# FATCA - new US tax law



## PuckiTwo

a free investor newsletter (investorPlace.com) posted this: 


> 1. Most people mistakenly think they're not affected by FATCA. If you are a U.S. citizen...or if you hold any of your money in U.S. dollars, *this new law definitely affects you.*
> 2. The more you trade and invest, the more likely you are to get hit hard by this new bill.


How should one read this? "or if you hold any of your money in U.S. dollars...." When I read CMF then most of CMFers hold money in US$. Are you then becoming subject to FATCA tax laws? I cannot imagine.


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## fatcat

you *are not* subject to fatca if you merely hold us dollars in an account either in canada or the usa
you *are* subject to fatca if you file a us tax return


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## Eclectic12

Based on the deal signed by Canada with the US, Canadian banks are to treat their customers with US markers as US citizens unless proven otherwise.
http://globalnews.ca/news/1130967/canada-u-s-sign-controversial-fatca-tax-deal/

So having a Canadian bank account is subjecting one to FATCA review.


Since FATCA is aimed at


> tax non-compliance by U.S. taxpayers with foreign accounts ...


there shouldn't be anything new if one *has* been filing US tax returns.


It's more the people who haven't been filing US returns such the poster here on CMF who was originally told they weren't a US citizen but amendments to the citizenship laws mean they are currently considered US citizens ... Or those don't realise their Canadian born children as considered US citizens.

There are also references to those with Green cards needing to keep filing US tax returns, despite no longer working in the US.

Cheers


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## kcowan

I talked to my broker about this and he said that their agreements are all being revised to properly identify US Persons. Although such people are already obliged to file US Tax Returns, many have not done so. Examples are children born in the US while their parents were there on assignment, Canadian children born to US parents, and current Green Card holders.

It is somewhat ironic that this forces USians to pay taxes and not get any benefit from that taxation. That was how the US came into being when Britain tried to do the same thing.


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## MrMatt

The people that will really be affected are those who should have been paying their US income tax, and aren't.

The US doesn't like it when people don't pay their taxes.


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## fatcat

MrMatt said:


> The US doesn't like it when people don't pay their taxes.


good point, unlike canada who don't seem to care at all if you don't pay .. strange


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## Eclectic12

kcowan said:


> I talked to my broker about this and he said that their agreements are all being revised to properly identify US Persons. Although such people are already obliged to file US Tax Returns, many have not done so. Examples are children born in the US while their parents were there on assignment, Canadian children born to US parents, and current Green Card holders.


Or a Canadian who fails the realise they've stayed too long in the US and need to take the appropriate action. Or the poster here who has now discovered that despite being told he wasn't a citizen when he left, the changes mean he's now a citizen again and should have been filing /paying since the law changed.

Going rate to renounce US citizenship is supposed to be $4K, where other estimates list the cost to file US tax returns is $500 on the low end to thousands at the high end.




kcowan said:


> It is somewhat ironic that this forces USians to pay taxes and not get any benefit from that taxation. That was how the US came into being when Britain tried to do the same thing.


+1 ...




MrMatt said:


> The people that will really be affected are those who should have been paying their US income tax, and aren't.
> The US doesn't like it when people don't pay their taxes.


It will be interesting to see how the IRS deals with those who didn't realise they need to file a US return or had their status changed.

There's clearly a gap as only for Canada, only 300K or so identify themselves as having US citizenship while US sources estimate the number over a million.


Cheers


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## Eclectic12

fatcat said:


> good point, unlike canada who don't seem to care at all if you don't pay .. strange


Odd ... they cared when I was working in the US, just like the IRS cared.


Cheers


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## fatcat

i am a dual citizen and file in both countries 

the irs has just issued another amnesty beginning on july 1
anyone who hasn't filed needs to file 3 years of returns and 6 years fbar's and they are good to go

the irs is herding cats here, trying to bring enough people on board before they drop the hammer
there are 10 million americans overseas, many in countries much less friendly than canada who already has whack of treaties in place with the usa

renouncing citizenship is a matter of paying the fee and simply filing a final return (assuming all your returns are up to date, if not you need to file 3 years worth of returns) and 6 years worth of fbar's ... depending on your tax prep costs this can cost less than about $1000 all in (including the $495 filing fee)

if you have less than 2 million in assets i believe you will own no exit tax

i have heard different things about whether you will denied access to the usa if you renounce, but it is certainly likely to be on record and you won't be welcomed with open arms

in the long run, the double taxation will hurt the usa since it will deter people from citizenship which will foster less usa support over time


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## bgc_fan

Interesting that Eritrea is the only other country that "taxes" its ex-patriots. So is there a fundamental difference between the two considering that we plan on closing their consulate?


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## fraser

It is a problem for expat American citizens. And many dual US Canadian citizens are in the net. Even those who may have been born in the US and then moved away at a very young age. Not just the tax either since there are offsets. All US citizens are required to file a return listing world wide income whether they are US resident or not. The return in a PIA, as are some of the potential penalties if you do it incorrectly.

Lots of expat Americans where I live. Some get their returns done professionally, for free via their employers. Others have to shell out to get it done by a pro.
I know of at least one who has given up his US citizenship because of this...he had been in Canada for years with no interest in going back. 

It seems to be designed to catch the 'bad guys' but it is hurting and causing concern for many others who owe no tax but have an obligation to file returns, etc.


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## fatcat

fraser said:


> It is a problem for expat American citizens. And many dual US Canadian citizens are in the net. Even those who may have been born in the US and then moved away at a very young age. Not just the tax either since there are offsets. All US citizens are required to file a return listing world wide income whether they are US resident or not. The return in a PIA, as are some of the potential penalties if you do it incorrectly.
> 
> Lots of expat Americans where I live. Some get their returns done professionally, for free via their employers. Others have to shell out to get it done by a pro.
> I know of at least one who has given up his US citizenship because of this...he had been in Canada for years with no interest in going back.
> 
> It seems to be designed to catch the 'bad guys' but it is hurting and causing concern for many others who owe no tax but have an obligation to file returns, etc.


right, it's designed to catch the big tax cheats hiding assets overseas (as many canadians do now) and it is ensnaring mostly middle class honest people who are now buried under paperwork 

i don't buy or sell anything or open any kind of account without first thinking long and hard about the effect on taxation, even just the issue of keeping track and filling out forms

the canadian financial industry (especially mutual funds which are not worth owning now) is going to take a hit because a million people are thinking long and hard about what they want to invest in

forget even starting a tfsa if you file a usa return, it'll cost more in tax prep than you save on the "tax free" investments


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## avrex

so does this mean.... 

fatcat = FATCA + T (i.e. Taxes)


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## MrMatt

fatcat said:


> forget even starting a tfsa if you file a usa return, it'll cost more in tax prep than you save on the "tax free" investments


TFSAs aren't tax exempt for US tax returns. 
I actually think more countries should do this, if you're a citizen, you should pay taxes.

It would get rid of citizens of convenience.


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## Guban

I kind of agree with MrMatt. It is not taxation without representation, as US citizens have the right to vote, and I understand that some do travel back during election time.

Having to file a tax return ensures that there is some tie to the country of citizenship. It is definitely a PIA, but is that too much of a price to pay for being a citizen? Many in the world would love to be a US citizen!

If Canada did this, there would be a whole lot less grumbling when it came time to rescue Canadians in a war troubled country such as Lebanon.


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## james4beach

Yup let me repeat this warning...

Anyone who files a US tax return, even if not a US resident or citizen, must look into FATCA and see an expensive tax accountant to see if you need to file foreign account disclosures. There's an alphabet soup of regulations, I believe the thing you and I report is called FBAR (as in, this is fubar), but FATCA is a legislation in the background. There's also another related disclosure process called Form 8938

http://www.irs.gov/Businesses/Comparison-of-Form-8938-and-FBAR-Requirements

Both of these are pretty new

If you're a US citizen these tax headaches will follow you around the world, for the rest of your life. Even as a non US citizen here, I'm now subject to all of this and it's ugly. I've started seeing a $340/hour tax accountant, yeesh


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## fraser

Other countries are starting to ramp up their taxation of residents and even non residents. It is happening in the EU. Spain now considers people who spend more than 183 days in the country, non contiguous, to be residents. They also have the power to deem someone a resident for tax purpose if they spend less than 183 days IF Spain is the 'centre of someone's vital interests. Any assets over UE50K have to be declared. Several other EU countries are starting down the same road, including Italy. 

For some people who have dual US citizenship, it is a mistake more than anything-sometime just dependent on where they were born. Giving up this citizenship means nothing to them because they consider themselves a citizen of the country in which they have lived all their lives and see absolutely no value in a US passport or US citizenship.


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## fatcat

james4beach said:


> Yup let me repeat this warning...
> 
> Anyone who files a US tax return, even if not a US resident or citizen, must look into FATCA and see an expensive tax accountant to see if you need to file foreign account disclosures. There's an alphabet soup of regulations, I believe the thing you and I report is called FBAR (as in, this is fubar), but FATCA is a legislation in the background. There's also another related disclosure process called Form 8938
> 
> http://www.irs.gov/Businesses/Comparison-of-Form-8938-and-FBAR-Requirements
> 
> Both of these are pretty new
> 
> If you're a US citizen these tax headaches will follow you around the world, for the rest of your life. Even as a non US citizen here, I'm now subject to all of this and it's ugly. I've started seeing a $340/hour tax accountant, yeesh


james, as is often the case, you are hyperventilating, find a brown paper bag and breath into it slowly...

i pay hr block $300 a year to do my usa taxes which are fairly straightforward with stocks and bonds and pensions
i have no tfsa since the problem with tfsa is not that the taxes are not exempt (you might have enough of a credit from canada to cover the usa tfsa portion owed) it's that the form is complex so if you are canadian and need to file usa taxes, better to dump the tfsa for the time being

i file my fbar's myself online (starting this year, they MUST be filed electronically) and it is straightforward if you keep good records, you don't use and accountant to do your fbar's ... this is also minimized by trimming unneeded accounts

form 8938 is filed within your usa taxes with your return and essentially mirrors the fbar's providing almost excatly the same information
you can see the differences here: http://americansabroad.org/files/7213/4764/1759/fatcaandfbarrules.pdf

basically 8938 IS FATCA ...it is the irs reporting portion 

yeah, we have to pay a price for our usa citizenship ... canada just lets people live in lebanon or the bahamas, collect their oas and only come home when they need medical care, how very NICE of canadians

the difficulty is that now the complexity of tax forms worldwide is making filing difficult

look for this to start happening all over the world as governments hunt for every last tax dollar


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## PuckiTwo

fatcat said:


> ... canada just lets people live in lebanon or the bahamas, collect their oas and only come home when they need medical care, how very NICE of canadians


I don't think that's the case - you have to be in Canada more than 183 days /year. Austrian friends of ours, Canadian residents, lost their medical coverage when they couldn't prove that they stayed enough days in Canada. Also immigrants with only resident status need to stay for a specific length of time in Canada (over a 5 year period I believe) in order to maintain resident status. Canadian citizens living outside the country are supposed to de-register.


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## fraser

Coming back for free medical is certainly NOT the case with the Canadians we know who also have homes in the US.

The new regulations require them to be extremely careful about not only how many days in the particular year that they spend in the US, but also the rolling average over X (could be five) years. Significant tax implications the claim if they screw this up. So for US/ Canada folk they are hemmed in not only by US tax law but also by their provincial universal health insurance plan.


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## Eclectic12

fatcat said:


> ... yeah, we have to pay a price for our usa citizenship ...


I guess you missed the threads where James posted that he was a Canadian who has moved to the US west coast for a job?





PuckiTwo said:


> fatcat said:
> 
> 
> 
> ...... canada just lets people live in lebanon or the bahamas, collect their oas and only come home when they need medical care, ...
> 
> 
> 
> I don't think that's the case - you have to be in Canada more than 183 days /year.
> 
> Austrian friends of ours, Canadian residents, lost their medical coverage when they couldn't prove that they stayed enough days in Canada...
Click to expand...

Since the provinces control Health Care, it varies by province. 
For Ontario:


> Your eligibility for Ontario health insurance coverage is based solely on:
> - you having one of the above OHIP-eligible citizenship or immigration statuses, and
> - you making your primary place of residence in Ontario, and meeting the physical presence requirements.


http://www.health.gov.on.ca/en/public/publications/ohip/ohip_eligibility.aspx

Where for physical presence, one is being in Ontario for at least 153 days in any 12-month period.

Then too - to collect OAS while living elsewhere, one has to have been a Canadian citizen or a legal resident of Canada on the day before you left Canada, and have resided in Canada for at least 20 years after turning 18.


One can debate whether there should be more or less requirements/restrictions - but the brief statement made it appear there were none.


Cheers


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## Eclectic12

fraser said:


> For some people who have dual US citizenship, it is a mistake more than anything-sometime just dependent on where they were born. ...


From what I've read ... the definition of when a US citizen parent confers US citizenship their child born in Canada has changed. I'm sure there are some born in Canada who will be in for a surprise. 




fraser said:


> ... The new regulations require them to be extremely careful about not only how many days in the particular year that they spend in the US, but also the rolling average over X (could be five) years.
> 
> Significant tax implications the claim if they screw this up...


There is a bit of leeway with some elections ... but one has to be aware of what's happening and that with the amount of Canada/US data shares, the US is going to be in a much better position to start counting the "couple of hour gas/grocery" trips to the US in the rolling average.

Then too - if CRA decides that at the same situation has resulted in a loss of Canadian residency - there's Canadian tax implication such as the departure tax ... not to mention the loss of provincial health care.


Cheers


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## Guban

fraser said:


> Other countries are starting to ramp up their taxation of residents and even non residents. It is happening in the EU. Spain now considers people who spend more than 183 days in the country, non contiguous, to be residents. They also have the power to deem someone a resident for tax purpose if they spend less than 183 days IF Spain is the 'centre of someone's vital interests. Any assets over UE50K have to be declared. Several other EU countries are starting down the same road, including Italy.
> .


I haven't read the tax treaties of those countries, but it seems that most countries have the 183 day rule negotiated. It is possible for Canada to treat somebody who was in the country for more than 183 days as a resident off Canada too. So a person that vacations too long may fall into this camp. However, tax treaties seem to be negotiated to prevent a person from being resident in two countries, so if the person who vacations here can still likely claim residency in their "home" country. Since there is a tax treaty between Canada and Spain, most Canadians who stay for more than half the year should be ok. 

Canada also has the power to designate somebody who is in the country as resident of Canada, even if they are physically here less than half a year. It sounds like James is going to file as a Canadian resident, even though he is going to be physically in the US, for example.

About declaring assets over 50k (euros?). This sounds like our $100,000 in foreign asset declaration in Canada. 

Don't see anything really different in what you have described between Spain and Canada. What am I missing?


