Have you just learned that the United States considers you a US person? (Updated February 6, 2014)

February 6, 2014 Update: Yesterday, Finance Canada announced an IGA with the United States that may change some of the information presented here.  We will update as more information becomes available and we better understand what it may mean.

Perhaps you’ve just read one of the sensationalist IRS-propaganda articles in the media that says every person born on US soil is a US citizen and must file income tax reports to the US, and are at risk for huge penalties. Perhaps you heard about this situation through another person who has a US connection. Either way, you’re probably confused about what this means and what you need to do about it. We’re going to offer some advice, but keep in mind that we are not lawyers, and none of this is legal advice, it is simply a sharing of information that we’ve gathered over time that we hope will help people make sense of things.

The following information is Canada-centric, as that is what we know. We don’t mean to exclude anyone, but necessarily, people from other countries must check their particular countries laws, tax treaties and positions on FATCA. We’ve tried to keep this simple and relatively acronym free, however, some must be used. To find out what acronyms stand for or what certain terms mean, please refer to the Acronyms and Definitions post. You’ll probably also want to check out the FAQ post. We’re not attempting to explain all the complex and convoluted laws here, this is a simple overview, but research the links provided on this site and others, and you can find much more detailed information. 

So, you suspect the US considers you a US person. You might be feeling a) worried, upset and frantic about how it’s going to affect you, or b) that the US will never find you because you haven’t had anything do with it for years.

In the latter case, unfortunately, it’s entirely possible that the IRS will find you, through FATCA. This new law by the US is requiring banks around the world to identify and report on their customers who are US persons.  FATCA is set to go into force in January 2013, and while it violates Canadian law, nevertheless, the banks are gearing up to comply with it. They will be reviewing accounts with more than $50K, whether a TFSA, RRSP RDSP, RESP for children, GIC, or regular savings or chequing account, looking for indications of a US connection. Although the limit is $50,000 now, there is no guarantee this limit will not be lowered in the future. If you have existing accounts under the $50k, the banks will go on what they know about you as a customer (KYC/AML rules).  If you open a new account, they may ask if you are a US person.  There are many people fighting against FATCA, but it’s going to be some time before we know what kind of protection will be provided by the Canadian government and Canadian law courts.  We also don’t know the final form that FATCA will takeThe draft FATCA guidelines can be found under links on this site.

You may wonder what about credit unions.    That also is a huge question. Some may have no US investments so they don’t have the IRS financial hammer over their heads.  Some of these have told customers they will not comply with FATCA.  Others that do have US investments or do some business in US have told their customers (also called owners) they are resisting FATCA, but they don’t know yet what they will do.

However, even if the IRS does find you through FATCA, it’s not necessarily the end of the world. The Canadian government, through the Minister of Finance, Jim Flaherty, has stated that Canada will not collect taxes or fines on Canadian citizens on behalf of the IRS, as long as that liability occurred while the person was a Canadian citizen. Further, we suspect (or maybe it’s hope) that the IRS will not expend the massive resources required to pursue us regular people (also called minnows), especially with that protection given to us by our Canadian government. The government’s stance does afford some protection, as long as you don’t have any US income on which 30% can be withheld by your bank.

If you’re in the second, frantic, category, first thing you need to understand is that this is likely to be a lengthy process for you, so you might as well take a deep breath, relax a little, and then educate yourself on your options. This is the best piece of advice we can offer: Do not rush into anything before you’ve thoroughly educated yourself. Do this for yourself before you consult any kind of a professional, whether a lawyer or a tax specialist.

There simply is no right way, or one way, to deal with this.

Some people, most particularly those who want to retain their US citizenship, feel they must comply and file all of the income tax returns, and reports on financial accounts, and continue to do so for as long as they remain a US citizen. That’s definitely one option, but not one either of the authors have much experience with, however there are people doing this. Retaining or renouncing citizenship is a very personal, and often emotional, decision. While most actually agree that it doesn’t make economic sense to remain a US citizen, they choose to do so because of emotional, financial or family ties to the United States.

