Category Archives: IRS

Knock Out!

Knock Out!  Manny Pacquiao punches “insatiable” IRS.
I admit I’d never heard of Manny Pacquiao before today. I’ve now learned manny timePacquiao is a world class boxer and is the second highest paid athlete in the world.
American Spectator says Pac Man now “takes on his toughest opponent in his next fight: the Internal Revenue Service.”

Roy Jones, Evander Holyfield, and Floyd Mayweather all fought the most powerful three-letters in boxing and lost. Manny Pacquiao, a Filipino who doesn’t possess their home field disadvantage, has already defeated the IRS without stepping through the ropes.

By fighting in China instead of in US:

The Pac Man may be the first boxer to defeat the Tax Man. More amazingly, he may be the first tax refugee to flee the “land of the free” for China. Should he earn $20 million for his fall fight against Brandon Rios, the government in Macau will gobble up $2.5 million of it. Had he opted for Las Vegas, Uncle Sam would have seized $8 million.

Forbes explains it this way:

Because Pacquiao is neither a U.S. resident nor a citizen, he will not pay U.S. tax on any money earned from the fight, allowing him to pocket an extra 28 percent of the purse.

I’m a bit confused. Wouldn’t he have a Green Card because of his previous fights in US?  Wouldn’t that still require him to pay US taxes?
In any case, I think we need the Pac Man in our ring as a FATCA fighter. Sock it to them, Manny!

Relinquished before 2004? Applying for CLN now? What are the IRS consequences?

There’s no question with renunciation (Immigration and Nationalities Act, s. 349(a)(5)).  You are relinquishing your citizenship and notifying the US government of it at the same time, and that’s the date your US citizenship ends.
But what if you relinquished your citizenship by a different method of INS, s. 349(a), such as taking citizenship in another country with the intent to relinquish your US citizenship (349(a)(1))?
The State Department is clear.  No matter when you notify the US govt of your relinquishment, once your CLN application is approved, your US citizenship ended on the date you actually relinquished it (that is the date your performed the relinquishing act, eg. naturalised as a citizen of another country — this date is indicated as your expatriation date on the the CLN.)
The IRS, however, according to s. 877A(g)(4) of the US Tax Code, considers the date of your relinquishment for IRS purposes is not the date of your actual relinquishment but the date you notified the US government of it (your consulate meeting).  This was not the case prior to 2004, however [the relevant section was 7701(n) in 2004 and it was replaced by 877A in 2008].
So, what if you relinquished your US citizenship long ago, but only recently learned of US law and policy changes which make it important to be able to prove you are not a US citizen, and wish to obtain Certificate of Loss of Nationality (a document you probably never even heard of before)?  What if the current law regarding IRS and citizenship termination did not exist at the time you relinquished?  Logic  leads one to the conclusion that laws passed after a person ceases to be a citizen are irrelevant.  The IRS has never made a definitive statement on this issue, however their instructions for the 8854 (expatriation tax form) are only directed at people with expatriation dates “after June 3, 2004.”
Tax lawyers Michael J. Miller and Ellen Brody have just published an excellent article on this matter, Expats Live in Fear of the Malevolant Time Machine, in which they point out the legal, as well as common sense, absurdity of a retroactive application position.  It’s very clear reading with useful references to legislation and case law as well.


We’ve known all along reciprocity is not really reciprocity.  Not only that, but  FATCA IGAs Are A Bad Deal For Partner Countries.
While vendors are cheering themselves on and salivating at the opportunity to make big money off our nightmare, Jim Jatras says “it isn’t clear that FATCA itself is doing as well.”
Why? Because the U.S. Treasury Department’s ability to enforce FATCA directly, on each and every FFI on the planet is highly questionable.
Getting IGAs signed isn’t proceeding like U.S. Treasury thought it would. Plus, faux reciprocity in Model 1 is in trouble.
Even according to an IRS manager, ““clearly existing U.S. rules don’t require U.S. financial institutions to provide the exact same information that a foreign institution has to under FATCA.
Mr. Jatras does an excellent assessment of that:

Some have been critical of Mr. Setzer for having the bad manners to speak something like the truth out where it could be reported to those not familiar with the imbalance codified in the IGAs. But putting aside questions of indiscretion and the vague characterization of a timeframe for “full reciprocity” – something that clearly isn’t going to happen anytime soon, and probably not ever – it’s nice to have confirmed officially what most people familiar with the details prefer to obscure.