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## fatcat

Eclectic12 said:


> I guess you missed the threads where James posted that he was a Canadian who has moved to the US west coast for a job?


no, i am well aware of that ... the difference is that james is not a citizen nor does he plan to become one, when he returns it will be much easier for him to relinquish his green card status (if has one, i am not sure, i believe he might be working under something like a B-1 visa, but i may be wrong)

canadians who worked in the usa for 5, 20, 20 years, whatever and held green cards are still liable for filing taxes unless they relinquish their green card status which is a different kettle of fish from renouncing citizenship

if we are moving to a world where the usa and canada are going to count and log visits to the usa and develop a running total on a spreadsheet then all bets are off on travel between the two countries

the tax situation is already burdensome enough, and now we are going to add a big-brother-i-know-where-you-are-at-all-times kind of thing into the equation ?

that will really create mistrust and confusion

we are undoubtedly looking at changes to all of this on a large scale all over the world

governments now have huge ability to create databases ... so naturally they want to, whether they are useful or not


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## fraser

Guban...a number of EU countries, most especially Spain, are changing their tax codes for non residents. Specifically they are starting to track assets with a view to eventually increasing the taxes. Spain has moved to a tax system whereby even if reside in Spain for less that say, 183 days, you can still be treated as a resident. Their tax dept can deem you a resident if a good portion al of your business dealing and investment assets are in Spain or registered in Spain. It is quite complicated and very open to interpretation. Many UK expats are very, very concerned. So it is entirely possible to end up as a resident of two countries notwithstanding the tax treaties. The new tax laws in Spain have essentially moved the tax free day from mid May to mid June.

We have been following these developments closely through UK websites since we have considered buying, and spending 5 or 6 months in Spain, Italy, or Portugal.
Italy is starting the same process with non residents.


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## Eclectic12

fatcat said:


> no, i am well aware of that ...


Interesting ... the wording made it sound like you were lumping James in with other dual citizens.




fatcat said:


> ... if we are moving to a world where the usa and canada are going to count and log visits to the usa and develop a running total on a spreadsheet then all bets are off on travel between the two countries ...


Apparently the sharing started last summer. The upcoming changes are to make the information available on a "near real time" basis. Canada is reported to be planning exit system similar to the US where airlines submit their passenger manifest for outgoing international flights.



> Canadian and American authorities will automatically be notified of every border crossing by a citizen, immigrant or visitor almost instantaneously a under vastly expanded border control system, QMI Agency has learned.


http://www.torontosun.com/2014/01/16/canada-us-to-share-real-time-border-crossing-details
http://www.thestar.com/news/immigra..._travellers_info_with_federal_government.html

One of the articles about the substantive presence test indicated that for the purpose of calculating residency, a day can be any part of a 24-hour-period in which an individual is physically on U.S. soil, according to the IRS.




> ... the tax situation is already burdensome enough, and now we are going to add a big-brother-i-know-where-you-are-at-all-times kind of thing into the equation ?
> 
> that will really create mistrust and confusion


You mean like the financial institutions that are closing client accounts where there is US citizenship?

http://world.time.com/2013/12/20/swiss-banks-tell-american-expats-to-empty-their-accounts/
http://www.spiegel.de/international...stop-serving-american-customers-a-803742.html




> ... governments now have huge ability to create databases ... so naturally they want to, whether they are useful or not


You mean like sharing visa applicant biometrics & info with other countries?
http://thechronicleherald.ca/canada/248783-canada-us-soon-to-share-visa-data


IAC - where the goal is to raise tax revenue, writing data mining programs to flag to the IRS those who are over the 183 days who don't realise it will likely be cheap and net a tidy profit, even if only a percentage end up having to pay.


Cheers


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## fatcat

Eclectic12 said:


> Interesting ... the wording made it sound like you were lumping James in with other dual citizens.


if james has green card then he will need to pay attention if and when he leaves the usa



> Apparently the sharing started last summer. The upcoming changes are to make the information available on a "near real time" basis. Canada is reported to be planning exit system similar to the US where airlines submit their passenger manifest for outgoing international flights.
> 
> 
> http://www. torontosun.com/2014/01/16/canada-us-to-share-real-time-border-crossing-details
> http://www.thestar.com/news/immigra..._travellers_info_with_federal_government.html
> 
> One of the articles about the substantive presence test indicated that for the purpose of calculating residency, a day can be any part of a 24-hour-period in which an individual is physically on U.S. soil, according to the IRS.


if indeed it gets this bad, i think we will see a clarification that stays of less than 48 hours are not counted since something like this will greatly inhibit cross-border traffic, something that neither country wants to see happen ...



> You mean like the financial institutions that are closing client accounts where there is US citizenship?


yes, absolutely, account closing is about the become a growth industry worldwide, if we are now required to keep detailed records of every dollar, account closing is often the better choice




> You mean like sharing visa applicant biometrics & info with other countries?
> http://thechronicleherald.ca/canada/248783-canada-us-soon-to-share-visa-data
> 
> IAC - where the goal is to raise tax revenue, writing data mining programs to flag to the IRS those who are over the 183 days who don't realise it will likely be cheap and net a tidy profit, even if only a percentage end up having to pay.


as i say above, if the irs starts doing this, they will be hearing loud and clear from the chambers of commerce on florida, californa, arizona and new mexico all of appreciate a regular infusion of snowbird cash (snowbirds spend 4.4 billion a year in florida alone) to prop up real estate and infuse the local industries ... if the the taxman starts to get heavy, people which change their patterns and go elsewhere / sell their vacation homes / go for less time

it only takes 2 or 3 nightmare cbc headline stories and the word will start to spread and canadians will start to adjust their patterns


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## Eclectic12

fatcat said:


> ... if indeed it gets this bad, i think we will see a clarification that stays of less than 48 hours are not counted since something like this will greatly inhibit cross-border traffic, something that neither country wants to see happen ...


Why would there be any impact on those close to the border?
Even if one goes every Saturday ... that's still only 52 days.

I expect the biggest impact is going to be snow birds who spend a lot of time in the US and when they return home, live close to the border. Or if they have significant time planned (say two weeks for a wedding or vacation), over and above their winter stay.


I also wonder whether it's law that provides the definition or policy. 




fatcat said:


> ... yes, absolutely, account closing is about the become a growth industry worldwide, if we are now required to keep detailed records of every dollar, account closing is often the better choice.


I'm not sure the Swiss dual citizens who had their accounts liquidated or can't open a bank account or get a mortgage would call it a "choice".
Their choice is whether they renounce the US citizenship or not.

I suspect the US is going be swamped with applications to renounce citizenship. The numbers are trending that way reports pegging increases at anywhere from 33% for specific groups to 300%+ overall.


Cheers


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## PuckiTwo

Eclectic12 said:


> I'm not sure the Swiss dual citizens who had their accounts liquidated or can't open a bank account or get a mortgage would call it a "choice".Their choice is whether they renounce the US citizenship or not.


The mayor of Zurich renounced her US citizenship in April 2013 http://www.bloomberg.com/news/2013-...s-u-s-citizenship-amid-tighter-tax-rules.html


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## fraser

I do not think that there is anything special about having dual citizenship with the US if you have not lived there, and do not plan to work or live there. Who wants the agro and expense of another tax code, tax filings, and other associated obligations unless it is absolutely necessary?

If anything it is a burden. Those that want to renounce their US citizenship actually have to obtain a clearance certificate from the IRS. It is to simply a case of renouncing and walking away from IRS filing obligations or tax obligations.


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## lightcycle

There are still many reasons to retain an American citizenship.

The US passport is one of the most coveted and least restrictive travel document on the planet.

If an ex-pat needs refuge from a tense geopolitical situation in their adopted country, they will always have a safe haven to return to.

The US has tremendous resources and political clout to aid a citizen in trouble no matter where they are in the world. Although they still may not save you from a caning if you happen to spray paint a car or two while on vacation...


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## fatcat

Eclectic12 said:


> I expect the biggest impact is going to be snow birds who spend a lot of time in the US and when they return home, live close to the border. Or if they have significant time planned (say two weeks for a wedding or vacation), over and above their winter stay.


this is potentially a huge impact on the snowbird communities where they stay, ask the south florida visitors bureau or phoenix chambers of commerce if they like these laws



> I'm not sure the Swiss dual citizens who had their accounts liquidated or can't open a bank account or get a mortgage would call it a "choice".
> Their choice is whether they renounce the US citizenship or not.


don't care much about dual people welathy enough to stash their money in switzerland, i am talking about the 1-million canadians in canada who need to file, they will be closing accounts willy-nilly if they are like me



> I suspect the US is going be swamped with applications to renounce citizenship. The numbers are trending that way reports pegging increases at anywhere from 33% for specific groups to 300%+ overall.


the numbers are going up but are still tiny

having a us passport allow many things: 


you can never be denied entry into the usa for any reason
you can retire in the usa and live full time without any hassles
if you travel you can choose which passport you want depending on where you are going, as lightcycle says, if you get in trouble, far better to be holding a usa passport 99% of the time as most countries fear the stick of the usa ... 
tina turner renounced her us citizenship

for most of us i don't think it is the technical aspects which are straightforward ... it's the emotional aspect of severing ties as well as the advantages that holding a us passport brings


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## Eclectic12

fatcat said:


> this is potentially a huge impact on the snowbird communities where they stay, ask the south florida visitors bureau or phoenix chambers of commerce if they like these laws ...


Question is are they going to be reactive or proactive ... I haven't been checking so I am not familiar with any lobbying they are doing, or lack thereof.




fatcat said:


> ... don't care much about dual people wealthy enough to stash their money in switzerland, i am talking about the 1-million canadians in canada who need to file, ...


How exactly do you know that the guy born in Switzerland, who has never visited the US and has dual citizenship is wealthy or "stashing" anything?

AFAICT - it's the same situation as the Canadian dual citizens, except that some German, UK and Swiss bank have determined there isn't enough benefit for them to keep serving dual citizens. 

The Canadian banks on the other hand, have too much to lose so they decided to keep serving all customers, including dual citizens.




fatcat said:


> ... they will be closing accounts willy-nilly if they are like me.


Weird ... it sounded like you were saying up thread that the hassle was being blown out of proportion and are now saying part of your plan is to close a bunch of accounts - simply based on a change in whether the IRS is going to be notified.

I must be missing something ...




fatcat said:


> ... the numbers are going up but are still tiny ...


Agreed ... if the article quoting just under 300 to just over 1500 was correct and the trend continues, it will bear watching.




fatcat said:


> ... having a us passport allow many things: ... for most of us i don't think it is the technical aspects which are straightforward ... it's the emotional aspect of severing ties as well as the advantages that holding a us passport brings


I expect that to a large degree, it will come down to effort versus benefit as well as any emotional attachment.


Cheers


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## fatcat

Eclectic12 said:


> Question is are they going to be reactive or proactive ... I haven't been checking so I am not familiar with any lobbying they are doing, or lack thereof.


 that's because the technical capacity to track people closely isn't being used to tote up time spent in the usa, if it does start being used and snowbirds start to fear being caught in an irs taxable event then you will start to hear about big time ... it hasn't really happened yet




> How exactly do you know that the guy born in Switzerland, who has never visited the US and has dual citizenship is wealthy or "stashing" anything?
> 
> AFAICT - it's the same situation as the Canadian dual citizens, except that some German, UK and Swiss bank have determined there isn't enough benefit for them to keep serving dual citizens.
> 
> The Canadian banks on the other hand, have too much to lose so they decided to keep serving all customers, including dual citizens.


lets stipulate by way of the ground rules that banks are whores, they will take any money they can if it spells profit .. i find it hard to believe that they are going to tell Mr. Jones who has 500K in their bank that they don't want his money ... if they are compliant with FATCA there is no need to fuss ... in any even if they do, Mr. Jones can easily find another bank to take his money somewhere ... why not just put it in a bank in New York and then he doesn't even need to report it ?

if he actually can't find a single bank in switzerland to take his money then he needs to renounce or move ... don't forget, it's the swiss banks that started all this fatca crap in the first place



> Weird ... it sounded like you were saying up thread that the hassle was being blown out of proportion and are now saying part of your plan is to close a bunch of accounts - simply based on a change in whether the IRS is going to be notified.
> 
> I must be missing something ...


either you are missing something or i am not writing clearly ... if you have ever filled out an fbar, you know that the first question they ask you is "do you have more than 25 accounts" if so, then you only need to put down your primary account and keep good records for the rest ... 

when i did my first fbar i had something like 20 reportable accounts, i briefly considered opening 5 more so i wouldn't have to report them but i am still supposed to keep all the records so what is the point ? ... a better way to go is to reduce your accounts to as few as possible ... 

the fbar's actually take time to understand and get up to speed on but once you have them figured out they can go reasonably fast if you have a a small number of accounts and keep good records

canadians that own mutual funds have to file a completely separate report and pay a separate tax just on mutual funds so i promise you that many canadians that need to file in the usa are dropping mutual funds like hot potatoes, they aren't worth the reporting trouble or tax bill



> Agreed ... if the article quoting just under 300 to just over 1500 was correct and the trend continues, it will bear watching.
> I expect that to a large degree, it will come down to effort versus benefit as well as any emotional attachment.


i agree


----------



## Eclectic12

fatcat said:


> that's because the technical capacity to track people closely isn't being used to tote up time spent in the usa, if it does start being used and snowbirds start to fear being caught in an irs taxable event then you will start to hear about big time ... it hasn't really happened yet


The capability is relatively new and slated to become more seamless so there isn't a clear direction. This strikes me as needing time to sort out ... similar to CRA sending the TFSA over-contribution letters a long time after the over-contribution happened.

Time will tell ...




fatcat said:


> lets stipulate by way of the ground rules that banks are whores, they will take any money they can if it spells profit .. i find it hard to believe that they are going to tell Mr. Jones who has 500K in their bank that they don't want his money ...


Whores or not - a bit of googling finds USA Today, Forbes, Time, the Wall Street Journal and others reporting that German, French, UK, Italian and Swiss banks have done this starting as early as mid-2011.




fatcat said:


> ... if they are compliant with FATCA there is no need to fuss ...


It depends ... even if the bank is compliant - there's a cost to setting up the review/reporting where some analysts have pegged the cost around $100 million. If there aren't a lot of customers and the reporting is a violation of German law ... cutting American citizen clients loose could be a fraction of the cost.




fatcat said:


> ... in any even if they do, Mr. Jones can easily find another bank to take his money somewhere ... why not just put it in a bank in New York and then he doesn't even need to report it?


Multiple banks have rejected US citizens so I'm not sure it's as easy to switch as you think. Without some stats, the comments that it's not rare/unusual plus one person being reject by four banks are it for now.

Interesting idea to transfer to a NY Bank ... not being familiar with what they offer - a bank account might work but would they expand into mortgages for dual citizens in a foreign country? How about life insurance?

I suspect the securities accounts might not be an issue.




fatcat said:


> ... if he actually can't find a single bank in switzerland to take his money then he needs to renounce or move ...


Renouncing the US citizenship seems the more practical as I doubt many would want to move after being in the same country twenty plus years.




fatcat said:


> ... don't forget, it's the swiss banks that started all this fatca crap in the first place.


I'm not sure that's going to be a consolation for the French, UK, Belgian or Italians affected by it.




fatcat said:


> ... either you are missing something or i am not writing clearly ... if you have ever filled out an fbar, you know that the first question they ask you is "do you have more than 25 accounts" if so, then you only need to put down your primary account and keep good records for the rest ...


The FBAR question, documentation requirements as well as the personal preference to reduce tracking is what was missing.

So far - I've never filled out an FBAR ... but there's time for the US to change their regulations and make me fill one out ... :biggrin:


Cheers


----------



## kcowan

Eclectic12 said:


> Why would there be any impact on those close to the border?
> Even if one goes every Saturday ... that's still only 52 days.


