“Life planning, career planning and the reality of U.S. citizenship for Americans abroad”
“Everything I wish I had known, but couldn’t even have imagined to ask!”
During the winter, John Richardson presented a number of seminars for those concerned with the obvious problems of U.S. citizenship (including the “threshold question” of whether you really are a U.S. citizen).
Seminar topics have invariably included the problems of: FBAR, FATCA, investing, retirement planning, mutual funds, U.S. tax compliance, renunciation, etc.The official “FATCA Launch” of July 1, 2014 will surely make the existing problems worse.
U.S. citizens living outside the United States are subject to a regime of rules that diminish their “life opportunities”. These rules are such that U.S. citizens abroad live at a disadvantage relative to the citizens of any other nation. Those attending previous seminars have been primarily “middle aged” people, who have attempted to plan for their retirement, only to find that their retirement plans are threatened, because of their birth in the United States.
A shared sentiment has been:
“If only, I had known about these rules earlier … This is information that my children and other young adults need to hear! What does all this mean for my children?”
Continue reading US Citizenship & Young Adults: Navigating The Special Rules Imposed Upon US Citizens
Just after the Canada US FATCA IGA was signed, CRA put out a list of frequently asked questions.
Among the list is item 14 which caught the attention of some: (emphasis mine)
14. Does my Canadian financial institution have to notify me if information on my accounts is being reported to the CRA?
Canadian financial institutions must be open about their policies and procedures for complying with the Agreement and must be prepared to make this information available to anyone who asks about them. Although there will be no obligation for financial institutions to automatically notify their account holders about reporting to the CRA under the Agreement, financial institutions must, upon request, allow account holders to have access to the personal information that has been reported.
In his testimony before the Senate Finance Committee on April 30th, Kevin Shoom mentioned that there was a change to the implementing legislation to take away the voluntary nature of informing customers that their accounts have been flagged as reportable. He cited ITA subsection 265(5), which is written in the usual almost incomprehensible language of the Income tax Act.
|(5) For the purposes of paragraphs (2)(a) and (b), subparagraph (2)(c)(ii), paragraph (3)(a) andb)(ii), subparagraph B(3) of section II of Annex I to the agreement is to be read as follows 3. if any of the U.S. indicia listed in subparagraph B(1) of this section are discovered in the electronic search,or if there is a change in circumstances that results in one or more U.S. indicia being associated with the account,then the Reporting Canadian Financial Institution must seek to obtain or review the information described in the portion of subparagraph B(4) of this section that is relevant in the circumstances and must treat the account as a U.S. Reportable Account unless one of the exceptions in subparagraph B(4) applies with respect to that account.
I have asked Kevin to ask CRA to change their frequently asked questions to revise item 14 and he agreed to do so.Until the Charter Challenge nullifies the IGA, there’s going to be mistakes made by FIs. At least now, with this change, they will be required to contact customers before passing private information through the CRA to the IRS.
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. Continue reading Have you just learned that the United States considers you a US person? (Updated February 6, 2014)
Canadian immigration lawyers have said U.S. Ted Cruz should be able to renounce Canadian citizenship “lickety-split” if there are no security or mental health issues.
A letter/article from Lynne Swanson (aka Blaze) to Senator Cruz asks him what’s taking so long to shake his embarrassing Canadian citizenship. Cruzing In Reverse also tells Senator Cruz how different the situation is for “accidental American” Canadians who simply (like him) want to shake free from their country of “technical” citizenship.
Continue reading Cruzing in Reverse
If all countries adopted American citizenship and tax laws, US President Barack Obama, Senator Ted Cruz and Secretary of State would finally agree on one thing. Citizenship-Based Taxation and FATCA are “Outrageous.”
Citizenship-Based Taxation: Unique or Outrageous was published in Tax-News today. This is an international tax publication based in the UK. The article by Lynne Swanson (aka Blaze) was originally published as a Letter to the Editor in Tax News International two weeks ago, but is only available to subscribers there. Continue reading Citizenship Based Taxation: Unique or Outrageous
Beanie Babies are now “US persons.” Uncle Sam is mad at Beanie Babies. Good old Sam has grabbed $53.6 million in FBAR penalties for $885,000 in taxes owed.
In IRS vs. Beanie Babies, Beanie Babies creator Ty Warner agreed to pay $53.6 million in restitution for his Swiss bank account of $94 million.
I do not support offshore tax evasion, but does this seem extreme to anyone else? Maybe it’s just a drop in the bucket when your net worth is $2.6 billion, but Ty could still face prison time.
Here’s what the U.S. Attorney said:
“Regardless of wealth, everyone must pay taxes on all of their income, not just the amount they choose to report. Such conduct invites federal prosecution.”
On the other hand, Hyatt Hotel heiress Penny Pritzker Understated Income by $80 million in income to IRS due to an “inadvertent clerical error.” Penny’s punishment? She was appointed Secretary of Commerce.
Here’s what a White House senior adviser said:
“I think she’ll be extremely effective in leading trade missions around the world and helping U.S. companies develop those contacts that will lead to contracts back here in America.”
