Dealing with Mr. FATCA

This is a non technical description on how I have dealt with FATCA and some general suggestions for others. It is based primarily on FATCA as it stood in July, 2011. I realize that there have been significant developments (such as IGAs) and new draft regulations in the meantime, but the basics remain the same.
As this is a Sandbox and there may be children playing nearby, I won’t use many of the words, most not polite, to describe the abomination that is FATCA. I’ll leave that to others in other places.
By way of preface, I am a prime candidate for relinquishment, but have not yet chosen to go through the process. Instead, I have chosen to protect myself from FATCA and other intrusions of the U. S. government into my financial affairs.
After first learning about FATCA, I wasn’t sure if Credit Unions were somehow outside of FATCA’s scope. So, I first approached the experienced and well respected CEO of my local Credit Union with some questions about FATCA. Specifically, would Credit Unions be affected?  His response was that he never even heard of FATCA (An aside-in June, 2011 a major international accounting firm released a worldwide survey of top level financial executives. The survey indicated that less than 1/3rd had heard of FATCA or had done much about it, if they had heard).  The Credit Union CEO referred me to the head of the regional Credit Union Central. This person is one of the senior Credit Union executives in Canada. I was told that FATCA was something that had to be dealt with at the national level and he had no answers for me at present.
Subsequently, I learned that Credit Unions did come under FATCA and that strong representations were being made to the IRS.
I then moved on to the branch manager of a major Canadian Chartered Bank where I had some accounts. My questions were not about FATCA as such, but about their AML/KYC policies (anti-money laundering/ know your client). I was told what IDs I had provided the bank and what their procedures were for new accounts. The procedures were to obtain 2 pieces of ID, one of which was a photo ID. They would make copies of the IDs and then enter the kind of ID (driver’s license, etc) into their system as well as an identifying number on the ID, such as a driver’s license number. Most interesting was that after a few days, they would shed the ID photocopies. Just an electronic record would remain.
FATCA has several thresholds. Aggregate accounts under $ 50,000 are exempt from review. Accounts between $ 50,000 and $ 1,000,000 are subject to an electronic search. Accounts over $1,000,000 are subject to both an electronic search and a manual search. There are different rules for insurance policies, for example, but I won’t get into that.
It is important to note that the word Aggregate is important. So, if you have $35,000 in bank savings and chequing accounts and $40,000 in an account at their discount brokerage arm, you’ll be over the $50,000 threshold. I’m not sure how this would work with Credit Unions where a person has a Credit Union account and a brokerage account at Credential Securities. Credential is owned by provincial Credit Unions. Somehow, I don’t think the two would be aggregated, but I’m not sure.
Here are a few suggestions, most of which are quite obvious.
If you can’t remember what ID you used to open an account, you can probably still ask without arousing suspicions. FATCA information has likely not filtered down to most bank branch employees at this point.
Open accounts at other financial institutions to get yourself under the thresholds. Make sure any IDs presented have no indication of U.S. personhood, such as a passport with place of birth. Then transfer money to those new accounts.
I recently opened an account at an additional  bank and there were absolutely no questions about place of birth.  I believe a question about citizenship may have been asked.
If you have a brokerage account, sell any U.S. based investments. Having U.S. investments will likely lead to a request to complete either a W8-BEN or a W-9.
Consider buying physical precious metals and storing them in a safe place. It may not be the best investment partially because of the cost of both purchasing and selling the metals, but precious metals are a form of money completely outside of the banking system.
These are a few suggestions. I’m sure others can add more.
One special note. If you have an investment adviser, they may very well know where you were born. My experience is advisers usually try to learn something about their client’s background. It may just be idle chit-chat, but place of birth may come out. For persons inheriting money from US relatives, your origins might be self evident. FATCA refers to advisers as “relationship managers”. Under FATCA, It is the duty of the relationship manager to determine if they are dealing with a U. S. Person.
Any comments or corrections are welcome.

51 thoughts on “Dealing with Mr. FATCA

  1. @Hazy2
    Good informative post about FATCA.
    Is there any particular reason why you have not chosen to apply for your CLN?