Apparently they will count a trip as short as to gas up but will eliminate plane connections through US airports.

BTW the annual stay in the US is restricted to 122 days unless the snowbird completes a form proving close association with Canada. Many "birds" don't know about these rules. I also suspect that most of them could easily pass once they understand the requirement.


----------



## RCB

It's late, and I really need to go back through this thread to address several comments, but let's just say this FATCA invasion by the US has severely affected my life and health for a few years.

The renunciation numbers are bogus, as well. I was not reported in the year I renounced, but the year after. Many aren't showing up in the numbers given, and relinquishments (for example, Americans taking another citizenship, or a government job in another country, then giving up US citizenship) are not counted.

Renouncing was FREE until about July of 2012, now it has a 450 USD fee. What does THAT tell you. Add in travel costs to a consulate, all in it cost me a grand or so. All to get rid of something they previously denied I had.

I have informed my spouse that if his several day trips a week into the US re-ensnares us into our financial data being sent to the IRS, there will be a tombstone purchase in the very near future.


----------



## fatcat

canadians don't go into the usa to shoplift, they go for precisely the opposite reason, to vacation and to shop
and they leave pocketfuls of cash

dial the hysteria back a little people
why would the usa want to discourage people from entering in to it who have money to spend ?
it makes no sense at all


----------



## RCB

Of course it makes no sense, little in the US does. Does it make sense to claim citizens of other countries are US taxpayers, and demand they comply? Does it make sense to tell a Canadia, born a dual citizen, that they are not a US citizen, then claim them as tax cheats 25 years later?

The only thing that makes sense about FATCA is that it is bad law, not thought out at all, and yet another over-reaching American action.

They may figure this out in the future, but in the past and present they are making life hell for many, many people, some not yet aware.

I'm pretty certain the term collateral damage was coined in the US.


----------



## james4beach

Thanks fatcat for the comments throughout this thread, I'm reading it all with interest.



fatcat said:


> i have no tfsa since the problem with tfsa is not that the taxes are not exempt (you might have enough of a credit from canada to cover the usa tfsa portion owed) it's that the form is complex so if you are canadian and need to file usa taxes, better to dump the tfsa for the time being


Could you clarify, this complex form with respect to TFSA. Do you mean that it would be very complex to fill out fbar/8938 when it comes to a TFSA account (i.e. foreign reporting of the TFSA is a disaster)

- or - Do you mean that including the TFSA account elsewhere on your tax return, as part of worldwide income, is the difficult part?

I ask this because I'm not a US citizen and currently _not_ a US resident for tax purposes, due to a tax treaty tie-breaking rule. I don't have to file "worldwide income" to the US. But foreign account _disclosures_ do not abide by the same tax treaty regulation. Therefore, I still do have to file fbar/8938. Therefore I'm wondering if the TFSA complexities you encountered are still a problem I will face. I don't have to report income from the TFSA, but I _do_ have to file fbar/8938 and disclose this foreign account to the US.


----------



## fatcat

james4beach said:


> Thanks fatcat for the comments throughout this thread, I'm reading it all with interest.
> 
> 
> 
> Could you clarify, this complex form with respect to TFSA. Do you mean that it would be very complex to fill out fbar/8938 when it comes to a TFSA account (i.e. foreign reporting of the TFSA is a disaster)
> 
> - or - Do you mean that including the TFSA account elsewhere on your tax return, as part of worldwide income, is the difficult part?
> 
> I ask this because I'm not a US citizen and currently _not_ a US resident for tax purposes, due to a tax treaty tie-breaking rule. I don't have to file "worldwide income" to the US. But foreign account _disclosures_ do not abide by the same tax treaty regulation. Therefore, I still do have to file fbar/8938. Therefore I'm wondering if the TFSA complexities you encountered are still a problem I will face. I don't have to report income from the TFSA, but I _do_ have to file fbar/8938 and disclose this foreign account to the US.


no i don't believe it will affect the fbar which is straightforward or the 8938

the problem with tfsa'a is that they are considered trusts and the reporting and accounting costs make the tax savings of the tfsa perhaps not worth it ... but if you are saying you are not required to file a us tax return then you are fine with your tfsa i assume

from: http://www.ctf.ca/CTFWEB/EN/Newsletters/Canadian_Tax_Focus/2013/1/130102.aspx



> *For Canadian residents who are US citizens, the Canadian benefits from TFSAs and RESPs may be more than offset by increased US tax-compliance fees and possibly US tax liabilities. The best strategy may be to avoid these plans or, in the case of an RESP, to have the contributor be a non-US citizen (perhaps the spouse).*
> RESPs and TFSAs are not tax-deferred for US purposes. TFSAs have no special status under the Internal Revenue Code, and the IRS has not issued any direct guidance on their tax treatment. The accounts are generally offered as deposits, annuity contracts, or trust-type arrangements. All of these types of vehicles create US reporting requirements and taxable income to US investors. The IRS may consider TFSAs offered in trust-type arrangements to be foreign grantor trusts. Thus, if the RESP or TFSA contributor (grantor) is a US citizen, all interest, dividends, and capital gains on the amount invested must be reported annually for US tax purposes. In addition, the government grants associated with RESPs are considered income to the grantor. This income may generate US tax liability unless the contributor is paying Canadian tax on other passive investments and is able to use the associated US foreign tax credits to offset the liability on the grantor trust income.
> *The larger issue, however, is the additional US compliance burden. Typically, there will be a requirement to file, for each TFSA or RESP held by the US citizen, form 3520 ("Annual Return To Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts") for any year in which there is a contribution or withdrawal from the plan, and form 3520-A ("Annual Information Return of Foreign Trust with a U.S. Owner") for every year that the plan is in existence. The reporting becomes more complex if mutual funds are owned within the TFSA or RESP. If the taxpayer employs a tax practitioner for tax-filing purposes, the requirement to file these non-trivial forms will increase the professional fees.* Given the relatively small amounts invested in most TFSAs and RESPs, these costs may approach or exceed the amount of Canadian taxes saved. There is a significant penalty exposure if the required forms are not filed on a timely basis.





> Of course it makes no sense, little in the US does. Does it make sense to claim citizens of other countries are US taxpayers, and demand they comply? Does it make sense to tell a Canadia, born a dual citizen, that they are not a US citizen, then claim them as tax cheats 25 years later?
> 
> The only thing that makes sense about FATCA is that it is bad law, not thought out at all, and yet another over-reaching American action.
> 
> They may figure this out in the future, but in the past and present they are making life hell for many, many people, some not yet aware.
> 
> I'm pretty certain the term collateral damage was coined in the US.


i hear your anger ... 

i have already passed through the 5-stages of fatca: denial, anger, bargaining, depression and acceptance.

but i do hear your anger ... 
we can stipulate that fatca is a *****


----------



## Eclectic12

kcowan said:


> Apparently they will count a trip as short as to gas up but will eliminate plane connections through US airports.


Interesting ... is there a source for this?
The articles I was reading didn't know for sure ... but since a lot of them were tax specialists, there's always the possibility of being vague to bias the reader to book an appointment ... :biggrin:




kcowan said:


> ... BTW the annual stay in the US is restricted to 122 days unless the snowbird completes a form proving close association with Canada. Many "birds" don't know about these rules. I also suspect that most of them could easily pass once they understand the requirement.


Say what? ... all the sources I was finding, including the IRS web site were saying the form to claim a closer connection was required if one was present 183 or more days where the total was a weighted sum of the current plus last two years.

http://www.irs.gov/Individuals/International-Taxpayers/Substantial-Presence-Test


Any references saying 122 days would be appreciated.

Cheers


----------



## Eclectic12

fatcat said:


> ... dial the hysteria back a little people
> 
> why would the usa want to discourage people from entering in to it who have money to spend ?
> it makes no sense at all


That's the thing ... as I think about it, there won't be a big hit on those jumping across the border in terms of numbers as there won't be enough visits a year. AFAICT - it's really the business people or snow birds that will be affected.

As you say, if it starts being applied and as snow birds change their habits, the tourist states will apply pressure ... but that may be well after people are affected in dramatic ways. Time will tell ...


BTW - a co-worker worked in the US under a TN1 visa for a year, was granted a Social Security number and filed one US tax return. He was asking if there was any chance he needed to file any paperwork. I didn't think so but I been checking for that situation. Any thoughts?


Cheers


----------



## fatcat

Eclectic12 said:


> That's the thing ... as I think about it, there won't be a big hit on those jumping across the border in terms of numbers as there won't be enough visits a year. AFAICT - it's really the business people or snow birds that will be affected.
> 
> As you say, if it starts being applied and as snow birds change their habits, the tourist states will apply pressure ... but that may be well after people are affected in dramatic ways. Time will tell ...
> 
> 
> BTW - a co-worker worked in the US under a TN1 visa for a year, was granted a Social Security number and filed one US tax return. He was asking if there was any chance he needed to file any paperwork. I didn't think so but I been checking for that situation. Any thoughts?
> 
> 
> Cheers


obviously i am not an expert but i suspect _not_ ... only green card holders need pay attention and they need to relnquish their green card status after leaving the usa ... TN1 is a temporary status not permanent like the green card

though there are many ways you can lose your green card status, i wouldn't take the chance, i would file the paperwork to formally relinquish it


----------



## james4beach

Eclectic12 said:


> BTW - a co-worker worked in the US under a TN1 visa for a year, was granted a Social Security number and filed one US tax return. He was asking if there was any chance he needed to file any paperwork. I didn't think so but I been checking for that situation. Any thoughts?


That's the situation I'm in. Working in the US with a TN1, have a SSN, etc. So far I've only been here a few months but soon enough, it will be a year.

There are mixed opinions on whether a temporary US visitor ("nonresident alien"), such as myself, has to file fatca & 8938. One thing seems certain, if you allow yourself to become a "U.S. Person" by staying in the US too long, you should be filing fatca & 8938. But the situation becomes much more confusing -- even to the IRS -- if you continue to be a nonresident alien by for instance, invoking our Canada/US tax treaty to declare that you're solely a Canadian citizen and Canada is truly home. In that scenario, which is where I'm at, the IRS is inconsistent about whether nonresident aliens have to file these same disclosures.

The US tax law is wacky beyond my wildest beliefs. Even IRS isn't clear on some of these grey areas. For example, the tax treaty allows me to declare that for tax payment purposes I'm a nonresident alien. This means my worldwide income gets reported to Canada, not the USA. Sounds great right?

Well turns out that even if you're nonresident alien for tax liability purposes, you may still be a resident or "US person" for other purposes, such as FBAR & 8938


----------



## james4beach

Wait I may have misunderstood the above question about TN1. Were you asking whether someone on a TN1 has to file anything as they leave the US?

Only any remaining tax returns that are needed. If in the process of staying in the U.S. he became a U.S. Person -- which is very likely unless he specifically invoked the tax treaty to remain a nonresident alien -- then he also has to file foreign account disclosures.

And as I post above, he may have to file foreign account disclosures in any case because the IRS and tax accountants aren't clear on whether this is required for nonresident aliens


----------



## kcowan

Eclectic12 said:


> Interesting ... is there a source for this?
> The articles I was reading didn't know for sure ... but since a lot of them were tax specialists, there's always the possibility of being vague to bias the reader to book an appointment ... :biggrin:
> 
> Say what? ... all the sources I was finding, including the IRS web site were saying the form to claim a closer connection was required if one was present 183 or more days where the total was a weighted sum of the current plus last two years.
> 
> http://www.irs.gov/Individuals/International-Taxpayers/Substantial-Presence-Test
> 
> 
> Any references saying 122 days would be appreciated.
> 
> Cheers


I went through this many years ago when deciding not to retire in the US so the reference is my brain. Here is a more recent source:
http://cdnsnowbirds.weebly.com/usa-irs-forms.html

While many snowbirds have ignored this rule, the improved tracking at the border should enable them to crack down.


----------



## Eclectic12

james4beach said:


> Wait I may have misunderstood the above question about TN1.
> Were you asking whether someone on a TN1 has to file anything as they leave the US? ...


Actually - since he hasn't worked in the US since 2005, I think he's reacting to the "green card" requirements and wondering if anything from the TN1 from years ago or having a SSN comes into play.

The details are that he worked in the US for a year from Jan to Dec 2005. His company filed the US tax return, after he provided a draft of the Canadian one. He hasn't worked in the US since.

I'm not sure if it matters ... but this all of this precedes FATCA. 


Cheers

*PS*

He also says that he was flying into the US pretty much every week and withholding taxes were being taken off his pay by the IRS. He believes this means he qualifies for an exemption from needing to do anything when he left under:


> You are a resident of Canada or Mexico who commutes frequently to the United States to work and your wages are subject to income tax withholding.


http://www.irs.gov/Individuals/International-Taxpayers/Departing-Alien-Clearance-(Sailing-Permit)

Now through is company, he did file a US tax return in 2006 so from a tax return perspective, he's up to date for the time worked in the US.


----------



## Eclectic12

kcowan said:


> I went through this many years ago when deciding not to retire in the US so the reference is my brain. Here is a more recent source:
> http://cdnsnowbirds.weebly.com/usa-irs-forms.html
> 
> While many snowbirds have ignored this rule, the improved tracking at the border should enable them to crack down.



So we are talking the same thing ... specifically, the 183 days is a weighted sum of the current plus last two years.
Of course where one is consistently at 122 days or so, one can file the closer connection form yearly.


Cheers


----------



## fatcat

kcowan said:


> While many snowbirds have ignored this rule, the improved tracking at the border should enable them to crack down.


hmmmm ...."crack down" .... you mean send a strong message to the effect "we don't want you to come to our country and spend money" ?


----------



## Eclectic12

fatcat said:


> hmmmm ...."crack down" .... you mean send a strong message to the effect "we don't want you to come to our country and spend money" ?


You mean like the "crackdown" that is FATCA - which is to send the strong message that "we won't put up with tax cheats - intentional or otherwise"? :biggrin:


AFAICT - the "part of a day" counts as a day criteria is not new ... so all the near real time reporting is doing is putting the numbers in the hands of the powers that be. The question is whether they will decide to apply the data to the substantive presence test calculations or not.


It will be interesting to see how the feds decide to proceed ... what impact happens come out of it and what responses affected state gov'ts/business mount.


Cheers


----------



## james4beach

FATCA may superficially be about tax "cheats" but it's really more about finding new ways to collect tax revenue by a government that's quite bankrupt.

Or did you think that $1 trillion+ deficits has no negative consequences? The USA desperately needs more tax revenue. FATCA lets them extort money from a whole bunch of people who previously had no liabilities to the USA... Americans around the world (including tons of them in Canada) will suddenly start receiving these violation notice letters saying that they must pay between $10,000 to $30,000 for multiple failures to file foreign accounts.

These people will inevitably "settle" for something like $5,000 to $10,000 (which sounds much better than $30,000 or jail time) and the US will get all kinds of new revenue


----------



## kcowan

fatcat said:


> hmmmm ...."crack down" .... you mean send a strong message to the effect "we don't want you to come to our country and spend money" ?


The federal government makes nothing out of snowbirds. Getting them to pay income taxes would be a windfall, and the improved border system just enables them to do it.


