# US FBAR reporting followup hits Canadian



## Eclectic12 (Oct 20, 2010)

It seems the US gov't is following up on missing FBAR forms. 
http://www.cbc.ca/news/politics/taxation-canada-u-s-irs-1.4025880

Interesting that it says:


> FBARs are a particular problem because a lot of Canadian [residents] don't realize that even an RRSP would require some sort of disclosure.



I guess my co-worker received good advice as RRSPs were one of the accounts he complained about having to report on.


Cheers


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## james4beach (Nov 15, 2012)

It could be that one reason people aren't posting on this topic is that they want to lay low. I would say that's a good idea... if you believe that the US govt might believe you are in violation of FBAR, don't attract attention to yourself. Instead, go see a tax expert.

The US govt has amazingly broad global reach and you should assume that they know of every non-US account that you own. It is therefore imperative that you fully disclose this list by filling out FBAR every year. _This doesn't mean that you must pay taxes_ -- just disclose that the account exists.

When filling the FBAR, your RRSP accounts should be marked as type "Other" and fill in the comment "RRSP".

Remember this requirement comes from being a US Person... that could mean citizen, or even a non citizen, if you are physically present in the US for much of the year, or a green card holder. If you're a snowbird in the US, you might have to file a FBAR. If you're a business traveller who hops over to the US frequently, you may have to file FBAR.

For example I am not a US citizen, nor a green card holder. Even though I use the US-Canada tax treaty and file taxes as a Canadian resident, and file a US nonresident tax return, *I am still required to file FBAR*.

One clarification. The article mentions Treasury Form TD F 90-22.1, which has been replaced by FinCEN Form 114. Someone correct me if I'm wrong, but this is where you file it: http://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html


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## Eclectic12 (Oct 20, 2010)

In my co-worker's case, she plus some of his kids have US citizenship while he does not. He seems to think Trump will at some point either make this easier or eliminate the needs for small fry like them.

As for not commenting - I would have thought some like me who have no connection or need to file FBARs would comment but maybe not.


Cheers


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## Nononymous (Jun 10, 2015)

There are a few stories circulating about this case, and follow-up discussion in the usual places: Isaac Brock Society, the American Expats Facebook group.

The case is a bit confusing, to be honest. This guy was resident in the US for part of the time for which he's under investigation. He filed US returns without disclosing the foreign accounts, then filed FBARs while under audit. He also had Swiss accounts tied to a company set up in the Turks & Caicos, which never looks good. What seems very clear is that this is NOT simply a case of the IRS tracking down some random Canadian-resident dual citizen and slapping him with FBAR fines for not having reported his Canadian bank accounts - much more to it than that.

What's also interesting is that he's being sued in a US court, and there's no indication of how the US thinks it might be able collect any fines if Mr. Pomerantz remains in Canada. (The Canadian government will not assist.) There's a link out there to a very funny court document detailing all the failed US efforts to serve papers in Vancouver. 

If anything, what this story tells me is that the US government is actually remarkably impotent when it comes to finding and punishing US persons outside its borders. Certainly the statements of the former IRS employee who spoke to Keith Redmond (a US citizen in France leading the charge against FATCA) backs this up. I would stand by my advice given earlier (and followed by myself) which is that if you are a dual Canada-US citizen not on the US radar, with no ties to the US, then under no circumstances should you get on the US radar. 

Canadian financial institutions are not trying very hard to find US persons (sometimes it's nothing more than a little "Are you a US citizen?" checkbox on an online form) so it is very easy to mislead them. If you don't identify yourself as a US person, they don't identify you under FATCA and the US continues to know nothing of your existence. (And if they did, it seems as though they can't do much about it, provided of course that you have no US assets, property, income, potential inheritance, requirement for extensive work travel or any other ties south of the border - different calculation if you do.) The worst thing you can do is seek professional advice, since lawyers and accountants are bound to tell you that you should comply with US tax law. 

Furthermore, although Washington appears to be an utter gong show these days, there are at least some attempts being made to repeal or hobble FATCA under the new administration. While I'm not holding my breath on that, it would be a good thing. Even if citizenship-based taxation does not change, getting rid of FATCA will make non-compliance that much easier (and it's already pretty damn easy).


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## james4beach (Nov 15, 2012)

Personally I would be cautious about a Facebook group where people discuss things like this. Government trawls through social media to look for crimes, so you must be very careful about drawing attention to yourself or implicating yourself on Facebook -- if you're posting with your real name.

Thanks for this post and the thoughts. I agree with not drawing attention to yourself.

However I'm not sure it's good to avoid lawyers/accountants due to their "inevitable" advice. It might still be useful to assess the risks or liabilities you face. You should also consider that the US government is able to mine many different sources of information. Think of the Panama Papers for example -- the IRS can read those documents just as easily as journalists can.


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## Nononymous (Jun 10, 2015)

Hi there, US government! Just so you know, I hijacked this IP from a neighbour's unprotected wi-fi network, honest.

Seriously though, there are over 4000 people on the expat Facebook group, using real names, some of whom are not shy about discussing their refusal to comply with the idiotic tax and reporting requirements of US citizens abroad. (I'm not one of them, but I'm not sure it's a huge risk either.) 