    1. Basically, I have not applied for a CLN because I do not believe I am an American. When I became a Canadian citizen in the mid 1970’s, one of my intentions was to lose US citzenship. I resent having to approach the US to receive their permission to not be a US person. In spite of my resentment, I still may change my mind for several reasons including border crossings, FATCA and possible complications with my estate if I decide to use a corporate executor the next time I change my will.

  2. Good info. We have 2 investment advisors at 2 different firms. Advisor A knows one of us has ‘issues’ re the US. He says it is far too early , that FATCA in its’ final form will not be recognizable. Perhaps he is just trying to preserve his fees. Advisor B says ‘ come on over’ I won’t ask and you won’t tell. He would like the fees.

  3. I asked one financial service about FATCA. They said that they had no idea and no one had ever asked before. I don’t know if they knew what my citizenship was and I don’t remember what I told them. They also didn’t seem to care. My bank adviser didn’t know that I was a US person until I told them.

  4. @all
    Hazy2 you are correct. Although there is nothing ‘on the books’ about where I was born, my investment advisor knows I was born in the States. As you said, ‘advisors try to learn something about their client’s background’. Having said that, she asked me last summer if I was still an American and I told her I had renounced my U.S. citizenship when I became a Canadian. We have had several discussions regarding FATCA. The impression I have is that I know more about it than she does. She is, however, quite certain that it will go through (in some form) in Canada.
    I also spoke to a VP from QTrade, an online brokerage firm. They do alot of work with credit unions. He was quite adament that they would need to determine who amongst their clients had U.S.indicia.

  5. @tiger: I had the same discussion with my financial adviser. She was certain as well that we would see FATCA implemented in Canada. She now has a copy of my CLN.

    1. One very significant aspect of the paper, alluded to by Tim, was that the CRA is not allowed to go on ‘fishing expeditions’. However, an important part of FATCA are ‘fishing expeditions’.
      The author questioned whether a Canadian court would allow a foreign country to do something that the Government of Canada, through the CRA, is not allowed to do.

  6. @Hazy2, great post. This ties into something I was trying to investigate over the weekend, that I wonder if anyone has any insight on. The internal revenue manual is very clear, and easily found, for the IRS procedures, but I wasn’t having much luck with the CRA procedures.
    Say the IRS found out about someone from a bank, as a recalcitrant account holder, or who has US indicia. The IRS checks their records and find they have no record of this person. No taxpayer ID, no social security number, no assets in the US, no income from the US, etc etc. Seems pretty obvious
    that the person is a Can citizen, right? Given the tax treaty between Canada and the US, and that BOTH the US and Canada will not collect taxes on their citizens if the liability accrued when th person was a citizen, then what are the chances the IRS would even try to take it any farther? That’s question 1.
    Then question 2, if they did go ahead and submit a request from the CRA, wouldn’t the CRA would come back saying the person was a Can citizen from xxxx date, therefore no further assistance or information would be provided, given the IRS can’t go back to the 70’s or 80’s or whatever for tax returns?

  7. I have gradually come to an understanding of how this might work. Fatca was aimed at US citizens resident in the US hiding assets overseas. This all came about because Swiss banks among others actively persued American and other tax evaders.
    Canadian minnows are collateral damage and have nothing to worry about so long as they don’t leap up and say ‘come and get me.’
    What are the chances? Question 1. The chances approach zero,
    Question 2. The CRA would be obliged to tell them to take a hike. Even if the IRS had a legitimate and proven claim against a dual citizen, we have been assured by Mr. Flaherty, by CRA and by court precedents that they would not receive any help from Canada for claims arising while the person in question was a
    Ccanadian citizen. Relax people.

      1. @New Guy: Welcome! Sorry for the delay in responding. I have not been in the sandbox for a few days.
        Before I answer your question, I need to ask you a couple of questions. What do you mean by none of the above except SSN? Do you mean you do not have US birth certificate? US passport? Green card? Have you filed US income tax returns? Have you voted in US elections?
        Is your question only about FATCA or is it about IRS, FBAR, etc.?

    1. @Cornwalliscal, it seems that when I added the bit to allow people to insert images in the comments, the edit function turned off. I have 3 things I would like to enable for comments, a better editor so we can bold, italic, highlight, etc, the ability of people to edit their comments, and to easily insert images. I’m working on trying to get them all going at the same time.