----------



## james4beach

kcowan said:


> The federal government makes nothing out of snowbirds. Getting them to pay income taxes would be a windfall, and the improved border system just enables them to do it.


Not quite true. A snowbird can (easily and accidentally) become a U.S. Person by spending too much time in the U.S.

Snowbirds may be on the hook for FBAR and FATCA too and potentially face fines of $10,000 or more.

In particular, some snowbirds who spend lots of time in the U.S. have received the advice for years up to now to file a treaty election using form 8833 to be treated as a Canadian resident and US non-resident. But what I've discovered is that accountants are generally ignorant of the fact that a Canadian in this scenario likely still is obliged to file FBAR and FATCA.

International tax law firms are warning that accountants are currently giving out of date advice that may expose Canadians to huge penalties and liabilities


----------



## Eclectic12

james4beach said:


> FATCA may superficially be about tax "cheats" but it's really more about finding new ways to collect tax revenue by a government that's quite bankrupt...


 ... and is why I suspect the new "near real time" reporting of entry/exits could be used to catch snowbirds who aren't considering a four hour trip to be a full day in the substantive presence test. Some are already aware of this and have adjusted their days in the US to factor in shopping/conference trips but I suspect many are not aware. At least the ones I'm talking to with cottages near the US border don't seem to be.

All of this seems to be a similar "get more revenue" situation ... where I expect should it be enforced, there would be a trigger for tourist states to apply pressure. In the meantime, snowbird who aren't adjusting or filing for a closer connection in time - could be a nice source of additional revenue.




kcowan said:


> The federal government makes nothing out of snowbirds. Getting them to pay income taxes would be a windfall, and the improved border system just enables them to do it.


 ... and that's the million dollar question ... will this new data capability be used to calculate based on the published formulas?
I don't see why they wouldn't.




james4beach said:


> Not quite true. A snowbird can (easily and accidentally) become a U.S. Person by spending too much time in the U.S.
> 
> Snowbirds may be on the hook for FBAR and FATCA too and potentially face fines of $10,000 or more ...
> International tax law firms are warning that accountants are currently giving out of date advice that may expose Canadians to huge penalties and liabilities


 ... and since the intent is to find "missing" tax revenue, I'm expecting the feds to use it. 


Cheers


----------



## fatcat

kcowan said:


> The federal government makes nothing out of snowbirds. Getting them to pay income taxes would be a windfall, and the improved border system just enables them to do it.


this makes absolutely no sense at all .... the federal government collects direct and indirect tax revenues in the states that snowbirds travel to, especially florida, california, arizona and new mexico ... 

i promise you with 100% certainty that if the us government starts getting heavy with snowbirds by trying to find ways to force them to file us taxes (and thus reduce their visits to the usa), then the federal government will hear loud and clear from the senators and congresspeople of those 4 states who alone are enough to stop legislation

nevertheless, canadians need to do their homework if they spend a lot of time in the usa



> International tax law firms are warning that accountants are currently giving out of date advice that may expose Canadians to huge penalties and liabilities.


the problem is that fatca is so new and fbar are only now being enforced and border crossings are only now being monitored with a high level of detail that nobody really knows what to do, it's all new and we are working things out'

it's notable that starting july 1 the irs has given yet another amnesty for non-filers, they are doing this because there is mass anger and confusion



> FATCA may superficially be about tax "cheats" but it's really more about finding new ways to collect tax revenue by a government that's quite bankrupt.


maybe but there would no pretext if there wasn't massive money hiding offshore

if the liberals or ndp get in (i hope they do this time) look for canada to implement something similar


----------



## kcowan

kcowan said:


> I went through this many years ago when deciding not to retire in the US so the reference is my brain. Here is a more recent source:
> http://cdnsnowbirds.weebly.com/usa-irs-forms.html
> 
> While many snowbirds have ignored this rule, the improved tracking at the border should enable them to crack down.


Here is the reference to the calculation of days in the US:


> When counting the number of days of presence in the U.S., keep in mind that even if you are present for part of
> a day you must count that day as a full day. For example, a 10-minute trip across the border counts as a full
> day. There are certain exceptions in the counting, for example, you can exclude days you regularly commute to
> work in the U.S. from Canada, days you were unable to leave the U.S. due to a medical condition that arose in
> the U.S. and days you were in transit in the U.S. for less than 24 hours while traveling between two places
> outside of the U.S. (e.g., you have a layover in Chicago on your way to Brazil).


It can be found in this document from RBC:
http://cdnsnowbirds.weebly.com/uploads/1/3/4/0/13402236/snowbirds_-_us_residency.pdf


----------



## kcowan

fatcat said:


> this makes absolutely no sense at all .... the federal government collects direct and indirect tax revenues in the states that snowbirds travel to, especially florida, california, arizona and new mexico ...


This is news to me. Can you indicate what and how they collect? I am aware of the 30% holdback on rental income. Is that what you mean? They collect that from the renter or rental agent for a Canadian-owned property if no paperwork has been completed. Otherwise it is 15% but reduced by property depreciation and other expenses.


----------



## fatcat

kcowan said:


> This is news to me. Can you indicate what and how they collect? I am aware of the 30% holdback on rental income. Is that what you mean? They collect that from the renter or rental agent for a Canadian-owned property if no paperwork has been completed. Otherwise it is 15% but reduced by property depreciation and other expenses.


gas tax, property tax, sales tax, taxes from profits of businesses that snowbirds patronize ... federal, state and local government all benefit hugely from canadians


----------



## Eclectic12

fatcat said:


> this makes absolutely no sense at all .... the federal government collects direct and indirect tax revenues in the states that snowbirds travel to, especially florida, california, arizona and new mexico ...


I can believe the lobbying part, where it sounds like it will be after the fact.




fatcat said:


> ... i promise you with 100% certainty that if the us government starts getting heavy with snowbirds by trying to find ways to force them to file us taxes (and thus reduce their visits to the usa), ...


The snowbirds who are keeping abreast of the issue are already reported to be cutting short their usual amount of time so that gas/grocery runs as well as summer visits don't put them over the 122 days. So to some degree, the behaviour is already changing.




fatcat said:


> ... then the federal government will hear loud and clear from the senators and congresspeople of those 4 states who alone are enough to stop legislation


But will they be enough to pass legislation to reverse what's in place?

It's already on the books ... it's just a question of whether the IRS makes use of data sources to apply the criteria more completely.




fatcat said:


> ... nevertheless, canadians need to do their homework if they spend a lot of time in the usa


If as stated up thread, it's being overblown and/or that it's useless data - I'm not sure why all of a sudden there's homework required ... or has your thinking changed?




fatcat said:


> ... the problem is that fatca is so new ...


FATCA was passed in March 2010, which means the accountant has had four years plus to figure out the potential impacts as well as what advice to give - yet it's the "newness" that's the issue? 

That's quite the turnaround time from an expensive resource who claims to have relevant advice/info.


Somehow European banks were able to not only figure it out but calculate that their dual citizen clients weren't worth the cost so that as early as mid-2011, they were sending notices that they were closing affected accounts. Canadian banks such as TD were lobbying about it back in 2011 and at least one Canadian newspaper writing about it in 2012.




fatcat said:


> ... maybe but there would no pretext if there wasn't massive money hiding offshore ...


I expect they went through the same "what will it cost to implement" and "what will the benefit be" as the European as well as the Canadian banks did.


Cheers


----------



## RCB

FATCA may have been passed in the US in HIRE in 2010, however those countries that negotiated an IGA instead of leaving banks to deal with it on their own are recent or ongoing. Canada signed the IGA in February, I believe, right before Flaherty resigned and passed away. The Conservatives rammed the implementing (and privacy-destroying) law in C-31, the omnibus budget bill.

The US has done no cost-benefit analysis of FATCA, which I believe is required by law. Additionally, Treasury does not have the authority to negotiate treaties, which is what other countries are passing the IGAs off as.

If the US ever reciprocates, as they half-heartedly promise in the IGAs, all hell will bust loose in Delaware, and other tax haven states. The Bankers' associations in Florida, Texas, and elsewhere, are already fighting that reciprocity issue.

It's a friggin' mess all the way around.


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## fatcat

eclectic,
let me respond to a few things without quoting you

lobbying will indeed be after the fact but it's worth keeping in mind that california and florida are loaded with legislative clout, snowbirds underpin a healthy chunk of the real estate market and the local economies, if they start to pull back, the chambers of commerce will start having meetings with legislators and we might see some changes

nevertheless, it is always prudent to keep abreast of the current law ... i don't like fatca but i damn sure do my best to comply

fatca may well have been passed in 2010 but is hugely unpopular and there is a lot of anger and confusion clouding the issue, again, i cite the latest amnesty by the irs which is a response to this 

we see in this very thread that there is still a lot of confusion about tax status or non-status as the case may be, it should be straightforward but it isn't, i suspect that is because it's a very large change in the law

as far as the european banks dumping americans are concerned, it simply isn't equivalent ... canada cra and american irs have a pretty tight relationship with a whack of tax treaties not to mention that 3 canadian banks own significant american banking interests

canadian banks simply passed the buck to the cra/irs, this is something that european banks couldn't do


----------



## Causalien

It really doesn't matter. I have already started avoiding US. Taking care to book all my flights and bypassing any transit to the US. Ideologically, I am against what the USA government is passing off as legitimate taxing by suddenly changing the tax rule. Legally, it is still such a cluster mess that I think it will serve better to wait it out until the water clears and after studying about all the stories of who somehow got charged $30 000 by accidentally being born in one of their remote territories that is somewhat considered US soil. I wonder if people who are accidentally born in Guam while flying over is affected. In the mean time, I will go to Europe instead of the US.

What is it with people who shame others about not wanting to pay more tax? The policy of tax and spend where the spending party is both the most corrupt (Legalized bribing called "Lobbying") and inefficient (40B defense spending unaccounted for) is something that should be actively voted against.


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## MrMatt

Causalien said:


> It really doesn't matter. I have already started avoiding US. Taking care to book all my flights and bypassing any transit to the US. Ideologically, I am against what the USA government is passing off as legitimate taxing by suddenly changing the tax rule. Legally, it is still such a cluster mess that I think it will serve better to wait it out until the water clears and after studying about all the stories of who somehow got charged $30 000 by accidentally being born in one of their remote territories that is somewhat considered US soil. I wonder if people who are accidentally born in Guam while flying over is affected. In the mean time, I will go to Europe instead of the US.
> 
> What is it with people who shame others about not wanting to pay more tax? The policy of tax and spend where the spending party is both the most corrupt (Legalized bribing called "Lobbying") and inefficient (40B defense spending unaccounted for) is something that should be actively voted against.


There is no rule change. Those people have always had US tax liabilities, under US tax law.

People have not been filing or paying their US taxes for years, the US gov is trying to give the IRS the tools to track them down.


----------



## Eclectic12

RCB said:


> FATCA may have been passed in the US in HIRE in 2010, however those countries that negotiated an IGA instead of leaving banks to deal with it on their own are recent or ongoing. Canada signed the IGA in February, I believe, ...


The more recent agreements tweak what's in play and how ... but as I understood it, the point was that some accountants were missing the basic points despite having years to review it to adjust their advice.
The OP can comment if I've misunderstood.




> The US has done no cost-benefit analysis of FATCA, which I believe is required by law. Additionally, Treasury does not have the authority to negotiate treaties, which is what other countries are passing the IGAs off as.


This is their first I've heard that it's required ... though they must be expecting some benefit. The 7000,000 difference between Canadians who self report dual citizenship and US estimates suggests there might be a penny or two to gain.


Cheers


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## Eclectic12

Fatcat ... at the end of the day, we are in agreement that there will be powerful lobby forces. Where we seem to be disagreeing is how long it will take, how easy it will be to show an impact and what chances they have of quick change.

For example ... while I'm sure Florida will know that visits have slowed down - how are they going to tell the difference between the snowbird who cut back on their visit time to keep under the 122 days versus the one that reduced their visit for other reasons such as health? I see this as vague ... similar to a Canadian bank trying to figure out which customers are closing a TFSA because of US filing headaches.


As for European & Canadian banks ... I doubt the tax treaties hold a candle to the US business interests where a 30% withholding tax was applied for not complying. Even if one doubles the US estimate of one million US citizens to two million - is their business likely worth the $100 million BNS alone is reported to have spent so far on FATCA compliance? I wouldn't think so.

The European banks that don't have that level of US business probably don't care about tax treaties either but the dollars and in some cases, the country's privacy legislation.


Cheers

*PS*

I'm expecting that as Canadian citizen with bank accounts - I'm going to have shoulder part of the cost that I'm sure the banks will pass on to their customers.


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## kcowan

The Mexican banks have opted out of FATCA reporting by telling their US expat customers that they will no longer accept US checks for deposit. In some cases they are advising them that their accounts will be closed by August 15. There are workarounds but all of them cause added inconvenience and costs.

The price of remaining a "US Person" has gone up substantially. Yet many of them want to leave their portfolios there and continue to pay the medicare premiums as a disaster fallback (along with evacuation insurance).


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## RCB

MrMatt said:


> There is no rule change. Those people have always had US tax liabilities, under US tax law.


Well, not exactly. See, this is one of the problems of Citizenship Based Taxation. When definitions in your tax code from Dept. of Treasury rely on the ever-evolving definitions and law of citizenship from Dept. of State, you have a constantly evolving mess. State does not check in with IRS/Treasury, Treasury does not check in with State, and politicians are knee-jerkers that make it even worse, see FATCA as an example. The left and right hands don't know what they are doing. They also like to make laws retroactive, furthering the mess.

I am a prime example of this. My birth was in the US to Canadian parents, raised in Canada from infancy, no US passport, no SSN. Shortly after age of majority in the early 90s, State said I was not a US citizen. They did not issue me a Certificate of Loss of Nationality (CLN) or notify me of the existence of CLNs, which the IRS now claims is required. They did not inform me of any obligation (reporting, tax, etc.) to Treasury, nor did tax code at that time require I "check out" of an IRS system I was never in. They did not inform me of a Treasury requirement to report ALL of my financial account information to them annually, once it reached an aggregate balance of $10,000 US.



> People have not been filing or paying their US taxes for years, the US gov is trying to give the IRS the tools to track them down.


Yes, let's hope they track down all those millions of currently law-abiding, middle class, non-US residents, citizens of other countries, and cripple them with accounting fees for years of insanely complex tax and financial reporting, and cripple them with ridiculously high non-filing penalties, when little to no tax is owed if they TRULY should be US taxpayers. They are surely criminal tax evaders for having some type of connection to the US, and failing to learn the tax and citizenship code of a foreign country. How could anyone, pre-internet, take the word of US government agencies as truth?

