Get out of my pocket, Uncle Sam
Several weeks ago, my brother sent me an article from the Financial Post -- and my life changed in an instant.
My brother and I were born in the United States, but we left as teens. I have lived and worked in Canada for close to the last four decades, as a proud Canadian citizen.
The article talked about the fact that the U.S. is the only country in the world that taxes its citizens who are neither living in the U.S. nor working there. Even if American ex-pats are not earning an income there, the U.S. government is still able to tax them.
But it gets worse –- in its supreme arrogance, because our neighbor to the south is broke and in considerable debt, it is now bullying folks like me, by laying down the law saying that all of its citizens must pay U.S. taxes, regardless of the circumstances. And if any non-resident citizens choose to be ‘non-compliant’ and not file up to several years of back taxes, they could be punished by facing stiff fines of up to 25% of their entire financial worth, and maybe even go to jail. The jackbooted tone of the warning was clear. The IRS meant to scare –- and it worked.
After reading that article, I felt like a deer in the headlights.
I was frozen, scared, confused –- how could this be?
I grew up in the U.S. until I was 18, when I emigrated to Canada with my family. When we proudly became Canadian citizens in 1974, we were compelled to forfeit our American citizenship. I recall having some mixed feelings about that, as the U.S. was the country of my childhood. Later, when I was given the opportunity to take back my U.S. citizenship, I jumped at the chance –- after all, I asked myself, what could it hurt to be a citizen of the two countries that I loved?
I now have my answer to that question. It hurts a lot.
I have neither lived nor worked in the US since 1974, when I went back for only one year to spend some time with my father. For the past 38 years, living and working in Canada, I have gladly supported my country financially with my tax returns every year. Never once have I been ‘non-compliant.’
I am a person who felt fondly toward my country of origin. I have enjoyed going back to the States when I’ve had occasion to do so. I cared about who became the President of the United States -- and what that would mean for Canada and the world at large -- so I made a point of voting in the last election. Little did I know that all of this would come around to bite me on the butt.
Voting in the last presidential election, I suppose, technically prevents me from crying ‘taxation without representation’. But it’s unlikely that my ‘representative’, President Obama, is likely to heed the cries of outraged ex-pat constituents like myself, who live and work in, and have adopted, another country as their homeland.
So, really, where is my ‘representation’? I am angry and I am hurt, to put it mildly.
I hate the fact that I seem to have no say in this –- I am but a number in this complex cog, this blatant tax grab. I am so furious with the U.S. that I now want to renounce my citizenship. But guess what? There’s another Catch-22. In order to renounce my citizenship, I have to pay at least 6 years of back taxes.
It’s Orwellian.
Although I am but a number, I am one of close to a million Canadians who are facing this exact predicament. These are tax requirements so complex and labyrinthine that virtually no citizen can prepare them without paying a lawyer or tax advisor. Accountant fees alone will cost each of us, on average, $15,000 –- in addition to assessed back taxes.
Many of the Canadians affected, like myself, are either retired or close to retirement age, when we have only a fixed amount of money to live on -- which only adds insult to injury. But because there are so many of us dealing with this brazenly unfair and crippling U.S. tax situation, we have a voice –- and our Canadian government (which works for us, which we often forget) needs to help us –- NOW.
The Globe and Mail reports that, ‘Ottawa has protested to the Obama administration that the law goes too far and may violate Canadian banking and privacy laws. But the U.S. appears determined to press on.’
It is unfair that tens of thousands of Canadian seniors are losing their hard-worked-for retirement income (earned in Canada) in their golden years. Ottawa will have to pick up the burden if their retirement nest egg no longer supports them for the years they have left to live, thanks to the Yankee tax collector.
I am not usually a political animal, and even when I have strong feelings, I rarely write about them and share them with the world. But this is different. This is outrageous.
If you –- or someone you know –- is facing this absurdly nasty situation, please let your thoughts and feeling be known. We need to find a way to band together and rally our elected officials to change the policy now in place that allows the U.S. to do this to Canadian citizens.
Canada always talks about America as our good neighbor to the south; our biggest trading partner and ally.
Well, America doesn’t feel like my ally right now.
It feels like the neighbourhood thug who just hit me over the head and stole my purse.
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(25) Comments
Stay away from border. Read Joe Cayo at Vancouver Sun. They cannot touch you. Have friends visit Canada.
if you go out of your way to tell IRS where you are... and if you insist on crossing the border.