  8. @Cornwallis: I agree with you as does the author of the article I referenced above. However, while he was very confident about that conclusion for FBARs he had some serious reservations about the individual reporting required under FATCA if laws are changed slightly and sees indications that that might be the direction things are heading.
    Give the article a read and let me know what you think.

  9. The prohibition against assistance in collection by the CRA against Canadian Citizens is absolute as is the prohibition of assistance in collection by the IRS against US Resident US citizens. The question raised by the author is on what ground would the CRA attempt to collect on behalf on the IRS on a non Canadian citizen Canadian resident where the penalties are solely for failure to file vs actual unpaid tax.
    Now to be clear many tax “scholars” consider the prohibitions on assistance in collection to be “outdated” and in fact some of Canada’s other tax treaties with countries such as New Zealand and the Netherlands provide no such opt out for Canadian “citizens.” However, Flaherty and other officials seem to have made a very “political” statement in saying in the case of the US Treaty they will not provide assistance in collection on Canadian citizens not now and not in the future.

    1. Generally the story as I understand is that the US Senate refused to ratify several tax treaties back in the late 1940’s due to assistance in collection provisions. A compromise was later made that during treaty negotiations provisions could be made for assistance in collection provisions as long as US citizens were excluded. Most countries in return demanded reciprocal treatment of their own citizens. Also very few US Treaties actually had Assistance in Collection provisions in them they were only added to the Canada treaty for example in the 1990s. For along time it was only France, Sweden, and a few other countries.

  10. johnnb. I read the article. Not being a lawyer and not used to arcane terminology, it’s hard to digest. However, the bottom line for me, a dual, is to relax and sleep at night. I believe fatca will not be implemented in its current form. China, Russia etc will not cooperate. The famous 5 European countries will get hung up over reciprocity, Canada will not accept it as it stands. After the election we will see some movement in congress. A lot of KPMG consultants and beltway lawyers may be looking for work.

  11. @ cornwalliscal
    I agree that the article is a bit hard to digest for an non legal type. The author seems to be hedging quite a bit because there are many uncertainties. However, I feel it is an very important paper. Wouldn’t it be great if we could invite the author to this site to dialogue with us?

  12. I think it would be excellent if he would come here and answer some questions or give some opinions. I was basing my concerns on his final paragraph:
    “Finally, although the revenue rule and the penal/public-law rule would currently preclude Canadian courts from assisting in collection, the ever-expanding role of judicial comity may one day see a repeal of these rules, or at least a relaxation of their strictures. Should that occur, the United States would be in a position to resort to principles of public international law as a basis for enforcement, even against dual citizens.
    In such a case, it may well be open to defendants to argue that the mere fact of their US citizenship should not, in and of itself, be enough to satisfy the real and substantial connection test—especially in cases where the defendant has had little or nothing to do with the United States and has certainly derived no benefit from his or her US citizenship.”
    This seemed to me to argue that dual citizenship in the future may not be enough protection. I think to what Tiger said about getting her CLN now because who knows how the law may change – or when. This opinion gives some substance to her concern.
    I think I will see if I can contact the author and invite him to post here.

    1. The other thing I will mention Johnnb that author of that article forgot is the Revenue Rule in Quebec is actually enshrined in the Civil Code(Remember Quebec is a Civil Law jurisdiction). So to change the “Revenue Rule” in Quebec would require an actual legislative change in Quebec City. In that sense I think it would be tough for the Supreme Court of Canada as a “pure” matter of fairness to somehow re-intrepret the common law as it applies outside of Quebec to somehow eliminate the revenue rule while allowing residents of Quebec to be protected by it under the Civil Code. In some sense it is really up to the provincial legislatures how they want to treat the revenue rule.
      The most current issue involving the “revenue rule” in Canada is in fact oddly enough that Quebec(which has its own income tax system) cannot collect back taxes from former resident who move other provinces. In this sense the view has been that as long a Quebec maintains the “revenue rule” in the Civil Code why should other provinces allow Revenue Quebec to bring collection efforts in their jurisdictions.

