The IRS made changes to the “Streamlined Program” (a “relaxed” way for delinquent U.S taxpayers to catch up with their U.S. tax and information reporting forms) on June 18 of this year. Further guidance was given on October 08. Snowbirds in particular, face a potential conflict. It is commonly
misunderstood that anyone can stay in the U.S. for up to 180 (actually 182 or less) days per year without any tax consequences. In fact, the manner of counting days is subject to a complex way of computing the total number and of course, there is a form to be filed in the event one is over the limit. In the same manner many expats have been caught off guard with respect to filing tax and information returns, snowbirds who are unaware of the correct procedure are at risk.
Should one be so unfortunate as to be cast into the U.S. taxation net, the Streamlined Program might appear to be a way out. Even better, recent IRS indications are that they will presume that those outside the U.S. were non-willful non-filers, which will eliminate penalties. What could be better? However, in order to qualify for the non-U.S. residence status, one must not have spent more than 35 days in the U.S. for the past three years. The Catch 22 is in order to qualify for the U.S. resident version of Streamlined, one must have filed U.S. tax returns for the previous 3 years.
It is estimated there are 7 million U.S. citizens living outside the United States. Some of these people don’t know that the U.S. may consider them to be citizens. The vast majority of these Americans abroad (according to U.S. law), are required to pay taxes and complete information reporting forms to the United States. Although “citizenship-based” taxation has existed for years, (you might even say that the U.S. practiced “unofficial residence-based taxation”), what is new, is the enforcement.
On July 1, the IGA with the United States became a reality. Canada signed this Intergovernmental Agreement with the United States concerning the Foreign Account Tax Compliance Act. This enables the U.S. to receive enhanced financial information of Canadians (account numbers, balances, deposits, withdrawals); information the Canadian banks were never permitted to send to the CRA due to our privacy laws. This reporting applies to those deemed “US Persons” which includes citizens, green card holders,”Accidental Americans,” “border babies,” and will affect the families of anyone considered as such by the U.S. Canadian financial institutions must determine what accounts are “reportable accounts.” Information regarding those accounts will be passed on to the CRA who will, in turn, pass this information on to the IRS. The late Finance Minister, Jim Flaherty emphasized that the CRA will not collect taxes for any person who was a Canadian citizen at the time the tax was incurred, nor will any penalties be collected concerning FBAR (Foreign Bank Account Report). This situation is causing confusion and concern for anyone who may have a US connection, whether it be actual citizenship, a member of the family, etc. These seminars will include discussion and analysis of the IRS “relaxed opportunities” for people to come into compliance and will focus on:
Are you a US citizen?
Are you still a US citizen?
Are your children US citizens?
What is an “Accidental American?”
What is a “border baby?”
Filing US tax returns
What is involved?
Filing information returns (FBAR, 8938, 3520A & 3520, 5471, 8621 etc)
Reasonable cause (avoiding penalties)
Financial Planning Issues:
Treatment of tax-deferred savings plans
Treatment of Mutual Funds (PFICs)
What might FATCA mean for me?
Will FATCA make it harder for me to cross the border?
Does it make sense to give up my US citizenship or greencard?
“Sailing Permit” – I-407
Information presented is NOT intended or offered as legal or accounting advice specific to your situation.
Presenter: John Richardson, B.A., L.L.B., J.D., is a Toronto lawyer and a member of the Ontario Bar. Citizenshipsolutions.ca
Where:Carr Hall, St. Michael’s College, U of T, 100 St. Joseph St., Toronto ON M5S 2C4
When: Sunday, November 30, 2014, 6:30 – 8:30 pm
Admission: $20 individual or $40 for a family of up to four people. Payable in cash at the door, please (to cover costs). Hope to see you and your families on November 30. Spread the word!