US expat tax and FBAR: Discussion thread (Ask your questions)

Please ask your questions here about US Expat tax and FBAR.


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222 thoughts on “US expat tax and FBAR: Discussion thread (Ask your questions)

  1. “Participants will need to provide their e-mail address (which will remain confidential) and an alias.”

    Peter, can there be a link there to the place where the “newcomer” would sign-up to WordPress.com, The Isaac Brock Society Blog?

    I tried myself to see how this would work for a new person (since you did all the work for me originally, I didn’t learn). Just want to make it as easy as possible for a newcomer to join sthe Issac Brock Society Blog (on WordPress.com) and ask their questions, so they don’t give up and go away from this valuable resource for them.

    Thanks once again (even though I don’t want your valuable time being taken for administrative duties).

  2. Hi Peter:
    Does anyone know how dividend income works. I have read many times that there will be no penalties for those that owe no tax. I have also read that dividend income from Professional Corporations is not treated the same in the U.S. and therefore I would owe taxes as dividends in Canada are used to decrease the amount of tax one would owe and is very low. At this time I plan to lay low and not comply but just in case I want to fully understand all the tax rules so I don’t get trapped into owing taxes on my dividend income and then penalties on top of that if I ever where forced to comply.

  3. Below is a very well written comment on this morning’s WSJ article “Reform the U.S. Expat Tax” posted by Martin Van Horn. I think he really hit the nail on the head. Its long but definitely worth reading:

    Sadly, I must say, US citizenship and the policies that arise from it, have become a real liability these days if you live overseas. We should join other OCED countries and have a territorial taxation system to replace the one we currently have. One could write reams about the unintended consequences that arise from this misplaced focus on citizenship taxation. Many homeland Americans probably wouldn’t read it, or just don’t care. They should.

    The issue of offshore taxation is a complex one and requires thoughtful analysis. If you live in Kansas, offshore sounds exotic or non patriotic, and so there is little sympathy for an outcry coming from a ever decreasing Expat Diaspora around the world. Just lump them together as criminals with Homeland tax cheats who hide funds off shore, and go after them to raise more revenues for America!

    That has been the tactic so far with IRS. Congress has piled on with the FATCA statute which attempts to get all financial institutions in the world to collect data on “US Persons” (not just citizens) and report it back to the IRS.

    So, what is the impact?

    Well, US jobs are lost in the export sector. We can’t compete because we don’t seem to understand that having a large US sales force around the world creates jobs back in the homeland. We should be making it easier for this to happen, not harder with ever increasing tax compliance complexity.

    If you don’t understand this, ask the Indian or Chinese immigrant in your workplace if they have to file reports and pay taxes back to China and India for their efforts in America, and you might get the point. Now recognizing that it costs US business many times more to employ a US citizen aboard vs local resident to sell it’s products (due to US taxation and reporting requirements), why would they do it?

    What Americans in the homeland should want is an army of its Citizens spreading around the world with Purchase Orders in brief cases rather than guns on top of tanks. This would do more to create US export jobs at home, and add to homeland security, than any war we have recently undertaken. And cheaper too!

    Secondly, this citizenship taxation issue impacts more than just citizens. It impacts “US Persons.” A concept many readers may not be aware of, but that can include Green Card holders, foreign spouses whose financial lives are intertwined with US citizens, Dual citizens, and accidental Americans who by birth have discovered that even though they have never set foot in America, they are Americans too. “US Persons” are required, legally to comply with IRS FBARS filings on their home country bank accounts, File 1040s even if they owe no US taxes, and now, with FATCA, have their bank account activity reported back to the IRS.

    This has a lot of new immigrants reconsidering whether or not they want to come under such a “US Person” regime. As the Economist said in a recent article called “Dutchman Trapped,” “America’s unusual requirement that its passport-holders pay it tax no matter where they live gives many qualifying residents good reason not to apply.”

    Good “reason not to apply”, indeed!

    The other unintended consequence and maybe more pervasive is the accidental negative marketing campaign that is now happening around the world. Look at it as a customer bad mouthing a company due to a poor customer service experience. These activities arise spontaneously and go viral, and are very hard for a Company to reverse. You now have expats like me, combining voices with “US Persons” in a duet chorus of warnings to new aspiring skilled immigrants, “Don’t do it! Don’t take any action (immigration, marriage, adoption, or US investment) that could trap you into becoming a “US person”. The cost is just too great!”

    Is that the message Congress, Obama and Homeland Americans want?

  4. I’ve emailed Peter to see if he can redirect links from his hosting account so I can create a forum for issacbrock.com. That would make it (I think) a little easier to sign up, and it would keep things organised. People commenting to these threads is going to turn problematic. People may ask a question, but it’s very easy to miss it.

  5. Increasing demand for information about this from US expats and from potential new immigrants to the US will be satisfied by more sites providing such information. Bob Sheth’s actions in shutting down the US tax subforum will cause blowback when people look for that info on the expat forum, see it’s been shut down and wonder why. I think they are in the process also of deleting all posts that list the Isaac Brock Society. Shooting themselves in the foot. They should have looked at it positively and seen how it could actually attract more traffic to their forum. Too bad for them.

  6. Hi Accidental,

    You are correct; it has been the standard policy of the IRS all along that one is not penalized for filing income taxes late where no tax is owed. The sticky issue is the FBAR’s; are you aware of these and if so, have you filed them?

    I do not understand your comment about dividends in Canada being used to decrease the amount of taxed owed. Could you kindly describe more fully, what you mean by this?

    Laying low might be okay for now, depending upon things such as, do you have a Social Security number, a US passport, ever lived there, etc. If you are a Canadian citizen, the Canadian government/CRA will NOT collect FBAR fines, nor will they collect taxes for the IRS if the person was Canadian at the time the tax was levied.

    I am wondering by your username, if you are an Accidental American?

  7. Hi Nobledreamer: I hope I am replying in the right place but I can’t find anywhere else to respond to you.
    I was born in the U.S. but only lived there for 6 months and my parents where Canadian therefore I consider myself as accidental as those born in Canada to U.S. parents. I have very little to do with U.S. beyond travel and have never had a S.S.N. but I did have a passport once that expired 12 years ago. I do know about FBAR and have large amounts of RRSP’s in my name. I have not complyed in any way so far. The way dividends work is that if your spouse sets up a Professional Corporation because he is a lawayer or a doctor; you can become a shareholder and get paid dividends from the Corporation which is essentially like income splitting but also dividends are taxed at a lower rate then a regular income. It is one of the benefits of a professional incorporating. You can also use your kids once they turn 18 and it works well when they stil have a low personal income. Anyway this benefit is aloud in Canada but I believe it is not recognized the same way under U.S. tax laws and therefor I would actually have a tax liability if I filed I think but I was wanting to confirm that fact if anyone new. The amount of tax I could owe in my estimate is a lot as dividends average out to about 15% tax rate which is substantially lower then regular income tax rate.

  8. My understanding is that Canadian eligible dividends are paid out of profits which are subject to tax at the corporate level. At the personally level, they are subjected to a lower tax rate than earned income. This is not just a problem for people who have their own professional corporations but for anyone who receives Canadian eligible dividends from publicly traded companies, as they would be subjected to a higher tax rate in the United States than in Canada.

  9. You may owe less tax than you think. Your Professional Corporation is probably a “qualified foreign corporation” for purposes of U.S. dividend taxation. If you’ve had the PC for years you definitely meet the holding period requirement (60 days before every dividend payment). Meaning you could get the US “qualified dividend” rate (0% or 15%) for tax years 2003-2012.

    Separate from that is the paperwork issue. The biggest problem is Form 5471, which is not cheap to get prepared. Americans who own big chunks of foreign corporations are supposed to file this form. If you own 100% of that Professional Corporation, then it’s a Controlled Foreign Corporation (CFC) and you owe Form 5471 for every year. If you and your wife own 50% and you are totally sure your wife isn’t a US person, it’s NOT a CFC but you may owe a Form 5471 for the year of incorporation. You’re better off not giving any of the corporation to your kids until you’re absolutely clear on their nationality issues — if by some chance the IRS considers them US persons, then shares they own are treated as if you owned them (“attribution rules” of Internal Revenue Code Section 958(a)) and then you’d be right back in CFC territory.

    The other caveat is that if your corporation owned lots of “passive” assets (like a building which you use as an office, or it kept lots of free cash in the bank) and was not a CFC, it could end up classified as a Passive Foreign Investment Company (PFIC) instead, meaning you’d owe a bunch of Form 8621s. I don’t know enough about this problem to say anything intelligent except that it makes Form 5471 look like a walk in the park.

  10. I would like to get an idea of how much it should cost to have a professional prepare my taxes for this year in the following circumstances. I believe them to be simple but you never know!

    1) I have never earned more than 9,000 dollars a year so my understanding is that I have no liability to file a 1040.

    2) My non-US bank accounts have remained under 10,000 dollars until now. Shortly I will be closing my last savings accounts there and then transferring them here. I am considering transferring everything into a checking account because I have heard that otherwise I would need to report the interest accumulated as well. Is this true?

    Furthermore, I believe that I will then have to file an FBAR and then form 8938. Isn’t there also a form in-between for accounts over 50,000 dollars that I would have to file as well? I can’t remember what its called.

    3) To complete my renunciation I will have to file form 8854.

    I have no investments, shares, nothing, etc. Literally just checking accounts. I have seen some crazy numbers be thrown around like 1,000 US dollars per form. In this case then I would have to pay 5,000 dollars to legally complete my renunciation. Does this sound correct? Just trying to sound reasonably informed before I contact a professional to do these forms for me.

    Kind Regards

  11. Another question – How exactly does one locate a tax specialist who can handle these forms? I have checked the websites of KPMG, Deloitte, etc, but they all seem to be exclusively for multinational companies. I am looking for some huge tax company to do this for me since I can’t be sure that random accountant X has ever dealt with a renunciation before and I want to be sure that it is done correctly. Can anyone recommend some of the big names for me or suggest how to locate the right people? Do the larger firms not handle individual forms? I live in Belgium.

    Thanks Again 🙂

  12. Don,
    I did mine with Tubotax downloaded from the internet (not the online version). I was able to get the back years of the program to 2007. Your situation sounds so simple, I think you could do it yourself. $1000/return for your situation sounds unreasonable.

  13. @iamquincy

    I want to thank you for this most excellent find! I don’t know why, but using something like Turbotax never occured to me. I was terrified of doing them myself with no knowledge of the US tax system so I had resigned myself to paying out my yearly salary to get them done…It seems to have everything that I need:

    -1040 (Maybe I’ll file it anyway just so they don’t ask why I didn’t file it)
    -Form TD F 90-22.1 (FBAR)
    -Form 8938

    Not surprising of course that it doesn’t have the expatriation form 8854, but hopefully after fiddling around with this I might be able to figure it out on my own. I’ll just assume anything that I have no idea what it means like “Eligible compensation deferred items” and “Non-regulator trusts” are too complicated to apply to me….Couple of other questions that just occurred to me though:

    1) Can we “e-file” even if abroad?
    2) What exchange rate am I supposed to use?
    3) If I renounce in the middle of this year, when should I file everything? Can I file right after my appointment, or should I wait for the CLN? Or do I have to wait until 2012 in case they use a yearly exchange rate? I think this info was somewhere on the expat forum, but the relevant thread was nuked of course.
    4) I hadn’t even thought about “state returns”. Do I need to do that as well or is the Federal product good enough? Is there also a tax liability with the last state of residence? I have never heard this mentioned before but figured that I should ask.

    Kind Regards

  14. I don’t know the answers to all of your questions but I am pretty sure, from what you describe, that you would not have to file an 8938. The $50k amount refers to people in the US. For a single filer who is out of the US, the threshold is $200k at the end of the year or more than $300k at any time during the year. It doesn’t sound like this would apply to you. Also, 8938 is not required if there is no income tax filing requirement.
    http://www.irs.gov/businesses/corporations/article/0,,id=251217,00.html

    I have heard FBARs can now be filed online but to the best of my knowledge, you cannot file 1040’s etc, from abroad. I am relatively sure I have read on the IRS site that they ask for the rate in place at the end of the year and you can use any of the sources listed here:
    http://www.irs.gov/faqs/faq/0,,id=199668,00.html

    People seem to have different strategies regarding when to file. Some are filing just before they renounce, some just after. People from the forum who have done this seem not to be waiting to receive their CLN.

    I sent 4 years of returns/FBARs in mid-December and 2011 will make the 5th year. I am renouncing Jan 20 (2nd appt) so I will have to file a 1040NR for Jan 1-19 and then the 8854. I am not exactly sure when to send it, I guess I have to at least wait until 2011 is filed.

    Some states do have requirements to file but I know very little about this. Nor have I heard that anyone else is even bothering with it.

    Hope this is helpful.

  15. Form 8854 doesn’t look too complicated. I filled it out until I got to the last page, and said, what the f… I am not going to fill out a form for the IRS that enumerates my assets for them. But then, if I take this stance, the relentless police state of the USA will never leave me alone. I have lost my right to expatriate. Oh well. So much for the Constitution, the Declaration of Independence, the 1868 Exptriation act, and the United Nations Declaration of Human Rights.

  16. Hi Don,
    1,You can’t e-file.
    2. I used the annual average exchange rate from the Bank of Canada website.
    3.I had no professional advice, but filed my 5 years of back taxes after I relinquished (in December). I’m not sure if I file a 1040 or 1040NR for 2011 but I’m hoping I have my CLN before it is due.
    4. I didn’t do state returns
    Just remember, I had no professional advice.

  17. US citizens abroad are treated as residents of Washington DC. No states taxes apply. Presumably with Turbo Tax you can print out your return and send a hard copy. Or?

  18. Where do you find expatriation form 8854? Is there somewhere online where you can print it off? I have been searching the consulate websites but all they say is that you should request the forms by mail or e-mail. My apologies if this info is already on this site somewhere and I missed it. By the way this site is a great resource. I have an appointment with a an expensive tax lawyer this morning and have been compiling questions for him with the info I’ve found here. I’m having a one hour consultation and then filing on my own.

  19. I want to thank you all again for kindly taking the time to answer my questions. I think I can print off the completed forms from Turbotax and send them in the post with a courrier. I will use the official Euro-Dollar exchange rate from the European Central Bank and ignore the state returns. It should be pretty easy since I would only need to file for this year since I have no previous tax liability or even liability to file whilst outside the US.

    @nobledreamer

    I think that I fall into the unusual category of someone who has never earned over the 9,000 dollar threshold but who actually does have a significant amount in savings (gifted by my grandparents), so I think I still have to file the 8938. When it comes to these US tax forms I am taking the attitude that overfiling is better to be on the safe side to avoid needless penalties for missing “Obscure Reporting Form XYZ Number 27.8, etc”. They would know the amount in my bank accounts from the FBARs anyway, so its not like I would be revealing more info than beforehand.