The only reason the Canadian government would help is if some of Stephen Harper's rich Conservative supporters turn out to hold joint Canadian/American citizenship and this might financially hurt them.
"staying away" from the border and thusly being cut off from friends, family, and an assortment of other things that canada doesn't have... is much easier said than done. Especially since the vast majority live within an hours drive of the border.
Then risk going to jail or being an indentured servant for the rest of your life.
The rules haven't changed - they're just being considerably more heavy-handed than before. And nobody can be heavy-handed like Uncle Sam!
I qualify for US citizenship based on my US-born father but have never pursued it due to this requirement since I've never intended to work in the USA (I have my own business) and I've been told by the US Consul that it is not something my children can inherit from me since my last US residency was as a young child in the 50s - so what's the benefit?
If I could do it for my children I'd do it in a heartbeat but given the need to file two tax returns each year even if the second one has a zero net balance there's no point.
NVBlogger, my understanding is that you don't have to 'pursue' it -- if you have one parent who is a US citizen (ie, born there) you are automatically a US citizen yourself, and so will your children be...
That means all of this will apply to you and your children too -- whether you want it to or not.
Only if your kids go before a US counsul and ask for citizenship before the age of 18.
I loved your article because I am in the same situation. I am originally from a third world country and I emigrated to the USA in 1958. Lived and worked in the USA for 30 years. Loved the Country. Became a dual citizen.
In 2001 I came back, semi retired to my Country of of birth. I have been filling two Income Taxes in both Countries. For the past 10 years I have never moved one cent from the USA to the country where I am not. All money I have in deposit here and invested were made working here. I am 78 years old and my life savings are limited. Being so far away and not having an IRS representative in this Country I never knew of the FBARS.
I learned about them by chance. Since them my life has become a nighmare. I have spent a lot of time and money trying to do the right thing insofar as the USA IRS. Last year I have spent US$3000.00+ trying to file my 2010 Return. When I consulted with US Tax Lawyers ($350 and hour) I have been asked to pay $15000.00 up front for him to save me from the jail and from losing all my life savings.
The Country were I am now has no tax treaty with the USA so that as self employed I must pay Social Security Tax in both Countries with no return in my present Country and very little return in the USA. Since I am retired in my present Country my small retirement pension is not taxed here. But I have to pay tax on it in the USA. The same for my savings in my present Country who are not taxed but I have to pay USA tax on them. Mind you all of this with money earned working in the present Country.
O got to a point that I considered giving up my USA citizenship. This hurts my feelings because I love the USA. I am also considering stopping working even though I love my job because more than half of what I make is going to pay taxes. And I am scared.
I have written to my senator from the State I lived in in the USA. HE sends me back the telephone number of the IRS for Americans living abroad, not toll free, long distance international call.
Don´t you all think that there is a difference between US citizens living in the USA who invested American earned dollars in other countries and an US citizend living and working abroad investing the money earn abroad?
Lately as you can imagine I have been unable to sleep because of these threats towards me.
Why are you even bothering filing? Live your life out in peace wherever you are.
We are neighbours not neighbors. K THX!
Why??
Threats and more threats. Besides I like to think of myself as a law abiding citizen.
...that they will not pursue U.S. citizens in Canada for the IRS that are penalized for late filing when there aren't taxes owed. However, at this time, there isn't any confirmation from the Department of Finance (Minister of Finance) to verify what the CRA has said. Come on Minister, say yes, no or maybe but say something because there are several hundred thousand people in Canada waiting to hear from the Canadian government so they can decide if there is a different course of action to take instead of being financially crippled from this (a)merican form of cruel and unusual financial punishment.
And threaten losing the votes of 700,000 voters? Not likely
Well, I too am in a quandry. I renounced my citizenship in 1967 but regained it in the 90's to help my daughter get her green card. I have been unaware of these new changes ( I fault my accountant for this ). All of my family live in the US, but I feel that I cannot cross the border for much longer. When should I stop going to the US is my question. I ( we ) were planning to visit our daughter and family in Dec, how soon must I stop travelling to the US? WE are about to retire, if they tax our RRSP etc it will financially cripple us as we do not have any pensions. So , can we form a "class action" group and fight this or are we just week and mild Canadians, always compliant. We are Obama's first and weakest targets. We need to help each other as our WEAK Canadian government does not seem likely to
America's Founders would be ashamed at the treatment of Americans living abroad. They receive no services from the government other than a travel document. They don't use the country's highways, roads, bridges, hospitals, schools, fire department, police, courts etc. Moreover, they have no representation iin Congress. I seem to recall that the battle cry of the American Revolution was "NO TAXATION WITHOUT REPRESENTATION!"