    2. @johnb;
      re; “especially in cases where the defendant has had little or nothing to do with the United States and has certainly derived no benefit from his or her US citizenship.” I hope that the author turns out to be correct, but I agree that there is no way of knowing whether duals will continue to have protection – as the US seeks to pass and tweak domestic laws to be as aggressive as possible in the tax treatment and pursuit of those it seeks to shake down – who are born and live outside the US. And I think that we have heard the position of the NDP and the current Conservatives, but nothing from the federal Liberals, that I know of? Please correct me if I am wrong about that.
      And I’d like to add, that since the US has forced those it considers to be US citizens (even those who automatically relinquished through naturalization decades ago, and duals by birth) to use only the US passport to travel into the US, regardless of other citizenships held, place of birth outside the US, and absence of US economic relationship, the mere possession of the US passport should have no bearing on determining the supposed US tie for tax purposes, and should not be considered a ‘benefit’. Like many, I did not obtain one because I wanted to, I did it because I was forced to. After 9/11, eventually, without it I could not enter the US to attend the sickbeds and then funerals of family members. I do not consider holding the US passport a ‘benefit’ as those in the US are so tediously fond of characterizing it. To me it is a costly burden directly related in proportion to its use by the IRS as an rationale and indicator of US relationship justifying imaginary tax obligations, draconian and invasive reporting, and confiscatory penalties – in addition to the use by Homeland Security as a mandatory travel document for the enhanced control of citizens.
      The mere existence of something conferred on one without choice or assent is not demonstrative of an actual ‘benefit’. To date, after many decades, I have received zero ‘benefit’ from being born into US citizenship. In fact, the US has caused me a loss in the thousands dollarwise, and the loss of physical and mental health. Add to that any more spent on meaningless annual compliance rituals to continue to demonstrate zero US tax owed from abroad, or spent on the renunciation fee of 450., and it is laughable that anyone can demonstrate how it has been, or could possibly be a ‘benefit’ or value to me or my family.

  13. Just to show you how despised the revenue rule is in the tax “scholar” community here is ANOTHER recently published paper criticising the existing system of limiting assistance in tax collection.
    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2128763
    Now is someone like this law professor in all likelihood going to change from a political standpoint Flaherty’s mind in terms of refusing assistance in collection on Canadian citizens. Unlikely. In my mind Its a personal decision whether or not to go for a CLN I don’t think it hurts but I don’t think it is a total get out of jail free card if the US really wants to force the issue.
    One issue is we are really into unchartered territority. There is no evidence of any other foreign country before Canada since 2011 ever raising any type of objection at all to the US taxing its overseas citizens. So how this fits in from an international relations perspective is unclear. I will say both the NDP and Conservatives have made policy committments not provide assistance in collection on Canadian citizens. Is this a position they are willing to take to the grave if there is no change in US Citizenship based taxation notwithstanding any extenuating circumstances.

  14. Okay, for a couple of hours I felt better, now I’m back to being depressed. ! I get nothing from the US. I want nothing from the US. I owe nothing to the US. If our government doesn’t protect us, what’s left? Somehow buying forged passports that give a false place of birth that is NOT the US? Or paying the US just about everything I’ve managed to scrape together for my retirement years?

  15. @Badger: I received a reply from Bob Rae. It was certainly more partisan than I liked, but it did at least address some of our concerns (although he called me a dual citizen, even though I began my letter by saying Like Prime Minister Harper, I am a Canadian and only a Canadian.
    I am in Pennsylvania right now, but I will post the comments in his reply when I return.
    I’m with hazy2, I will not give the Americans control over me to make me prove I am not a US citizen. That and other reasons are why I personally will not go anywhere a US Consulate or the IRS. As Cornwalliscal suggested, I’m not not going to jump up and say “come get me.”
    I certainly respect, though, that others like Johnnb and Tiger need to do whatever gives them the most peace of mind.
    Plus, draft FATCA regulations provide for an alternative to a CLN: a non-US passport or other proof of non-US citizenship and a reasonable explanation of renunciation of US citizenship.
    I hope everyone will take Cornwalliscal’s advice and and relax.
    Please remember, banks have no legal authority to ask for your place of birth. To do so would be a violation of Canadian banking and human rights laws. To release information to a foreign government without your consent would violate Canadian privacy laws.
    If the government tries to change the laws to accommodate IRS, we may have grounds for a Charter challenge against the government. Before anyone thinks the government would simply change the Charter, remember Meech Lake. Enough said.