  20. @somerfugl

    Do a Google search for “8854 irs”. The form itself is the first hit and the instructions are the second. Sorry about not providing the direct link, but I don’t want to post the direct link to a US government website here you understand 🙂

    Its the form for 2011 though. I imagine that the 2012 form will be released soon. The legislation hasn’t changed though so it should be identicial. Just replace in your head everything that says 2011 with 2012 if you want to get an idea of what it looks like.

    Hope this helps!

  21. This is not a question. It is just information sharing.

    I am posting this for those that are either in the OVDI, or contemplating entering,(or not!) and struggling with what is “reasonable cause”, and what is “non willful” vs “willful” vs “willful blindness” as it relates to that darn FBAR filing requirement!

    What you consider “willful”, what the IRS considers “willful”, and what the Courts are determining “willful” to be, span a wide spectrum. It is a key issue that a lot of OVDI “Opt Out” decisions rest on, and frankly is probably keeping a lot of folks from “Opting In”, in the first place. IE, it is having a negative impact on compliance objectives, which Shulman states is his goal, but the OVDI drives folks in the opposite direction due to the Draconian penalties imposed in this amnesty.

    As we know, the IRS’s “so called” VDP Amnesty is nothing like it is characterized, or how you would be treated if you were doing this in Canada. Willful or “non willful”, it wouldn’t matter. You would just pay up taxes and interest without fear of other penalties or prosecution.

    At least that is what it says here.

    http://www.cra-arc.gc.ca/gncy/nvstgtns/vdp-eng.html

    I draw your attention to this recent post over at Jack Townsend’s blog. Many may have already seen it, but for those of you who have not, it involves the William’s case, which has been working it’s way through the Courts. Jack has blogged on it several times, and frankly it was the hook that got me reading and commenting there in the first place.

    I would stay abreast of developments in this regard, and I think you can depend on Jack to keep you up to date on the issue.

    Here is the link…

    NTA Discussion of the Williams Case (1/12/12)

    http://federaltaxcrimes.blogspot.com/2012/01/nta-discussion-of-williams-case-11212.html?

    I would say, happy reading, but upon reflection, none of this is happy reading! 🙂

  22. @ Don, I know what you mean about the overfiling, it’s just that the penalties for mistakes on 8938 are high and the form is a bear. I am just thinking that if you really are not required to do it, it may be wise not to take a chance. Regardless, just thought I would pass it on………

    Here is the quote from the IRS site that I am referring to:

    “If you do not have to file an income tax return for the tax year, you do not need to file Form 8938, even if the value of your specified foreign assets is more than the appropriate reporting threshold.”

    http://www.irs.gov/businesses/corporations/article/0,,id=251217,00.html

    “Failing to file Form 8938 when required could result in a $10,000 penalty, with an additional penalty up to $50,000 for continued failure to file after IRS notification. A 40 percent penalty on any understatement of tax attributable to non-disclosed assets can also be imposed. Special statute of limitation rules apply to Form 8938, which are also explained in the instructions.”

    “Form 8938 is not required of individuals who do not have an income tax return filing requirement.”

    http://www.irs.gov/irs/article/0,,id=251216,00.html

  23. I don’t know if anyone can help me, but I have my final renunciation appointment at the end of this month. Can I safely assume that anything that I do or have financially after that date will be of no concern whatsoever to the IRS? ie: not reportable on either a tax return or FBAR. (I would actually like to purchase a small business here in the UK, but only after my expatriation) Or would it be prudent to not make any assumptions and wait for my CLN to arrive, however long that may take? Thanks.

  24. @Ken After renunciation the IRS expects you to do the final tax forms to check out of the Hotel California: Form 8854 and 5 years of tax returns. I believe this is a violation of the right to expatriate.

    I set up my corporation after my relinquishment of US citizenship. I am now under the Tony Soprano here in Canada (i.e., CRA). You were right to wait until after renunciation to set up a company. No American can own a small business outside the US and keep up with the filing requirements of the United States. You cannot do it without first being free of their slavery.

  25. Thanks Petros. I am up to date with with my tax returns. And have no problem filing 8854 after my renunciation. Would not be considered ‘covered’ either. Just wondered if it would be best to wait until I have the Cert of Loss of Nationality in my hands (and thus certain the shackles have been removed) before I do anything further. And I assume once I do have the CLN, anything from my renunciation date onwards would not be reportable in any way. Sorry… but all of this is obviously nothing I’ve ever had to worry about before.

  26. @Ken I don’t see why. The CLN is a piece of paper on which State acknowledges that you have exercised your right to expatriate. Nothing legal can go wrong, unless you do some of the things that could show that your expatriation was not sincere or was against your will. See this post.

    Just make sure that you do none of the wrong things after, like vote, move back to the states without the proper paper work, or travel on a US passport. Remember, don’t act like they can take your expatriation away from you. They are trying to keep everyone in the Hotel California. They don’t have that right. Once you renounce, you are free.

  27. Can anyone tell me the name of the reporting form for financial accounts with a value over 50,000 dollars? I know that this exists but I can’t locate it anymore. I’ve calculated, like nobledreamer said, that I thankfully don’t have to file the 8938. I think I just have to file two FBARs (Its one per account right?), the 50,000 dollar form and then the renunciation form. I might still file a 1040 showing under 9.500 dollars in income just to be safe. That should be everything.

    Thanks everyone!

  28. For those coming here for answers to questions, I would remind them to stay up with Jack Townsend’s blog too, as he has been posting some very specific information lately here… I have also answered some questions from Anons on what to expect.

    http://federaltaxcrimes.blogspot.com/2012/01/irs-re-opens-offshore-voluntary.html?

    Here is a recent example:

    MJan 19, 2012 10:22 AM
    Dear Prof Townsend,

    In a case where the filer discloses FBAR assets for 2011, but did not do so for 2010 and 2009.

    I would think the recent disclosure would cover prior years as well. Disclosure is disclosure. The IRS/Treasury knows about the assets.

    They would have to make the argument that the country was somewhat harmed that it did not know of those assets in 2010. Since the FBAR is some kind of terrorist protection, and there were no terrorist acts that could have been prevented as result of the Treasury knowing about these assets, it would be a thin argument.

    Furthermore, as immigrants, (because I cannot see the IRS charging expats, they would not come back), the filers can say that they just learned about the law, just started filing, and have complied when they found out.

    They would show knowledge of the law and compliance with the law.

    Do you know of any cases where charges were filed in such circumstances?

    Even in solely domestic tax-evasion situations, I cannot imagine the IRS bringing criminal charges for past years if the taxpayer is in compliance for the last year.

    I would be curious if you know of such cases.

    Another major issue, is that as immigrants they are dual residents and they always have the option of going back to their native country.

    If they are professionals (ie engineers), they also have the option of working in several countries with the need for their profession.

    So their relationship with IRS/DOJ would inform their decision whether to settle in the US or keep looking for a better place.

    These tax-related arguments and regulations (and even a jail sentence) are “grist for the mill” in their overall life decisions and direction.

    Mobility and flexibility allow people to avoid jurisdictions with onerous and unjust laws.

    Jack TownsendJan 19, 2012 11:03 AM
    To M @ Jan 19, 2012 10:22 AM

    Just a few comments:

    1. Disclosure for one year is not effective disclosure for other years (earlier years in your example). The subsequent year disclosure might mitigate the problem, but other factors could override it to give the IRS the incentive to go full bore on civil and, possibly, criminal penalties. Just depends on all the facts and circumstances — at least as they become known to the IRS.

    2. For a similar reason, the IRS may and will, depending on facts, prosecute years earlier regardless of intervening year(s) of compliance. The IRS will certainly consider the intervening compliant years in the overall mix, but then will prosecute consistent with its tax enforcement priorities. Intervening year compliance is not voluntary disclosure or amnesty for past sins.

    3. The FBAR requirement is not solely about terrorist protection. Indeed, I think one of the principal goals was the war on organized crime (using the term loosely), but the Committee Report also say that the reports are useful in tax enforcement.

    4. In my opinion, IRS will charge ex pats in appropriate cases. The IRS cannot afford a message that ex pats will not be prosecuted and certainly would not selectively prosecute immigrants over ex pats.

    Best,

    Jack Townsend

  29. Hello friends! Forgive me if this has been asked before… I have a hypothetical scenario to propose to all of you. What if someone moved to another country and didn’t file to the IRS for several years, then began filing their back returns. If that person doesn’t file FBARs, regardless of whether or not they meet the threshold, how would the IRS/US treasury know whether that person needs to file an FBAR? Does the IRS or treasury actively try to find that information out? And if someone is renouncing before FATCA is implemented, would it even be necessary to ever file an FBAR if all the other requirements are met?

  30. @z There is the line in the 1040 that asks if you have foreign bank accounts. How do you answer that question? Also, you may have RRSP, but you are supposed to claim in your tax return as well. So now, before FATCA is implemented, they only know what you tell them.

    I consider renunciation the absolute right to free oneself from duties as citizen. But the US tax code requires the exit process, form 8854 and the last years of filing to be accomplished before they release you. It is contradictory, unreasonable, and sucks, but it is what they require. So that you enter a limbo of having lost your citizenship but still being a person subject to IRS until you finish the exiting paper work to their satisfaction.

  31. Hi all,
    I must confess to not having looked in detail at all the questions and answers above, but a quick scan didn’t seem to address my situation.
    American Mother, Canadian Father. Born in Canada and have always lived in Canada (save one year overseas). Mother registered my birth with U.S., Mother applied for me to get a U.S. Social Security Number, Mother applied for passport for me. I have both Canadian and U.S. Citizenship. When I was around 27 I renewed my U.S. passport, but never traveled on it (presently age 40). That was the only affirmative action I have personally taken vis a vis U.S. citizenship. No bank knows of my dual citizenship status.
    I have never filed a U.S. tax return – I have always filed my Canadian tax returns. I don’t earn over the net yearly income amounts that would trigger U.S. tax. I own a home jointly with my wife. My total net worth on a deemed disposition of all my assets (including 1/2 interest in my home is about $400,000.00.)
    What should I do? Lay low and hope they won’t find me? (I have moved since my age 27 passport renewal – so they don’t have my current address); catch up on filing and hope I don’t get nailed with penalites? Catch up on filing and relinquish citizenship before my net worth breaches the $600k threshold? Another consideration is to save my kids from the potential estate tax headaches (My kids may face problems because by the time I pass, my assets may breach the estate tax thresholds due to inheritances).
    I’ve been worried sick about this and the CA I spoke to didn’t seem to have a clear idea as to what approach I should take.

  32. @barney
    Your response depends partly on your need or desire to travel or work in the United States. Compliance should be a matter of simply filing back tax returns and FBARs, with an accompanying letter saying that you were unaware of the filing requirements.

    Or if you have no desire to retain citizenship, you could renounce it and be clear of the problem.

    But there is no need to fear a confiscation of your wealth, because the IRS has no access to your Canadian accounts and no ability to put liens, holds or seizures (provided they are all in Canada and you have no assets in the United States). So relax, you have time to decide what to do. Your wealth is not in danger. Canada has said it will not enforce FBAR for the United States. Neither will Canada collect any taxes for the United States from a Canadian citizen. The only actual leverage that the United States has over you is access to the United States.

  33. @Barney
    CRA has already put out a statement that they will not collect US penalties(filing or FBAR) on Canadian citizens. I’ll try to repost a link to it.

    This is what the CDN govt was saying as of October.

  34. @geeeez I think there may be residency requirements to bestow citizenship automatically to children (i.e., parent would have had to lived a in the United States for a certain amount of time). Victoria, our resident expert, could probably answer that question. The grandparent could bestow citizenship if it is asked for, but it is not automatic.

  35. Thank-you Petros. Have you heard of any instances of how the U.S. treats former citizens who renounce/relinquish citizenship who attempt to enter for short holidays?

    If I do try to catch up and comply am I guaranteed to get hit with the 27.5% penalty? I may be conflating or confusing issues here…

  36. I immigrated to Canada from the U.S in 1948,was married to a Canadian and have lived in Canada since then. I applied for Canadian citizenship and received it on Feb.5,1963. At the time of my birth in U.S. my father was a Canadian. I use a Canadian passport and have never had a U.S. passport. I last filed U.S. income tax about 1949. Was out of the paid work force until 1985 when I began filing Canadian tax forms. Can I be considered as having relinquished my U.S. citizenship? How could I ascertain this?
    stressed grandmother

  37. Does anyone know if North Shore Credit Union, or Vancity Credit Union has assets in the “Excited States of America”, or legally connected to any company that does? How about the CCEC in Vancouver, a cooperative which looks interesting?? The Bird

  38. @ Stressed Grandmother

    I would suggest you read the many comments under “Relinquishment and Renunciation of U.S. Citizenship” on another section of this blog.
    When you took out Canadian citizenship in 1948, the oath of allegiance to Canada also included a “Declaration of Renunciation” to any foreign sovereign. So the answer is yes, you would be considered to have performed an expatriating act and relinquishing your U.S. citizenship.
    If your financial institutions require proof of this, you might need to obtain a copy of your oath and also you might eventually need to obtain from the U.S. Department of State a “Certificate of Loss of Nationality” or CLN.
    My situation is not unlike yours and I plan to “get my ducks in a row” and get a copy of my oath through Citizenship and Immigration Canada and the Access to Information Department. I would then be prepared to go to the U.S. Consulate and apply for a back-dated CLN.
    Whatever you do, do not file any U.S. tax returns or FBARs as that would be enough to indicate that you did not “intend” to relinquish your U.S. citizenship.

  39. @A broken man on a Halifax pier, @Petros, @Victoria, @Barney

    It appears as though he didn’t meet residency requirement, it seems. Let’s hope they never start using grandparents– it’s already a big enough mess.

    An American parent automatically passes citizenship to their children, as in Victoria’s case and my case. It’s kind of hard to believe they do this, even if you don’t want it.

  40. HI,

    I was born in the USA in 1962. Moved to canada in 1963. Never lived in the USA since. Had 2 driver’s licences and registered 2 cars in the us using my grandmother’s address. Never worked in the us. Never had a bank account. Never filed a USA tax return. Never had a US passport. Have been traveling to the US several times per year for a few days at a time.

    2 questions:

    Do I need to file US tax returns?

    Should I stop visiting the US?

    Thanks very much.

  41. Billy

    I know you are wanting a quick answer, but I am not the one to supply it to you. There maybe some others here who will just give you quick yes or no.

    However, you are reading in the right spot to work out for yourself what is the best course of action….

    In theory, you are a US citizen, and so you are required to file tax returns and submit FBARs if you meet certain criteria.