This is another indication that America has drifted too far away from its original values. A rebirth or renaissance of the Founder's values is long overdue. Hopefully its not too late!
There are a lot of people being harmed by this "Hire" legislation and no we don't have ANY representation and Obama simply does not care about us whatsoever.
I didn't owe any U.S. taxes as I am a stay at home mom. Enter the FBAR penalties then. Who ever heard of an FBAR before now? The IRS never mentioned it when in past years I called them to make sure I hadn't met the requirement to file. Not a word out of them. Now I find out because I have "signing rights" with my Canadian husband on our checking account that I needed to file FBARS. Ten thousand dollars a year fine, on EACH account even if you owed zero in taxes. This is a bullying penalty grab my foreign spouse would have to pay out of HIS income. So they are fining Canadian citizens some of whom have never been American at all on zero taxes owed too.
I will be forced to give up my U.S. citzenship as my Canadian spouse will not go along with FATCA or FBAR penalites when the American in our family *me* made zero of the income. Then I will get to worry if I will be hassled crossing the border to see my family. There are millions being affected by this who have done nothing wrong at all. Some people actually gave up their U.S. citizenship in the seventies only to be told they are now still considered American for tax purposes!
I am livid and I will never forgive Obama, Baucus, Carl Levin and anyone associated with passing this. They don't respresent us, are stealing from people even when they owed zero taxes and even in some cases when they are not even American and never have been American by proxy by taxing our sole income earners who are Canadian. This is the most heinous thing I've seen the U.S. ever do to ex pats. Ever. It's unforgivable. Obama is supposedly our representative. SOME respresentation!
Then risk going to jail or being an indentured servant for the rest of your life.
It's not this simple for some. My father is seventy one and can't travel, my sister's husband has a pulmonary lung disease and cannot fly. They all live thousands of miles from the border. Am I not to ever see my father and sister or brother in law again in my life time? That's a reasonable answer for some and for others it isn't. I didn't owe them any taxes but, the FBAR penalties are ridiculously punitive even when you owed nothing in tax.
I loved your article because I am in the same situation. I am originally from a third world country and I emigrated to the USA in 1958. Lived and worked in the USA for 30 years. Loved the Country. Became a dual citizen.
In 2001 I came back, semi retired to my Country of of birth. I have been filling two Income Taxes in both Countries. For the past 10 years I have never moved one cent from the USA to the country where I am not. All money I have in deposit here and invested were made working here. I am 78 years old and my life savings are limited. Being so far away and not having an IRS representative in this Country I never knew of the FBARS.
I learned about them by chance. Since them my life has become a nighmare. I have spent a lot of time and money trying to do the right thing insofar as the USA IRS. Last year I have spent US$3000.00+ trying to file my 2010 Return. When I consulted with US Tax Lawyers ($350 and hour) I have been asked to pay $15000.00 up front for him to save me from the jail and from losing all my life savings.
The Country were I am now has no tax treaty with the USA so that as self employed I must pay Social Security Tax in both Countries with no return in my present Country and very little return in the USA. Since I am retired in my present Country my small retirement pension is not taxed here. But I have to pay tax on it in the USA. The same for my savings in my present Country who are not taxed but I have to pay USA tax on them. Mind you all of this with money earned working in the present Country.
O got to a point that I considered giving up my USA citizenship. This hurts my feelings because I love the USA. I am also considering stopping working even though I love my job because more than half of what I make is going to pay taxes. And I am scared.
I have written to my senator from the State I lived in in the USA. HE sends me back the telephone number of the IRS for Americans living abroad, not toll free, long distance international call.
Don´t you all think that there is a difference between US citizens living in the USA who invested American earned dollars in other countries and an US citizend living and working abroad investing the money earn abroad?
Lately as you can imagine I have been unable to sleep because of these threats towards me.
You do not have any representation in the U.S. government except for the president and good luck getting a response from him.
Dear friends, if you think that the IRS will only know about you if you cross the border or voluntarily turn yourself in you are wrong. As of 2012 banks will have to turn over all the data on their US clients to the IRS (yes they will have to ask every client where he was born, where his parents were born, etc). And yes they WILL do this or else they will be excluded from any interaction with US markets. Its called FATCA, in combination with FBAR and the tax treaties, it means that they are able to come into your country and find you.