Many believed they relinquished or renounced US citizenship when they became citizens of Canada years or even decades ago.  For many years the US Consulate was clear, firm and direct that loss of US citizenship was “permanent and irrevocable.” They have been stunned to learn that, due to a US Supreme Court decision in 1986, the US may now think otherwise.

A few lucky ones received Certificates of Loss of Nationality at the time.  Most had no idea such a certificate even existed and did not receive one.

Some lawyers think the IRS will recognize people in this group are NOT US citizens or persons.  Other lawyers have advised that anyone born in US is a US citizen and that those individuals should become compliant, unless they can prove their relinquishment with a CLN.  These mixed messages compound the confusion, frustration and worry.

Some people are spending the time, effort and money to come into compliance and then immediately taking the necessary steps to renounce their US citizenship.

There are choices to be made if you choose to come into compliance, such as entering a voluntary disclosure program, quietly filing all of the required years of tax returns and reports, or filing all of the reports and returns and opening a dialogue with the IRS.  Each of these options must be considered carefully, most particularly the entering into one of the disclosure programs, which can be very dangerous, financially.

For the people who will try to stay below the radar and hope the IRS never finds out about them, success  will be depend, in large part, on if the Canadian government will step up to the plate to uphold its laws and protect its citizens. If FATCA goes through as the United States intends, without opposition from our government, this will option will likely fail in the end.

Many people are taking steps to prove that they are not US citizens. This has been successful for several people, and they have obtained their Certificate of Loss of Nationality from the US State department, backdated to the date they became Canadian citizens. This is very good news for thousands of people around the world.  If you can prove you are not a US citizen and have not been for many years, then obviously there is no need to file anything with the IRS. A CLN may be required to prove to banks that you are not a US person, but that’s something we just don’t know at this stage. FATCA draft regulations do provide 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.

At this time, Canadian banks have no legal authority under Canadian law to demand information about place of birth or citizenship.  Unfortunately, to date, the government has not made a statement reassuring Canadians that Canadian laws will not be changed.

Others have decided that they will simply refuse to comply, even if identified as a US person.  The consequences of this are just not known yet. If a person has no income from the US, no property in the US, has no possibility of inheriting from a US person, it may be an option to consider. If someone admits to their bank that she was born in the US, but refuses to fill out the FATCA-required IRS forms, the bank is required to report that person as a ‘recalcitrant account holder’ and must withhold 30% of US source income. There are consequences to a bank for having recalcitrant account holders and we just don’t know at this stage how the banks are going to deal with it. We do not yet know if it will affect your ability to retain your bank accounts, open new bank accounts, obtain mortgages or have RRSPs.

In short, some of the options are:
–          Agree that you are a US person, file all past returns and reports, and continue to do so for all of your remaining years of life;
–          Agree that you are a US person, file all past returns and reports, and then renounce your US citizenship;
–          Prove you are not a US citizen by obtaining a Certificate of Loss of Nationality;
–          Do nothing until further information is available.

This post at citizenshipsolutions.ca gives tips on What you should consider before contacting a lawyer. This is written by a lawyer who is a dual Canadian-American citizen.

Only you can decide what is right for you. Read, read, read, and read some more, and then join in the discussions and ask questions. Take your time to make sure you’re making the decision that’s right for you and your family.

 

136 thoughts on “Have you just learned that the United States considers you a US person? (Updated February 6, 2014)

  1. Schubert

    @Lynne Glad to see you’re back and able to “keyboard” more easily. Best wishes for a continued and speedy recovery.

    Also that is very good news about the BC man whose CIBC branch accepted his renunciation oath during his citizenship ceremony as evidence that he is not a US person. Let’s hope other banks and financial institutions in Canada are similarly inclined. Perhaps keeping the identity of that branch and man in reserve, if he’s willing, might be helpful if cases arise in other banks in Canada where such documentation isn’t accepted and the rejection is to be challenged in court.

