Karen, on her fixthetaxtreaty.org blog, just posted the sad stories of Australians Shaun and Mary, who did their best to be tax compliant with a foreign country (United States) and then ended the relationship by renunciation of U.S. tax citizenship.

The emotional and financial damage done to these Australians was a direct result of their decision to enter or maintain tax compliance, to the best of their ability, with a foreign state.

We have heard similar stories before, but are there any lessons to learned regarding, for example, whether citizens-permanent residents of countries outside the U.S should ever enter into “IRS tax compliance”?

If Shaun and Mary could go back in time, would they still have entered into the IRS tax system? Is $50k plus emotional distress (post-traumatic stress; stress exceeding that of chemotherapy) a reasonable tradeoff for the renunciation of, divorce from, US tax-citizenship?

What would they now recommend Australians to do in the same situation?

For those persons abroad who do want to become IRS compliant, how could they ever find a trustworthy tax compliance expert? Can tax compliance persons purporting to be cross-border experts be taken to task for their incorrect advice? Does this ever happen?

Is it really possible for any human living outside the U.S. to become IRS tax compliant?

Is it ever ethical (e.g., in this post) to advise the unknowing of their tax “obligations” to a foreign state and by doing so cause them harm?

USCitizenAbroad comments: “It is painfully obvious that Shaun would have been far better if he had NEVER entered the U.S. tax system. This is hindsight. He could never have understood where this was going…” and “…this story is a sad sad reminder that those who have been most hurt by the predatory and immoral practice of U.S. “place of birth taxation” are the ones who tried hardest to comply…”

Karen says: “…the majority of the people profiled on the Our Stories page have already renounced/relinquished. Those that haven’t yet renounced likely will, eventually.* From all the people I’ve spoken to here – including some who are not comfortable sharing their story (even anonymously) – the ones who suffered the most were the ones who tried hardest to comply…”

Shaun’s Story:

I have lived solely in Australia for 3 decades. I kept my US Citizenship thinking that there was no drawback from doing so. I was told I had to continue to file US Tax returns and I would just send the US based CPA my Australian Tax Return & they would send me a huge document saying “No Tax Due” & I would sign it. It was incomprehensible to me how the Australian Tax return was converted to the IRS Tax return. I just thought I would never owe anything due to the tax paid in Australia.

This went on for many years until one year the USA Accountant said I had a huge Tax bill. I couldn’t understand this as all of my US Returns never owed a cent, but it seems that they had been preparing my returns incorrectly and all my deductions in Australia were not deductions in the USA. This was the start of my long intense problem that lasted from for several years

I was never told by the USA CPA that my Self-Managed Superannuation account here in Australia was not considered by the IRS as SUPER, it was considered a Foreign Trust and hence had been reported incorrectly; so all of my Super Savings here & interest income in it was treated by the USA as STRAIGHT INCOME and taxed as such going back 8 years. I lost all the benefit of my Super Savings. Then because the US CPA didn’t fill out the single page Foreign Trust Form the IRS Penalised me 30% of the total amount of my Super Balance. I had hired very good tax lawyers in the USA to handle all my dealings with the IRS & instead of getting me a fair result they were predatory in their billing & let things drag on & on.

The other large issue was all of the money I gave to Charities in Australia over the 8 years were not allowed my US Tax returns because “They were not recognised as USA Approved Charities”. This is another issue that the US CPA never advised me about. So between losing my SUPER & my Charitable deductions I owed a huge sum to the IRS, then add on USA Tax Lawyers & Australian Tax Lawyers fees.

I was so distraught ( I was also being treated for a blood cancer at this time ) I decided to give up my USA Citizenship & all the hassles that entailed. The day I had to give that final statement I was in tears at the counter at the US consulate in Sydney, I felt I had been betrayed & abused by the US. Then I had to file the final IRS form 8854 which again looks at all your assets as Capital Gains at the value the day you gave up your citizenship.

This whole situation was like having a second full time job, the lawyers who were supposed to help & protect you become part of the problem. If I could have chosen between Chemotherapy & dealing with this legal situation, I would have chosen Chemotherapy because at least you would know when the end would happen & the worst thing would be that you could die. With the legal matters months turn to years & I felt totally helpless that it would be resolved before I died.