  16. Well, if the author of that paper is correct in what he thinks might happen, then it looks like we’ll be working together in the future on a Charter challenge. It will be very interesting to see if Johnnb has any luck getting the author to come chat with us and answer questions.

  17. The Charter he is discussing deal more with Section 8 rather than what I and others have discussed previously which involve Section 15 issues which I still happen think is a “stronger” argument than Section 8. Now of course any legislation that violates Sec 8 or Sec 15 can be “saved” by Sec 1 however, Section 1 is being invoked sucessfully on fewer and fewer occasions. It is essentially becoming the judicial equivilent of the “Notwithstand Clause.” The public relations aspect of a Section 1 battle over FATCA would be quite devasting essentially the entire practice of citizenship based taxation would be on trial so to speak from the standpoint of the US in a highly respected but yet foreign court. If I was to map how a judicial battle would work the Section 15 and Section 8 issues I suspect would be ajudicated quite quickly in the lower courts I suspect against a FATCA Intergovernmental Agreement with the Section 1 issues being appealed either way to the Supreme Court of Canada. At this point serious consideration I suspect would given at the US Department of Justice in Washington to getting the SCOC to give special dispensation to allow one of their own lawyers to plead in person in Ottawa as occurs on rare occasions. The additional issue is the Section 1 “Oakes Test” is it is called is multi step with all steps having to have been met for the law to pass scrutiny under the Charter(In this sense the circumstances of someone such as Blaze I believe under a Section 1 argument the “Oakes Test” can be flunked to speak on multiple steps.
    The truth of the matter is the first step in the “Oakes Test” what is known as a “Big M” test is essentially a political judgement by the SCOC. The Big M Test basically says Parliament cannot pass a law whose purpose in itself is discriminatory and then try to “save” it under Section 1. The problem is once you pass the Big M test to try to “save” a FATCA IGA you have to get around the due process issues of someone like Blaze being told she was no longer a US citizen then having her citizenship re-instated without her knowledge or approval.
    http://en.wikipedia.org/wiki/R._v._Big_M_Drug_Mart
    http://en.wikipedia.org/wiki/R._v._Oakes

  18. This is how Wikipedia describes the first step in an “Oakes Test” essentially the standard from the original Big M case.
    This step asks whether the Government’s objective in limiting the Charter protected right is a pressing and substantial objective according to the values of a free and democratic society. In practice, judges have recognized many objectives as sufficient, with the exception, since Big M, of objectives which are in and of themselves discriminatory or antagonistic to fundamental freedoms, or objectives inconsistent with the proper division of powers. In Vriend v. Alberta (1998), it was found that a government action may also be invalidated at this stage if there is no objective at all, but rather just an excuse. Specifically, the Supreme Court found an Alberta law unconstitutional because it extended no protection to employees terminated due to sexual orientation, contradicting section 15. The government had chosen not to protect people in this predicament because the predicament was considered rare and obscure. The Court ruled this was an insufficient objective, because it was more of an explanation than an objective.

  19. Tim, I can’t follow all the nuances, (and will re-read to try), but re: “The public relations aspect of a Section 1 battle over FATCA would be quite devasting essentially the entire practice of citizenship based taxation would be on trial so to speak from the standpoint of the US in a highly respected but yet foreign court.” I am very interested in the possibility that the US, in its hubris and blind arrogance pursuing the one goal – universal imposition of FATCA globally, may involuntarily open itself up to something that it did not foresee – directly bringing into question the whole notion of US citizenship-based taxation – and the concomitant oppression of those with other dominant citizenships (e.g Canadian born) and/or living abroad within other countries (naturalized duals or permanent residents). At the very least, resulting in a great deal of unwanted scrutiny of this ‘unique’ US policy – bringing it to public attention and broader awareness of it’s intrusion over into other sovereign nations – and generating a great deal of ill will and hopefully negative press (think ‘innocent Canadian grannies’, and Canadian minors who merely inherited the burden). That would be a very welcome outcome. The more public attention brought to this, the better.