    I’ve heard (hearsay evidence, obviously) that US officials at the border won’t accept an oath of renunciation sworn before anyone other than a US consular officer, so if things every get testy at the US border for crossing on a Canadian (or other) passport showing a US birthplace, that might not be enough to get you into the country if you need to travel there. However this remains to be seen. Like Lynne, I can’t imagine how any financial officer or government official in Canada could ignore evidence of an oath sworn and signed in a Citizenship Court (which is as legitimate a court of law as any other court in Canada), and if CRA were to ignore it I think one would have a hell of a good court case against them. Since CRA is federal and so are citizenship courts …

    Reply
  2. Lynne Swanson

    @Ward: I hope you are still following this. I apologize for not responding sooner. I was in the hospital when you posted.

    I agree with Schubert’s advice to get information from your citizenship file. I did that on his advice over two years ago. It was the best $5 I have ever spent. My 1973 file contained a signed and witnessed oath renouncing other citizenship. This was a I requirement until April, 1973, so depending on when in 1973 you became a Canadian citizen, it may also be in your file.

    We do not know for certain if Canadian banks will accept this, but a copy in my safety deposit box and with my lawyer and accountant. I don’t know how any Canadian bank could refuse to accept that, but there have been far too many unpleasant surprises since this nightmare entered our lives three years ago.

    I advised a man in B.C. to get that document from his file. He presented it to CIBC. They said they had never seen it before, but they accepted it as evidence he is not a U.S. person.

    Information was maintained on microfiche, so it is difficult to read, but it I’d legible.

    @Miaposa: The most important thing to remember iiis CRA does not and will not collect taxes or penalties for IRS from any Canadian citizen.

    Again, do not rush into anything. Learn all you can, carefully consider your options and do whatever gives you the most peace of mind.

    Reply
  3. Schubert

    @Ward Moway, if you’re still monitoring this thread and no one has told you (I am replying belatedly because I’m only tracking threads sporadically these days)

    Anything you signed and submitted during your Canadian citizenship ceremony should be on your citizenship file with Citizenship and Immigration Canada. For the payment of a $5 fee (and a wait of several weeks or maybe a couple of months, depending on their workloads) you can get a copy of the contents of that file through an Access to Information Request, as is your right under Canadian law. The link for the application is here:
    http://www.cic.gc.ca/english/department/atip/form-imm5563.asp

    It is possible that your Canadian financial institutions might accept a copy of the document that you mention as prima facie evidence you aren’t a US citizen and hence (as not a US resident) not a US person and not reportable under FATCA, but that isn’t certain. What is I think quite clear is that submission of that form as part of a claim to the State Department for having relinquished your USC in 1973, would be iron-clad and compelling evidence that you knew what you were doing and intended to relinquish at that time. As long as you’ve done nothing to assert USC since then, you should be home and dry for a back-dated CLN. I’m not a lawyer, but that’s my advice. I know several people who got back-dated CLNs without the benefit of a document like yours (Canada stopped requiring renunciation of prior nationality upon become Canadian back in 1973, April I think it was but I’m not sure). So a copy of that document, which certainly should be in your citizenship file, would be a silver spike through the vampire’s heart/final nail in the coffin/icing on the cake (pick your metaphor). IMHO.

    Reply
  4. Miaposa

    My father passed away many years ago and there is no family surviving that I’m aware of in order to get some history of how his citizenship came about. I do remember standing side by side with my father as we took our oaths together in order to complete our citizenship requests at a US Consulate. I have a current and up to date passport and social security card. I don’t doubt that I have valid US citizenship….I assume that I received citizenship as a child of a US parent, albeit an adult child.

    Thanks so much for all the advice, it’s been a very trying time to say the least. I am concerned by the impact this could have on my husband, as we own our own home, have modest investments & work pension all considered foreign gains. I will not be able to afford paying 2 sets of taxes once I retire either. And what of the impact on my children and the estate tax? The long greedy arm of the IRS knows no bounds!

    I haven’t come to any decision and more then likely feel am under the US’ radar but am having a hard time burying my head in the sand and hoping for the best. I just don’t function that way…

    Reply
  5. calgary411

    Although Miaposa said this happened during her 20’s (I would think that in her 20’s, she would have to apply herself as an adult?), this could have been the way her father applied for US citizenship for his children:

    http://london.usembassy.gov/cons_new/acs/passports/robirth.html

    Children of American citizen parents who are not eligible for U.S. citizenship at birth may be able to acquire U.S. citizenship through expeditious naturalization or an immigrant visa.

