looked upon favorably. Even the most vociferous proponents of
repeal concede that FATCA will be a tough nut to crack, but claim that
“if and when FATCA receives the kind of scrutiny in the United States it
should have received before enactment, it is unlikely to survive.” 188
Further, tax evasion is a contentious political issue. Voters will not like
seeing a bill repealed that is aimed to target tax evasion by wealthy
Americans taking advantage of loopholes in the current system.189 As
long as getting Americans back to work remains a top priority for
Congress, the bipartisan support that enacted FATCA will struggle to
repeal it.
In addition, Americans living outside the United States do not have
a big footprint in American politics and have no concentrated voting
strength in any particular state or district. Although groups such as
American Citizens Abroad and Republicans Abroad have organized
movements to repeal FATCA, American expatriates have trouble
speaking with a unified voice on the issue.190 A strong unified message is
needed to ensure the success of the repeal movement.
Lastly, FATCA is not mainly about revenue and is more about
information on foreign bank accounts held in foreign countries.191 This
may also be part of the reason why a proposed withholding regime would
not be implemented because it is not in line with Congress’s policy
purpose behind the bill when it was enacted. There could be other ways
to get information from banks, but in general there will be a similar
sentiment against this. However, efforts to repeal tax legislation enacted
by President Barack Obama have succeeded before.192
187.
…

CONCLUSION: FATCA, THE ROAD TO NOWHERE
It is critical for all participants, including government organizations
and the general public of consumers, to strike an acceptable balance of
burdens on each side, so that all participants can achieve their goals.
FATCA is not the way for the U.S. government to prevent income tax
evasion. Moreover, the current state of the U.S. economy is already
problematic, and legislation increasing the reluctance of foreigners to
invest in the United States is worrisome.203 The IRS should not force
taxpayers and banking consumers of foreign nations to pay the costs of
compliance with American tax laws from which these people derive no
benefit.
It is becoming increasingly apparent that the protests against the
implementation of FATCA, the burden on IRS regulation writers, and the
enormous cost of compliance for FFIs are not worth the tax revenue and
information that FATCA is projected to produce.204 The growing
opposition movement will continue to attract the opposition of foreign
banks, international governments, and American citizens abroad likely
culminating in the repeal of FATCA. In the end, if someone wants to
hide their assets abroad, they will figure out a way to do it. The goal of
FATCA is laudable, but using it as a means of achieving a reduction in
offshore tax evasion is destined to fail.

The IRS and Your Email

Posted on by Posted in Issues regarding US persons abroad 11 Comments

Slashdot had an interesting link to a post about the IRS and their rather disturbing insistence that reading people’s email doesn’t require a warrant.

It seems the ACLU has requested information via the FOIA because the IRS asserts that it can and will continue to make warrantless requests to ISPs to track down tax evasion.

Apparently the outdated Electronic Communication Protection Act allows federal agencies to request and read any email that is over 180 days old.  Even more startling is the IRS assertion that the fourth amendment doesn’t apply to email at all.

In fact as recently as 2009, the IRS has claimed that there is no expectation of privacy for emails, and in 2010, asserted that email stored on a server is fair game.

Is the IRS reading my email or yours? Probably not. But it’s disturbing to know that they can and think it’s within their rights to do it if they want to.

Salim Lamrani hates us immigrants and wants us to suffer

Posted on by Posted in Issues regarding US persons abroad 7 Comments

French professor of Latin American studies Salim Lamrani proposes that his country should adopt that uniquely American system of taxing based on what passport you hold rather than what society you actually live in, the way the rest of the civilised world does things. His facile idea about “how to end tax exile”, originally floated in French last October at Canadian website Mondialisation.ca and in Portuguese at Opera Mundi, has recently reared its ugly head again in English over at the Huffington Post, thanks to a translation by Larry R. Oberg.

Continue reading →

FATCA and outsourcing of Canadian banks’ IT jobs — is there a connection?

Posted on by Posted in Issues regarding US persons abroad 30 Comments

Like most other Canadians, I was outraged to learn that the Royal Bank of Canada has been laying off IT workers and replacing them with temporary foreign workers, with the intention of outsourcing their IT functions overseas. I was ever more outraged to learn in today’s news that RBC is not unique among Canadian chartered banks in doing this; several other members of the Canadian Bankers Association also stand accused in the media of the same practice, by some laid-off and even current IT workers from several banks other than RBC (specifically, CIBC, TD, Scotiabank and BMO).

See: Outsourcing bank jobs is common practice, say employees:  CIBC, TD, Scotiabank and BMO replaced Canadians with temporary foreign workers, claim hundreds of emails

Am I the only person who is wondering whether there is a connection between the outsourcing of the banks’ IT functions to less-expensive overseas contract workers, and the indications we hear of the banks’ preparations to comply with FATCA (which will entail some extensive and expensive IT systems work in these banks)?  Outsourcing all that IT work could help reduce the costs to the banks of rolling over and complying with IRS invasion of our citizens’ financial accounts.

Is it the case that not only are the banks preparing to throw Section 15 of Canada’s Charter of Rights and Freedoms under the bus, as well as the account information on thousands upon thousands of Canadian citizens’ financial information to the tax agency of a foreign country, but they also are laying off highly-educated and highly-trained Canadian IT workers to boot in order to achieve this, even requiring those workers to train their under- or un-trained replacements in Canada before those workers go back to where they came from (and where Canadian privacy, banking and Charter rights don’t apply as those workers will be on foreign soil)?

And what will the outsourcing of IT functions overseas do to what remains of privacy, secrecy and security of Canadians’ financial information – of ALL Canadians, not only those of US origin?