/sarcasm


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## fatcat

eclectic, to the snowbird issue, i don't know how that will play out, one or two big news stories might be enough to change the tide one way or the other (arouse the chambers of commerce in florida/california or scare snowbirds into lessening their visits)

to the banking, the us/canada banking situation is arguably the most integrated dual-country banking/taxation/reporting system in the world and just isn't comparable to other countries



> The price of remaining a "US Person" has gone up substantially. Yet many of them want to leave their portfolios there and continue to pay the medicare premiums as a disaster fallback (along with evacuation insurance).


perhaps the "evacuation" insurance is worth it ? ... there are an estimated 10-million people outside the usa who fall under fatca/fbar ... we don't see anything like a rush to renounce, it's a slowly increasing trickle but that's all 

RCB, we all know the usa is unique in the world for citizenship based taxation ... as tax systems get starved for cash we will see more of this around the world and more complexity in all tax codes, it will be a mess .. it's a big mess now

i am still waiting for my tax preparer to call me as he has filed the usual extension for the usa and i won't be submitting until next month after having worked my way through canada's tax system ... it is unfair but unlikely to change

it certainly behooves all of us to keep our financial life as simple and minimalist as possible .. forget any kind of complex investment scheme that has to be run through 2 different tax systems

accounting and reporting is now a very real and important consideration ... the accountants are all popping the champagne corks i'm sure


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## Eclectic12

Fatcat ... for the banks of the world, I suspect comparable or integration takes a back seat to cost/benefit for their business/legal environment. No matter what, they have to decide if the money to implement FATCA is worth spending for their situation.

For the dropping of US citizenship, what you are calling a slowly increasing trickle, US sources have reported a 500% increase ... but we'll see where it goes from here.


Cheers

*PS*

Some links talking about the increase in numbers as well as those choosing to ditch their US citizenship.
http://www.huffingtonpost.com/2012/05/11/eduardo-saverin-us-citizenship_n_1510099.html
http://www.bloomberg.com/news/2012-...ue-to-give-up-passports-in-swiss-capital.html

So far, I haven't found updated numbers.


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## fatcat

Eclectic12 said:


> For the dropping of US citizenship, what you are calling a slowly increasing trickle, US sources have reported a 500% increase ... but we'll see where it goes from here.Cheers


i hope and believe that the us government, treasury, congress, irs and so on, all understand that losing citizens and even worse spreading the word to potential citizens that it is best to avoid becoming entangled with the usa tax authorities is not a good thing

and thus they will work to raise minimum requirements for fbar's and fatca and find other avenues to make this process easier because it is only growing more complex by the year and people are angry, something has to give

the united states does not want to send the message around the world that it's citizenship is best avoided ... they need good, high skilled people to come to the usa now and in the future

but as you say, we will see .. for me, it's on the back burner and i would like to avoid it but it isn't entirely out of the question


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## Eclectic12

^^^^

I'm not sure they are headed in the right direction as:



> Sens. Charles Schumer and Bob Casey last year suggested that Congress vote for a law that would force former US citizens to pay taxes for years after renouncing their citizenship – as well as ban them from ever returning to the US.


http://rt.com/usa/us-tax-income-pay-244/


Cheers

*PS*



> ... "When I became an immigration lawyer 30 years ago, people really were excited about going to America.
> 
> Now, more than half of my clients are people thinking of other alternatives rather than people seeking to immigrate to America," said Eugene Chow, the principal of Chow King & Associates in Hong Kong...


http://online.wsj.com/news/articles/SB10001424127887323585604579007860126146566

If I am reading correctly, the official number of those ditching US citizenship for 2008 was 235, 2011 was a banner year at 1,780 and Q2 2013 was 1,130 which is up from the previous quarterly record Q1 2013 at 679.

It's a drop in the bucket compared to the total six million number but there does appear to be a relatively steady upward trend.


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## fatcat

Eclectic12 said:


> http://online.wsj.com/news/articles/SB10001424127887323585604579007860126146566
> 
> If I am reading correctly, the official number of those ditching US citizenship for 2008 was 235, 2011 was a banner year at 1,780 and Q2 2013 was 1,130 which is up from the previous quarterly record Q1 2013 at 679.
> 
> It's a drop in the bucket compared to the total six million number but there does appear to be a relatively steady upward trend.


as you say it's a drop in the bucket ... giving up US citizenship is a big fffing deal, not undertaken lightly ... the numbers will surely, predictably go up but will remain paltry compared to the total overseas us citizens

a much bigger deal will be the ripple effect which you point to with your link 

the word is slowly getting out and it will eventually come back to haunt the usa, i think that some people in the government know this

a simple solution that would accomplish most of what the government wants to do, i.e. catch tax cheats, can still be accomplished easily even if they raise the fatca/fbar filing threshold to 500K in assets

there has been talk of a 250K minimum

middle class people with small portfolios are not the ones hiding assets offshore


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## james4beach

I met with my accountant and we went over various scenarios and options that I had. This was a good, but expensive, discussion.

(Background: I'm not a US citizen but I will soon become a "U.S. Person" by spending too much time in the USA. I have to file US taxes due to employment income. I pay US taxes off my paycheque but the US can't tax me on other things, like investment income. Nevertheless, the I.R.S. requires that I disclose and report my foreign accounts & investments)

Due to pressure from the I.R.S. and the burden of complex forms, I decided to:

1. shut down my TFSAs (I will keep one, just because they're awesome)
2. sell all Canadian ETFs or move them inside my RRSPs

Of course US ETFs are unaffected. Ha ha. See what they're doing here? Pressuring global investors out of domestic investments and into US investment vehicles.

#2 (the IRS calls them PFICs) was the big surprise to me. In my case, the US can't demand taxes on these but they can make me fill out ridiculous forms. My accountant said that their office has had lots of trouble with the IRS rejecting and complaining about the PFIC forms. They're new and not well understood, not even by IRS agents.

I'm pissed off, frankly. The IRS is bullying me out of my TFSAs even though they have no jurisdiction over these. They're also bullying me out of some great investments like Central Fund of Canada on which I'm going to incur *huge* capital gains when I close it. The RRSP comes to the rescue as I can try stuffing these things inside the RRSP, and then file a simple Form 8891 to invoke the exemption.

Again, none of this is IRS's jurisdiction and under the Tax Treaty I don't even have to pay US taxes on these things. But I have to overhaul my investments due to this, or face tremendous burdens with extra forms. (Many of which carry separate $10,000 non-filing fines)


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## AltaRed

Your coss-border tax accountant should have made you aware of all these things before making the decision to work in the USA and become a US person. These issues have been known for awhile now and also discussed in many threads on Serbinski's tax forum and Financial Wisdom Forum. As I understand it, any TFSA will cause undue paperwork, and any trust (think institution that issues a T3) is considered a PFIC. 

I do not understand your comment about IRS not taxing you on your Canadian investment income. As I understand it, the only income that is not subject to US tax is within your RRSP (and only by filling out 8891). You will pay US income tax on the TFSA since it is not considered a tax protected, i.e. retirement, vehicle by the IRS.


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## james4beach

I'm a Canadian tax resident. My "world wide income" liability is to Canada, not the USA. I'm making an election under the Tax Treaty tie-breaker rule as my primary permanent home is in Canada, I'm only in the US temporarily, and my life (and intention to continue) living in Canada.

For US tax purposes I'm a non-resident alien (NRA). This is unrelated to being a U.S. Person for foreign disclosure purposes. As a non-resident alien, the US does not tax me on income etc from Canadian investments.


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## fatcat

james4beach said:


> face tremendous burdens with extra forms


this is the real nut to crack, the damn forms, you fill out more and more every year and you don't really understand them ...


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## AltaRed

james4beach said:


> For US tax purposes I'm a non-resident alien (NRA). This is unrelated to being a U.S. Person for foreign disclosure purposes. As a non-resident alien, the US does not tax me on income etc from Canadian investments.


Okay. Missed that point somewhere upthread. Do you know how long that election will continue to work? With a TN Visa, maybe for multiple years, for L type Visas, not so much. I got away with it with an L Visa 13 years ago but was able to demonstrate I was in the USA on single status...had left my family back in Canada.


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## james4beach

AltaRed said:


> Do you know how long that election will continue to work? With a TN Visa, maybe for multiple years


There's a recipe of factors they look at for treaty tie-breaker, currently it's in the favour of Canada.

My accountant figures the election can work for me around 3 years minimum, which is the original TN visa. Remember, TN even explicitly says you are not permitted to pursue permanent residency or immigration... it is by nature a temporary work permit. The way I see it, doing the treaty election for Canadian tax home is totally consistent with the spirit of my TN.


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## brad

fatcat said:


> this is the real nut to crack, the damn forms, you fill out more and more every year and you don't really understand them ...


I don't find the forms that onerous: if you get rid of your TFSAs and only invest in RRSP then you just have one form to fill out (the one that lists all your foreign bank accounts). I got rid of my TFSA last year and have never invested outside my RRSP. Once you fill out the foreign bank account form one year, you can reuse most of the information in subsequent years, just updating the amounts and the highest balance that each account reached at any moment during the year (the "highest balance" is misleading and leads to double-counting, but that's another matter).

The only thing that took me by surprise this year is that I had to declare all my trips to the United States. I didn't know that was a requirement so I didn't keep track and had to do a bit of digging through my calendar. It'll be easier this year since we've gotten rid of our car; I can now look at my car-share and car-rental records to quickly spot each trip to the US.


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## Eclectic12

AltaRed said:


> Your coss-border tax accountant should have made you aware of all these things before making the decision to work in the USA and become a US person...


In a perfect world, this would be the case.

From other threads, I believe for the OP is was the more common case of accepting the job and then seeing the cross-border tax accountant.

In my case, the Canadian firm I was working for scheduled the visa specialist first and after I had been working in the US a couple of months, then the session with the accountant was scheduled. 

I doubt it is scheduled this way anymore as the US requirements were much simpler then.


Cheers


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## james4beach

brad said:


> I don't find the forms that onerous: if you get rid of your TFSAs and only invest in RRSP then you just have one form to fill out (the one that lists all your foreign bank accounts). I got rid of my TFSA last year and have never invested outside my RRSP. Once you fill out the foreign bank account form one year, you can reuse most of the information in subsequent years, just updating the amounts and the highest balance that each account reached at any moment during the year (the "highest balance" is misleading and leads to double-counting, but that's another matter).


Thanks, that sounds promising. Unfortunately my RRSP doesn't currently have the room to bring in my PFIC-category investments (notably Central Fund of Canada) so I'm scratching my head about how to shuffle those around. Yes the FBAR and Form 8938 don't sound too difficult to complete, just have to be careful of filing deadline as there are massive penalties.

I'm still pretty angry about how nosy the US is and how they're able to disrupt my investment activities. I've lived in other countries before and never saw anything like this. Again, fundamentally it's not their jurisdiction (but that doesn't stop them)



> The only thing that took me by surprise this year is that I had to declare all my trips to the United States. I didn't know that was a requirement so I didn't keep track


For air travel, with new information sharing between Canadian and US governments, both countries now track all exit and entry dates. When you're on a TN visa anyway, if you go to the CBP web site for the I-94 and punch in your passport number, you'll see a full log of your entry and exit dates and border crossing locations.

Again maybe that's just for air travel, but it seems the governments already have all the data of each trip to the US. Another consequence of this is that snowbirds can't get away with failing to disclose their foreign accounts, or filing with the IRS. If a snowbird spends more than the threshold amount of time in the US, the government already knows and probably automatically flags them for investigation.


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## james4beach

By the way, and I'm sure this is obvious to most people, but the US tax policies are repelling foreigners (like me) from wanting to do business in the USA.

I'm a guy who has capital, ideas, and entrepreneurship experience. In a past era -- possibly in the 50s, 60s, 70s -- I may have said, wow the USA is a great place to live and run business. I'm going to bring my capital from Canada, establish myself here, start a new business and get rich... I'll employ people (meaning Americans) and make lots of money.

Not anymore!!

Instead I think: the American government is a pain in the ***. What can I do to make sure that I *don't* become a resident here? The paperwork, tax headaches, and threats of penalties are bad enough as a visitor, and surely it would be hell as a full resident or citizen. There is absolutely NO WAY that I would buy a house or other large asset in the US. I want to make sure I get _out_ of here and get the hell away from the IRS as soon as I can in the near future.


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## fatcat

brad said:


> I don't find the forms that onerous: if you get rid of your TFSAs and only invest in RRSP then you just have one form to fill out (the one that lists all your foreign bank accounts). I got rid of my TFSA last year and have never invested outside my RRSP. Once you fill out the foreign bank account form one year, you can reuse most of the information in subsequent years, just updating the amounts and the highest balance that each account reached at any moment during the year (the "highest balance" is misleading and leads to double-counting, but that's another matter).
> 
> The only thing that took me by surprise this year is that I had to declare all my trips to the United States. I didn't know that was a requirement so I didn't keep track and had to do a bit of digging through my calendar. It'll be easier this year since we've gotten rid of our car; I can now look at my car-share and car-rental records to quickly spot each trip to the US.


thats the definition of an optimist :biggrin:

i am tempted to say that the only reason you find them easy to fill out is because you are blissfully ignorant of the one or two that you *don't know* you need to fill out ! ...


----------



## brad

fatcat said:


> thats the definition of an optimist :biggrin:
> 
> i am tempted to say that the only reason you find them easy to fill out is because you are blissfully ignorant of the one or two that you *don't know* you need to fill out ! ...


Er, well, it's more likely that those are the forms my accountant fills out for me. ;-)

There's no way I would attempt to do my US income tax returns myself; friends of mine do it and it's a huge effort for them to keep up with all the changing rules, forms, etc. I pay an accountant to do that; he's a cross-border expert. He fills out all the forms he can do on his own, but I have to fill out the foreign bank account form and compile a few other bits of information.


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## james4beach

fatcat said:


> i am tempted to say that the only reason you find them easy to fill out is because you are blissfully ignorant of the one or two that you *don't know* you need to fill out ! ...


Not to mention the separate $10,000 penalty applicable to failing to file each one. And I think one of the forms is due as early as March. I've seen as many as 5 different forms needed for foreign account disclosures.

Forget to a file a couple of those and suddenly you're staring at a $20,000 penalty. Welcome to the USA!

Remember that the fact you have an accountant doesn't free you of liability. If your accountant screws up, it's still YOUR *** on the line.

Canadians don't realize how lucky we are in Canada. The USA has an _extremely aggressive_ tax and penalty regime.


----------



## Eclectic12

james4beach said:


> ... For air travel, with new information sharing between Canadian and US governments, both countries now track all exit and entry dates...


It's not just air travel anymore.



> Currently, under the bilateral “Entry/Exit Initiative,” Canada and the United States *are already collecting and exchanging the entry data at all land border ports of entry *of third-country nationals, permanent residents, visitors, foreign students and those who are here on work permits.


http://www.thestar.com/news/immigra..._travellers_info_with_federal_government.html
http://www.torontosun.com/2014/01/16/canada-us-to-share-real-time-border-crossing-details




james4beach said:


> ... Another consequence of this is that snowbirds can't get away with failing to disclose their foreign accounts, or filing with the IRS. If a snowbird spends more than the threshold amount of time in the US, the government already knows and probably automatically flags them for investigation.


It also means that if the US gov't applies the definition from the IRS web site where a couple of hours in the US to buy gas/groceries counts as a full day, those close to the limit who aren't aware of this - at best end up with more paperwork and at worst, might have penalties applied.


Cheers


----------



## james4beach

Good observations. Yes this has huge consequences for Canadians. People will take a couple years to figure this out, but basically there are now huge consequences for any trip into the US.

For business people who make frequent US trips, the implications are very scary. Business people are best advised to avoid unnecessary contact with the USA, and shoppers/tourists are advised to avoid trips into the USA. Any "deals" or "savings" are by far offset by tax and liability headaches and potentially massive fines.