    Should you do it now, well some would say no, and some would say it ‘all depends’.

    Should you stop visiting the US, well the longer time passes, and the more the IRS and Immigration begin to focus on US Citizens traveling on other passports, then your risk does go up.

    Ultimately, anything you do, or any decision you take is based upon your own personal risk tolerances, and whether or not you want to be compliant with the consequences of being a US citizen. Some would say, why do you want to be a US citizen anymore anyway, if you have been in Canada since 1963? However, renouncing that citizenship isn’t so easy either, so maybe you see why I am staying away from black and white yes or no answers.

    May I suggest, that you might want to check out this section of this blog, and start there…

    http://isaacbrocksociety.com/2012/01/28/the-ovdi-drudgery-for-minnows/

    Also, maybe some other Canadians (I am not one) will share with you what actions they are taking and why.

    At some point, after you educate yourself some more, you may need good legal advice, but not yet!! Now is the time for the drudgery.

  42. @Billy There are many possible answers to your question. The first one I ask is did you become a Canadian citizen? Were your parents US citizens when you were born? What were they doing when you were born there (on a temporary job assignment, permanent residents, US citizens, or diplomats?)

    The US birthplace is problem for you if you want to continue going back and forth. The US considers you a US citizen. But what about you? Do you even want US citizenship? Is it important to you?

  43. Thank you Petros and Just me.

    My dad (Canadian at the time) was going to university in the USA. My mom was a US citizen at the time I was born but became a Candian in the 1980’s. I was registered in Canada in 1965 as a Canadian born abroad.

    I am 50 now and had been thinking that it might be nice to retire in Phoenix in 10 – 15 years, however, I would be willing to renounce if there were benefits. Like not having to file. I have RRSP’s and an RESP for my kids. I am legally separated. Net worth is a couple million. I just bought a $500 timeshare week in Idaho. In my RRSP and RESP I own mostly US stocks – MO PM and MSFT.

    If I continue to to travel to the USA, what could happen?

    What are the costs and benefits of filing in order to become compliant?

  44. @ Billy: If you have un-filed FBARs there is a problem. If you file your back FBARs, you have to have a lot of trust in the United States that they will not fine you heavily. Do you trust them? You also have to worry about potentially owing taxes because of differences in US and Canadian taxes (such as if you have gains in TFSA, Canada eligible dividends).

    Do you even have a Social Security Number? If not, you are off the radar for now. The FATCA legislation will make that impossible for you. If the banks comply, your bank accounts will now be fully exposed to the United States. If the banks don’t comply, your US investments become illiquid, and you will have to get rid of them before Jan 1, 2014, or selling them will result in a IRS 30% withholding.

    You are safe as far as Canada is concerned because the CRA will collect from you neither FBAR fines nor US tax. But your US investments give the IRS leverage against you. The border guards are also harassing people with a US birthplace on their foreign passports, may even deny entry. If you want to live or travel in the US, this problem is not gonna go away.

  45. Hi Billy:
    I am responding to you because we are in similar situations. I too was born in the U.S. in 1964 and lived there for 6 months and was born abroad by Nov. 1964 when we moved back to Canada. Both my parents were Canadian. I have very little to do with the U.S. beyond travelling there a few times a year and like you, my husband and I had hoped to retire in Arizona.
    Our money situations are also similar however I have no RESP’s as my kids have used those all up thank goodness as the U.S. doesn’t except them. Based on my dividend income I receive from my husband, I would owe taxes and therefore owe penalties. I would also have to do FBAR reports as I have substantial RRSP’s. I have done the math and could owe anywhere up to $500,000 if the I.R.S. wanted to unfairly hit me with the penalties owed dued to my dividend income. I have made the personal decision not to comply for obvious reasons and will continue to work through my bucklist of travelling to the U.S. until it is clear I can’t cross the boarder anymore. I went to Florida a month ago and they took notes at customs on their computer. I didn’t dare ask but I am assuming it was because my Canadian passport says where I was born. My husband and daughters passports passed through just fine.
    As Petros mentioned, you also have a great deal of U.S. investments which they could target. Moving to a small credit union that doesn’t do business in the U.S. and won’t comply with FATCA might be a good decision for you.
    Everyones choice is personal. It is a big sacrafice for us if we can’t travel to the U.S. anymore but based on principal and how Canadian I really am, I won’t give them a dime. To renounce means to tax comply. The accounting fees alone for me could run me $30,000. It is such a damned if you do damned if you don’t situation. I wish you good luck in whatever decision you make. Who knows, maybe the whole thing will settle under the mat and go away but right now it does not look that way. The U.S. will grab money where they can.

  46. Thanks to all especially Accidental.

    I am going to do the same as accidental. Thank you all for sharing. It made my decision easy. Thanks very much!

  47. Billy , I think you need advice from a good professional. My guess is you can’t afford to become compliant. It might cost you hundreds of thousands. There may come a time when your timeshare is useless. Retiring in Phoenix also is problematic. So too are your US investments. Anyone anywhere, US citizen or not, has to file an estate tax return if they own more than $60,000. worth or US assets including stock shares. In most cases, there would be no estste tax owing but the paperwork burden is very onerous.

  48. This web site is a wonderful opportunity for people to vent about the new IRS initiative to focus on offshore compliance. I would guess that most people fall into one of two categories: those who are “off the grid” and do not file nor do they have any intention of becoming compliant with their US federal tax obligations and those who are sincerely attempting to figure this all out and determine what to do and then make a good faith effort to comply. For those in the second category, here is a thought from a 30 year IRS veteran attorney. The name of the game here is the abatement of civil penalties (assuming your tax problems do not arise from an illegal activity). Under widely recognized IRS procedures, civil penalties can be abated upon a showing of reasonable cause. That could mean reliance on the wrong advice of a professional, or ignorance of the law, say for someone who has lived in Canada all their lives and is an “accidental” US citizens who never had any reason to know about FBARs or FATCA. At the present time, the IRS is under an enormous amount of pressure to “be reasonable” in its administration of these new penalties and statutes. If you happen to “get caught up in the system” and the IRS comes after you, you can be sure at some time you will get a computer generated notice with penalties stacked up automatically. If you choose to cooperate and play the game, it is usually an easy matter to get to talk to a human being and talk some sense into them and agree to pay the tax owed but get all the penalties abated.

  49. @30yr IRS Vet
    Perhaps you misunderstand. We are not here to “vent” as if this is some kind of gab session. Neither are we here to figure out some way to reduce civil penalties as though we admit being some kind of tax cheats as the media in the United States has constantly called us. Nay, we are here to fight the IRS and to encourage the politicians in our countries to stand up for us.

    Many of us aren’t even really Americans, at least not according to international law. We are of dominant Canadian or other nationality. But your portrayal of our activity here as “venting” is condescending. If you want to help us, then please help us by fighting. We are not going to back down, and we are not going to compromise with the IRS.

  50. Welcome–and Thanks IRS Veteran. Did I read correctly that are also an IRS veteran attorney?

    Be prepared to be swamped with questions. Let me be the first!

    When I became a Canadian citizen in 1973, I was told by American Consulate I was renouncing my U.S. citizenship. I also recall a Consular Official who met with me just before my citizenship ceremony and had me sign a document confirming my understanding. I did not receive a copy of that document or a CLN.

    I took my oath of Canadian citizenship with the full knowledge intent and expectation that I was no longer a US citizen. Since 1973, I have only ever identified myself as Canadian–not as a dual citizen.

    I have only ever had a Canadian passport, but twice US border officials have told me I should get a US passport because I was born in US. They have insisted I am US citizen. I have insisted I am not..

    Based on recent developments, it seems US and IRS are now trying to reclaim me. Many others on this website are in similar positions. We understand there are different rules which apply to when you became a Canadian citizen.

    I have not earned any income in US since 1970, have no assets or investments there, and do not own property there. My American SSN (which I don’t even remember!) has been inactive since 1970. I have always paid my taxes in Canada. My income is below the $92,000 which I understand is exempt for foreign earned income.

    Based on this, do you recommend I continue to do what I have been doing? Would going to American Consulate to formally relinquish my American citizenship and apply for CLN help or would it put me on the radar of the IRS? Do you know if I can be forced to get a US passport in order to visit my elderly mother, who is in poor health?

    I know what I think is best, but your inside advice would be very helpful. I also know others would appreciate answers to these questions.

    Thanks!

    T

  51. @30 Year IRS Vet – Thanks for coming on here!! Welcome! I don’t know if this was your department, but I think a lot of people, me included, are very curious to know why the US wants to tax people who make (zero) money in America, yet receive zero benefit or services from America? Or even “file” for that matter? I don’t even make enough to pay taxes in America, so for me to file costs the IRS money money to process my $0 return. I’m sure everyone connected with this site would love to hear something. But like I said, I don’t know if this was your specific area, so no pressure at all…

    I don’t have FBAR problems, but I have a feeling this FATCA is going to make me an “undesired” person by banks or any financial institution for that matter – all over the world. This is what I can’t have happen, so I’m renouncing as soon as I can. Misguided? Very! My parents have been really good at telling all of my extended family, and no one blames me at all.

  52. Pingback: Comment from a 30-year tax lawyer | The Isaac Brock Society

  53. Dear Petros. Touche’ and I applaud you and respect your anger. Having done federal tax for 41 years I have never seen something as controversial and volatile as this issue. I must say based on my experience in working for the IRS that the Washington never considered or could have anticipated the problems with the new rules which are specific to Canadians. We don’t want to alienate our good neighbors to the North. I can tell you that Washington is certain to consider the problems of Canadians under FATCA and I am sure they will be addressed in the regulations once they are published and the whole world has a chance to comment.

  54. 30 Year:
    This is affecting a lot of people, even people in Brazil.

    Canada is not the only country that has US Citizens. There’re tons here (and everywhere), especially the naturalised variety.

  55. @IRS Vet: You have far more confidence in the IRS than we do. They have given us no reason to trust that they will listen to reason. This has caused considerable anxiety and stress for many responsible, law-abiding American citizens and former citizens. Many of us have health or family challenges and we do not need the threat and bully tactics of the IRS intruding into our lives far removed by choice from the US.

    The December IRS Fact Sheet did nothing to alleviate the frustration, worry and anger people are feeling. Do the IRS, DOS and elected representatives have any idea what this is doing to the US reputation world wide? Do they know how much they have alienated people from their country or birth–or from their parent’s country of birth? Do they care?

    After my mother’s death, I will never again travel to U.S. There are far more interesting and welcoming places in the world where I can travel on my Canadian passport to spend my money!

  56. @IRS Vet: It’s very nice to have you here though I expect you will be bombarded by questions and may regret it. 🙂

    I wonder if you have any ideas about the TAD delivered by TAS. We have all been waiting for Comm. Shulman’s response, which was due last Thursday. Nina Olsen seems to have quite a lot of guts. If IRS does not concede, do you think she will take it to the Congressional Oversight Committee? Is this a rather rare situation?

  57. Well It sure looks like I stirred up a hornet’s nest! I just came back from a week in Panama talking about FATCA with people who have an American connection down there. I thought they were angry!? Let me say that my legal ethical requirements as an attorney prevent me from giving specific advice here, but for those of you who wish to contact me directly, I may be in a position to be more helpful. On this web site, I can say what the law is and give some history or perspective and answer some very general questions regarding the law.

    First it is important to note that your anger should not be directed at the IRS but rather the US Congress. The poor folks at the IRS are simply trying to figure out what Congress meant when they passed FATCA, and do their duty to administer a very difficult law. The examples you all cite here are situations which simply must be addressed in the final regulations which are set to be published any day now. That publication date starts a comment period during which Canadians and others do have the opportunity to make their views known.

    I would urge everyone of you to write to the IRS Commissioner and express your concerns. Believe me, I used to work in Washington for the Commissioner’s Chief Counsel. The IRS does read these comments and each one is carefully considered. I can assure you that simply by the volume of your comments, you will be heard. A literal application of the FATCA rules to Canadians simply cannot stand. Moreover, whatever the final regulations say, the IRS would not have nearly enough resources or the desire to pursue Canadians over this except for the most egregious situations which is what the law was intended to cover in the first place.

    http://www.mopsicktaxlaw.com

  58. Pingback: Comment from a 30-year tax lawyer | The Isaac Brock Society

  59. @ IRS Vet of 30 years…

    I want to salute your courage in being willing to post comments on this site. We know some IRS agents lurk around, but rarely do they make comments and identify themselves, and so to you I say, …”Bravo”

    I am mulling over what exactly to say to you, and help you understand the situation that many have been going through the past 3 years. I think I will reserve my comments and make them later over at the new posting that Petros started…

    http://isaacbrocksociety.com/2012/02/01/comment-from-a-30-year-tax-lawyer/

    In the meantime, I would encourage you to read this thread..

    Has your life been stolen from you by the IRS?
    http://isaacbrocksociety.com/2012/01/21/has-your-life-been-stolen-from-you/

  60. Might 30 yr vet hazard an answer to the tax position of people who expatriated before 1994 but only informed the State Dept recently?

  61. Ja, Ja. Keep writing zese nootes – ve read zem und write down ze information to uze lader againzt you – SS Sturmfuehrer Shulman!

  62. @ 30 year irs vet
    Thank you for joining our blog. Like Blaze who wrote earlier today, I have a very difficult time understanding how any U.S. government department could possibly think of me as a U.S. citizen.

    I first left the U.S. for Canada on a student visa as an 18 year old in 1961, then landed in Canada married to my college sweetheart in 1964. Citizenship in 1972. At that time, the oath taken in Canada had both an oath of allegiance to the Queen but also you had to “hereby renounce all allegiance and fidelity to any foreign sovereign or state of whom or which I may at this time be a subjecct or citizen”. I took that oath voluntarily and with full intent to relinquish my U.S. citizenship.

    Since that time I have done nothing that would indicate I thought of myself as anything but a Canadian ie no U.S. passport, no application for U.S. Social Security, never called myself a dual citizen. I have always been completely integrated into Canadian society. Most years I never had to file income tax returns in Canada, as I was fortunate to be a “stay at home” mother until my youngest was in his last year of high school in 1989 – in other words 25 years after I “landed” in Canada. I vote in Canada: my children and grandchildren live in Canada: I have buried one daughter in Canada and buried my husband in Canada. I have no plans to leave this wonderful country.

    I have filed Canadian income taxes since 1989. My income is not from employment but from investments and CPP earned by my late husband and OAS. It is very modest income and consequently I usually have a very small tax liability or often no tax liability. Therefore, I would not have a “foreign tax credit” to use on a form 1040. Therefore, it is possible that a 1040 would show I owed money and therefore would be subject to the penalties. Yet why should someone like myself even have to file a 1040 when I left your country 48 years ago and have never asked anything of your country in all those years.