Of approximately 8 million US citizens living outside the country, about 1 million file tax returns. FATCA may change that, but there's a long way to go before compliance approaches domestic rates. Or FATCA will be hobbled by the Republicans, directly or indirectly, and we can all return to our daily lives without fussing over the IRS.

It is actually very difficult for the US to do anything to you outside its borders. If you have no US assets for them to seize, it's very expensive and time-consuming for them to come after you, not worth their while unless you have many, many millions squirreled away. The Pomerantz case is odd, I suspect there is more to it than meets the eye, or it's some sort of test. Given the futility of serving papers (see the second link below) who knows what they think they'll achieve.

https://www.documentcloud.org/documents/3518799-Pomerantz.html
https://www.documentcloud.org/documents/3518808-Pomerantz2.html

Be very careful regarding legal and accounting advice. If you want to pay someone to read out the worst-case penalties, great. But in general the tax professionals have not covered themselves in glory on this issue. The sleazier ones engage in deliberate scaremongering, but even the more credible suffer from an institutional bias to do things correctly, which can make compliance very expensive (e.g. they don't like reporting mutual funds, TFSAs, RDSPs etc. as "savings accounts" to avoid complex PFIC filings or payment of US tax on investment income that is tax-free in Canada). Don't even get me started on the capital gains payable on sale of a primary residence (the US gives you a lifetime exemption, $250k per person or $500k per couple, but beyond that, it's taxable). How many dual citizens in Toronto or Vancouver would, in theory, owe five- or six-figure sums after selling their homes?

To summarize, I've not yet heard of anyone regretting their decision to stay off the radar. There are literally zero known instances of Accidental Americans outside the US being identified and punished for non-compliance. (I base this on a few years of paying close attention to the relevant forums and groups.) The biggest FATCA problem is denial of banking services to customers with US birthplaces, primarily in Europe where the ID requirements for accounts are stricter than Canada. 

I have, however, heard plenty of stories from people regretting their decision to become compliant because it's cost them huge amounts of money, both in accounting fees and taxes owed on investment income or sale of a home. In most cases they renounced but felt compelled to settle their tax affairs "by the book" when doing so. You can, in fact, renounce then happily ignore the filing requirements (or submit "partial compliance" exit returns carefully calibrated to ensure that you owe $0) as there is no evidence the IRS will follow up. 

My view is that renouncing is only useful if you are at risk of losing banking services, in which case it may be worth it for you to buy your freedom for US$2350. Otherwise, stay off the radar!


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## james4beach (Nov 15, 2012)

My gut agrees with the idea of staying off the radar and not drawing attention to yourself.

But if you really want to stay off the radar, I suggest you also avoid direct ownership of US stocks and other US assets. When I finish working in the US and return to Canada, I plan to dispose of every US asset I have. I will empty the 401(k) and pay the penalty. I will empty my US brokerage accounts, and I will sell all individual US stocks and replace them with Canadian domiciled ETFs.


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## Nononymous (Jun 10, 2015)

Getting rid of US assets is an excellent way to protect yourself from US capriciousness.

For a dual citizen in Canada, the best strategy remains non-compliance, particularly now there's a chance that FATCA might be repealed - stay off the radar until that situation settles itself. First step is to ensure that no banks or financial institutions are aware of US personhood, so nothing is reported. Refuse to answer citizenship questions, or lie, and never sign a W9 or any US government form. Wait it out until the situation becomes clearer.


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## james4beach (Nov 15, 2012)

Also remember, don't ever list any US addresses or US phone numbers on your profile for a Canadian bank. The presence of any US indicators will immediately flag the account.


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## AltaRed (Jun 8, 2009)

james4beach said:


> Also remember, don't ever list any US addresses or US phone numbers on your profile for a Canadian bank. The presence of any US indicators will immediately flag the account.


Same if a Canadian has a Social Security Number (as compared to a ITIN). Disclosure of a true SSN will get you tagged as a US person by default in Canadian banks and brokerages and it is hell dealing with that (impossible in some cases). Canadian ex-pats in the early days (decades ago) had to get SSNs when they took on an assignment in the USA, and the USA at that time did not differentiate on the type of SSN issued......and hence that has now become a haunting problem for many.


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## james4beach (Nov 15, 2012)

Thanks AltaRed for this warning. I am not a US citizen, but I do have a true SSN because the ITIN I had at the time was deemed inadequate for the employer's needs. As far as I know I have not ever told any Canadian banks this, but I will be especially wary going forward. I appreciate the tips.


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## AltaRed (Jun 8, 2009)

Learned from experience. Never give the SSN to a Canadian brokerage in particular.


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## Nononymous (Jun 10, 2015)

No, god no. No US address of any kind, no SSN, no nothing. Keep it clean and simple, only give your financial institutions Canadian data, regardless of your citizenship.

If the FATCA police ask you to sign a W8 or W9 for compliance purposes - i.e. not because you have US investments - then tell them to take a hike. Canadian banks should not be using US government forms to cover their asses.