  20. In reply to Hazy2’s suggestion about asking your bank what ID you used to open your bank account, remember it is very unlikely you used a US birth certificate as only a Canadian birth certificate is one of the accepted forms of ID for opening a bank account in Canada.
    Here is information from Canadian Bankers Association about what ID can be used to open a bank account: http://www.cba.ca/en/consumer-information/40-banking-basics/83-opening-a-bank-account
    If you are going to open other accounts at other banks to stay under the $50,000 threshold at each, Hazy’s suggestion that you not use a Canadian passport with a US place of birth is probably a good one. If you have already used a Canadian passport with your present bank, I very much doubt if anyone made a record of where you were born.
    So, again it comes back to how will Canadian banks identify “US persons.” They don’t have that information in their records. They are not entitled to ask for it. You are under no obligation to give it to them.

    1. i also agree that if you used a passport to open an account in the past, it is unlikely that place of birth would have been recorded. Probably just a serial number (or whatever it is called) would have been recorded.
      It would be really helpful to have some input from persons who currently work at banks. Surely, there must be duals or former USPs out there who work at the branch level and know what is or has been recorded in the case of a passport. Of course the comment would be anonymous.

  21. As a follow-up to my original post and some of the first comments, I have spoken with a somewhat senior person at the private wealth management division of a major Canadian bank. She told me that there has been no specific training or information provided yet to their investment advisers regarding FATCA, nor has their been any change to their account opening procedures that would ask for a place of birth.
    For clarity, the person I spoke to has had no involvement in FATCA planning. That’s being handled elsewhere within the Bank.

  22. One of my next projects is to do some biographic profiles of different members of the board of directors of various Canadian Banks and other financial institutions to figure which ones can be put under political pressure regarding their institutions positions regarding FATCA. I do believe there are a few such as Carole Taylor and Jim Prentice.

    1. @ Tim
      I’m sure you know this.
      Although of a different political persuasion, Frank McKenna holds the Deputy Chair position at TD and was the Canadian ambassador to the US for a while.
      Barbara McDougall was on the board of Scotiabank for about 10 years.

  23. There are many others too. I have some sources that indicate that David Dodge former governor of the Bank of Canada and senior Finance Dept. official but now serving on the Board of Directors at Scotiabank went up to Geithner at an event they happened to be both attending in Mexico and gave him a very hard time about FATCA and the Volcker Rule. Supposedly Mark Carney and Flaherty also at the same conference had to “break” the argument up.
    I actually wonder the argument was like. David Dodge has pretty tough guy reputation in Ottawa who doesn’t suffer fools gladly and I suspect views his personal record of governing Canada’s economy far more favorable than Tim Geithner’s of governing the US economy.

  24. I can’t remember and can’t find which thread I said I would post my letters from Bob Rae, Jim Flaherty and Privacy Commissioner. This seems the best thread for it, so I will post them here:
    From Bob Rae to Blaze: http://maplesandbox.ca/wp-content/uploads/2012/08/LiberalFATCALetter.jpg
    From Jim Flaherty to Blaze: http://maplesandbox.ca/wp-content/uploads/2012/08/Flaherty-to-Blaze.pdf
    From Privacy Commissioner to Blaze: http://maplesandbox.ca/wp-content/uploads/2012/08/PrivacytoBlaze.pdf
    Also, here is a letter from Mr. Flaherty to NDP MP Don Davies: http://maplesandbox.ca/wp-content/uploads/2012/08/FlahertytoDavies.doc