    This has become unbelieveably stressful to the point that I don’t sleep at night, my children and my doctor are all concerned. I have to be able to bank in my country but this ridiculous rule that your congress passed could prevent that. Does any of this make sense to you?

  63. @30 Year IRS Veteran, You wrote “I can tell you that Washington is certain to consider the problems of Canadians under FATCA and I am sure they will be addressed in the regulations once they are published and the whole world has a chance to comment.” I am not sure that I understand, can you explain “the problems ” that are unique to Canadians but do not apply, say to Brazilians, Mexicans, Australians or French, or to to other dual-nationals with US citizenship residing in other countries? Thanks so much.

  64. Yes indeed the IRS is bound by law to enforce the statues that Congress enacts, but bear in mind that although FATCA was introduced and sponsored by Senator Levin (D, Michigan) its provisions were written in full and complete collaboration of IRS Comissioner Schulman and his top experts. It was exactly what he envisioned as necessary for the IRS to find and collect taxes on the hundreds of billions of dollars hidden abroad by tax-evading Americans.

  65. @ Roger The IRS complicity in drafting FATCA is a very interesting point. I personally do not hold blameless the Executive branch; Shulman and Geithner have caused untold pain and suffering in the Expat community abroad. We have already discussed in this blog that FBAR is subject to the interpretation of the Secretary of Treasury, and entire countries or classes of persons could be relieved of the filing requirement (such as genuine residents abroad). Low-level bureaucrats may not be to blame, but the are nevertheless complicit–Does the line, “I’m just doing my job”, excuse those who enforce unjust laws? If the current implementation of the Bank Secrecy Act (FBAR) gives the impression that the IRS wants to round up US citizens abroad and plunder a percentage of their savings, it is only because of the OVD programs that Shulman has created and his minions have enforced.

  66. I just want to know why the US wants to think it is “entitled” to a part of someone’s earnings when they make nothing in America?? Even if — if I understand the law correctly — someone makes 1 euro/ C$ / Aud, whatever, they are expected to file…

    My parents have been pretty good at telling my extended family about this, and they all seem to understand this is US nonsense.

  67. 30 Year IRS Vet said:

    “Moreover, whatever the final regulations say, the IRS would not have nearly enough resources or the desire to pursue Canadians over this except for the most egregious situations which is what the law was intended to cover in the first place.”

    If that’s the case why did they employ the carpet bombing approach and build up so much ill will toward the US? They’ve alienated foreign governments and banks … these are the very people whose cooperation they need to catch the real tax evaders and money launderers.

    Can we conclude from what’s happening as opposed to what should be happening as evidence that the IRS Commissioner is ineffective at his job and the wrong man to bring the real tax evaders and money launderers to justice?

  68. @omg: “Can we conclude from what’s happening as opposed to what should be happening as evidence that the IRS Commissioner is ineffective at his job…?”

    Was that ever in doubt?

  69. @Roger… @ 30 yr IRS Vet.

    Thanks for making the point about IRS collaboration with Carl Levin to slip FATCA into the Hire act in the dead of night. I think that point is missed or not known by many…

    Yes, ultimately Congress is responsible for the Statutes they create, and that is a fair point. But…..as I understand it, the IRS was working as a Lobbyist for these ridiculous statutes, and helping create the language that would be added to the Hire Act.

    With all due respect, …To now beg off any responsibility or complicity by saying….. “The poor folks at the IRS are simply trying to figure out what Congress meant when they passed FATCA, and do their duty to administer a very difficult law”…… is a bit much for me to stomach! I didn’t fall off the turnip truck yesterday! It is disingenuous at best, or shows a total lack of understanding how Statutes get created in the first place. Maybe that is not what you meant to convey.

    Carl is incapable of writing this, and someone with inside knowledge of what they wanted, had to construct the language. Would that be just some young 20 something staffer with a BIG vision of world financial reporting? Hardly. It is some committee from the IRS probably comprised of attorneys, knowing what the IRS leadership wanted. They said, “Here is our opportunity, and here is our complicit Senator who will do our bidding and sponsor this amendment.” They wrote it and targeted it as an amendment on a Statute that was sure to pass. Which Democrat was going to vote against something called a “Hire” act during this time of financial strife?

    Well…Mission accomplished. FATCA is Fact, and now you tell us the IRS are just poor victims struggling to determine Congressional intent? Hell Congress didn’t even know the provisions were in the bill, as they don’t read them, remember? How many pages was the Hire Act anyway? Actually small by Congressional standards. They could have read it. It was only 125 pages, if my googling is correct.

    So, with all due respect, the justification you site for our misplaced anger, might apply down at lower level manager or staffer, i.e., someone “just doing their job.” Can’t really be angry at them. I get that! However, this justification does not hold any water for the Leadership who has been lusting after this additional power. Hold the “woe is me” refrains from the “poor IRS people” for those that are easily duped, as I am not buying it.

    And in less you think, I am just some old cynic out here in the ether, I speak from some experience as how laws get passed. I have one amendment to one Congressional Statute that has my imprint all over it. And I am not proud of it.

    A law was passed that helped divvy up “USPS mail” between airlines in Alaska that got slipped into a spending Statute by the late Uncle Senator Ted Stevens. (Call it the ‘mail to nowhere’ bill if you like!)

    Little ‘ole me, got a ‘real politic’ lesson on how legislation happens, and had a major hand in writing the language working as a lobbyist for an airline group. We got our way! And when the Alaska villages protested the changes in flight schedules that resulted, I could say, “Oh we are just poor little airlines trying to figure out the intent of Congress, and if you don’t like it, you should direct your anger at them, not us!” Yea, right. I became a cynic on that day!

  70. @Just Me
    There is a difference between the IRS and the US Treasury department of tax policy office. In theory the tax policy office is reponsible for designing tax policy whereas the IRS is responsible for enforcing it. Having said that the tax policy office is a badly degraded office compared to what it once was and most definately compared to its Canadian equivilent Finance Canada’s tax policy branch. Its not clear whose fingerprints were on this act precisely. My experience in Canada is governments like to give themselves a lot of flexibility in implementing actual legistlation whereas in the US the Treasury and IRS don’t seem to have a lot flexibility in this one. Congress does maintain a fairly extensive internal tax policy department as part of the JTC(Joint tax committee) so I suppose that is one place to look.

  71. 30 year IRS vet
    would you consider representation for those folks wanting to enter ovdi 2012? Would you look at their fact pattern and
    see if they are candidates for disclosure of how to become compliant

  72. Suresh: Just so you know, we have not restricted access to Mopsick website. If you wish to contact this law firm for representation, you do so at your own risk. This website, the Isaac Brock Society, has not officially recommended or endorsed tax professionals.

  73. 30 year IRS vet – For a while i thought that i was discussing with an IRS agent who currently works in the IRS and could be a sounding board for the situation a majority of us are in.
    But looks like that is not the case. I think users should identity themselves more clearly. Maybe the tone in the mails and the mention of Washington D.C, Chief Counsel etc, anger should not be directed at IRS, made me think that i was discussing with a current IRS agent handling offshore issues. But looking at posts from others, other seem to have made the same assumption.
    I appreciate you including your law firms URL and that makes it clear that you are not a current IRS employee.

  74. @Tim…

    Thanks for your comments, and I understand those differences although I probably take some license in lumping them together since IRS does report to Treasury.

    However, I also understand that Statutes are created with a lot of mays not shalls, and the IRS is given wide discretion in implementation and regulatory rule making. Look how unenforced FBARS were for so long, before they decided to become more harsh with the power they were given.

    My point is a simple one, while Congress surely bears the blame for voting for Statutes whose contents and impacts are unknown, the IRS does not come out of this as poor non complicit victim in legislation that gets created. If Treasury and/or the IRS opposed FATCA, it would have never seen the light of day.

    Whether it is via Treasury attorneys or by IRS attorneys,or a combination of the two (likely) the IRS/Treasury leadership had a role in the bills creation. To now claim difficulty in understanding Congressional intent just doesn’t wash with me. Just ask Shulman or Geithner what they intended. That is about as deep as they need dig. I am sure no one (or few) but Carl Levin in Congress knows what was intended. JTC is a fair point for you to make. (They would be the few).

    Maybe I am wrong, and too cynical, but I have seen how the sausage is created. I had my little part in creating some of it. The IRS can also lobby Congress to undo what they have done, and create amendments to strike a different balance, if they wanted. They could have stopped it in the first place.

    It should not have to wait for letters to Senators/Congressman from a far flung Expat Diaspora to raise a stink and awarness. ACA has been working the issue hard, but there are few other Expat groups so organized that can lobby or fight this. I am looking for evidence that the IRS really wants changes in FATCA or will do anything different without pressure just because it is the right thing to do. So far I see the opposite, but will amend my views given the evidence to the contrary. I guess we wait the next FATCA regulatory guidelines.

    However, as you know, they (the IRS) have gone a step farther than FATCA, and have attempted by regulatory power to create DATCA, or the domestic version of FATCA to impose on all US banks the requirements to disclose the amount of interest paid to nonresident aliens, under the ‘what is good for the goose is good for the gander’ theory.

    http://www.accountingtoday.com/news/Congressman-Tells-IRS-Back-off-Bank-Disclosures-60322-1.html

    So, what do you make of that? Are they just trying to intone Congressional Intent, or do they have a larger mission here? So far, it seems they have been deaf on Congressional intent here, but there has been no further reporting that I have seen so not sure.

    Fair questions, I think, but you can correct if I am wrong. I am very open to contrary opinion or thought. I would like to be less cynical of our poor IRS officials. There is only one official, I am not cynical about, and that is Nina Olson. So far IRS leadership are ignoring her. I am watching for their response to her TAD and report to Congress to figure out IRS intent, as that intent has more relevance to us right now.

    BTW, I am pretty sure that ACA has been lobbying the JCT, as I think you are right, that is the place to look now. Maybe in the current offshore hunt, they can call off the dogs.

  75. I think 30 Year IRS Vet should change his username to be more clear that he is not currently with the IRS and he has a business interest in participating on this site.

    We assume everybody is following the conversation at the same speed we are but some folks dont’ have time read through all this stuff and figure out who is who. We don’t want to lead lambs to the slaughter…

  76. I’m 100% against the FACTA because it results in account closures and all other nasty things. But if the US wants to apply extraterritorial taxation, let us have the same deductions as mainlander Americans have. I have a strong feeling that we wil ** Drain the US treasury!*** Then they might reconsider citizenship-based taxation.

  77. From a Canadian perspective(and also I suppose from New Zealand perspective too although I am not as familiar with all the details in NZ) I think essentially the US is in the position that Canada was in the final years of the old wholesale/manufacturers sales tax before the “new” GST(the Canada/New Zealand/Australia verison of VAT) came into place in the late 1980s. You essentially had many people in business effectively “burning the house down” as to how the old wholesale sales tax was effectively killing Canadian exports and Canadian business and how these problems would only escalate after the US Canada free trade agreement came into effect. One the other side you had most of Canadian public who did not even know about the old MST(which was a hidden tax) and its highly detrimental effect on exports but KNEW very much that what the replacement GST was and how much they didn’t like it. In the middle you had the politicians(of the governing Conservatives) that knew they to save the business community and manufacturing sector from annihaltion but also knew that instituting the GST(they still very much needed the revenue from the old MST) was certain to end their political careers. Here are some news videos and public service announcements from that time period. (Note: the governing conservatives of the day were reduced to TWO I repeat TWO seats in the next election. The next government a Liberal one promised to scrap the GST in that election only to break that promise in time for the 1997 election). The whole thing was made even more messy by the “stacking” of the Canadian Senate.

    http://archives.cbc.ca/politics/federal_politics/clips/13230/
    http://archives.cbc.ca/politics/federal_politics/clips/12071/
    Some public service announcements from the day:

  78. Dear friends from the Great Country to the North:

    There have been a lot of thoughtful comments in the past few days and it is a privilege to participate in this discussion group.

    A word to clarify who I am. After 30 years with the IRS I retired from the government and entered the private practice of law focusing solely on representing people before the IRS. I most definitely do not work for the IRS but I know a whole lot about it and how it works. Any person currently working for the IRS who published the things I have on the internet would be fired the very same day. The IRS speaks through its public relations office in Washington or through notices, announcements, regulations, revenue rulings and other approved avenues. All IRS employees have to have any public comments cleared first by someone above them. Even the Commissioner of Internal Revenue coordinates his significant comments to the press through the Treasury Department since the Commissioner of the IRS is also an Assistant Secretary of the Treasury Department.

    As a private citizen I can say whatever I want to say about the law, our government, and the IRS. I am free to comment about things people say which are wrong or inaccurate and in my practice I find that my clients appreciate me because I often get them money back from the IRS when I can prove the IRS wrong. I also tell my clients up front when they take on the IRS in an audit or in court if the law is against them or if they have not properly understood the law or if they have little chance of succeeding.

    I had a number of interesting jobs with the IRS as an attorney. I was a litigator for the IRS representing the organization in the United States Tax Court. I was also an assistant to a man who became the Acting Chief Counsel of the IRS responsible for managing all the IRS attorneys in the country. That was very interesting because I got to see up close and personal, how tax laws are enacted, how the IRS fits in the Washington scene vis a vis the Congress, the U.S. Treasury Department (where tax policy is formulated in cooperation with the White House), and the Department of Justice which represents the IRS in all US courts except the United States Tax Court.

    Please trust me on this: the IRS does not make tax policy. Tax policy is determined by the Treasury Department and the White House who then fight it out with Congress who accepts what the Treasury Department wants, rejects it, or compromises on it.

    When an idea for legislation in the Executive branch of government gets some traction, it is true that tax attorneys from the IRS work closely with the Treasury Department to craft the actual language. If a tax proposal continues to be viable, the Treasury Department takes it across town to Capitol Hill where people from the tax writing committees (in the House—Ways and Means, in the Senate, Senate Finance).

    Often times the attorneys from the IRS who worked with their counterparts at Treasury on a proposed bill will then work with attorneys from the Congressional Tax writing committees who in turn work with the staffs of whoever in the Senate and the House is willing to introduce the bill in their respective houses. Sometimes lawyers from the IRS are still involved at this stage, often times not.

    The reason I am so “defensive” about the people who work for the IRS is because I know from my 30 years’ experience that they are normal people like you and me. I have also learned that people who work for the IRS are over represented in our population amongst people who work with kids, do volunteer work, are involved in church activities and everything else Canadians and Americans think of in terms of what is good and right for society. They are not scheming in their offices on ways to deceive, cheat, or oppress people.