In his article, Mr. Jatras also points out many ways US has to unilaterally change or escape from an IGA after it is signed.

Moreover, an IGA provides no protection at all for one additional, simple reason: they are written on sand.

American Bankers Association have also now joined the fray

“There is no indication or evidence suggesting that the Treasury conducted the required due diligence for entering into such an automatic exchange relationship” with Mexico.

Mr. Jatras further says:

As a bad deal for all concerned, the IGAs should also be seen as a “weak link” for undermining FATCA and working for its repeal before its worst features go into effect.
Foreign governments need to stop helping to save FATCA from its own fatal flaws by signing IGAs that cannot provide promised protection for cherished institutions. Instead, they should tell Treasury in clear and principled terms that they will not allow their domestic firms to comply with FATCA, and that they’re prepared to respond with WTO and other remedies if IRS tries to apply sanctions.
Finally, firms faced with wasting untold millions of dollars to comply with FATCA need to stop pressing their governments to sign IGAs and instead help get rid of it by supporting the repeal campaign in the United States.

We need to keep up the pressure on our own governments and financial institutions.

Green Party of Canada Issues Statement On FATCA

Elizabeth May and Erich Jacoby-Hawkins have now issued a Green Party of Canada Statement on FATCA. (IRS Tax Collection: Evasion of the US or Invasion of Canada?)
Green Party Leader Ms. May says:

“Clearly, any person with earnings or part-time residence in the US should file tax returns and pay US taxes in keeping with current bilateral agreements. However, our government must stand up for Canadian citizens who are neither working under nor representing any burden to the US governmental system”

Green Party Revenue Critic Mr. Jacoby Hawkins (who was the only representative of any of the parties at FATCA Forum) says:

“It would be a clear violation of our Charter of Rights and Freedoms to have Canadian banks, under the direction of the IRS, violate the privacy rights of some Canadian citizens or residents based on their current or former ties to another country, namely the United States.”

I hope the government is prepared to listen to the Green Party’s position on this:

 We must not permit Canadian financial institutions to comply with FATCA in violation of our own privacy laws, and if the US attempts to enforce FATCA against them, we must vigorously respond and seek legal remedy as is our right.
If the US feels the existing Canada-United States Convention with Respect to Taxes is not working, they should provide specific details and suggestions on how to improve it through legislative amendment without sacrificing the rights of Canadians to foreign interests.

Of course, the Green Party only has one seat in Parliament.  That is Ms. May’s. She herself was born in US, moved to Canada (Nova Scotia) as a teen and has been a Canadian citizen since 1978.  Her seat is for a BC riding, Saanich-Gulf Islands.
Ms. May, like many of us, believed she relinquished her US citizenship permanently and irrevocably when she became a citizen as a young woman.  I believe she is also like most of us in that she does not have a CLN.
I hope this statement may result in Finance Minister Jim Flaherty and other parties breaking their months-long silence on FATCA to assure Canadians that their fundamental rights will be protected.

Toxic Tax Act (FATCA) Is In Trouble

Here might be a ray of hope for us.
Nigel Green says FATCA, America’s New Toxic Tax Act, Is In Trouble.
Mr. Green gives two reasons for believing FATCA is “running out of steam.”

Firstly, the US Treasury Department has again failed to meet its own end-of-year deadline to publish the FATCA rules, one of the key steps in its implementation.  This is the second time that the Treasury Department has missed such a deadline – the first one came and went in September 2012.
Secondly, to date, only the UK, Denmark, Ireland and Mexico, plus a handful of British Crown Dependencies, have signed FATCA’s required Intergovernmental Agreement (IGA).  The Treasury Department had hoped to finalise IGAs with many others, including Canada, France, Germany, Italy, Japan, Spain, and Switzerland before the end of 2012. It failed on that too.

Mr. Green does expect IGAs to be signed and regulations to be released.  Yet, he remains optimistic:

But there’s no getting away from the fact that the campaign to introduce FATCA appears to be floundering.

As most of you know, Mr. Green also had a thread last week, FATCA Good Or Bad: You Decide.  Some familiar names and a few new ones are in the comments.  All “decided” FATCA is bad.  If only these were the real decision-makers!
Let’s keep up the pressure as FATCA flounders.