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## fatcat

james4beach said:


> The USA has an _extremely aggressive_ tax and penalty regime.


but they also offer a much stronger set of protections to taxpayers 

american taxpayers have more rights when dealing with the irs than canadians do when dealing with the cra

this is going badly ... in order to catch a small number of usually well-heeled tax cheats, they are implementing a big-brother surveillance regime that is ensnaring millions of middle class people and adding to their already complex tax compliance problems

for those of us who have to now wind our way through two complex tax systems that often contradict each other, it is becoming a constant source of unfair stress

i am now actively choosing all of my accounts and investments based on reporting requirements and i believe that as james says, people will start to avoid the usa, it's citizenship and even travel to stay away from tax complications


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## Eclectic12

james4beach said:


> Good observations...


YMMV ... for someone like me who goes for a couple of weeks training during the year, maybe an extra week visiting distant relatives and then might spend another five on day trips - it makes no difference.

For business people or snow birds spending large chunks of time - that's a different kettle of fish. The one thing the business people have to their advantage is their company likely has on retainer or internally cross-border experts, where any fees paid are a business expense.

Snow birds or people such as yourself - I don't believe have the same write off option. I only had one US return that the company did for me, almost twenty years ago so I may be out of date on this.


Cheers


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## cashinstinct

I had almost 0% interest in working in the US In the future.

After reading last posts in this thread, I am closer to 0% for sure!


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## RCB

Everyone please note that reporting information sent Banks to CRA to IRS (account numbers, balances, owners' names and addresses, financial institution holding account or insurance) under FATCA is NOT considered to be confidential taxpayer information by the US. This information about your financial life can be shared between Treasury and any other US agency. ANY agency. No data protection. Period.


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## Eclectic12

fatcat said:


> but they also offer a much stronger set of protections to taxpayers
> 
> american taxpayers have more rights when dealing with the irs than canadians do when dealing with the cra


I'll take your word for it ... though I haven't noticed a lot of difference in the news shows profiling tax authority questionable behaviour, regardless of which of the two were involved.

... not that I've had anything more than minor time wasting out of a junior CRA clerk to this point.




fatcat said:


> this is going badly ... in order to catch a small number of usually well-heeled tax cheats, they are implementing a big-brother surveillance regime that is ensnaring millions of middle class people and adding to their already complex tax compliance problems


That's what's puzzling ... but so far, this the course that's been set with limited concern, AFAICT.


Cheers


----------



## Eclectic12

cashinstinct said:


> I had almost 0% interest in working in the US In the future.
> 
> After reading last posts in this thread, I am closer to 0% for sure!


For me it's all cost/benefit - if there's enough benefit for the hassle, I'd consider it.
FATCA pushes the required benefit to a much higher level.


Cheers


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## Cal

Just opened a new account at the bank, b/c of FATCA there is more paperwork to fill out. Even the bank reps struggle with the new paperwork hoops they have to jump through.


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## james4beach

FATCA is going to hurt the Canadian financial industry. It's also going to hurt the Canadian mutual fund and ETF industry since it will chase assets out of domestic mutual funds, under threat of the IRS.

I just closed one TFSA account at a depository bank, and I'm going to close another one at a brokerage before year end too.


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## RCB

FATCA goes to Federal Court in Canada.

http://isaacbrocksociety.ca/wp-content/uploads/2014/06/ADCSClaimFilingPressReleaseAugust112014.pdf

This fight is funded by the little people, using their own money, fighting the Canadian government using the Canadian taxpayers' money. It is an insult to have to pay for both sides.

A Human Rights complaint has also been submitted to the UN. Acceptance of the complaint unknown until later this month.


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## james4beach

That lawsuit makes a legitimate argument and I think cuts to the core of the matter: IRS has no jurisdiction here, Canada is a sovereign country.

Mind you, the USA has time and again bullied Canada into passing laws that are extensions of their own interests so this isn't the first time and likely won't be the last. And it truly is bullying, because the USA has driven non-compliant foreign banks out of business. Canada probably has to cooperate with the IRS, because otherwise the USA can seriously hurt Canadian banks. You worry about a real estate crash? Pshaw. Just wait for the hell that would be unleashed if USA started calling Canadian banks havens for "tax evaders".

For example, Swiss banks first refused to comply with America's outlandish demands. Wegelin Investment Bank wrote this famous article describing how the USA came after Switzerland for bank account disclosures not because of actual tax evasion, but due to broader context: the USA is cash-strapped, seriously burdened by debts, and _will_ aggressively pursue all foreign sources of income it can discover. Wegelin advised that foreign investors stop dealing with America due to tax consequences.

Then in 2013, Wegelin -- Switzerland's oldest investment bank -- paid fines to the USA and ceased operating as a bank. Founded in 1741 and terminated in 2013 because of their resistance to hand over Swiss info to the IRS, plus (I'm sure) a little punishment for the direct jabs against the USA in their widely circulated article.

The point is, yes the USA is clearly compromising Canadian sovereignty and yes it's unacceptable for them to collect our Canadian account info (I'm not even a US citizen!). *But* the USA really needs the money, and their aggression is increasing in response to their deteriorating fiscal situation. Canadian banks will be severely punished if they don't comply with the IRS.

I probably should have listened to Wegelin's instruction, which was to avoid doing business with the USA. What I'm experiencing now is a direct consequence of not taking their advice. The article is a must-read.


----------



## james4beach

More detail on this FATCA lawsuit in a fresh article, August 12, at Forbes
http://www.forbes.com/sites/robertw...ock-fatca-and-prohibit-handover-of-u-s-names/


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## Eclectic12

james4beach said:


> ... Canada probably has to cooperate with the IRS, because otherwise the USA can seriously hurt Canadian banks...


I think the bigger driver is how much the Canadian financial institutions would lose by cutting lose their US business.

Otherwise, they could comply with the US requirements without having to file/report anything to the US (or change their paperwork significantly). They could use the same method as some French, Italian, Belgium, Swiss and German banks where they have closed down the accounts of their clients who are dual citizens or there was any reason to suspect the client might have US citizenship.


After all, the US itself estimates that there's only one million US citizens in Canada so without other US business, that's a drop in the bucket compare to the rest of the market.


Cheers


----------



## troy87

MrMatt said:


> The people that will really be affected are those who should have been paying their US income tax, and aren't.
> 
> The US doesn't like it when people don't pay their taxes.



+1...


-------------------------------
Have a nice day
Used Cars for sale in Canada


----------



## fatcat

james4beach said:


> That lawsuit makes a legitimate argument and I think cuts to the core of the matter: IRS has no jurisdiction here, Canada is a sovereign country.


it will likely fail ... the usa and canada have a boatload of complex and well established tax treaties, this is a small reach beyond these, the supremes will come back and say exactly this ....



> I think the bigger driver is how much the Canadian financial institutions would lose by cutting lose their US business.
> 
> Otherwise, they could comply with the US requirements without having to file/report anything to the US (or change their paperwork significantly). They could use the same method as some French, Italian, Belgium, Swiss and German banks where they have closed down the accounts of their clients who are dual citizens or there was any reason to suspect the client might have US citizenship.
> 
> 
> After all, the US itself estimates that there's only one million US citizens in Canada so without other US business, that's a drop in the bucket compare to the rest of the market.


except i am one of those 1 million and we are pretty good customers who contribute a big chunk to the banks bottom line

not to mention that both td, royal and bmo have extensive usa banking interests that integrate with their canadian businesses to serve many of these customers who travel to the usa and have money

refusing to cooperate is out of the question ... think about it for a moment ... why would they want to drive away all that business when they can merely shift the burden of privacy invasion to the cra ?


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## RCB

Well, let's hope it doesn't fail. This is unreasonable search and seizure by a foreign government, aided by our own Canadian government, paid for by ALL Canadian bank customers.

Also, this is NOT a treaty. The US Treasury Dept. and IRS do not have the authority from US Congress to negotiate a treaty in this matter. Maybe they lost that email, they're good at that.

This issue will create a few generations of Canadians (and other nationals) that will not invest in US financial products. With true reciprocity, there will be capital flight from the world's largest tax haven...the USA. I hope the blowback smacks them hard, right in their exceptionalism.


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## Eclectic12

fatcat said:


> it will likely fail ...


That's what I'd expect ... but one never knows until the fat lady sings .... 




fatcat said:


> ... except i am one of those 1 million and we are pretty good customers who contribute a big chunk to the banks bottom line
> 
> not to mention that both td, royal and bmo have extensive usa banking interests that integrate with their canadian businesses to serve many of these customers who travel to the usa and have money


With according to StatCAn, 22 million 18+ year olds Canada only citizens in 2011 - I suspect the driver is far less the US estimated 1 million US citizens (something less than 5% of the potential market) and far more the growth opportunities in the US for various subsidiaries.




fatcat said:


> ... refusing to cooperate is out of the question ...


Especially when in the final analysis, the European banks that are cutting US citizens loose *are* cooperating by divesting themselves of those clients that would trigger reporting.





fatcat said:


> ... think about it for a moment ... why would they want to drive away all that business when they can merely shift the burden of privacy invasion to the cra ?


Agreed ... though as I say, I suspect it's less the dual citizens and more the business opportunities as well as areas that the financial institutions want to tap into.


Cheers


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## fatcat

Eclectic12 said:


> Agreed ... though as I say, I suspect it's less the dual citizens and more the business opportunities as well as areas that the financial institutions want to tap into.
> 
> Cheers


of course, the banks are interested in their customers only as far as they add to the bottom line 
i agree that business opportunities in the south are the main driver

nevertheless i think canada is not europe since the usa and canada have considerable trade and back and forth immigration, extended families and so on, the big 5 banks would have a hard time pulling off a dumping of 1-million peoples' accounts

what the hell, we would all go to credit unions many of which are exempt from fatca reporting, so maybe it wouldn't be so bad

if the court case succeeds (it won't) then all hell will delightfully break loose and we will get to see what the banks do



> This issue will create a few generations of Canadians (and other nationals) that will not invest in US financial products. With true reciprocity, there will be capital flight from the world's largest tax haven...the USA. I hope the blowback smacks them hard, right in their exceptionalism.


 agreed, this will come back to bite them 

just today i got into a discussion with a woman who overheard that i was dual citizen and she wanted some advice about immigration, she has a boyfriend in seattle and she told me that they are now keeping a very accurate calendar of all her time and visits to the usa so they don't get caught in a taxable situation ... 

i lectured her in no uncertain terms to be very cautious in any residency / vacation / home ownership / green card / citizenship situation

this is going to hurt american business, american investment products and especially the snowbird states

and it will certainly hurt canadian investment products as well as james says


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## james4beach

Regarding the US-Canada Tax Treaty. My sense is that FATCA (and all the foreign reporting disclosures) reaches beyond the Treaty; it is _not consistent_ with the Tax Treaty.

For example, I am someone who specifically invokes the Tax Treaty to address my residency situation. Under the Tax Treaty, my 'worldwide income' is payable to Canada and not the USA. That's one of the things this complex Treaty defines (which I'm very grateful for). Remember, I'm not a US citizen so I don't have citizenship tax liabilities.

But what the US wants, all my Canadian bank info, pretty much ignores the Treaty. These are addendums to US tax law, and this recent stuff almost side-steps the treaty. That's why the accountants and lawyers are confused -- and surprised -- as they learn that the account reporting requirements continue to apply even when the tax situation is covered under the Treaty.

Basic message: the existing Tax Treaty has no knowledge of these new American laws and does not take them into account. Tax liability and account reporting obligations are distinct things currently. So you may not have US tax liability but may still have to report all your Canadian accounts.

If you do have US tax liability, then you definitely have to report your Canadian accounts.


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## james4beach

I do recommend reading that article by Wegelin bank. They really had some foresight.

Among the advice is to avoid owning US assets. For example I can't imagine anything worse than owning a home in the US... the tax implications are mind bogglingly horrible.

Long-term, this situation is bad for both countries and probably quite destructive to America. But in the short term, it will help the US collect more tax revenue and that's the whole point.


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## AltaRed

Unless things have changed, the tax treaty trumps any bullshit out of Congress/IRS, etc. This is, as I understand it, according to International law.

This is long ago, but I was working single status in 2001 in the USA (non-resident alien for tax purposes) and the IRS came after me in 2002 to pay US taxes on my Canadian investment income. My cross-border accountant recited the tax treaty provisions to the IRS that I was a resident of Canada for tax purposes and the IRS backpedalled. So while it may be necessary to file all the paperwork, it does not mean tax liability.


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## james4beach

AltaRed, yes the Treaty should trump it but these things need court rulings to get ironed out. We're so far from that: currently the IRS doesn't even know how to interpret some of the forms they are demanding in relation to the new rules!

These recent changes are all too new. Unfortunately the IRS tends to change its tax rules quicker than the courts can keep up.

Frankly: USA is screwing us on the Tax Treaty and it's not cool


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## kcowan

These are what can classify a person as a US Person under FATCA:


> · U.S. citizenship or lawful permanent resident (green card) status;
> · A U.S. birthplace;
> · A U.S. residence address or a U.S. correspondence address (including a U.S. P.O. box);
> · Standing instructions to transfer funds to an account maintained in the United States, or
> directions regularly received from a U.S. address;
> · An “in care of” address or a “hold mail” address that is the sole address with respect to the
> client; or
> · A power of attorney or signatory authority granted to a person with a U.S. address.


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## james4beach

Yes, virtually anything can qualify you as a U.S. Person.

This is an attempt to levy taxes against as many people in the world as they can get their hands on. Ironic considering America's "taxation without representation" chant by their founders


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## HaroldCrump

_A power of attorney or signatory authority granted to a person with a U.S. address._

^ does this include naming a person with a US address in a "living will" (POA)?
My brother-in-law in the US has my wife's POA.
As well as being named the guardians of our kids (in the event of our demise).
Does this make us US persons now, subject to FATCA?


----------



## fatcat

HaroldCrump said:


> _A power of attorney or signatory authority granted to a person with a U.S. address._
> 
> ^ does this include naming a person with a US address in a "living will" (POA)?
> My brother-in-law in the US has my wife's POA.
> As well as being named the guardians of our kids (in the event of our demise).
> Does this make us US persons now, subject to FATCA?


certainly not if the power of attorney has *not been exercised*

i assume the power of attorney can be exercised upon either your wife's death or incapacity

until then it has no signature authority (your brother in law has no ability to exert control over your wife's assets)

if in the unlikely case that she granted him some form of currently active power of attorney then he would have to fill out an FBAR and list her / your accounts under the *signing authority / section 4 part*

most powers of attorney are activated only on death or incapacity


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## RCB

AltaRed said:


> Unless things have changed, the tax treaty trumps any bullshit out of Congress/IRS, etc. This is, as I understand it, according to International law.
> 
> This is long ago, but I was working single status in 2001 in the USA (non-resident alien for tax purposes) and the IRS came after me in 2002 to pay US taxes on my Canadian investment income. My cross-border accountant recited the tax treaty provisions to the IRS that I was a resident of Canada for tax purposes and the IRS backpedalled. So while it may be necessary to file all the paperwork, it does not mean tax liability.


That is so cool! You worked there, and it was hands off for the IRS. I was born there, left as a baby, was told I wasn't a US citizen, have not lived or worked there, and they want everything. Tax, financial data, that of my Canadian husband and elderly Canadian father....