Dear friends, if you think that the IRS will only know about you if you cross the border or voluntarily turn yourself in you are wrong. As of 2012 banks will have to turn over all the data on their US clients to the IRS (yes they will have to ask every client where he was born, where his parents were born, etc). And yes they WILL do this or else they will be excluded from any interaction with US markets. Its called FATCA, in combination with FBAR and the tax treaties, it means that they are able to come into your country and find you.
2012 is just an arbitrary deadline set by the USA, it was never agreed upon by any other institution or government, nor has there been a pledge to "comply" with said deadline from the government, and is therefore null and void.
If the Canadian Governments forced banks to provide this information to the US Goverment (& IRS) it would be a breach of Canadian Human Rights Laws as well as our own Constitution (which is vastly different to that of the US). FATCA is basically beauraucratic terrorism, and therefore, Goverments (especially the Canadian Goverment) would face a great deal of backlash not only from lobbyists and Human Rights groups but from their voters & taxpayers as well. In short, it would never happen. There may be tete-a-tete's between our PM and the southern Heads of state, made in an attempt to placate and delay the governing bodies to the south while Canadian governments jockey to find the necessary legal position to stonewall the insanity; but allowing American government, American policing, American military to not only exist within our borders but to operate with absolute power is heresy.
Sorry, But Canada is NOT one of the 51 states that America governs. We are our own country with our own rules. So there can be no expectation for Canadians to comply with another countries laws while residing in their own country.
Being excluded from American trade via FATCA is a JOKE. Businesses around the world will be laughing, not in disbelief but in happiness. Exclusion from American markets is a GOOD thing. Exports, business ventures, investing in the USA etc has been on the decline since early 2008. There was a short period of time in 2009-2010 when the global economy thought for a second that maybe the US wasn't actually failing, but the trend was quickly reversed. Even with the economic crisis in Europe, no one is flocking to the green back, and everyone (even Canada) is trying to cut their ties as quickly as possible as to not get dragged under when that *titanic* goes down. Being legally excluded via FATCA will only hurt the USA. It will force investors and businesses to look for new opportunities, it will force OTHER governments to work together through this weak global economy, to forge new alliances and innovate new treaties and agreements that support and benefit their countries despite and in spite of the immoral US laws.
The global communitiy is getting sick and tired of the USA thinking they have all the power and can call all the shots without a second thought to the wants needs and concerns of other countries, FATCA is just one example of that type of thinking, and it will only hurt the US, as well as provide an open door for all other countries to walk out of and free themselves from the grips of US economic tyrrany.
The fact of the matter is this: if the IRS takes wealth, retirement savings etc from expats in Canada, they are for all intents and purposes stealing from the Canadian government, who would then have to support the elderly now unable to pay for their own upkeep due to the IRS's new policies. FBAR and FATCA are last ditch efforts to avoid an economic crash, thinly veiled as "tax requirements."
If you pass the "physical presence test" and can proove that you've been outside of the USA for 330 days in any consecutive 12 months, you are totally exempt from paying any US Taxes. A US citizen living abroad still has to file taxes on all income earned, "worldwide income", but if he/she has been outside the USA for 330 days per year, that year is tax free. I am a US citizen, I'm paid by a US company, but if I choose to live outside the USA, and all my income is earned while overseas in other countries, I have no tax obligation to the USA. So, unless you're spending more than one month per year stateside you are tax exempt and have nothing to fear. Of course you still have to pay taxes in whatever country you live in, in your case Canada.
I was born in the U.S. but moved to Canada at 5 Yoa with my parents. I have the option of being a dual citizen but have not gone down that path to date. After fretting about this for a couple years I finally discovered that if you were not 18 years old at the date of moving to Canada, you do not fall into this tax quandry. I thought of obtaining my citizenship in the U.S. because I cannot take the cold any more, but have decided the potential for dual taxation is too much a grey area. I have filed taxes in Canada following Canadian rules and have been told by Canadian auditors that they don't care what the rules say, if they don't think something is reasonable, they dissalow it (which they have). I was told to hire a lawyer if I wanted to fight it. Ya, that only makes sense if you are very wealthy and the amount is huge. I just can't immagine having to deal with two blood sucking taxation departments.