    FATCA was conceived because our system of voluntarily self-reporting income and deductions was not working. The theory is, in a democratic society, the government has no right or reason to know what assets we hold or the extent of our personal wealth. The theory is that with an enlightened and educated citizenry, we are on our honor to honestly report our gains and losses on our tax returns. Unfortunately, the government concluded that that was not happening and many Americans were using off shore bank accounts and other foreign investments to cheat their fellow Americans by not paying their fair share.

    FATCA was designed to target Americans who were cheating on their taxes through the use of offshore accounts. FATCA is a sad commentary on the fact that in some instances, our honor system was not working. No one in the US government was thinking of Canadian citizens who had little or no connection to the United States when FATCA was enacted.

    Nevertheless, the statute which came out of Congress (not the IRS) literally applies to some dual nationals who were minding their own business and not looking for trouble, not cheating the American fisc or the US government and who couldn’t care less what the Americans were doing to administer their own tax system.

    So we have a problem and the question is how to fix it. In my next installment I will address what can be done about it from Voluntary Disclosures (which are not for everyone), to organizing a writing campaign to make sure the detailed rules cover Canadian problems, doing nothing and simply blowing it off!

    Respectfully submitted,

    30-year IRS Veteran

  79. Thanks for that explanation 30-year IRS Veteran.

    Here I was thinking the Americans were just out to pick our pockets cause they ran out of money!

    Does it take a rocket scientist to figure out that you should exempt bonified overseas residents even if they are technically American?

    DATCA only requires reporting on non-resident aliens.

    But with FATCA if you even ever french kissed an American the IRS wants you to fill out a form! We feel like the IRS is crawling up our butts and till now couldn’t figure out why.

  80. Pingback: The rational behind FATCA: 30-year IRS vet | The Isaac Brock Society

  81. 30 Years writes: “In my next installment I will address what can be done about it”

    I look forward to that. You also mention “final regulations which are set to be published any day now.” What exactly is this expected document? Schulman’s reply or something else? Should we wait to see what these regulations are before making any decisions?

    One of the main frustrations of all this has been conflicting advice from people with sometimes vested interests.

    Apparently I’m in a fairly typical situation: long-term dual citizen expat (in the EU), never knew I needed to file at all, then a couple of years ago found out and caught up for past years – but an ex-CPA relative did my returns for me, ticked the “no” box on schedule B without asking me, and stupidly I didn’t review the forms before sending them off…. I have around $200k in foreign accounts from general savings and selling a house – all generated in my EU country of residence, and compliant in that country. Unlike others here, renunciation is not an option, and in fact I intend to to return to the US later this year with my new (foreign) spouse (meaning I need to be current for a visa application).

    So far I have been advised very different things by different professionals: 1) file amended returns for the past five years with FBARs, and the current year done properly (including the new 8938 form), along with letter of explanation of reasonable cause. This seems most in line with the IRS December fact sheet for expats and dual citizens, though that document says nothing about mistakes on previous years; 2) “go forward” and file only the current year correctly, and “assume” the past ones were okay, then hope for the best; 3) do nothing on past years, file for an extension on the current year then move all my money in small transfers under $10k to my US accounts, then tick the “no” box on schedule B once it’s all done, and otherwise file as normal; 4) discuss VD with a lawyer. The last two seem most risky, albeit for entirely opposite reasons.

    Does anyone actually KNOW anything? Are any of these options objectively better than any other in the real world? With no offense intended to 30-year, can these lawyers actually be trusted to give objective information and advice, or are they more concerned with promoting their field of business and hoping to lure in frightened expats to ramp up their billing hours? On other blogs, no matter how professional and expereinced people are, advice goes only up to a point – and that’s the point where it’s time to engage the services of a lawyer… (the one who owns the blog, perhaps?). Fair enough, but it would be nice to know where people are coming from, and their motivations.

    So, I’m grateful for this blog since its grass-roots, change- and goal-oriented, and isn’t fear-mongering. Once my situation is resolved I will defnitely write letters to the IRS and to every politician who will listen. Until then, I’m too paranoid.

  82. @Vet: Petros has started two separate threads with your postings. I hope you will check out the numerous comments there.

  83. @30 year Vet… Yes please do follow the separate threads that Petros has created out of your comments. That gets your POV and comments more visibility, and allows us to have a proactive discussion which your contribution is important.

    They are located at…

    Comment from a 30-year tax lawyer
    http://isaacbrocksociety.com/2012/02/01/comment-from-a-30-year-tax-lawyer/

    The rationale behind FATCA: 30-year IRS vet
    http://isaacbrocksociety.com/2012/02/02/the-rational-behind-fatca-30-year-irs-vet/

  84. A couple things:
    Firstly, I have consulted an immigration lawyer who has confirmed that it is his understanding that those who committed expatriating acts before 1994 should be exempt from the exit tax regime. He also recommended the Isaac Brock Society as an excellent source of information. I confirmed that I already spend multi-hours on the site.

    I do understand the above Special Rule under section 511(g) as it pertains to the exit tax, but I really don’t see how it applies to not having to submit back tax reports and FBAR’s even after having received a backdated CLN. Tax reporting requirements and FBAR’s have been around a lot longer than the Exit tax. I understand the logic of why you shouldn’t have to comply with reporting requirements, but logic seems to have very little to do with it. Is there a reference or resource somewhere for this?

    Found this site clarifying the sequence of events in obtaining CLN.
    U.S. Department of State Foreign Affairs Manual Volume 7―Consular Affairs
    http://www.state.gov/documents/organization/113465.pdf
    Information is sent to the IRS after CLN is approved. Interestingly, names of people who have successfully renounced/relinquished are also sent to the FBI! Good grief, how ridiculous is that?

  85. FBAR has a six year statute of limitations. If you expatriated before 1994, then the FBAR statute of limitations has been passed.

    As for taxes, well that was so long ago. The requirements before 1994 did not include Form 8854. I don’t think there is any requirement for someone who expatriated before the Reed Amendment (1996).

  86. hijacked2012 said: Interestingly, names of people who have successfully renounced/relinquished are also sent to the FBI! Good grief, how ridiculous is that?

    They’re going to have to increase the FBI’s budget alot soon!

  87. It sounds a little ridiculous at first, but think about what they say in the 1st renunciation interview:

    1- You are not off the hook for any crimes you may have committed;
    2- You are not off the hook for any taxes owed.

    Haha. I got a recent copy of my FBI certificate to naturalise here. All clean 🙂

  88. Oh yeah, let’s send the IRS all our confidential bank account information along with a list of all our assets so we can be sitting ducks for identity theft by their own employees. Even the CRA doesn’t ask for this information and we live in their jursidiction.

    The IRS actually sent this guy $1,865,000 in refunds before his own bank figured out he must be running a scam.

    Former IRS Employee Sentenced for Identity Theft

    http://kfyo.com/former-irs-employee-sentenced-for-identity-theft/

  89. @hijacked2012

    Re “Firstly, I have consulted an immigration lawyer who has confirmed that it is his understanding that those who committed expatriating acts before 1994 should be exempt from the exit tax regime.”

    Would this mean that any of us who committed expatriating acts before 1994 (including taking Canadian Citizenship Oath) would have to have the ever-important Certificate of Loss of Nationality in hand to prove that we did?

    As most know, I became a Canadian citizen in 1975, was warned that I would relinquish my US citizenship, but I was not told about, so did not know nor do I have that important CLN.

    I was advised by a cross-border accounting firm in 2008 that I was still a US citizen and would have to file back tax returns to the US, which I have done and am now compliant 2005 through 2010, as well as FBARs for the same years. That was my Waterloo and I continued to make bad choices for myself 1) in going to a cross-border accountant for my advice instead of to an immigration lawyer; 2) then based on that bad advice, filed back US taxes so I am presently compliant from 2005 – 2010 and out in excess of $15,000 for being in compliance for these years; then applied for and received in 2009 a US passport (because of what I think of as intimidation by a US border guard to do so before I crossed the border the next time). As well, to add insult to injury I foolishly had cast my first US vote (before the passport) since I might as well now make some use of this dreaded US citizen and perhaps help make a difference for what I considered the absurdity of the administration “governing” the US.

    Now I need to commit another expatriating act, which will be my renunciation of US citizenship once I have ensured that everything is in order to do so. From what this immigration lawyer says I would not have been subject to the Exit Tax if my expatriating act was before 1994 (and if I had the CLN?). So, I now see it as, since I am back in the clutches of the US, I could be subject to the US Exit Tax if it is determined that I fit the US description, which I need legal assistance to understand (I hope not!).

    I know I am the fool, but I’ve had plenty of help in this cursed process and I’m really tired of going around in circles. Let me off this wretched merry-go-round.

    And, thanks for that gem of information that we hadn’t heard — that those who relinquish or renounce will have their name turned over to the FBI, as well as be on the “for shame” list. Have at it — I’ll be honoured.

  90. Since you obtained a passport and voted, they will consider you American until the day you renounce. It is unlikely you will pay any exit tax. 1. Your net worth would have to be greater than 2 million. 2. If it is, you would file 8854, calculate the increase in value of your assets over their cost base, subtract $636,000. from any increase and pay the exit tax on that net amount.

    The downside is you could have to pay an accountant. On the bright side, you are compliant and almost finished this nightmare.

    Some of us are only at the beginning of a 5 year process.

  91. @KalC: “Some of us are only at the beginning of a 5 year process.”

    There’s nothing wrong with filing five years’ worth of returns and renouncing.

  92. @calgary411

    As I understand it (and that’s only how I understand it this minute, not necessarily tomorrow when some other bad news may come to light), I can apply to relinquish and if all is right with the world, sometime in the future I would be granted a CLN backdated to my expatriating act in 1967. Then the consulate (or possibly the Dept. of State) woul send the information to the IRS . According to the immigration lawyer, who by his own admission is not a tax attorney, and information on Isaac Brock, I shouldn’t be subject to the exit tax, or to filing back tax returns and FBAR’s, as long as I “establish to the Secretary of the Treasury that such loss of US citizenship occurred before Feb. 6, 1994”. Being a pessimist, I’m not entirely convinced that the 1996 amendment stipulating this hasn’t been replaced by some other amendment. Who can understand this stuff? In some respects I think it would have been wiser to consult a tax attorney as that is the part most difficult to make sense of.

    Unfortunately these are uncharted waters for the most part and who among us knows what to do. At least you’ve made a start. I’m still vacillating back and forth – which option is safer, less expensive, least objectionable, etc – and the rules, if you can understand them, change daily.

    Your story is appalling but you made the best decisions you could along the way, according to the information you were given at the time. Nothing foolish there.

  93. @hijacked 2012

    I am so hoping that you and others that might be able to hold that you did relinquish (we were told that in the 70’s) when you took the Oath of Canadian Citizenship — get your Certificates of Loss of Nationality with no problem, no cost, no Exit Tax. I’m in your corner — I’m rooting for you 150%.

    And now, we’ve also got to do something for the “Accidentals” — appalling that there is NO CHOICE, both for them whether they wanted to take advantage of what their birth could provide to them, and for us whether we wanted to be reinstated with US citizenship. Most of us would say we did not want that, thank you very much.

  94. Well I just filed 6 years back-taxes with IRS and filed FBAR as well Hope they accept it. I genuinely did not know of this requirement until recently. If they do impose big fines. . well I just won’t go to USA again ever. Or just travel on my Canadian Passport which shows my Canadian birthplace. And I would file to renounce my citizenship if I am required to pay big tax penalties. I was born in Canada anyways.. just got US citizenship through naturalization. My Father being American born. The worst thing is that they tax our TFSA, RESP, and even Disability benefits. These are Canadian government registered tax shelters and should remain so!

  95. Hi all
    My husband and I are US citizens living in Canada for the last 35 years. 3 children with dual citizenship. No taxes owed,but we haven’t filed US taxes or FBARs since living here and are now looking into options. What are the risks of visiting in the US as we try to work this out? Is it true that people with US passports are being asked about their tax compliance at the border? Or that their names are being recorded? Would this interfere with a voluntary disclosure if they already have our names from this? Thanks for any information.

  96. Not being asked about taxes. I presume you have US passports. A very few Canadians with US place of birth are being asked why they don’t have US passports. Be very very careful about OVDI . Read the warning posted by Petros and the long story posted by just me as to how he was hornswoggled by the 2009 OVDI. You are at the beginning of a long and difficult journey.

  97. I have just been very cheerfully told by a tax professional that all we really need to do is file tax returns for the last three years, and FBARs and mutual fund info for 2003 to present. I hope this is true! We are not criminals or tax evaders, as most of us on this site are not, and really do resent the fear and dread associated with this issue. We are becoming more and more convinced that the OVDI is not for us. But I guess we need to do something especially with FATCA coming into being and we hope to continue using banks! We’re just hoping for information on the advisability of visiting with family in the US as we get this sorted out. Or is it best to stay out of the country until we have filed.

  98. @Sunflower, FBAR has a six year statute of limitations. That means you’d only have to go back to 2006 or something. I’m never going to do an FBAR. But I relinquished my citizenship last year. You have to decide what’s right for you.

  99. @Petros, thank you for that information. We are planning on relinquishing when we are in a position to do so. But from what I understand we need to be tax compliant before we are ‘allowed’ to renounce. Is that true? Do my children (they are dual citizens in their twenties) need to do all this filing before they renounce?

  100. @Sunflower,

    I think all expats should just do QD (in case you have never filed before). That should be fine. The only problem is mutual fund — IRS treats all “offshore” mutual fund as PFIC — so it is a different rule of gain/loss. Inside OVDI, it is recommended using mark the market method.

    I just took a look at TSE index (as I did not have earlier records of my own), it went down from 8,413. at the beginning of 2000 to 6,614 at the beginning of 2003 (OVDI starts on this day!). I think it was due to two big events — dotcom crash and 9.11 attack.

    TSE went back to high since 2003, that means loss is my own –Gain (from dip to peak) goes to IRS

    Of course, this could be a good argument that even if OVDI period is shorter than my residency time in US, I am comfortable that I would have owed no tax to IRS had OVDI period started on my first day arrival to USA.

  101. @ij, anyone doing quiet disclosure or go-forward disclosures on FBAR must be aware that they are voluntarily relinquishing their 4th Amendment right to require a warrant before disclosing to Federal officials their private banking information.

  102. @Petros,

    What is the law of the land ? I guess my right as US resident has been taken away by FBAR — it is a crime if I do not disclose willfully.

    So for expats, law of the land may not apply -:). It is under Canadian law — as far as the residency is concerned, am I right ?

  103. @saddened123,

    I can only speak as an OVDI participant (and US resident), that is inside OVDI, IRS wants you to calculate gain year by year — so, there is no such a thing as capital gain (when you buy and when you sell).

    So, if you have fund on Jan. 1, 2003 70K, and by the end of the year 80K — that means you gain 10K — so you report 10K for that year as MTM gain (mark the market gain).