Sorry for the sarcasm, I've been living this nightmare for three years now, with no end in sight. There is no tax treaty to save most of us from this complicated mess of US law, unless Canada (and other countries) stand up. They are not standing up, so little people, such as myself must donate to a Charter challenge to FORCE our country to stand up for us.


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## james4beach

RCB, I feel for you... that's a tough situation. I agree this is a totally unfair situation forced upon you and yes, Canada is failing here.


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## kcowan

RCB said:


> They are not standing up, so little people, such as myself must donate to a Charter challenge to FORCE our country to stand up for us.


and I am willing to bet that the government will prevail. I would feel more confident if the class action included the tax treaty since that is what AltaRed relied upon.


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## HaroldCrump

fatcat said:


> certainly not if the power of attorney has *not been exercised*
> i assume the power of attorney can be exercised upon either your wife's death or incapacity
> until then it has no signature authority (your brother in law has no ability to exert control over your wife's assets)


Okay, thanks for clarifying.
I have so far not looked into these new rules, but maybe I should at some point.

I ceased to be a "US person" many years ago, although I do have a social security # and have contributed to SS and UI for several years.
They can have a party with my contributions :biggrin:


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## Guban

RCB said:


> That is so cool! You worked there, and it was hands off for the IRS. I was born there, left as a baby, was told I wasn't a US citizen, have not lived or worked there, and they want everything. Tax, financial data, that of my Canadian husband and elderly Canadian father....
> 
> Sorry for the sarcasm, I've been living this nightmare for three years now, with no end in sight. There is no tax treaty to save most of us from this complicated mess of US law, unless Canada (and other countries) stand up. They are not standing up, so little people, such as myself must donate to a Charter challenge to FORCE our country to stand up for us.


Even if FATCA is overturned, you will still be offside of the IRS, as a US citizen. The end to your nightmare is to renounce your US citizenship. Emphatic end, with a message to the US. They might get the message down south if there was a rush to the exit door.


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## Eclectic12

There's already a rush with the previous yearly total of US citizenship renunciations climbing from 285 a year, setting a new record every year and the last number I could find was a quarterly number that implies about 4400 is the new record.

So it would appear the question is what metrics the US gov't will use to decided it's an issue.


Cheers


----------



## fatcat

HaroldCrump said:


> Okay, thanks for clarifying.
> I have so far not looked into these new rules, but maybe I should at some point.
> 
> I ceased to be a "US person" many years ago, although I do have a social security # and have contributed to SS and UI for several years.
> They can have a party with my contributions :biggrin:


unless you have formally abandoned your green card you are still required to comply (file fbars and tax returns) ... did you file an I-407 ?

http://photos.state.gov/libraries/164203/dhs/I-407.pdf


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## fatcat

RCB said:


> That is so cool! You worked there, and it was hands off for the IRS. I was born there, left as a baby, was told I wasn't a US citizen, have not lived or worked there, and they want everything. Tax, financial data, that of my Canadian husband and elderly Canadian father....
> 
> Sorry for the sarcasm, I've been living this nightmare for three years now, with no end in sight. There is no tax treaty to save most of us from this complicated mess of US law, unless Canada (and other countries) stand up. They are not standing up, so little people, such as myself must donate to a Charter challenge to FORCE our country to stand up for us.


you realize there is an amnesty as of july 1 ?

3 years of returns and 6 years of fbars and you are good to go ...


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## HaroldCrump

fatcat said:


> unless you have formally abandoned your green card you are still required to comply (file fbars and tax returns) ... did you file an I-407 ?


I didn't have a green card.
I worked briefly under TN and subsequently under H-1B.
I did file US tax returns during those years, but not since the year I stopped working there.


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## fatcat

HaroldCrump said:


> I didn't have a green card.
> I worked briefly under TN and subsequently under H-1B.
> I did file US tax returns during those years, but not since the year I stopped working there.


sounds like you are ok then harold


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## RCB

Guban said:


> Even if FATCA is overturned, you will still be offside of the IRS, as a US citizen. The end to your nightmare is to renounce your US citizenship. Emphatic end, with a message to the US. They might get the message down south if there was a rush to the exit door.


I have renounced...twice...once in the early 90s, and again a year ago. In the first instance I was never asked for an address to send a CLN to, and the consulate claimed to have no information on file for me. I must now keep my blood pressure up by keeping up on US citizenship and tax law. They like to change the laws, often making them retroactive. 

I did file an exit tax form, which required a statement as to why I had neither a SSN (wasn't eligible per their 1990s advice), nor a TIN ( not a chance I'd bother applying for one to "log out" of their system I wasn't in). That statement was pretty nasty. It took everything I had not to complete the exit tax form in red crayon, claiming only a baby bottle and blanket, since I left as an infant.


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## RCB

fatcat said:


> you realize there is an amnesty as of july 1 ?
> 
> 3 years of returns and 6 years of fbars and you are good to go ...


You mean the new and improved Streamlined program? Not a chance I have any interest in filing tax returns or financial account forms to a foreign country, or pay thousands to have someone prepare them. They can stuff their $10,000 per form penalties and threats of imprisonment. They have given me exactly...nothing. I give them...well, it's the longest finger on my hand. I am prepared to do the same to my bank, if necessary, and I'm not the only one.

Needless to say, they won't find me in ever again in their country spending money, or investing in anything American.


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## fatcat

RCB said:


> You mean the new and improved Streamlined program? Not a chance I have any interest in filing tax returns or financial account forms to a foreign country, or pay thousands to have someone prepare them. They can stuff their $10,000 per form penalties and threats of imprisonment. They have given me exactly...nothing. I give them...well, it's the longest finger on my hand. I am prepared to do the same to my bank, if necessary, and I'm not the only one.
> 
> Needless to say, they won't find me in ever again in their country spending money, or investing in anything American.


outstanding ... fight the good fight ... live wild and free ... don't let em take you alive

the rest of us are paying the price for a small number of well heeled tax cheats

it's unfair as hell but it's here to stay


----------



## Cal

Currently trying to set up a new business account....total PITA factor with new paperwork at the bank b/c of FATCA, employees don't even know how to fill it out. There are IRS forms now, which is ridiculous if you are not a US citizen, nor someone doing business with US businesses.


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## kcowan

A friend refused to answer the relevant questions and asked what the consequences would be. They said that it would just be noted that he refused.


----------



## PuckiTwo

kcowan said:


> A friend refused to answer the relevant questions and asked what the consequences would be. They said that it would just be noted that he refused.


But... what does it mean 'it would just be noted'? Does it stay in the bank files or will it actually be reported to wherever and from there the 'note' goes into the whole system? Our bank told us that 'people couldn't dream of what they (the banks) all have to report'.

*Edit:* I think not answering questions is the wrong thing to do in this situation. It raises red flags and makes someone suspicious.


----------



## AltaRed

fatcat said:


> sounds like you are ok then harold


I agree Harold should be fine BUT he will have either an ITIN or a SSN if he worked there. If it is a SSN, that can create all sorts of issues with Canadian financial institutions.....because they will default to believing you are a US Person if you have a SSN. Never provide a SSN when filling out a W-8BEN as they will tell you to full out a W-9 instead. I had a huge headache circa 4 years ago or so with discount brokers because of me having a SSN (which I got when first working as an ex-pat in the USA in the 1980's). I had to get a senior tax accountant with a major accounting firm to provide the clowns with an explanation of why a non-US Person might have a SSN. I suspect that may rear its head again and I will have to go through all that pain yet again.


----------



## RCB

kcowan said:


> A friend refused to answer the relevant questions and asked what the consequences would be. They said that it would just be noted that he refused.


Yes, they will note that he refused. This makes him what the US calls a "recalcitrant accountholder". This means the bank is required to send his information in to CRA to go to the IRS. In their (IRS) hare-brained eyes, he is a US tax evader. Bad move.


----------



## kcowan

RCB said:


> In their (IRS) hare-brained eyes, he is a US tax evader. Bad move.


Except he is a pure Canadian (not a US Person) who would be doing it for sovereignty reasons.


----------



## fatcat

RCB said:


> Yes, they will note that he refused. This makes him what the US calls a "recalcitrant accountholder". This means the bank is required to send his information in to CRA to go to the IRS. In their (IRS) hare-brained eyes, he is a US tax evader. Bad move.


i am surprised to hear this from you rcb since such an action would only serve as a guerrilla disruption tactic (of which you would presumably approve) ... the mighty irs can huff and puff all they want but if indeed kcowan's friend has no usa connections then they would be powerless against him and might spend precious resources chasing him (though perhaps, in the process of their fruitless chase, they might not let him cross the border or put him on a no-fly list or something)

the problem for so many canadians is that there are huge and complex ties to the usa by virtue of travel, investing, vacation housing, relatives and so on .. the two countries have a lot of connections (and share a LOT of data)


----------



## RCB

I have no trouble with guerilla disruption tactics, but they should only be used in your own favour. To have a purely, 100% Canadian, non-US person become considered a recalcitrant by Canadian banks and the IRS is no favour to that person. Under the FATCA IGA, a recalcitrant's information will go Bank>CRA>IRS. Needlessly. Of course the IRS is due nothing, but the information is now all in the US, to use as they wish. By any government agency, or crook.


----------



## cheech10

But which government agency would he have to fear? If he's hiding from the CIA, being recalcitrant might not be a great idea, but otherwise I don't see much risk.


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## james4beach

Reminder that FATCA reaches far beyond just US citizens. Absolutely US citizens (and green card holders) have the worst situation but FATCA has impacts even for non-US citizens. It can affect business people visiting the US, snowbirds, even people just visiting their family in the US.

The USA is hurting itself with new aggressive taxation and FATCA. They are alienating many people, _and chasing away capital and wealthy people_. In the history of civilizations, this has never had good results. Guys like me flocked to the US in past decades to establish new business and industry. But now with the US government's aggressive taxation, it just repels people -- both Americans and foreigners want to stay out.

This cycle will just continue. More wealth will flee from America, and the government will become more aggressive. Capital controls are coming. The border will tighten. This is a long-term process though. For now, economic turmoil in Europe will probably still make capital flee into America and offset some of what I describe.


----------



## RCB

cheech10 said:


> But which government agency would he have to fear? If he's hiding from the CIA, being recalcitrant might not be a great idea, but otherwise I don't see much risk.


That is the unknown. In this situation someone is needlessly caught up in the unknown. First, there would very likely be IRS contact, as the assumption will be that he is a US tax evader, and the person will need to prove a negative...that he is not a US person for tax purposes. 

There could be future border crossing issues, which aren't important if you don't travel, but could have career implications if you need to travel for business. There is the Reed (Reid?) amendment on the books, barring those that have expatriated for tax purposes from entering the country. (Not yet enforced, but neither was the tax law til now.). To enforce, IRS/Treasury would send info to the borders. State already does that because they know I've renounced.

Thing is, once your info is in their hands, and you are within their reach, they could do anything, including all of their screwy laws, and their even screwier interpretations of them. Best to keep your info as far from the US as possible.


----------



## cheech10

That might be a concern for an ex-pat, or even one who has employment history in the US, but for a non-US person they should be well beyond the reach of the IRS. I think we all agree that this is a terrible law, and all of us who are non-US persons should refuse to answer any questions to a foreign government agency that has no jurisdiction over us on principle.


----------



## fatcat

cheech10 said:


> That might be a concern for an ex-pat, or even one who has employment history in the US, but for a non-US person they should be well beyond the reach of the IRS. I think we all agree that this is a terrible law, and all of us who are non-US persons should refuse to answer any questions to a foreign government agency that has no jurisdiction over us on principle.


i would love to have the freedom of saying "go stick it" ... but I don't and i accept that

at the same time if in the middle of a cold canuck winter I decide "that's it i'm gonna move to Arizona and work on my tan" ... the guy at the border with the badge and gun and mean look can't do diddly squat to stop me from doing just exactly that ... he can question me all day long and check to see what lists i'm on or not on but he HAS to let me in the usa ...

I'm angry about fatca because it has been so badly implemented but I admire the USA for putting a high price on their citizenship

I would be happy to see canada step up her own game in that regard and make the holding of a canadian passport cost a little more than it now does


----------



## RCB

The way I see it, nothing could happen or anything could happen. Last year there was the news of some Canadians not allowed into the US due to medical issues that were related through the information sharing at the border from local Canadian police. There have been numerous instances of people inconvenienced since the implementation of the US' No Fly list, due to the same name, some as young as 7. My point is, once the US has your name it's like a lottery...which name will they pick to screw with.

If you had told me 5 years ago that the US would consider me a US citizen, a US tax cheat, and Canada would be sending the private financial information of 1 out of 30 Canadians to the IRS, I would have told you to put down the bong. What a difference a bit of time makes.


----------



## kcowan

RCB
Is there any special category for a US citizen that has renounced? I mean I know about the immigration legislation...


----------



## fatcat

ok, here we go, this is getting interesting, if the lawsuit against fatca succeeds (i don't think it will)

apparently, according to the financial post: http://business.financialpost.com/2...could-be-worse-off-if-fatca-lawsuit-succeeds/ the hypothetical canadian who has no usa connections and tells the bank to stick it "i ain't answering" would end up having the their account closed under the current fatca legislation ... the irs is demanding that any bank that wants to avoid a witholding of deposits close any account of anyone who doesn't answer the usa tax-liability question

so the person who is a non-cooperator would be seen as a likely us person and have their account shuttered
i suppose they can then get themselves to a credit union where they would be ok



> “The IGA relieves Canadian banks and therefore their depositors from the really nasty, harsh bits of FATCA, like the requirement that the banks close the accounts of ‘recalcitrant’ U.S. depositors,” Mr. Berg says.





> “If Canadian banks don’t comply, any payment coming to them from the U.S. then becomes subject to a 30% withholding tax — not a withholding against tax, but a 30% tax,” Mr. Berg says. “As well, the bank is frozen out of U.S. capital markets and markets that conclude contracts in U.S. dollars, like the petroleum market.”
> 
> The upshot is that the federal government is unlikely to stand idly by if the IGA falls. *It will likely have no choice but to amend privacy or other legislation if necessary, or find some other vehicle, to enable the information transfers about U.S. citizens that will allow Canadian banks to function in U.S. markets.*


----------



## MrMatt

cheech10 said:


> That might be a concern for an ex-pat, or even one who has employment history in the US, but for a non-US person they should be well beyond the reach of the IRS. I think we all agree that this is a terrible law, and all of us who are non-US persons should refuse to answer any questions to a foreign government agency that has no jurisdiction over us on principle.


Yeah, I have US investments. They already know about me, it's how I avoid the withholding tax in my RRSP.

I think their approach is a bit too aggressive, but really they are a sovereign nation, and they can pass the laws they want. A lot of this could be avoided if countries simply didn't permit dual citizenship.


----------



## kcowan

MrMatt said:


> A lot of this could be avoided if countries simply didn't permit dual citizenship.


What part of FATCA would go away if dual citizenship were not permitted?


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## fraser

It is US citizenship that is the issue.

You can very easily be a US citizen only and have lived and worked all your life in Canada, GB, wherever.

FATCA applies to you by virtue of your US citizenship alone. Dual citizenship does not enter the equation.