A few years ago my brokerage asked me if I was a US citizen, and requested an SSN. After some back and forth I simply told them I wasn't a US citizen and couldn't remember the SSN I might have had as a grad student - lies, all lies - and they seemed happy to accept that. At the time I thought perhaps my parents had betrayed my dirty little secret in the context of estate planning, but recently it occurred to me the broker possibly had an old US address on file, since the RRSP was set up for me decades ago while I was away doing grad school, in an effort to reduce the taxes payable on my modest Canadian scholarship income (I needed all the help I could get with loonie being worth 65 cents back in the day).


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## james4beach (Nov 15, 2012)

Here's another one. Beware of which phone number you call the brokerage or bank from. Let's say you're a snowbird and are in Florida, with a land line and FL number. If you dial the brokerage from this, your US number will show up on caller ID.

To simplify my Canadian presence (I have homes in both countries), I use a Voice-over-IP "SIP phone". This is tied to a Canadian phone number in my home province of residence. This way, even if I am in my US apartment, I can pick up the phone and call the brokerage. This shows my Canadian phone number.

VoIP is an excellent technology to maintain a constant phone number, no matter where in the world you plug in from.


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## kcowan (Jul 1, 2010)

james4beach said:


> Also remember, don't ever list any US addresses or US phone numbers on your profile for a Canadian bank. The presence of any US indicators will immediately flag the account.


My bank had our MagicJack number (San Diego) registered because we get the calls in Mexico/ Canada/ anywhere. They recommended that we remove it so we did.


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## james4beach (Nov 15, 2012)

kcowan: it sounds like your VoIP used a US phone number. I have VoIP running with a Canadian phone number. I'm using CallCentric, and I actually ported my old 416 number over to them (number portability). CallCentric supports Canadian phone numbers, e.g. my 416 -- you can either buy them from this services, or bring your own through number porting


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## kcowan (Jul 1, 2010)

Yes I signed up for MagicJack over ten years ago. At the time I was home swapping to San Diego every year. I have looked at getting a 604 number and concluded it is not worth the effort. 

We get free LD in Mexico on both landline and cells so the need for MJ had dropped. I keep it on the iPhone so I can call Cdn/US 800 numbers.

We keep our Cdn landline because we rent our place. They need the number to unlock the front door.

(I have a friend here who extolls the virtues of Google Voice and all the magic he works with numbers everywhere. We just do not need it.)


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## gardner (Feb 13, 2014)

More news on FBAR:
http://www.cbc.ca/news/politics/irs-cra-taxation-fatca-1.4083232



> CBC News has learned as a result of a U.S. Freedom of Information Act request [that] thousands of reports containing confidential Canadian banking information records have been sent directly to the U.S Internal Revenue Service, without the Canadian government's knowledge.


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## Userkare (Nov 17, 2014)

james4beach said:


> Thanks AltaRed for this warning. I am not a US citizen, but I do have a true SSN because the ITIN I had at the time was deemed inadequate for the employer's needs. As far as I know I have not ever told any Canadian banks this, but I will be especially wary going forward. I appreciate the tips.


That SSN thing has been an annoying itch in the back of my brain for years. Although I renounced my US citizenship in 1972, I still had a SSN from previous US part-time student employment. When the last of my parents died in 2004, I inherited a share of the family home in the states. The lawyer handling the estate was holding things up because they wanted me to get an ITIN to report the income from the sale of that home. Not to keep my siblings waiting, I volunteered that I had an old inactive SSN; they said it would be O.K. to use that. I paid the required tax, and thought nothing more about it... until FATCA. I now get a statement mailed periodically to my Canadian address from the SSA telling me that I don't qualify for benefits because I didn't contribute enough when I was working there. I asked them to delete my record, but they said that they couldn't do that unless I was dead.

I fear that some day, some how, a connection will be made, and because I paid US taxes in 2004 with my SSN, this would somehow be used as a US person indication. I have no holdings of any kind in the US, but still, having to defend myself from the long arm of Uncle Sam is something I'd rather not have to deal with.


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## james4beach (Nov 15, 2012)

I opened a new brokerage account last month. I was careful to do all the phone calls from within Canada. There were zero questions about US affiliations, zero questions about SSN, so I did not have to answer questions like that (this could be because I have an existing profile with the bank).

One question they asked was "are you a resident of Canada for tax purposes" and my answer was yes - end of story.


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## Nononymous (Jun 10, 2015)

I recently learned (via the Isaac Brock Society site) that CRA will be rolling out a new tax-residence form for the CRS (Common Reporting Standard) later this year. The short version of the story is, when opening an account with a financial institution, you may be presented with a CRA form in which you check off your countries of tax *residence*: Canada, US, other. The form isn't submitted to CRA, but is kept by the financial institution to prove it's done its due diligence.

I think this is actually good news, as it could stop the practice of banks using the US government W8 and W9 forms (with their nasty perjury warnings) for FATCA compliance purposes, which they shouldn't be doing. It could also make it far easier to avoid FATCA reporting, because many US persons will either not know that their US birthplace implies US tax residence (why would they?) or will choose not to check that box.


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