  25. I just came upon this, Canada’s Finance Minister James Flaherty responds to CARP (Canadian Association of Retired Persons) – Canada Continues to Press for Fair Tax Deal with US , June 15, 2012 (http://www.carp.ca/2012/06/15/minister-flaherty-canada-continues-to-press-for-fair-tax-deal-with-united-states/
    This was published shortly after Minister Flaherty’s letter to me (http://isaacbrocksociety.ca/2012/05/23/canadas-registered-disability-savings-plan-rdsp-canadas-finance-minister-flaherty-responds-regarding-this-as-well-as-the-resp-and-tfsa/)
    Someone else may have picked this up; I wasn’t vigilant enough and haven’t noticed it at Isaac Brock or anywhere else.
    Thank you, CARP. Thank you, Minister Flaherty.
    Minister Flaherty: Canada continues to press for fair tax deal with United States
    Minister of Finance Jim Flaherty responded to CARP’s request that he address some of the membership’s concerns with the following letter:
    Canada and the United States are neighbours, allies and friends. We share a common border and common values. One of those values is fighting tax evasion and ensuring that everyone pays their fair share.
    Recently, the U.S. government introduced legislation called the Foreign Account Tax Compliance Act (FATCA), which will require non-U.S. financial institutions to enter into an agreement with the IRS to identify their U.S. account holders and report their account information to the IRS.
    The U.S. also requires its citizens, including those living abroad, to file a U.S. tax return if they have income above the U.S. filing thresholds, and a Foreign Bank Account Report (FBAR) if they have more than $10,000 in non-U.S. accounts. These requirements apply to U.S. citizens resident in Canada, even if they are filing Canadian tax returns and paying Canadian income tax.
    While we support fighting tax evasion and making sure everybody pays their fair share, our Government – like many – has concerns about the impact of FATCA and FBAR on Canadians.
    For instance, many dual citizens affected by FBAR have complained they have only very remote links to the U.S. and a very limited knowledge of their tax reporting obligations to the U.S.
    We recognize – and have publicly told the U.S. – that the vast majority of these dual citizens being targeted are honest, hardworking and law-abiding people – including many senior citizens – who have dutifully paid their Canadian taxes.
    Their only transgression has been failing to file IRS paperwork that they were unaware they were required to file. These are not high rollers with exclusive offshore bank accounts looking to evade paying their fair share of taxes.
    Faced with the knowledge they have an obligation to file U.S. tax returns (even if they most often do not actually owe any U.S. taxes) and FBARs, we appreciate that many dual citizens want to fulfill that obligation. But we also understand that the threat of large fines for simply failing to file a return they were never aware they had to file has become a frightening prospect causing unnecessary stress and fear among many honest, hardworking individuals.
    As such, we have called on the U.S. government to look upon those individuals in Canada with leniency.
    I am happy to report the U.S. government has listened to our concerns and the concerns of Canadians.
    Last December, the IRS released new guidelines for U.S. citizens living in Canada and other countries for their U.S. tax return and FBAR filing requirements.
    According to the guidelines, U.S. taxpayers who owe no U.S. tax are not subject to any penalties for a failure to file a U.S. tax return. In the case of a failure to file an FBAR, where the IRS determines that it was due to reasonable cause, there is no penalty. For more information, visit the IRS website.
    We have also been clear that penalties imposed by the IRS under FBAR will not be collected by the Canada Revenue Agency (CRA) on behalf of the IRS.
    While the Canada?United States Income Tax Convention contains a provision that allows for the collection of taxes imposed by another country, this does not apply to penalties imposed under laws that impose only a reporting requirement.
    Furthermore, our Government has been clear that CRA does not and will not collect the U.S. tax liability of a Canadian citizen if the individual was a Canadian citizen at the time (whether or not the individual was also a U.S. citizen at that time).
    Many individuals are also concerned that the investment or interest income earned in their Canadian Tax-Free Savings Accounts (TFSAs) and Registered Disability Savings Plans (RDSPs) may be subject to U.S. tax.
    While TFSAs and RDSPs – both introduced by our Government in recent years – do not yet receive an exemption from U.S. income tax under the existing Canada-United States Income Tax Convention, the Government will argue for such an exemption as the Convention is renegotiated with the United States.
    Another piece of U.S. legislation causing concern is FATCA, which is proposed to come into force on January 1, 2014.
    To be clear, Canada respects the sovereign right of the U.S. to determine its own tax laws and combat tax evasion. However, Canada is not a tax haven and people do not flock to Canada to avoid paying taxes. In addition, we have existing ways of addressing these issues with the U.S. through the exchange of information provisions of our bilateral Income Tax Convention.
    That’s why the Government is actively seeking a solution with the U.S. government that both countries will find agreeable. The U.S. has been receptive to the concerns we have raised. This is reflected in the U.S.’s openness to alternative approaches that will minimize the red tape burden, minimize conflicts with privacy and other laws, and improve collaboration between governments.
    We continue to work with our U.S. counterparts towards a fair and reasonable solution that will address the concerns of Canadians and protect their interests.
    Jim Flaherty
    Minister of Finance of Canada