    Of course, you can also claim loss — but it would have some limitation.

    If you sell fund before the year end, you just use the sale price to replace the year end price.

  104. @ saddened: I’m not an accountant, not even close. What I know is that there are many pitfalls for US expats. That is why as an investor, I found it necessary to relinquish my citizenship. That’s the only way to be able to invest with the knowledge that you can take advantage of the shelters that are available in the country in which you live. RRSPs are allowed. But not TFSAs. Some things like mutuals funds may have gains even when you don’t realize them through sale. That’s why relinquishment is the way to go. How can you ever know if you are satisfying the IRS?

  105. Sunflower. With respect to you and your children, you are supposed to file 5 years worth before you renounce. there are 3 tests for the expatriation ‘exit’ tax . Google IRS 8854 instructions.

    1 Tax owing less than 150,000 for 5 previous years. 2. net worth lesss than 2 million. 3 Swear ‘on penalty of perjury’ that you/they are tax compliant for the previous 5 years.

    Very generously, they agree to waive 1 and 2 but not 3 for dual citizens at birth who lived outside the US for at least 5 of the last 15 years. Quote

    “Certain dual-citizens. You may qualify for the exception described above if you meet the following requirements.
    • You became at birth a U.S. citizen and a citizen of another country and you continue to be a citizen of, and are taxed as a resident of, that other country.
    • You were a resident of the United States for not more than 10 years during the 15-tax-year period ending with the tax year during which the expatriation occurred. For the purpose of determining U.S. residency, use the substantial presence test described in chapter 1 of Pub. 519.”

    In other words you/they are supposed to file 5 years worth and then renounce. Aren’t you glad you asked? PS i am neither a lawyer nor an accountant but am in this mess.

  106. Accidental, I’m not sure of the details but dividends from personal corps ARE an issue. Apparently, in the US the earnings of the PC flow through in some way to the owner resulting in a mismatch of credits and in tax owing.

  107. Hi KalC…. This is the issue I have been concerned about. Not only do I owe taxes on dividend income which the US taxes higher, I expose my husbands PC which I am a shareholder of. The article in the Globe back in Dec. had indicated that it was yet to be determined how persons with PC would be treated in regards to the penalities as taxes would be owed. Once again non-compliance seems to be the best answer for me. Thank goodness I have no ties to the US and all my RRSP investments are non-US funds so I should be safe when FATCA comes into place.

  108. Accidental. I reread your posts including Jan 31. I agree with your plan 100%. I don’t think you have any other option.

    I firmly believe canadian banks will not ask where you were born and it also appears that RSPs will be exempt from FATCA reporting by the banks.

  109. KalC… Thanks for reading my story. It angers me to no end with how little I have had to do with the U.S. throughout my life that I have to make this difficult decision that effects my husbands and my future retirement plans. My own accountant agrees that exposing the PC and all my dividend income is not a good option. The accounting would also be so complicated. Not at all straight forward like some people with straight T4’s. My other personal income all comes from self employed sources with write-offs the U.S. probably don’t except. Scary to possibly not be able to cross the border and frustrating to feel like a criminal. Can you explain the RRSP’s not being part of FATCA? I didn’t know this. I thought they had to be reported and that they could take a good percentage as well. What if some of your RRSP’s are in Mutual Funds?

  110. Accidental, This is preliminary as the regulations are still in draft form and are pretty much gobbledygook. However, the draft regs that the banks would follow if they choose to are here.
    http://www.irs.gov/pub/newsroom/reg-121647-10.pdf

    Skip to page 286 and 287. The way I read it, banks can ignore RSPs and other tax favoured accounts when deciding whether or not to report their US account holders.

    I don’t see how your RRSP is invested has any bearing on the matter. Your bank won’t ask where you were born and you don’t need to tell them. You are Canadian.

  111. Addendum; This is from the regs as interpreted here
    http://paper.li/CUMicah/1328750124
    Note the last paragraph.

    7. Definition of Financial Account

    FATCA reporting is required only with respect to United States accounts.42 A U.S. account is any financial account held by a U.S. person or a foreign-owned U.S. person.43 Accordingly, if an account falls outside of the definition of a financial account, it is exempt from FATCA due diligence and reporting. The definition of financial account has been narrowed in the proposed regulations to focus on bank accounts and custodial accounts.44 The proposed definition excludes most debt and equity securities issued by banks and brokerage firms. Specifically, the proposed FATCA regulations would narrow the definition of financial account to include only:

    A) Depositary accounts in a financial institution.
    B) Custodial accounts.
    C) Non-publicly traded equity or debt in a financial institution (including hedge funds) and
    D) Cash value insurance contracts.

    Retirement and pension accounts subject to non-U.S. laws are excluded from the definition. Tax-favored non-retirement savings accounts established under non-U.S. law that limit annual contributions to $50,000 or less are also excluded from the definition.

  112. Wondering about how FBAR obligations and reporting requirements apply to US citizens/’persons’ participating as volunteers in community and professional associations – which are frequently governed and run by an entirely volunteer board – whose members may have co-signatory powers on organizational accounts (to co-sign checks for expenditures, pay staff salaries and deposit funds from fundraising…): Example (a) non-profits such as community and charitable groups (e.g. food banks, literacy groups, children’s sports leagues, etc.); OR Example (b) US citizens/’persons’ participating as volunteers in governance of professional associations – as treasurers, and board members with co-signatory powers…. I’m assuming that we have to report those accounts on FBARs as well – even though we have no actual personal benefit in the assets? Should US citizens/’persons’ then refrain from participating in their communities in order to avoid yet another FBAR (and FATCA?) obligation?

  113. @Brock the Badger

    Yes, its all got to be reported. I have been refused signing authority twice due to FATCA not only at my company but also at a voluntary organisation. I have also heard stories of “US Persons” being asked to stand down as Treasurer of a Parent-Teachers Association and of another who had to stand down as the signer of a hobby group’s accounts.

    But yes, that seems to be the US is sending: “Volunteer…but only in America!”

  114. Thank you so much for this…trying to glean as much info as I can on what to do next. Truly terrifying. I’ve been here since 1974 and now retired.

  115. I have a quick question.
    If I close all my foreign bank accounts, except for the one where my salary gets transfered to from my employer once a month, and my wife (NRA) opens a new account at a different bank in her name and I have no signature authority on this new account, do I still have to file an FBAR as long as I automatically have the balance of my salary account tranfered monthly over to my wife’s account. My monthly salary is not yet over 10’000 USD 🙂

  116. After thinking about it for a while, no not about trusting my wife 🙂 , I might not have to file an FBAR but the money I transfer to my wife’s account will probably considered by the IRS a gift and since she is considered an NRA there will probably be gift taxes due 😦
    Ya just can’t win with the IRS can ya ? 😡

  117. Transfer it to her account if you want–it is not a gift. Don’t tell the IRS–why is it their business? Consider it a disbursement to pay rent, food, etc. and not a gift.

    Such a solution wouldn’t work in Canada unless you keep an accurate ledger of your money and hers. Then, you keep track of how much money your money earns and you pay income taxes on it. Giving your spouse money for investment purposes is not allowable form of income splitting. You may lend to your spouse at interest. So I would check with an accountant in your own country to see if you can give your wife all your money and what the rules are. Of course, it is a manner to dis-empower you and to empower your wife. Don’t you think it would be simpler to relinquish your US citizenship?

  118. @Petros
    I ‘m living in Switzerland married to a Swiss and according to Swiss marital and tax laws from the day we married ALL of our income is split between the two of us. For Swiss tax purposes it doesn’t matter who’s name the account is in. From a Swiss point of view I just have to get on my knees and beg my wife for pocket money every month 🙂
    On the topic on renouncing, I’ve been thinking about it for quite a while now but haven’t decided to cross that bridge just yet. I keep wondering what the situation will be in 15 or 20 years from now. A US passport does make it a whole lot easier to settle down for retirement later on, either on or near the ocean some place warm like South Carolina or Florida. Switzerland is a land locked country and the mountains are nice, but I love the ocean too. I don’t make enough money to be able to afford living in both the US and Switzerland when I’m retired. So far the FEIE has been helping me from owing taxes in the US, but I haven’t set a price limit on US citizenship yet in case those idiots back home decide to revoke the FEIE.

  119. @ Uncle Great for you. If everything is in your wife’s name but swiss law says it is common property then it sounds like a good stop gap solution. You don’t have to file FBARs. Take that IRS.

    There are nice beach spots around the world with good tax laws: Grand Cayman, e.g. Plenty of places in South America. The US is gonna get worse before better. If you can ride the storm, why not? But it is gonna get much worse. But your suggestion is not a workable option for Canadians. Cheers.

  120. @Petros
    O.K. thanks for this great site. I’ll try to keep adding my .02 from time to time, but for now I’d better get back to work!! 🙄

  121. I just had a most interesting phone call. From someone at the local . CRA office.

    In December, I had written letters to everyone I could think of, including the Harper, Flaherty, the CRA and the Privacy Commissioner about all this stuff, including FBAR reporting, particularly related to the “signing authority with no interest: part and my job as treasurer of a small local non-profit organization.

    The letter I had written had made it’s way to the local branch. She called to tell me it didn’t seem there was much the CRA could do, and it would be maybe better sent to the privacy commission. (The privacy commission has already replied and basically PIPEDA applies to businesses)

    But we had a nice little conversation about the difficulties. She said she had read about all the problems and thought it was horrific and wished me the best of luck in dealing with it.

    So, to me it means that all the letter writing does have an effect. This one person can’t really help, but it probably prompted her to look into it and it raises conciousness a little bit everytime.

    Now if only we could get to the people with the power!.

  122. 8th Amendment of the US constitution:

    Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted

    Why should an expat be fined if (s)he doesn’t owe the US govt’ anything? FBAR / FACTA’s are “cruel and unusual punishments” and clearly are “excessive fines imposed”.

    The Tax Advocate service even pointed out that FBAR’s penalties could violate the 8th amendment in their most recent report to the US congress: Full report (http://www.irs.gov/pub/irs-utl/2011_arc_internationalmsps.pdf)

  123. @showdown Great find.

    The point is that the IRS is very much cognizant of their limitations. But still, they think that 20, 25, 27.5% is proportionate for minnows, yet they know that they are unable to wield the heavier fines against most people. That certainly should make us all breathe a sigh of relief, now that we know the IRS is just bluffing. I will post on this very soon.

  124. @Don Pomodoro;
    Thanks for sharing re: community volunteer roles (ex. treasurer, or board governance w/ co-signing authority) and obligation to file FBARs on the accounts in question. I’ve written to the TAS and submitted SAMs Systemic Advocacy Management submissions to the TAS ( on that issue, as well as related – FBAR burdens for US ‘persons’ in voluntary (non-paid, non-professional) power-of-attorney-for-property/executor/trustee/guardian roles.

  125. @30-year IRS veteran (and anyone else who might know): On the topic of FBARs required to be filed on other peoples assets/accounts (where there is no personal benefit – and my SAMS submissions above), I’ve also been wondering about the FBAR obligations for US ‘persons’ working as trustees/executors for 1. various financial bodies such as banks/trust companies/credit unions who perform their duties for pay, but may represent many clients (of unknown citizenship) and 2. provincial Offices of the Public Guardian and Trustee (see ex. http://www.attorneygeneral.jus.gov.on.ca/english/family/pgt/overview.asp ) here in Canada. Do those government staff who might have personal FBAR filing obligations (as US ‘persons’ also have to file on behalf of : (a) the ‘foreign’ estates/accounts/assets they manage for clients, and (b) file FBARs if their clients are US ‘persons’? (note: if yes, the clients are deemed incapable of managing their affairs, so how could the IRS hold them responsible?). I would think that to comply would be impossible: due to breaching privacy and fiduciary duties and probably Canadian law, as well as impossible due to the scale of a caseload.

    I’ve just been thinking about other ways to demonstrate and challenge how discriminatory or unethical the FBAR (and FATCA) regulations are, – and it seems to me that to demonstrate the impact of the burden on those least able, or least responsible might be very embarassing to Congress and the IRS internationally. If the Canadian and provincial governments were to have to intervene on behalf of civil servants who had to report all their clients (ex. OPGT), that also would demonstrate the ridiculous reach of the IRS – and spur provinces to speak up officially as well.
    Any thoughts?

  126. Was asked specifically at pre-clearance at Pearson (once they’d established that I was a USC born and still living in Canada) today whether I’d been filing tax returns.

  127. Broken Man: This is very concerning to me. Were you travelling with a Canadian passport or U.S.? What did you say to them and what ended up happening? I always travel to the U.S. via Pearson and I have a trip planned for May to San.Fran. When I crossed in Dec. they typed notes in the computer after examining my passport. Can you give me more details on your experience.

  128. @CanuckDoc, thank you for your post (Feb 14), am very interested in the issue you mentioned, re “signing authority with no interest: part and my job as treasurer of a small local non-profit organization.”

    Was looking into this myself for future work reasons, and also for volunteering (hence my previous posts). My past experiences are that with limited staff and small boards in community not-for-profits, co-signing powers – even just as backups for others is very important. If we can’t work or volunteer in non-profits without getting further entangled in the FBAR/FATCA mess – and their account totals count toward our threshold for reporting, and for calculating possible penalties – it is a burden for us to have the co-signatory role – a burden that US resident ‘persons’ don’t face….a barrier to some categories of employment, to getting experience/training through volunteer roles, or participating fully in our professional communities…Can’t even sign on a tiny ‘foreign’ petty cash account without an FBAR? Don’t want to have to explain to a potential employer or my community group, why I can’t/won’t be a co-signatory….

    Funny though – thought barriers to employment would mean barriers to earning taxable wages – and barriers to generating US taxes … Oh, I forgot – it’s the FBAR/FATCA PENALTIES that have such lovely potential for revenues extracted (extorted) from US ‘taxpayer’ ‘persons’ abroad – not the usual modest salaries in the not-for-profit sector (unless the most current proposal to eliminate the foreign earned income exclusion is successful…). Basically, the more unrelated accounts and assets the IRS and Congress tie into the “highest aggregate sum” reporting basket, the more people will meet the threshold – even if they themselves don’t have anything much to save in ‘reportable’ accounts.

