# Bad news for Canadian residents (dual US - Canada citizens) - new Trump tax



## Numbersman61 (Jan 26, 2015)

http://www.cbc.ca/news/politics/trump-tax-repatriation-canadian-1.4779747


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## humble_pie (Jun 7, 2009)

Numbersman61 said:


> http://www.cbc.ca/news/politics/trump-tax-repatriation-canadian-1.4779747



it's extremely bad news for some canadian taxpayers. The only solution would be to surrender american citizenship & for many with strong family/personal ties to both countries, this is not emotionally possible. Although continued plundering from the current occupant of the oval office might come to turn surrendering american citizenship into a joyful occasion.


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## ian (Jun 18, 2016)

If you are in this position, and do decide to renuounce, the article seems to indicate that you will have to pay the tax in one year vs. the eight year special arrangement. Not good. For many, it will be financially challenging to renounce.


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## Nononymous (Jun 10, 2015)

If you are a Canadian citizen business owner and find yourself at risk from the new transition tax and are not already compliant with US taxes, DO NOT become compliant with US taxes. If you have been compliant, STOP being compliant before it costs you an absurd sum of money.

Two very important things you need to know:

1. As a Canadian citizen you are protected from any attempt by the IRS to collect taxes, penalties, fines etc. against you in Canada. (If you have US assets or income, that's another matter.) Under the terms of the tax treaty, the CRA will provide no assistance to the IRS for any form of collection against Canadian citizens. If you don't believe me, write to the Finance Minister and ask - his office will confirm it.

2. Should you choose to renounce US citizenship, it is not necessary to be compliant with US taxes beforehand. Your tax status (compliant or non-compliant) has no bearing on your ability to renounce. It will cost you US$2350 and from that date forward your tax obligations stop. Past obligations are not however erased. It may make sense for you to exit the US tax system by filing 5 years of returns plus the 8854 form, but if doing so would cost you a lot of money, you can simply choose not to bother. 

The ones who will be hurt by the transition tax and all that are those business owners who have (foolishly as it turns out) attempted to be compliant with their US tax filing requirements and wish to continue doing so. Two categories of people are more vulnerable, as they can't simply tell Uncle Sam to go pound sand: US citizens living in Canada who do not have Canadian citizenship (under the terms of the tax treaty, the CRA must provide a level of assistance to the IRS if it wishes to collect from a US-only citizen) and those who do a lot of cross-border business and have US income or assets.


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## Numbersman61 (Jan 26, 2015)

Nononymous said:


> If you are a Canadian citizen business owner and find yourself at risk from the new transition tax and are not already compliant with US taxes, DO NOT become compliant with US taxes. If you have been compliant, STOP being compliant before it costs you an absurd sum of money.
> 
> Two very important things you need to know:
> 
> ...


I was wondering when you would comment. My post was for those US citizens who have decided to comply with the law which applies to all US citizens. It was certainly not intended for those US citizens who have decided not to comply with the law. You break the law - you take your chances.


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## Nononymous (Jun 10, 2015)

Numbersman61 said:


> I was wondering when you would comment. My post was for those US citizens who have decided to comply with the law which applies to all US citizens. It was certainly not intended for those US citizens who have decided not to comply with the law. You break the law - you take your chances.


I don't check in that frequently, but when there's a chance, I do try to warn any dual US-Canada citizens to stay the hell away from US tax compliance. In this case one is much better off breaking the law!


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## Numbersman61 (Jan 26, 2015)

Nononymous said:


> I don't check in that frequently, but when there's a chance, I do try to warn any dual US-Canada citizens to stay the hell away from US tax compliance. In this case one is much better off breaking the law!


Of course, there is always a chance that a lawbreaker will be caught and be subject to the consequences.


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## Nononymous (Jun 10, 2015)

Numbersman61 said:


> Of course, there is always a chance that a lawbreaker will be caught and be subject to the consequences.


In this particular case, US law is not enforceable in Canada against Canadian citizens.

Caution should be exercised by Canadian residents with only US citizenship, and anyone with US assets or income. Otherwise, under current law, the IRS cannot touch you. 

Exaggerated fear of the US government leads people to make very expensive decisions.


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## AltaRed (Jun 8, 2009)

i am with Numbersman61 in this debate in a general sense. It may be one thing to say one could take the chance of non-compliance, but to advocate for 'breaking the law' borders on irresponsibility. If I was to non-comply as Nononymous suggests, I would be sure to never step foot in the USA or one of its territories ever again.