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## Cal

The problem I have is the bank employees don't seem to know anything either. It is frustrating to know what the consequences of not filling the form out correctly would be when they don't even know. In fact I was referred to TDI as the employees in the branch had not been trained in how to assist in filling out the forms, that they require you to fill out.


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## Eclectic12

fraser said:


> ...FATCA applies to you by virtue of your US citizenship alone.
> Dual citizenship does not enter the equation.


I'd say FATCA applies to Canada because of our close business ties to the US.

As a Canadian, my understanding is that I get hit with the short version - which is to provide info proving I'm a Canadian citizen. I'm sure I'll also be hit in the pocket book as the financial institutions pass on the cost of paperwork changes, training and data collection for the US gov't (apparently it's pushing $750 million at this point).


The US or dual citizen gets the privilege of more as well as on going paperwork, including tax returns.


While I can agree dual citizenship isn't relevant, it is more than US citizens that are affected.


Cheers


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## james4beach

fraser said:


> It is US citizenship that is the issue.


It's part of the issue, but you can fall under FATCA even if you are not a US citizen. (I'm not a citizen, and I have plenty of FBAR / FATCA headaches)


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## RCB

If you have had US citizenship forced or imposed upon you, and you are thinking of getting out (renouncing), you may want to act quickly. Toronto consulate had appointments available in one week when I booked mine in Feb. 2013. It now takes 5 months to have that appointment at that consulate.

http://globalnews.ca/news/1519628/want-to-shed-u-s-citizenship-get-in-line/

Additionally, someone at the Vancouver consulate today to renounce was told the fee ($450 US) is going up soon to $2,400 or $2,800. This was in addition to other reports of consulate employees telling of a sharp increase in the fee very soon.


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## RCB

It's official. If the US has claimed you as a taxpayer (citizen), whether you want it or not, the first step in getting out from under has gone up. Citizenship renunciation fees to Dept. of State will now go from 450 USD to 2,350 USD, up from 0 USD in 2012.

http://isaacbrocksociety.ca/2014/08...respecting-human-right-to-change-nationality/

The Canadian government and compliance vultures have all said "just renounce" to get out from under FATCA. It would be safer and cheaper to deal with Tony Soprano than the US government.


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## gardner

I'm not a lawyer but in my reading of the actual FATCA agreement, a good deal turns on the meaning of "US person", which is not defined precisely. It COULD mean almost anything that the USGov wants it to mean: citizen, resident -- sure. But they might decide it means anyone who's been to the US or has a $US bank account or holdings on a US exchange.

I've banked with the same outfit for many decades and I don't think I've ever told them where I was born or given them any idea whether I am/am-not a "US person" by any definition. I could be originally from Mars, for all they know.

I really can't see how the banks could possibly comply without basically telling the CRA/IRS EVERYTHING about EVERYONE, and letting them decide what they're interested in.


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## RCB

gardner, you are correct, the US holds the ability to define "US person" for tax purposes, and can change the definition at any time.

CRA will NOT be sorting through the data to determine what individuals have their information sent to the IRS, that is up to the banks. The banks, erring on the side of caution, and under threat of penalty from the US, will oversend. Mark my words.


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## Fast Gary

*What is recommended?*

Born in US 1946
Came to Canada 1956
Became Canadian Citizen 1968
Have never worked in US. May at some time own US stocks, ie M funds or ETF's.
I was recently asked by the TD bank to sign their waiver allowing them to give info to the IRS, which I did not sign.
I have been told that prior to 1986 you gave up your US nationality when becoming a Cdn?


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## Eclectic12

Most articles I've read have been more along the lines of this G&M article that says:



> A lot of Canadians born in the United States may have been unaware of their tax obligations, assuming that once they gained Canadian citizenship, by affirming an oath to the Queen, they automatically relinquished their U.S. citizenship.


http://www.theglobeandmail.com/repo...enounce-canadian-citizenship/article16211886/



I'd check with a US-Canada specialist who is familiar with the US statues & which apply when.


Cheers


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## fatcat

Fast Gary said:


> Born in US 1946
> Came to Canada 1956
> Became Canadian Citizen 1968
> Have never worked in US. May at some time own US stocks, ie M funds or ETF's.
> I was recently asked by the TD bank to sign their waiver allowing them to give info to the IRS, which I did not sign.
> I have been told that prior to 1986 you gave up your US nationality when becoming a Cdn?


you are taking a large risk ... intentionality is the key issue ... you would be considered a us person since you didn't take positive steps to renounce your citizenship ...i would check with a GOOD lawyer

the key issue is: could you walk up to the border and demand to be admitted into the usa, the answer is that almost certainly, yes, you would have to be admitted, you were born there and that gives you rights and with the rights comes the obligation to report your worldwide income to the internal revenue service



> The primary effect of recent developments in the US regarding dual citizenship has been to add the requirement that loss of citizenship can only result when the person in question *intended* to give up his citizenship. At one time, the mere performance of the above (or certain other) acts was enough to cause loss of US citizenship; however, the Supreme Court overturned this concept in the Afroyim and Terrazas cases, and Congress amended the law in 1986 to require that loss of citizenship would result only when a potentially "expatriating" (citizenship-losing) action was performed voluntarily and "with the intention of relinquishing United States nationality".


http://www.richw.org/dualcit/law.html#LossCit


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## TaxGuy

fatcat said:


> renouncing citizenship is a matter of paying the fee and simply filing a final return (assuming all your returns are up to date, if not you need to file 3 years worth of returns) and 6 years worth of fbar's ... depending on your tax prep costs this can cost less than about $1000 all in (including the $495 filing fee)


The renouncing fee increased to $2350 on Sept 12, 2014!


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## Userkare

Hello. I'm newly registered to this site, but have been reading it for a few months.

Thanks to everyone for all the interesting information about FATCA. I've been following this because I was born in the USA, immigrated to Canada in 1970, and renounced my US citizenship in 1972; I have a CLN document. But... after the death of my parents in 2005, the family home was sold, and I received my share of the proceeds of that sale. I had to declare that income to the US IRS, and needed to pay an accountant around $1000 to fill out the necessary forms. At one point, I was told by the accountant that I needed some kind of tax identification number to file the necessary forms with the IRS. I volunteered that I had a Social Security Number that I had since I worked part-time as a 16 yr old; he said that would do fine. 

Now, I get the occasional mailing from the SS administration informing me that I do not qualify for benefits since I did not contribute the minimum amount. That's fine, I don't want anything from the US, but just to be left alone. I contacted the SS admin to close my account, but they said it couldn't be done unless I was dead. I'm not willing to meet that requirement just yet.

I had been dealing with RBC for my American banking needs while I paid the lawyers fees, and also expenses (utilities) of the family house after my parents death until it was sold. I since have transferred out my RBC RRSPs, and left only $100 in the savings account.

So now I'm nervous that some bureaucrat in a cubicle in Wash DC will flag my name as a US person, or RBC will report the US activity, and cause me all sorts of grief and expense to defend my case against being taxed by the US.

Does anyone have any insight into the process of determining whether someone is a "US person"? Is it just based on information obtained from your Canadian bank, or could there be such a connection made by activity on a SS account? If RBC reports me as a US person with $100 of assets, with the IRS go looking for my other Canadian accounts? Am I being paranoid?


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## james4beach

RCB said:


> gardner, you are correct, the US holds the ability to define "US person" for tax purposes, and can change the definition at any time.


And they're going to get more aggressive with it. As Hodgen law points out, the law is currently written such that anyone on the planet is a potential filer. They're starting by going after US Citizens of course, and next the I.R.S. will come after Canadian snowbirds, visitors to the US, business people frequenting the US.



> The banks, erring on the side of caution, and under threat of penalty from the US, will oversend. Mark my words.


Right. I fear the same. This US legislation is basically a method of international extortion and as you say, under threat, our banks will start sending (probably everyone's) data to the I.R.S.

In a year or two, I wouldn't be surprised if tourists start seeing letters show up in their mailbox. "$10,000 penalty from the I.R.S. for failing to file FBAR disclosures due to lengthy vacation stays in the USA". It's coming.

This is what happens when a country goes broke. They desperately need tax revenue, and they're broadening the net. Foreigners have less recourse and can't vote (_taxation without representation_) so they're easy targets. This is a natural stage in the empire's progression: now they tax the world, and yes they are being dicks about it.


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## diharv

james4beach said:


> This is what happens when a country goes broke. They desperately need tax revenue, and they're broadening the net. Foreigners have less recourse and can't vote (_taxation without representation_) so they're easy targets. This is a natural stage in the empire's progression: now they tax the world, and yes they are being dicks about it.


You mean a natural stage in an empire's regression ? I suspect that more and more they will be told to shove it , we're not playing your game.


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## kcowan

diharv said:


> You mean a natural stage in an empire's regression ? I suspect that more and more they will be told to shove it , we're not playing your game.


This is a sure sign of the decline and fall. Eventually they will charge $20k for renouncing. So anyone with that bent better get it done. Of course it is impossible to renounce being a US Person. Back in 2002, we investigated becoming snowbirds in the US. We rejected it based upon the taxation without representation issue. We figured the founding fathers had it right.

(For example, the need to file US taxes after 31 days in residence is only forgiven because of the Canada-US tax treaty. That can change anytime. It is an annual filing to request permission. Look at how they refuse to recognize the TFSA even though they have a similar vehicle in the Roth IRA. Never trust a cash-strapped friend with your money!)


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## fraser

Just read in the UK papers that the IRS has been after Boris Johnson for years.

Boris is the Mayor of London, UK. He was born in the US and holds dual citizenship. A number of years ago he sold his home. The IRS have been after him to pay capital gains tax, and presumable file a tax return.

His position is that this is a ridiculous request and has essentially told them to pound sand. He has said this publically and privately.

What is interesting is that Boris Johnson may in fact run for a seat in the Commons. He is being touted as a replacement for Cameron. Would be interesting to see what happens IF he does become leader, and then PM and subsequently visits the US on a state visit.


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## Guban

kcowan said:


> This is a sure sign of the decline and fall. Eventually they will charge $20k for renouncing. So anyone with that bent better get it done. Of course it is impossible to renounce being a US Person. Back in 2002, we investigated becoming snowbirds in the US. We rejected it based upon the taxation without representation issue. We figured the founding fathers had it right.
> 
> (For example, the need to file US taxes after 31 days in residence is only forgiven because of the Canada-US tax treaty. That can change anytime. It is an annual filing to request permission. Look at how they refuse to recognize the TFSA even though they have a similar vehicle in the Roth IRA. Never trust a cash-strapped friend with your money!)


TFSA's are waaaay better than Roth IRA's! We have much more flexibility to withdraw and recontribute the money. Earned income is not necessary for contributions to a TFSA. You can also contribute to your TFSA no matter how much you make whereas the Roth is eliminated for high income earners in the US. The Americans probably look at our TFSA, and say that it is not equivalent to a Roth because of the greater flexibility we have.


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## Eclectic12

^^^^

I was going to say that likely the ability to withdraw at any time changes the TFSA from a retirement vehicle, from the US point of view.
However, it seems the original contributions can be withdrawn from a Roth IRA with tax implications.

So the only thing I can see is that the TFSA allows growth to be withdrawan tax free whereas the Roth IRA does not seem to allow this.


I like the TFSA much better. :biggrin:


Cheers


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## HaroldCrump

fraser said:


> Boris is the Mayor of London, UK. He was born in the US and holds dual citizenship. A number of years ago he sold his home. The IRS have been after him to pay capital gains tax, and presumable file a tax return.
> His position is that this is a ridiculous request and has essentially told them to pound sand. He has said this publically and privately.


The US tax situation is simple - because they have been completely unable to extract any taxes from their corporations, they are turning around and punitively taxing individuals.
Both income tax & retail tax increases at the local levels are highly unpopular in the US - the general population over there are not docile enough to bend over and let corrupt governments have their way with them one after another.

So, the administration is now turning to the non residents - citizens or not.
That is where FATCA and parts of the Patriot Act come into play.

The US needs to figure out a corporate tax structure that is both fair to the corporations and individuals, won't kill growth, as well as is enforceable.


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## james4beach

The US's tax regime is highly discouraging me from wanting to stay in the U.S. If they want to keep attracting innovators and entrepreneurs, they'd better re-think these policies. For instance I've run a business for many years and I would never, ever, ever dream of running my business out of the USA.

TFSAs are a beautiful thing. I did shut down a second TFSA account I have, but I'm keeping one... despite the insane forms (3520/3520A) the I.R.S. wants. Have you seen one of these forms? My god...


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## humble_pie

HaroldCrump said:


> ... So, the administration is now turning to the non residents - citizens or not.
> That is where FATCA and parts of the Patriot Act come into play


HC i know your book is full but when u have time perhaps u could squeeze in there the looming US estate taxes for canadians?

not US citizens. No connection with the US of A. Maybe never even set foot over the border, not even to shop for cheap bed linen.

just your estate, when you depart this green earth, if you should happening to be owning things like VTI or AAPL ...

there is a threshhold, but sometimes even figuring out the threshhold requires a specialized dual-nation accountant with experience in pre-planning estate tax avoidance. For instance, if you own a US country property, it should be in a trust or corporation, so as to escape your estate inventory ...


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## james4beach

There seems to be an update regarding Form 8938. This is one of the two forms (along with FBAR) where you have to report all your Canadian bank accounts.

http://blogs.angloinfo.com/us-tax/2014/12/15/2765/
http://www.gpo.gov/fdsys/pkg/FR-2014-12-12/pdf/2014-29125.pdf

The US govt apparently clarified very recently that dual-resident taxpayers using forms 1040NR and 8833 to claim treaty benefits no longer have to fill 8938. I think.


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## Guban

While this clarification is helpful for some, unless I misunderstand your situation, this does not apply to you, James. You are filing as a non resident, not a dual resident? Dual residents are basically immigrants, or emigrants to the US.


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## james4beach

I'm filing as a US non-resident by invoking the US-Canada Tax Treaty status (this is a declaration to be treated as a non-resident). As a resident of both countries, one can declare in which jurisdiction their permanent home is.

So while I am a US resident in the conventional sense, by using the Tax Treaty, I establish that I can only be a resident in one jurisdiction -- Canada


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## Causalien

james4beach said:


> I'm filing as a US non-resident by invoking the US-Canada Tax Treaty status (this is a declaration to be treated as a non-resident). As a resident of both countries, one can declare in which jurisdiction their permanent home is.
> 
> So while I am a US resident in the conventional sense, by using the Tax Treaty, I establish that I can only be a resident in one jurisdiction -- Canada


I arrived at the same conclusion after being in the US. Ended up hiring an accountant for $1000 to deal with it.

It gives people who are in the process of going to the USA a big headache. Compare that to EU, I feel a lot less hassle coming here.


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## Eclectic12

Wow ... I expected that Canadian banks would do too much business with the US and there would be enough dual citizens that they would complain but comply with the US reporting.

Apparently, Canadian Western Bank sees it differently as since mid-2014, they are refusing to open new online accounts for US citizens, including those residing in Canada.

http://www.theglobeandmail.com/repo...un-us-clients-amid-tax-rules/article23186804/


Interesting that existing accounts are grand-fathered and that the policy does not apply to "in person" applications (if it is truly an online bank, how many "in person" applications can there be?).


Cheers


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