    Expeditious Naturalization Through A Grandparent

    Under the Child Citizenship Act of 2000, a child under age 18 who has a U.S. citizen grandparent who meets the physical presence requirements may qualify for expeditious naturalization under the Immigration and Nationality Act. Although not entitled to U.S. citizenship at birth, the child can, through this procedure, become a U.S. citizen by naturalization without first having to take up residence in the United States. It is, however, necessary for the child to travel to the United States for the naturalization, and all applications and documentation must be submitted and approved beforehand. For information and application material for expeditious naturalization, please write to:

    USCIS Headquarters
    Field Operations Directorate, 2nd Floor, Suite 2008
    111 Massachusetts Avenue, NW, MS2030
    Washington, DC 20529 – 2030,USA

    This procedure must be done through the United States Citizenship and Immigration Services. The process can take from six months to a year or more.

    *********************
    http://london.usembassy.gov/cons_new/acs/passports/citizenship.html says:
    If you were born outside the United States, have not been previously documented as a U.S. citizen and are:

    under the age of 18: please see our instructions for obtaining a Consular Report of Birth Abroad;

    over the age of 18: you should review the information concerning transmission requirements to see if your parent(s) had the prerequisite physical presence in the United States required by U.S. citizenship law in effect at that time. If, based on this information, you believe you have a claim to U.S. citizenship, please click here and follow the instructions provided.

    **********************
    It would be interesting to know if any of these “claims” for US citizenship are accepted incorrectly. (It seems my husband would have had to claim his “US citizenship” through his grandparents, as his dad moved from North Dakota to Saskatchewan with his family when he was four years old — but it may have been because of the “regulations” way back when that happened, not when he became a “US citizen” (through the Calgary U.S. Consulate) in 2000 or 2001. He has now, of course renounced that ill-claimed US citizenship, whether or not it was properly “given” to him.)

    Reply
  6. OutragedCanadian Post author

    @Miasposa, welcome to the Maple Sandbox, I’m truly sorry to hear that you’re caught up in this nightmare. Like Lynne, I don’t quite understand how the US gave you citizenship, however the fact that you have the passport says they did. I’m really curious about when you received the citizenship, if you’re willing to share more of your story we’d love to hear it, this is a situation I haven’t heard of before.

    As Lynne said, don’t make any rash decisions, make sure you fully inform yourself of all of your options and the ramifications of each.

    Most of all don’t panic – keep firmly in the front of you mind that the CRA will not assist the US  in the collection of taxes or fines. That’s very important to remember.

     

    Reply
  7. Duke of Devon

    Lynne. You sound just like KalC. Don’t know whether or not that’s a good thing. Miasposa would do well to heed your advice.

    Reply
  8. Lynne Swanson

    @Miasposa: Welcome to Sandbox. You are among friends here.

    The first thing to do is take a deep breath. Do not panic or rush into anything. Do not allow fear mongering accountants or others to terrorize you into complying with the IRS.

    The answer to your question is not an easy one.The issues are very complex, so learn as much as you can.

    You were born in Canada, so if your bank asks y0u where you were born for FATCA, you can honestly say Canada.If they ask you if you are a US citizen, you will need to decide how you want to reply to that.

    Renouncing would be complex and costly. The new fee to renounce is $2350 US. You would be expected to file five years of returns with IRS. You may not owe anything, but accounting fees may be exorbitant and some accountants may try to convince you that you owe penalties for not declaring your assets previously to the US.

    Remember, Canada Revenue Agency does not and will not collect for IRS on anyone who is a Canadian citizen. Canadian courts to date have ruled IRS has no jurisdiction in Canada. Some speculate that could change, but we have seen no indication that it will.

    I am perplexed by your description of how you acquired US citizenship. Did your father live in the US for five years after the age of 14? If not, I do not think he could legally pass US citizenship on to you. Yet, you have an American passport, so it seems Department of State accepted that you are a US citizen.