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## cainvest (May 1, 2013)

AltaRed said:


> If I was to non-comply as Nononymous suggests, I would be sure to never step foot in the USA or one of its territories ever again.


Yup, one could never vacation or cross-border shop again. I would imagine you'd be detained (or worse) at the border crossing.


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## AltaRed (Jun 8, 2009)

cainvest said:


> Yup, one could never vacation or cross-border shop again. I would imagine you'd be detained (or worse) at the border crossing.


Likely not if US immigration doesn't necessarily coordinate with IRS et al, but why take the chance?


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## Nononymous (Jun 10, 2015)

AltaRed said:


> i am with Numbersman61 in this debate in a general sense. It may be one thing to say one could take the chance of non-compliance, but to advocate for 'breaking the law' borders on irresponsibility. If I was to non-comply as Nononymous suggests, I would be sure to never step foot in the USA or one of its territories ever again.


I'm not sure I understand the difference here, as "take the chance of non-compliance" = "breaking the law".

But hey, if you have $2 million in deferred income saved inside a corporation for your retirement, and the cost of compliance is giving 18 percent of that to the US government plus the Canadian tax hit for taking the money out to pay the bill, breaking the law starts to look like a pretty good deal.

PS on edit: Or your house in Vancouver or Toronto is worth $5 million more than when you bought it. How badly do you want to comply with US taxes? Enough to pay capital gains on that when you sell?


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## Nononymous (Jun 10, 2015)

cainvest said:


> Yup, one could never vacation or cross-border shop again. I would imagine you'd be detained (or worse) at the border crossing.


The current situation is this:

1. US customs has no access to tax data. If you are merely non-compliant, i.e. never file returns and the IRS doesn't know you exist, then nothing will happen at the border because CBP has no information nor do they have any reason to stop or ask you (not that they ever need a reason for being assholes, but that's a different problem). And think about it for a minute - if CBP or the IRS don't know anything about your Canadian finances, they can't determine if you even earn enough to be required to file returns or FBARs (a US person with no income or savings who does not file is in fact compliant).

2. If you were to have a large unpaid US tax debt, which the IRS has tried to collect, it's possible that CBP could detain you briefly at the border to ask for contact information so that an IRS agent could call or pay you a visit during your stay. (The IRS can flag people using a DHS system called TECS, I believe.) You would not be arrested - owing a large debt is not a crime.

3. If the IRS had actually brought criminal proceedings against you and you were foolish enough to enter the US, then it's possible you could be detained. But you would need to have done something extremely bad for that to happen. And you would also need to be very silly.

(Additional caveat regarding point 1. A non-compliant person could come to the attention of the IRS if they had account info reported under FATCA. As yet there is no evidence that the IRS is translating FATCA data into debts owing, or even uses FATCA info to contact non-compliant US persons abroad, but it may happen one day in the future. Always best to avoid FATCA reporting by not admitting US citizenship to your Canadian bank - they won't check or challenge your answer.)


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## Numbersman61 (Jan 26, 2015)

Nononymous said:


> I'm not sure I understand the difference here, as "take the chance of non-compliance" = "breaking the law".
> 
> But hey, if you have $2 million in deferred income saved inside a corporation for your retirement, and the cost of compliance is giving 18 percent of that to the US government plus the Canadian tax hit for taking the money out to pay the bill, breaking the law starts to look like a pretty good deal.
> 
> PS on edit: Or your house in Vancouver or Toronto is worth $5 million more than when you bought it. How badly do you want to comply with US taxes? Enough to pay capital gains on that when you sell?


The bigger the amount of tax evaded, the bigger the risk. If the IRS ever found out that a US citizen had not reported a significant amount of income, their criminal enforcement department would certainly be on the case.


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## Nononymous (Jun 10, 2015)

Numbersman61 said:


> The bigger the amount of tax evaded, the bigger the risk. If the IRS ever found out that a US citizen had not reported a significant amount of income, their criminal enforcement department would certainly be on the case.


I suppose that hangs on how much money counts as "significant" and whether the IRS has any ability to touch the person (they currently cannot do anything to a dual citizen in Canada). I doubt that either of the two examples I gave above would trigger their interest, given that the odds of collection are nil.

Still best not to bring yourself to their attention though. Generally speaking the damage is self-inflicted, when people try to come into compliance.


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