I made one mistake & was willing to take responsibility for that & I did but all the above things I mentioned were so unfair that I couldn’t cope with it.

So I feel a huge responsibility to help publicise this situation so that other people don’t suffer as I had to for nearly 5 years. Australia is supposed to be the USAs’ best friend; how can best friends treat each other like this?

– Shaun”

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Our lawsuit claims that the legislation that enables the FATCA IGA “agreement” between Canada and United States violates Canada’s Charter of Rights and Constitution.

In this phase of the litigation, which little advances the lawsuit, the Canadian Government has asked, in a Motion, the Federal Court to compel the Plaintiffs to provide much additional private financial information. Our Vancouver litigators have had to spend time responding in a very lengthy document that such a request is unreasonable.

Personally, I am disappointed that our litigators have had to spend any time responding to the Government Motion.

Here is the “Overview” to the March 9, 2017 reply to the Government from Plaintiffs Ginny, Gwen, and Kazia:

“OVERVIEW [from pages 28 and 29 of Plaintiffs’ reply to Government Motion]:

1. More than two years after this constitutional and Charter challenge was initiated and its basis made clear to the defendant federal government ministries, the government is now asserting that it requires vast and invasive disclosure of private financial information concerning the Canadian citizen plaintiffs who have taken on the task and public responsibility of challenging highly problematic legislation on constitutional grounds.

2. The government’s motion is more than a mere fishing expedition. The effect of its application for such vast disclosure, if successful, could be to discourage Canadians from advancing precisely the sort of constitutional challenge being advanced in this proceeding.

The plaintiffs respectfully submit that the Court should not permit the government to require private citizens to comprehensively disclose years of private financial information as a precondition to challenging legislation on constitutional and Charter grounds.

This is especially so in the circumstances of the government’s present motion which, as set out below, completely fails to advance any reasonable theory as to how the documents it seeks are relevant to the plaintiffs’ challenge.

3. The government misleadingly glosses over the extremely remote nature of its theory as to the relevance of the disclosure it seeks. Put simply, the defendants [Mr. Justin Trudeau’s Attorney General and Minister of National Revenue] assert that, since Canadian financial institutions could be subjected to a 30% withholding tax on their operations in the United States if the impugned legislation is struck down as a result of the plaintiffs’ challenge, the plaintiffs must comprehensively disclose several years of their financial history on the tenuous and highly speculative theory that those financial institutions could pass on the costs of such a withholding tax to the plaintiffs in some unspecified and unquantified manner.

Among other things, this theory ignores the obvious fact that financial institutions – even when they face a new cost such as a foreign withholding tax – are obviously not automatically permitted to directly deduct amounts from their clients’ accounts in order to cover such costs.

4. As the government openly admits in, among other places, paragraph 16 of its Written Representations, its theory rests on the notion that debits in the plaintiffs’ bank accounts “may be increased” if the aforementioned withholding tax were imposed; while the plaintiffs’ financial holdings “could be devalued”. The who, what, where, and how of such speculative “increases” and “devaluations” are not explained. Suffice to say, these ideas require highly speculative and remote assumptions about how Canadian financial institutions and the U.S. government would react if the impugned legislation were struck down.

5. As for the government’s demand for particulars, the plaintiffs submit that this is simply a delay tactic as demonstrated by, among other things, the extreme lateness of the government’s motion. Not only is the government seeking particulars long after pleadings have closed (and indeed more than two years after receiving the plaintiffs’ original claim), but the particulars sought are, in substance and to the extent that have not already been provided by the plaintiffs, requests for evidence which the government will have the opportunity to request through discoveries.

It is trite that requests for particulars are an inappropriate means of seeking to obtain evidence from an opposing party. The pleadings are intended to illustrate the case to be met; not how it will be proven. In any event, it is extremely rare for particulars to be sought, let alone granted, where, as here, more than two years have passed since the relevant pleading was served and discoveries are contemplated to take place soon.

There are no exceptional circumstances that could justify the government’s delay.“

[The above is part of a 216 page document containing much legalese and private financial information of the Plaintiffs.]

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