    My personal advice is: Get a Canadian passport if you do not already have one. Do not renew your American passport. Live your life as a Canadian only. Do not tell your bank you have an American passport. Do not file returns with IRS. Do not renounce.

    If you find this advice helpful, please consider donating to the legal challenge fund at adcs-adsc.ca to challenge FATCA in Canadian courts.

    Please note, I am not a lawyer or accountant and this is not legal advice. It is just common sense practical information from three years of following these issues.

    Others may have different advice. You will need to do whatever gives you the most peace of mind, but feel free to ask questions that will help you to make your decisions.

    Lynne–aka Blaze

    Reply
  9. Miasposa

    This is all new to me…was born and raised in Canada to Canadian parents and have never lived a day outside of Canada. In my 20’s my father decided to acquire US citizenship through one of his parents (both deceased at the time). He received citizenship and thought it would be beneficial for my brother and I to have. So now my brother and I have US passports but with Canada as our birthplace. After reading the news recently, I see that I was supposed to file tax refurns which I’ve never done. Suffice to say I’m confused about what to do and concerned about repercusions coming. I have no ties to the US, my father sadly has since passed and am considering the impact of renouncing my US citinship…

    Reply
  10. OutragedCanadian Post author

    @HonestCanadian, welcome to the Maple Sandbox. Sorry you’re embroiled in this, as well. Duke of Devon gives some good advice – particularly about not panicking or rushing. That’s very important. When we first find out about this, we usually tend to do both, resist that urge. Read as much as you can here, at Isaac Brock Society and Citizenship Solutions. Talk to people, mull it over and then talk some more.

    I’m a little confused about how you became a Canadian citizen in your teens when you were already a Canadian citizen, would you mind sharing a bit more about that so we have a better picture of your situation?

    @Duke of Devon, thanks for the letting us know about that link, I’ve fixed it.

     

    Reply
  11. Duke of Devon

    It’s important to know how old you were when you ‘became a Canadian in your teens” You may not be US citizen. It’s very complex.

    Voluntarily acquiring another citizenship after the age of 18 is one of several ways of losing US citizenship.

    Your case is complicated by the fact that you might have been a dual citizen at birth.

    Don’t panic, don’t rush. Educate yourself. Don’t enter an amnesty program of any kind.

    You could start here but this is only the start of a long process:
    http://isaacbrocksociety.ca/2011/12/12/relinquish-dont-renounce-if-you-can/

    Reply
  12. HonestCanadian

    Hi,
    Just found out by accident yesterday that I may be a US person still for tax purposes? Both my parents are Canadian, went to work in Canada in the 70?s, I was born in 1973 and moved back to Canada at age 1 in 1974. I have not lived in the US since the age of 1! Never earned money there, never had a US passport, and became a Canadian Citizen in my teens. I am confused and have no idea what my next steps are….

    Reply
  13. Ward Mowry

    Am I still seen by the US as a citizen? Became Canadian in 1973–never had a US passport. At the citizenship ceremony, I sgned a statement that I realized I was losing US citizenship by becoming a Canadian. The court clerk took the statement away and I never saw it again, nor did I ever see a CLN. Have voted etc in Canada. I don’t think I am still a US citizen, but I don’t know what they think so I have not crossed the border since 2011 when I began to hear about Fatca, etc. Help!

    Reply
  14. Blaze

    @Scared:  The United States will do whatever it can to punish anyone born in US who chooses to live elsewhere or (GASP) become a citizen of another country.

    This isn’t about taxes. This is about power and control. The US used to punish us for becoming citizens of other countries by stripping us of US citizenship. Now, they punish us by trying to force us to remain US citizens so they can financially terrorize us.

    As John Richardson said at one of the sessions:

    “U.S. citizenship is probably the most dangerous, toxic citizenship in the world today.”

     

    Reply
  15. ScaredCanadian

    @Blaze Thank you so much for the info. I will be thinking about the options you outlined. This will be a tough decision. I wonder about the probably 90 percent or more of the over 6 million people across the world who have no idea that they are in the same situation. Will the US attack and strip the common law abiding citizen of their wealth on the world stage?

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

Optionally add an image (JPEG only)