  129. @Jefferson D. Tomas: Thanks for that info. about the IRS backlog. I have done 3 years of returns and FBAR (for a small RRSP) but have not sent them yet. A tax accountant that I had one consultation with recommended that because of my low income, I should be able to get away with filing for only 3 years. The main reason for filing for only 2009-2011 is that I was self-employed prior to those years. The accountant said the filing for self employment (even with a tiny business and a low income) is unbelievably complex and that I should definitely avoid going there.
    I have been very hesitant about filing as I’ve been living entirely in Canada for over 40 years and have been a Canadian citizen for the past 10 years. I’ve never traveled with a US passport (except in 1971 when I arrived in Canada), never voted in a US election etc., so i don’t want to admit US citizenship by filing, but I don’t think I have a choice if I want to renounce and get a CLN..
    I thought if I filed the 3 years, then wait awhile to renounce, I can say that I’ve been compliant with the IRS and thereby avoid filing for 5 years. If there is a huge backlog, maybe I can get away with this??
    I really resent having to pay $450 to renounce, but from what I’ve read on this site, I don’t think you can get a CLN if you became a Canadian citizen after the mid-1990’s. I want to be able to continue to travel to the US to visit relatives, and I refuse to get a US passport. I also want to be free from worrying about FACTA in 2013.
    This whole mess is so confusing and frustrating, and like so many of us I feel caught in a nasty trap with no easy way to escape.

  130. @somerfugl: I think some of the folks who filed got $300 back–even though they had not paid anything and didn’t owe anything. I think that was for 2008, but one of them could confirm the date. It’s bizarre. The $300 was for the stimulus package. If you file (and that’s still a big If) and got the $300, you could use that towards your $450 to renounce.

    However, I think you can relinquish if you became a Canadian citizen with the intent of relinquishing and you haven’t done anything since then to reclaim. There is no fee to relinquish and you only need one appointment. Can someone with more knowledge of that let somerfugl know. Also, my understanding is that you do get a CLN (when they finally mail it) after you relinquish or renounce regardless of when you became Canadian..

    I think Petros just renounced last year, then applied to relinquish and is awaiting his CLN. Petros, is that correct?

  131. @Blaze; Thanks for the info. I’d definitely prefer to relinquish as I’ve not done anything to reclaim. That is why I’m holding back on sending in the tax forms. if anyone has experience or advice on this I’d really appreciate it.

  132. Pingback: U.S. citizenship as a disabilty – How much longer will other countries allow U.S. citizens to immigrate? « Renounce U.S. Citizenship – Be Free

  133. Hello, I paid the exorbitant FBAR penalty of 20% of the highest balance and now want to know if there is some class action lawsuit or claim being made to the IRS that I can join?

  134. @brian,

    I don’t know of any class action lawsuit or claim being made to the IRS, but if your think you should have been given FAQ 35 consideration, or a lessor penalty using normal discretion in an “Opt Out”, I would call the TAS, DC office to explain your situation and Facts and see if they have any suggestions or help.

    Their TAD to the IRS, called for just such adjustments. Shulman has failed to respond formally, but still will have to respond to a Congressional Commission, I think. So, there might still be some slight hope here. Give a call. Nothing ventured, nothing gained.

    See this recent letter by ACA to Commissioner Shulman
    http://isaacbrocksociety.com/2012/03/09/aca-writes-commissioner-shulman-about-unfair-irs-treatment-of-americans-overseas/

  135. @ Howard: Ive read and heard the same thing from Greenback and am wondering how they can appear so confident in regards to expats just filing the missing paperwork while in other places you have people screaming that the sky is falling and get into an OVDP now!

    Any longterm participants have an opinion about this?

  136. @anonymouse.

    Well, I think there is adequate information on this web site, for you to asses the correctness of that statement for yourself, but I would take all recommendations, or generalized comments like this from any forum that is trying to get your business with a ‘grain of salt’. It all depends on your facts and circumstances.

    There are those that have taken the QD (quiet disclosure) route with amended returns, file late FBARS with a reasonable cause argument, and then are now in the waiting for the statute of limitations (SOL) period to expire. So the truthful answer is we don’t really know.

    We do know a lot more now about how Opt Outs from the OVDI programs are being handled, and there is some cause for hope that the IRS is going to use discretion “to be more lenient”. I would read Moby’s story that is on the front page of Isaac Brock.

    http://isaacbrocksociety.com/2012/03/10/moby-opt-out-update/

    One thing for sure, doing something, or doing nothing, comes with some risk, and assessing that risk has not been a simple manner as much of the IRS actions/processes are pretty opaque.

    If you decide to follow “greenbacks” recommendations, you are still going to have to use a lot of “LCUs” to become compliant, and there are others that are refusing to do this, again depending on their circumstances and POV.

    I would continue to read more here, and recognize this year, with the new form 8938 you have some real conundrums to deal with when you do your taxes.

    I might recommend this recent article to you on Accounting Today.

    http://www.accountingtoday.com/ato_issues/26_3/FBAR-FATCA-put-pracs-on-alert-61871-1.html?pg=1

  137. Forgive me, I need somewhere to vent…. I am almost finished my US tax forms It is all clarity personified until I decided to see if I am supposed to include the AMT. I have just assumed in the past it wouldn’t apply to me, but as i have heard someone say it is applying to more and more people, I decided to look into it. I can’t see why i would, as I’m not taking any weird deductions. hardly any actually besides the standard ones and the foreign tax credit, which wipes it all out, but in order to see if i need to file form 6251, I need to complete 6251, and this form must be the utimate in orcish. There is an AMT assistant that is supposed to tell you in a few easy questions whether you need to do the 6251. It just says i need to complete 6251 to see if I need to file 6251. I can actually understand the 1116 (Foreign tax credit) and can do the rest of my tax forms independently, but this…….. Perhaps it was inserted by the H&R Block Orcs to make sure no one would be able to do their own tax forms. Does anybody actually understand this stuff…..AAAAAAARGHH……….. (Tomorrow i am calling my accountant, but my husband is away so I have no one to complain to now.) Thanks for listening.

  138. @canuckdoc, I commiserate – I’ve been trying and trying, but I just can’t understand some of the forms or what counts as what – to even decide WHICH form it is – as clear as muck. Everytime I think I’ve got it, it slips away – plus I’m terrified of making a mistake….

  139. What, complaints about the complexity of the forms. I am shocked, just shocked! 🙂 Don’t you know you are completing the best income tax system in the world that money can buy? We are the BEST! This is exceptional America you are talking about, and how can it be difficult, when it has been designed by the “best and brightest” the IRS has to offer? You must be doing something wrong, and it is all your fault!

    Soldier on, dear comrade. You will eventually get it right or not. We will tell you when we send you the penalty notice. LOL

    mvh

  140. They will be sending it to me in the insane asylum! I actually found a site with a “course” for tax preparers on the AMT. It described it as a “mess” and that very few people who have to report the AMT do their own taxes (less than 1% I think it said) but it helped in that it explained what it is trying to do. I’m sure it is a great income producer for tax preparers. Apparently, it is a “parallel” tax calculation which was originally intended to make sure the really rich didn’t get away with paying no tax, but ends up with all kinds of unintended consequences partly because the exemption amount is not indexed. It even appears to have it’s own separate calculation of the Foreign tax credit, which is where I completely lost any ability to understand the gibberish.

  141. @canukdoc

    AMT Problems on the IRS receiving end: http://www.accountingtoday.com/news/IRS-Commissioner-Shulman-Addresses-Tax-Delays-62087-1.html?ET=webcpa:e2331:241779a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=WebCPA_Daily_032312

    ..discusses IRS PROBLEMS — delays caused by AMT patch (so after they get your AMT-related return, canuckdoc), the status of the IRS’s tax return preparer program and identity theft. “Shulman ended his statement during his testimony before the Ways and Means Oversight Committee calling on them to pass the annual patch for the AMT and resolve questions over already-expired and soon-to-expire tax credits, or else they could once again delay the start of next tax season.”

    Shulman He noted that the IRS had already instituted an agency-wide hiring freeze and has only been replacing attrition on an exception basis. Attrition savings were not sufficient to meet the 2012 levels, however, so the IRS resorted to voluntary incentives designed to accelerate retirements of those who were retirement-eligible, or close to eligible. As of March 5, 2012, buyout incentives were given to approximately 1,000 workers, Shulman noted. “As a result of these measures, the IRS has approximately 5,000 fewer staff on the payroll this filing season, as compared to last year,” he said. “Of the 5,000 person reduction, approximately 3,000 are in Enforcement, with the balance of the reduction principally coming from Taxpayer Service.”

  142. So you’d think that having millions of no tax owing returns from abroad coming in is not what they should be trying to get at this point in time. Unfortunately, they’ll probably just take that a challenge to make them all have tax owing by passing some new stupid rule. Everyone in the US seems to be worried only about their refunds. As long as the refunds are fast, everything is fine there.

  143. @canuckdoc

    Canada also has a very complicated AMT tax law. I remember learning about it in a course, but thankfully have never had to use it for a client.

  144. Last year the IRS stopped mailing us the overseas filers tax package. It is very difficult to find a telephone number to request the forms be mailed to us. The 800 numbers no not work from Canada and every local U.S. number we have tracked down and tried just drew blanks. The nearest U.S. consulate is over a hundred miles away and is not phonecall friendly (not physically very approachable now either due to security measures). One IRS “agent” or whatever told us they don’t mail forms so get them from the internet but we said that was not doable for us. She had never heard of FBAR either. It should be a simple thing to get the forms but it has proven not to be so for us. Any suggestions?

  145. Em

    I hate to say it, but the internet is the source these days of everything. That is the simplest of suggestions. I am not sure why that is not doable for you. If you don’t have access to the internet, or not comfortable navigating the IRS.gov web site, surely there is someone who could help you. If nothing else, you could probably use the internet at a Library and print out what forms you need there, or just order up Turbo Tax and all the forms are available in it. So, you do have a lot of options, and really don’t need the IRS package that they have discontinued.

  146. Thanks for the reply, Just Me.

    Navigating the internet is not a problem. Keeping a printer filled with $50 ink cartridges is though.
    It just seems to me that if they want people to file they could at least make it easier to obtain the forms without any cost involved. I really resent paying any amount for the “privilege” of subjecting ourselves to the onerous task of completing all that paperwork every year. BTW, if I hadn’t been thumbing through the overseas filers instruction book over a decade ago I would not have been aware of FBAR. It may just mean another trip to the U.S. will be needed to pick up the forms (family to visit anyway).

  147. Em…
    Well, I don’t know what type of printer you have, but I find the cost of printing out the forms I need as negligible, so I can’t imagine going through $50 of ink, unless you are trying to print each instruction booklet, or you have a Tax return the size of GE at 57,000 pages. 🙂

    Either your tax filing life is way more complicated than mine, or you have a printer with too expensive print cartridges, but I don’t find it an issue for me personally. There are a lot of things I resent about filing US taxes, but printing out the required form is the least of my concerns, but that is just me.

    mvh

  148. @Em
    It is annoying to have to print all those forms, i know. But the forms are actually PDF’s that you can download, save, fill out on line save some more and print when you are ready. Aside from the annoying fact that it gets the IRS off the hook for having to send you any, it’s actually quite convenient. You can just print the pages you need. You don’t have to print the instructions, pages with no information, etc.

    I actually have my last years FBARs saved. i just went in and changed the maximaum amounts. (I see there is a new form this year, but it has the same questions, so it should be OK) And there may be some forms you need more than one copy of, so even if you got sent the forms, you might have to make more copies. I needed two 1116’s. Just fill out the identifying data on one, then copy it, and the second form is already partialy completed.

    My tax form was 34 pages, including FBAR’s and 8938’s. Yes I minded having to use the ink to print them, but that seems to be the way everything is going these days. And it’s really not that expensive compared to a trip to the US.

  149. A $50 ink cartridge is an issue when it’s a 200 mile drive to get a replacement. Perusing a printed booklet is more efficient (for us at least) than scrolling through hundreds of pages of a pdf or using a search engine which will seldom deliver something you might not even know you should be looking for. We are old foggies on a tight budget but we’ll manage this somehow. We are discussing renounciation but it will be for reasons other than “paperwork reduction”, of course. ; )

  150. Em…. Understand. One does get use to doing things in the manner you have become accustom. I have long ago moved on from needing paper, but like a reading a Newspaper, some like it folded in their hands with black ink on your fingers, and some like me like reading online. BTW, you can always order ink from Amazon much cheaper than a 200 mile drive. 🙂

  151. Does anyone have any info on whether the IRS has issued the new guideline for duals citizens as promised, and long overdue…? I have not been able to find anythign other than the Dec. fact sheet.

  152. @Howard. Haven’t seen it either. The Titanic changes course slowly in response to commands from the wheelhouse.

  153. Just Me….I’m a landed immigrant who has not ever applied for Canadian citizenship. I have a U.S. passport and have been here since 1975. Learning about all this (late!) should I be filing returns since there is no new info…no deadline? Appreciate your thoughts…

  154. @retired and scared.

    I would be in a wait and see mode, regarding the additional information that has been promised. Although it is possible it will never be forth coming, or will be just a restatement of exist statutes repackaged so it can claim to be something it is not!

    In the meantime, I would relax a bit and allow yourself time to digest all the information that is available on this site before making any decisions on what to do.

    The IRS is definitely on a jihad against Expats overseas, but…. you have a lot of friends here who can help you assess your risk or provide alternate strategies.

    Have you read this…?

    http://isaacbrocksociety.com/2012/01/10/press-release-isaac-brock-society/

    What I wouldn’t do yet, is run to a Practitioner, as they will certainly scare into doing things that might be against your best self interest. You have to be very selective at who you choose, and you need a good information base before you can assess the so called “experts” and whether or not you can trust their advice. It is a buyer beware world with them. You need time for education drudgery, and you are at a good site to learn that.

    More on the drudgery aspect of self education is here.

    http://isaacbrocksociety.com/2012/01/28/the-ovdi-drudgery-for-minnows/

    On Isaac Brock, you are amongst a lot of Canadian friends, and will find some differing opinions as to how to progress now. Some are strong ones about what you “shouldn’t do”, but ultimately you are in no position yet to decide! A lot depends on your facts and your connection back to the US. IE, family, assets, accounts etc. So, I won’t provide generalized advice, other than to encourage you to read things here in a systematic manner and be deliberate in your decision making. Don’t let fear drive any decision.

    Once you get enough education to fully understand the issues, then you might want to consult with a good practitioner, but NOT YET!!

    One part of your consideration is whether or not US citizenship is so valuable to you that you are willing to pay the cost to become compliant with the rules? I can’t answer that for you.

    If you feel Canadian, through and through now, and have no plans of ever returning to the US, then you might look at renouncing your citizenship and be free of all the fear and complexity. Many Expats are discussing that actively here. I don’t follow the pros and cons that closely, as I am in NZ, and returning to the States next month. However, you might want to read through all the discussion. There is a lot of it.

    http://isaacbrocksociety.com/2012/01/13/ask-your-questions-about-renunciation-and-relinquishment-of-united-states-citizenship-discussion-thread/

    Hope some of this helps. Figure a good month of your time to get better familiar with the issues involved in your decisions, and don’t be rushed into filing tax returns and FBARS yet until you are fully informed of the consequences.