Taxpayer Advocate Report Is Out

IRS 2012 Taxpayer Advocate Report is out.  It’s not flattering to IRS.
Perhaps the nicest thing Nina Olsen has to say is the most apparent:

The most serious problem facing taxpayers – and the IRS – is the complexity of the Internal Revenue Code (the “tax code”).

Mind you, she seems to be talking about taxpayers in US with that statement.  The report does not even touch on FATCA or citizenship-based taxation, which was disappointing.
The complexity of the IRS Tax Code within US is nothing compared to the complexity for those outside the US–including for those of us who don’t even consider ourselves to be “US persons.” Continue reading Taxpayer Advocate Report Is Out

FATCA Forum Spreads Word On YouTube

FATCA Forum is on YouTube.
Nine segments offer a wealth of information and a great chance for all of us who were unable to attend to hear and learn from the presenters and the discussions.
I will post a link to Abby Deshman’s presentation on the CCLA thread.
In the final segment, Sinclair Stevens suggests we use the “new age” of the Internet “and “all that entails” to “bypass the traditional press” who are “in the pockets of the establishment.”  That, of course, is what we, our allies at Brock and elsewhere, are trying to do.  We need to keep doing it! Continue reading FATCA Forum Spreads Word On YouTube

Santa Is A Canadian Citizen: Update 2013

We told them last year.
Santa is a Canadian citizen. Santa Is Canadian
We warned them then:  Don’t you dare insist Santa is a “US person.”  Well, the Americans are at it again.
Another Conservative MP and Parliamentary Secretary to the Prime Minister confirmed in the House of Commons last week that Santa is Canadian. Yet, the USA is trying to nail him as theirs.
They’re Baaack! For the holiday season, the Americans are once again insisting Santa lives in the US. Don’t they know his suit is red and white–not red white and blue?
They probably  issue Santa a Green Card every December to add Christmas color to his all-Canadian suit. Or, maybe they just let him hang out in Alaska so they can impose “substantial presence” on Santa.
US Treasury and IRS are sneaky. They do that so when Santa returns to his real home at the North Pole in Canada with his Canadian HOH OHO postal code, they can nab him as a “US person” and FATCA (Foreign Account Toy Compliance Act) the jolly fellow.
If there is any question about Santa’s citizenship, the fact Canadian Conservatives and Liberals actually agree on that point should prove it. . Liberal leader Justin Trudeau even made a public declaration on television.  Look at what the goodwill of the holiday season can accomplish!
So, will Canadian Finance Minister Jim Flaherty ensure Santa and all other Canadian citizens are protected from IRS and FATCA under Canada’ banking, privacy and human rights laws? Or, will Santa have to join other Canadians in a challenge under Canada’s Charter of Rights and Freedoms?
Below is what we said last year about Santa’s Canadian citizenship.  citizenship. It’s incredible that it is still dragging on a year later.
USA, don’t you dare declare Santa a “US person!”
Santa is a Canadian Citizen.  This has been confirmed once again by Canada’s Minister of Citizenship and Immigration, Jason Kenney.
Just like Prime Minister Stephen Harper and many of us, Santa is “Canadian and only Canadian.”  But, unlike other Canadians, Santa doesn’t even need a passport to travel the world.
No countries charge Santa duty on toys he imports, but we fear USA may FATCA (Foreign Account Toy Compliance Act) Santa because of his immense stash of toys housed at Santa’s home in North Pole Canada HOH OHO Continue reading Santa Is A Canadian Citizen: Update 2013

12 Reasons Why Canada Must Reject FATCA

There are a multitude of reasons why Canada must reject FATCA.
Here are just 12 of them.
1.    FATCA violates Canadian privacy, banking and human rights laws and Canadian Charter of Rights and Freedoms.
2.    Canadian laws are made in Ottawa, not in Washington
3.    FATCA treats Canadian citizens born in US and their Canadian-born children as second class citizens in Canada.
4.    FATCA threatens Canadian sovereignty and autonomy.
5.    FATCA threatens retirement, education and disability savings of Canadian citizens and residents.
6.    FATCA places huge costs on Canadian financial institutions.
7.    FATCA takes money out of Canadian economy and tax base.
8.    Canada has a 70 year effective tax treaty with US to combat tax evasion.
9.    Canada does not negotiate with financial terrorists.
10.   Canada is not a tax haven.
11.    Canada should show leadership to the world in standing up to IRS bullies.
12.    FATCA is just plain wrong.
Canada, Just Say No!