    1. @Calgary411, I actually don’t thank him for this. “we appreciate that many dual citizens want to fulfill that obligation.” No, what I want is recognition that I am not a dual citizen and that I have no requirement to file taxes or anything else to the US. To me, this is falling into line with IRS propaganda; that although we intended to relinquish our US citizenship when we became citizens of Canada, we really didn’t, so that makes us dual citizens. I call B.S. on that. Yes, things are a bit easier for anyone that does regard themselves as a dual citizen, but there’s no recognition of those that do not consider themselves dual citizens. I don’t care whether it’s 6 years or 3 years, I’m not filing taxes to the IRS. And it still leaves the whole ‘reasonable cause’ wide open. I wrote to Mr. Flaherty after the June 26 announcement, and expressed my displeasure that he was happy with that, when I felt that it was too, too little and did not address the very real concerns of probably hundreds of thousands of Canadians.

      1. @Outraged
        I agree with you. What I have been waiting to hear from the Canadian government is some recognition of the fact that not every ‘born in the USA’ person, living in Canada continues to fall under the duties/obligations of U.S.persons as far as the IRS is concerned.
        I appreciate that Canada can not dictate to the U.S. what their tax policy should or should not be. Just like we feel that the U.S. has no right to dictate to our sovereign nation. Therefore, I appreciate if someone is genuinely a ‘dual’ citizen (and there are many in Canada who choose to continue to be dual citizens), Canada can not tell the U.S. government that person should not have an obligation to file U.S.returns.
        However, the time is long past due where politicians/cabinet ministers in Canada, need to step up to the plate and clarify the facts about how many of us voluntarily and with intent lost our U.S. citizenship perhaps years ago and ergo have no obligation to file forms with the U.S.government.

        1. @outraged, tiger: Yes! For us and many, many like us this is a central point. An automatic CLN should be issued for anyone in our situation or for those born in the US because it was the closest hospital or born to parents vacationing in the US and, and, and…
          Anything less leaves the US free to redefine citizenship every few years putting people through more hoops involving stress and anxiety.

          1. This and the CBA letter might be of help to me since I’m no longer in your situation. I’m doing all I can to get my ass covered and work for those disabled who cannot renounce and I certainly agree with all of you, looking at it from where you are. November 14th can’t come too soon for me as I’ve made too many mistakes. My story could have been a whole lot different.

  26. I have not previously seen this, but there is a lot of good information regarding FATCA — and, among many other subjects, RDSPs, RESPs and TFSAs, which I was doing a search on this afternoon. At any rate, it is worth another review by anyone interested. (I will cross-post on Isaac Brock.)
    This is a link to April 30, 2012 Canadian Bankers Association, Canadian Life and Health Insurance Association, Investment Funds Institute of Canada and Investment Industry Association of Canada submission to the IRS, Re: REG-121647-10: “Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions and Other Entities”
    http://bsmlegal.com/PDFs/Canada.pdf

  27. @Calgary: Great find. The joint submission is professional,,reasonable, thorough, complex and strong. While much is beyond my understanding, it does seem to cover many points we share.
    It is good to see they are addressing RESPs, RDSPs, TFSAs, etc. So far, I have not seen any indication that the Canadian government is doing that except to say they may bring it forward in future tax treaty discussions.
    I didn’t see any specific reference to the fact FFIs have no legal authority to ask for place of birth and doing so may contravene Canadian law. Did I miss it? That really is the bottom line for many of us. Our banks and our government need to recognize that and let IRS know Canadian financial institutions must adhere to Canadian laws first and foremost.
    I do think essentially Canadian FFIs are saying Get Real to the IRS. Unfortunately, I’m not convinced IRS is listening.
    I have established a link to this under FATCA comment letters.
    Thanks Calgary.

  28. Many apologies everyone for several spam that slipped through on this thread.
    I think even Mr. FATCA would be ticked off at numerous attempts to sell Cialis on his thread!

  29. One further point to my original post based on the UK-US IGA. For joint accounts the whole balance of the account is attributed as belonging to each holder of the account.
    For those concerned about FATCA thresholds, they may want to consider
    splitting up joint accounts into individual accounts to put themselves under a threshold.
    This may work.

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