For U. S. tax filing purposes the following are consider U. S. persons
A citizen of the U.S., including someone born in the U.S. but living in another country, who has not renounced or otherwise relinquished their U. S. citizenship.
A lawful resident of the U.S., including a U.S. green card holder
A person residing in the U. S.
Someone spending a specified amount of time in the U.S., potentially including “snowbirds” who spend winters in the Florida or other warm climes.
A green card holder who never formally handed in their green card upon leaving the U.S. (even though the green card in no longer valid for U. S. immigration purposes).
The child of a U. S. citizen provided a parent lived in the U. S. period for a specified time period (with some exceptions, see T Dott comment)
All of the above would be affected by FATCA. Financial Institutions will also look for indicia including:
A U. S. place of birth
A current U.S. residence or mailing address ( including a U.S. PO Box)
A current U.S. telephone number
Standing instructions to pay amounts from a foreign (meaning non U.S.) account to an account maintained in the United States
A current power of attorney or signatory authority granted to a person with a U.S. address
A U.S. “in-care-of” or “hold mail” address that is the sole address with respect to the account holder
Others affected by FATCA include any non U.S. person who shares a joint account with a U.S. person or otherwise allows a U.S. person to have signatory authority on the account.
Any business or not for profit organization that allows a U.S. person to have signatory authority on a financial account.
Ted Cruz has “nothing against Canada.” Likewise, many Canadians born in US have”Nothing against United States (until now).
Here is an article by Lynne Swanson (aka Blaze) which appeared on the Congress blog at The Hill today.
This tells Senator Ted Cruz he has nothing to fear from Canada for renouncing Canadian citizenship–unlike what happens in reverse
Senator Cruz, Canada respects your decision to renounce your Canadian citizenship. When it is granted, I assure you Canada will not stalk you for information about your private finances and will not demand taxes or penalties from you.
Senator Cruz, will you and your Congressional colleagues do the same to protect Canadians and others around the world from outrageous demands of IRS and US Treasury?
Exposed: IRS Colludes With Banks To Unfairly Target U.S. Citizens Abroad is an excellent article about the real impact of FATCA. It comes from Occupy.Com.
It is one of the comprehensive and accurate articles on FATCA I have read.I wish the mainstream media would do as thorough and as accurate a job in covering the issues.
A woman in France speaks for many of us when she says:
“I hope someone, somewhere, sometime will say this is wrong.”
“In a panic,” she renounced her U.S. citizenship because of the upset it was causing her ill non-US husband. She is now “more and more depressed.”
Victoria Ferauge (aka Victoria) says:
“There are too many unintended consequences. It’s negatively impacting people who are not tax evaders. What I find astonishing is how it never occurred to the IRS how this could have an impact on regular people.”
Marvin Van Horn (aka Just Me) shares his horror story of IRS trying to seize $172,000.
“I said, ‘You want to apply the penalty based on my house?’ So then my penalty went from $90,000 to $172,000. I said, ‘This is ridiculous. For a tax failure that’s less than $20,000 over six years and a failure to file a form, you want to charge me a penalty of $172,000?'”
With help from TAS, he managed to whittle that down to $27,000, which he now says he probably should not have paid.
A Georgetown University law professor gets it:
“In my view, a working system to address offshore accounts addresses offshore accounts,” said Itai Grinberg, professor of law at Georgetown University. “For a U.S. expat living in Berlin, having an account in a Berlin bank is not an offshore account. It’s an on shore account.”
“That’s my view, that’s not what FATCA says,” he added.
Victoria describes the situation well:
“We feel a little like David against Goliath here.”
I’m certainly no Bible expert, but I seem to recall from Sunday School that David whacked the giant bully Goliath in the head with a stone and killed him.
If we are Davids working together, we can do the same to FATCA (I hope!)
Thanks to Badger for posting in What’s New Part 2 of the Interview with Bill Yates, former Associate Chief Counsel (International) with IRS
The interview relates to residence-based taxation, but also deals with OVDI and FATCA.
My favorite comment from the story is this:
“I’ll tell you one thing. I’ll never forget what someone said after one of our many, endless Form 8938 drafting sessions.”
“Boy, I sure wouldn’t want to have to fill out this form.”
That sums it all up, doesn’t it?
On FATCA, Mr. Yates says
I thought it was bad policy. We shouldn’t be pushing U.S. citizens towards expatriation.
He recognizes FATCA is hitting U.S. taxpayers living overseas with unforeseen consequences, such as having their foreign bank account(s) closed.
When asked if he thinks FATCA was a mistake, he replies:
It doesn’t matter what I think, now. FATCA is inevitable.
On OVDI, he gives an example of an Accidental American born in a US hospital to Canadian parents. He insists this was not and should not be the target of OVDI. But,
Believe me no one at the IRS Field level is going to speak up about the inconsistencies inherent in OVDI as far as “accidental citizens”
One more confirmation to stay away from OVDI!
Here is the Part 1 of the Interview with Bill Yates, which was earlier posted under What’s New.