I am writing today to my MP to ask these questions.  I urge you all to do likewise.  I would like some clear and believable answers.  (No, I am not writing to CBA. I want an answer I can believe, and I think that Question Period in the House of Commons, followed as appropriate by a federal government investigation to get answers, is the only way that’s going to happen.  CBA is not going to have any credibility with me on this one.  I believe what fellow Canadian workers are telling CBC, not the insipid denial by that RBC official.)

Over past months, some of us have wondered how to get our fellow (non-US-origin) Canadians interested and upset about FATCA.  If my suspicions about the answers to the above questions are correct, I think this could be a real doozy of a way to raise public awareness and concern about FATCA, US violation of our sovereignty, and possible complicity in same by our financial institutions.

Linda McQuaig: On FATCA–still clueless

Posted on by Posted in Issues regarding US persons abroad 10 Comments

Harper government’s fraudulent attempt to look tough on tax havens: McQuaig

If the Harper government had any genuine interest in tackling tax havens, it would get behind growing global efforts to shut them down. Even the U.S. Congress passed a sweeping law, to take effect next year, requiring foreign banks to report all assets held by their U.S. clients to U.S. tax authorities.

A plan to develop an international system along these lines, long championed by the U.K.-based Tax Justice Network, has fresh momentum in the wake of last week’s revelations.

#Americansabroad need a lobbyist for tax reform – it’s a matter of protection from Congress

Posted on by Posted in Issues regarding US persons abroad 15 Comments

As this article in the New York Times demonstrates, U.S. democracy has become a “marketplace” where votes are bought and sold. In other words, the legislative agenda is driven by special interests and money.

The last major U.S. tax reform was in 1986. That was the year that the PFIC was introduced. It is likely that the PFIC legislation was largely driven by mutual fund lobbyists who wanted to keep “Homelanders” investing in the United States. Nobody could have seen (at least I hope) the severe, punitive consequences of the PFIC rules on U.S. citizens abroad and on their countries of residence.

The PFIC rules may well have been originally intended to prevent “Homelanders” from investing in foreign mutual funds. Their primary effect is now to punish U.S. citizens abroad and extract wealth (in the form of penalties) from their counties of residence.

During this era, the Chair of the Senate Finance Committee was Senator Bob Packwood of Oregon. What was the original intent of PFICs? Were they intended to apply to the mutual fund holdings of U.S. citizens abroad?  I am sure the answer is NO they were not originally intended to punish U.S. citizens abroad. To this day there are no IRS regulations that specifically state that Canadian mutual funds are PFICs.

“However, you need to look further.  In 1991, twenty-one years ago, the I.R.S. published proposed regulations on PFICs which have never been finalized.  The proposed regulationsare not binding on taxpayers.  They are considered a body of informed judgment but accorded no more weight than the I.R.S.’s litigation position.  The proposed regulations are where the bulk of the rules related to PFICs are located.”

http://intltax.typepad.com/intltax_blog/pfics/

In fact it was not until a 2010 ruling by an IRS counsel that Canadian mutual funds were presumed to have the PFIC taint.

As a result of the 2010 IRS policy review, the IRS issued Chief Counsel Advice 201003013, stating Canadian mutual funds should be classified as corporations for U.S. tax purposes. Therefore, if an American citizen receives income from a PFIC or sells a Canadian mutualfund that is a PFIC, U.S. tax and interest penalties could apply.

http://www.advisor.ca/tax/tax-news/tax-planning-and-dual-citizenship-46794

Imagine that!  The IRC does NOT specifically include Canadian mutual funds in the definition of PFICs. The IRS has NOT published regulations including Canadian mutual funds as PFICs. Yet because of a 2010 ruling by an IRS counsel, Canadian mutual funds have been retrospectively defined as PFICs.

(Those willing to invest the time, should read what shows up when “Bob Packwood PFICs” is searched. At at minimum you will see how Tax Reform hearings work.)

Another very sad case of “unintended consequences” from 1986

NobleDreamer posted the story of Joe Stack. Eventually the frustration of dealing with U.S. tax laws drove him to suicide. He flew a plane into an IRS building in 2010. This was the result of a law passed for the benefit of a special interest group at the expense of the average American.

The New York Times reported that:

The law, known as Section 1706 of the 1986 Tax Reform Act, made it extremely difficult for information technology professionals to work as self-employed individuals, forcing most to become company employees.

Many software engineers and other such professionals say that the law denies them the opportunity to become wealthy entrepreneurs and that it makes it harder to increase and refine their skills, eventually diminishing their income.

Harvey J. Shulman, a Washington lawyer who represented companies that supported the desires of software engineers to be independent contractors, estimated that the law currently affects at least 100,000 such people.

“This law has ruined many people’s lives, hurt the technology industry, and discouraged the creation of small, independent businesses critical to a thriving domestic economy,” Mr. Shulman said in an interview Thursday. “That the law still exists — even after its original sponsors called for its repeal and unbiased studies proved it unfairly targeted a tax-compliant industry — shows just how dysfunctional and unresponsive Democratic and Republican Congresses and our political system have been, even on relatively simple issues.”

The law was sponsored by Senator Daniel Patrick Moynihan, Democrat of New York, as a favor to I.B.M., which wanted a $60 million tax break on its overseas business.

Under budget rules in effect at the time, any tax breaks had to be paid for with new revenues. By requiring software engineers to be employees, a Congressional report estimated, income and payroll taxes would rise by $60 million a year because employees had few opportunities to cheat on their taxes.

This reminds me very much of the PFIC rules!

Have a look Commissioner Shulman’s comments on Joe Stack and offshore tax evasion beginning a the 3 minute mark.

 

 

 

 

 

 

For best service to his ‘US Person’ clients, this financial planning professional learned and passes on information…

Posted on by Posted in Issues regarding US persons abroad 3 Comments

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.”…