    Fortunately, you are in a good country with a lot of protections against Congresses/IRS extraterritorial reach so relax and let the education begin…

    Hope this helps.

  155. @Just Me

    You are a saint. Each time I see a new ‘scared’ person new to the site, you post such good, calming advice. Bravo!

  156. You bring tears to my eyes with your immediate and calming response….thank you so much. I have been on Isaac Brock for awhile now and read alot and will continue to. I do have a sister in Boston and, of course, friends, but i intend to apply for citizenship now and hopefully when it comes, I will not renew U.S. passport due in 2014. I have no bank accounts or business in U.S. but applied for social security benefits due me that I am now receiving. I had no idea about all this at the time! I just didn’t know whether to act and file and your response to basically continue to wait and see and educate myself is great. It’s just the site can also be scary with the more complicated situations people write about.

  157. Just me I’m responding to your answer to retired and scared, which is me. Swanee66 – I’m new to this…sorry

  158. @retired and scared.

    My advice would be to begin the process of applying for Canadian citizenship, so as to have choice and options. There is no downside and no cost. Organize all your paperwork (birth cert, landed immigrant paperwork, etc) in one place to do this.

    It can take up to two years to receive Canadian citizenship, so start the process now – you can always change your mind at any point along the way.

    All the forms and info are on the Canadian government website:
    http://www.cic.gc.ca/english/citizenship

    I suggest you go to the constituency office of your local Member of Parliament for assistance and advocacy in applying for Canadian citizenship. This is core competency for most MP’s staff and they can be very helpful. If you have any special circumstances – such as a medical condition – they may be able to assist in speeding things up a bit.

    The advice against hasty action or otherwise spending a lot of $$ for lawyers or accounts is good.

  159. @retired and scared
    You refer to receiving social security benefits that were your due. Please do not worry that because you receive those benefits, things are worse for you. There are many Canadians who live in Canada and receive social security benefits from the US and others who receive retirement benefits from other countries, they might have lived and worked in at one time. This is their right and the tax treaties determine the taxation of those benefits in both countries.
    I agree with Wondering. You should start the process of Canadian citizenship. As Just Me recommends read as much as you can on this site and then make a determination on how to move forward. You will be protected by the Canadian government.

  160. Social security. Last week I had a chance conversation with a never-before-met US-Canada dual citizen. That person is receiving US social security and intending to stay off the IRS filing radar because noncompliant. That gave me a brain chuckle. (I think straight face persisted.) I’m guessing there is total disconnect between SS and IRS, perhaps because SS is nontaxable? Also the person had little interest in severance of citizenship from fear of loss of the SS. A newly minted non-US citizen would continue to receive SS – or is that vague impression wrong? Lots of wrinkles on this page of the saga.

  161. Hi Everyone – I just wanted to give an update as to my “progress” in shedding my U.S. person status. In spite of the fact I relinquished my U.S. citizenship about 40 years ago, I applied for relinquishment and a CLN last November. Then I filed U.S. tax forms to the for the past five years with a covering letter of explanation. I just received three separate “Amount due” notices from the IRS. I owe $0 for 2009 and $84.00 for each year of 2007 and 2008. Most of that is interest and “failure to file” fees. I have not received notice regarding the other two years. This charge was made in spite of a tax loss carried forward. My inclination is to send them a check and hope for the best. No CLN has arrived yet, but I remain hopeful.

  162. @usxcanada

    I have a neighbor who will fall under the catagory of ‘newly minted non US citizen’, who continues to receive his Social Security benefits. It was confirmed by his cross border tax attorney that it would not be a problem; he is entitled to the social security from his years of working in the U.S. prior to coming to Canada 45 years ago.

  163. @wondering and @tiger
    thank you for good info for me retired and scared Swanee66 – I will gather my paperwork and apply for citizenship. Good to know about social security protection regardless. I am traveling to Chicago in May and in reading blogs sort of concerned about border questioning. The number one worry is that there is a deadline for filing that I’ll get in trouble for if I don’t do something NOW. Thank God I found you all.

  164. @swanee66
    Traveling to Chicago should not be a problem. As you are not yet a Canadian, you won’t be travelling on a Cdn. passport with an American place of birth. I think for the few people who are getting hassled at the border, it is most likely those who show a US birth place and are not travelling on a US passport.

  165. @tiger

    Your neighbor is playing a dangerous game. The IRS is especially focusing on international retirees, and SS is taxable.

    Also, BIG DATA is the theme of the century for business and the IRS. Connecting data bases to find out information on you either to sell you productions or track you down. The IRS will surely try to find out those with SS payments and foreign addresses just like they are doing with retirement accounts. Maybe he is just showing a US address, but they are on a mission, so hopefully he wins the death lottery and goes before they find him. 🙂 He is not below the radar any more. They know there are millions of him out there and they want him!!!

    http://www.irs.gov/retirement/article/0,,id=223461,00.html

  166. Sorry Tiger… my delayed response was to usxcanada in relation to the APRIL 5, 2012 AT 2:29 PM comment. I am behind in my reading!! 🙂

  167. Has anyone been requested by the IRS to include an ‘Employer Identification Number’ on for 3520-A? I used 3520-A for a TFSA, which I closed in March of 2011, to document the TFSA.

    At this link the IRS gives an explanation who may need an EIN. http://www.irs.gov/businesses/small/article/0,,id=97872,00.html

    The interesting thing is that this letter was originally sent to my branch of the Royal Bank here in Calgary, AB. The IRS letter was forwarded to me through the Royal Bank and not in the original IRS envelope. I guess the Royal bank didn’t want to touch this.

    I’m assuming that because a TFSA is seen as a trust in the US I may need a EIN for the Royal Bank. Can this be right?

  168. I have a question about the 3520 and 3520-A – for example, in the case of TFSAs, RESPs, RDSPs, as well. The 3520 seems to be even more of a devil than the FBAR in terms of statute of limitations, and potential penalties. Does anyone know more about it?
    Minister Flaherty specifically spoke about FBARs, but in light of the IRS not recognizing the TFSAs, RESPs, RDSPs, and the proposed PRPPs (pooled? registered pension plans) – these are all potentially toxic to have going forward – and he should have addressed the 3520 as well if he is going to encourage those in Canada to buy them. Is it similar to the FBAR in terms of whether it is Bank Secrecy Act, or similar to what governs the returns?

  169. @badger @itacaf
    Boy, is this an area that I hold NO expertise…
    I have no answers for any of the questions you both ask…

    I am commenting only because I just saw this at Phil Hodgen’s blog and hoped you did too… He seems pretty knowledgeable about these issues.

    http://hodgen.com/how-the-irs-can-make-rrsp-cleanups-painless/

    Additionally, I know he has commented a lot about 3520s, and fortunately for me, that was a minefield I avoided…

    Also, I see under the search function he has a lot of posts on the RRSPS…

    http://hodgen.com/category/rrsp/

    and then you can also do a search on 3520s…

    http://hodgen.com/?s=3520

    cheers

  170. Just Me, thanks. The letter I got back was actually addressed to the Royal Bank. The only connection to me was the account number. I assuming this will put me on the ‘list of US persons’ when FATCA hits. I need that CLN as soon as possible…

  171. Under what authority would the IRS solicit information from a foreign bank directly? Would a Canadian bank have the authority under Canadian law to respond directly to requests for information concerning a Canadian resident from a foreign (i.e. USA) government rather than via the information sharing provisions per bilateral conventions?

  172. @oohlala
    At this time, they don’t have the authority. This is what they are trying to achieve through FATCA and what we here are opposing. Five European countries have agreed to a ‘government to government’ reporting. The Canadian government has not yet agreed to anything. And therefore, Canadian banks, as yet have no authority to report any information to the IRS. This is what we are fighting to prevent.

  173. I think you are over reacting here. It’s a simple mis- communication
    You used 3520A for a TFSA which you subsequently closed.
    Some lowly clerk at IRS had no idea what to do with it. He/she had never heard of a TFSA. He/she presumed RBC was the administrator of some sort of trust and assumed RBC should be identified with number of some sort-hence the request to them for a EIN.

    RBC got their request, said ‘WTF is this all about?” and sent it to you. No big deal.

  174. @itacaf
    I got the same letter sent through TD. It was sent there because TD is considered the trustee. The IRS assigned an EIN to the trust (tfsa account) NOT the institution. The trust is an entity. I called the office in Philadelphia that issues EINs and they looked up the number and it was assigned to my account not to TD. There is nothing for you to do, just use the number if you need to in the future. There is some discussion of this on the Serbinski forum.

  175. @iamquincy
    Thanks for your comments. I’ve already filed the form and will leave it at that.

  176. FWIW the FBAR processing centre in Detroit has gotten to my FBARs, filed in October of last year.

    (Sites like this are confidence-building – back then I would have hit the ceiling if I’d got mail from something calling itself the ‘Financial Crimes Enforcement Network’, but no more.)

    Now. I filed my FBARs before the notice came out about ‘reasonable cause letters,’ and the IRS now wants one. Is there a sample I could template off?

  177. @broken man
    Here is my letter. I don’t know if it did the trick since I only sent my FBARs in January. Hope it helps.
    Please find enclosed my FBARs for 2006-2010..
    I recently became aware through media reports that I am required to file US taxes and FBARs due to my birth in the United States. I have therefore prepared the required reports. As I am fulfilling my reporting obligations, expeditiously upon recognizing them, I trust that I will be treated accordingly, as per the examples given in IRS notice FS-2011-13 “Information for US citizens or Dual Citizens Residing Outside the US”. I believe I meet the definition of reasonable cause and am requesting the waiver of any potential penalties for the following reasons:
    • My family moved to Canada when I was a child (in 19xxx) and I became a Canadian citizen in 19xx.
    • I believed that I had relinquished my US citizenship in 19xx, when I obtained Canadian citizenship.
    • I have been completely compliant with the Canadian Revenue Agency (CRA) and have properly reported all of my income to the CRA.
    • To enable me to be compliant with IRS, I have recently filed tax returns for years 2006-2010, reporting all income and resulting in no tax owing.
    • All of my bank accounts in Canada have been for legitimate purposes and not for concealing income.
    • On (date), I appeared before the Vice Consul of the American Consulate in Toronto and formally relinquished my US citizenship. I am now awaiting my Certificate of Loss of Nationality from the State Department.

    I hope that this submission, together with my soon to be filed 2011 return, satisfies my obligations to the US as I seek to conclude any residual tax/financial reporting obligations.

  178. Not sure if anyone will be able to help me on this one, but I can’t find the relevant info elsewhere, so here goes. Thanks in advance for any pointers.

    I am an American citizen, married to a Korean citizen and living in Seoul for the past ten years. We’re planning to move back to the States this summer. I’m up-to-date on filing all my income tax returns but only this week became aware of FBAR. I’d like to get myself into compliance, but wonder about the best way to do so. A few facts:

    * I have only a few hundred dollars in my bank accounts in Korea. The great bulk of our money is in accounts belonging to my wife (as said, an ROK citizen), over which I have no signature authority. Must I declare these accounts, even though a large amount of the money therein is not mine and belongs to a foreign resident?

    * The greatest majority of our money is tied up in the Korean “key money” system (jeans) on our apartment. For the unfamiliar, in Korea, renters typically pay an up-front, lump-sum deposit (in our case, about $110,000) in exchange for a two-year, rent-free lease on the apartment. When we move out, the deposit will be refunded to us. Thus, while we have an agreement to get this money back, it’s not technically ours at the moment. However, we will be receiving this money again before we move to the USA. How, if at all, do I declare this on the FBAR?

    * For how many years, if any, must I retroactively file FBAR forms? Should I be using Form 8938 or Form TD F 90-22.1? Both? Neither?

    Again, thanks for any info you can offer. I’m a bit bewildered at the moment.

    A.

  179. Hi Aaron
    I am just a random person on the internet and you should not take my advice as Truth. However, if the accounts are not in your name, you have no signature authority and the money is not technically yours at the moment, then it does not sound like you had an FBAR filing requirement. If the deposit is refunded to you this year then you will have a filing requirement for next year. The FBAR is for financial accounts > $10,000. The 8938 is for financial “assets” > $50,000. If you get $110,000 back then I think you will have to file both forms, but I am not totally sure how the 8938 works.

  180. @Aaron,
    I agree with rodgrod as long as your wife is not a green card holder. If you live abroad, you don’t need to file 8938 unless the balance of the financial account is over $200,000 on Dec. 31 or over $300,000 during the year. The $50,000 threshold is for resident Americans. So be careful when you move back to the US if you still have that $110,000 in Korea. If your wife gets a green card, then I’m pretty sure she will have to report on both forms.

  181. Thanks for those replies. My only other question, which may too far afield for this forum:

    If/when we move back to the States, can my wife wire that money from HER Korean account to MY account in the USA without incurring any tax liabilities? Will this necessitate any FBAR activities?

  182. Anon –

    Get some solid qualified advice before you make any moves on this task. Three loose suggestions. (1) Take a good look at the pros and cons of keeping separate assets distinct and separate, or at least well defined on the accounting side. (2) Look into alternatives to wire transfer (e.g., personal transport of a declared instrument). Money flying through the aether can get hung in a frustrating limbo where you have no handles, especially if you are doing this on a one-time basis. (3) Find out how transitional FBAR works. As soon as your wife becomes some sort of “US person” she probably becomes subject to FBAR. Unless you transit on the stroke of midnight on New Year’s Eve, and she also acquires status on that same stroke, it seems likely that she will have a piece of a year where FBAR must be reported.

  183.  My son is a teacher and contributes to the Teachers’ Pension Plan.    Would anyone know if THIS needs to be recorded anywhere?  1040, FBAR, FORM #***.  He has never lived or worked in the United States, but he is registered.  What was I thinking when I did that!

     I placed a call to the IRS  seeking  their help on another question I had in completing these tax forms.  They had me on hold for an hour , gave me the wrong information, then they disconnected me.  This  has made me physically ill and I have lost HOURS of my days and nights worrying.  

  184. @ferfet
    I think if he meets the threshold to file form 8938, it has to go there. I think the threshold is for financial assets totaling $200,000 on Dec 31 and not over $300,000 during the year (if not filing jointly)
    If you look at FAQ 12 and 13 on this link, it might help.
    http://www.irs.gov/businesses/corporations/article/0,,id=255061,00.html
    If he’s born in Canada and never filed, has he considered just ignoring them? Or is he trying to keep all of his options open?

  185. Thank you . He does not have financial assets totaling $200,000. Will file the returns now , and then he if he decides to renounce, the tax returns will be done.

  186. Well, all of my hard work in completing 1040s and FBARs has paid off handsomely. In today’s mail, I received a beautiful cheque from the United States Treasury for $31.00 as a tax refund! I’m going to frame this baby!

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