Tax penalties on U.S.-Canadian citizens in Canada "outrageous," MP Don Davies says

American rules a "tax grab" on people living here -- and Ottawa should intervene, critic says.

For over a month, NDP MP Don Davies has been receiving worried calls from constituents with U.S. citizenship who fear the American government will impose severe penalties on them -- up to 50 per cent of a major asset -- if they don't file their U.S. taxes by August 31, 2011. 

"It's outrageous," said Davies. "Ninety-eight per cent of the people we've talked to are not trying to avoid paying U.S. taxes, but they have just had so little connection to the States so far that they didn't even know they had to report to the IRS."

Unlike Canada, taxes in the U.S. are based on citizenship rather than residency, which means that all U.S. citizens living abroad are obligated to declare their income to the IRS. That means that even if the U.S. citizen in question has never worked in the U.S., the individual is required to declare all Canadian accounts, or potentially face hundreds of thousands of dollars in fines.

Since 2009, the IRS has increased efforts to get U.S. citizens living abroad to file FBARs (Report of Foreign Bank and Financial Accounts) on all their accounts based outside of the U.S. -- including checking accounts, savings accounts, RRSPs, RESPs and mutual funds. Individuals who fail to report by the deadline may be subject to a penalty of $100,000 or 50 per cent of the total balance of the foreign account. People who apply for an "amnesty" via an Offshore Voluntary Disclosure Initiative may have the penalty reduced to 5 per cent. 

Davies, however, feels that even a 5 per cent is overly severe for long-term Canadian residents and dual U.S.-Canada citizens.

"Some people are technically U.S. citizens simply because they were born in the States, but they grew up in Canada and work in Canada and don't have a penny of U.S. income," he said. "Other people have moved here decades ago, and identify completely as Canadian." 

Many dual citizens living in Vancouver were alarmed when they heard about the August 31 deadline for declaring their Canadian accounts, and are conflicted about whether to disclose their assets to the IRS or keep quiet, hoping to go unnoticed. 

"It's just a big cash grab, (the U.S.) is just being desperate for some money now since the financial crisis," said one West Vancouver resident, who wished to remain unnamed.

"What they really want is to go after all the big guys with the Swiss bank accounts, but a lot of average people get caught up in the process."

The dual citizen, who has lived in Canada for 35 years, said that he felt "stuck in a tight spot" because he may face a late penalty if he reported to the IRS, or face a crippling penalty if he didn't disclose and was later found out. 

Tax accountant Steven Flynn of W.L. Dueck, a company in Richmond specializing in U.S. and in cross-border taxes, said that while he has never seen people punished with heavy fines for failing to file taxes, it would be better to be safe rather than sorry. 

"I hear the term 'cash grab' being used, but it is the law, and this applies to people equally, everywhere ... and the penalty, if you qualify for amnesty, is 5 per cent of your financial accounts, which doesn't include your home or your business."

Flynn said that while people can call their MPs to seek a political resolution to their concerns, they shouldn't expect to see themselves exempt any time soon.

Davies said that many MPs have received calls from similarly fearful dual citizens and long-term Canadian residents, and said that the NDP is urging the Harper administration to intervene.

"We've all been writing letters to (Finance Minister) Jim Flaherty, saying Canadian government needs to work out another deal that's a more fair to everybody," said Davies. 

"This is about a transfer of wealth from Canadian citizens to the U.S., and it's affecting hundreds of thousands of people in Canada."

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Comments

US TAX GRAB

It is the 20th of August and I just found out about this issue from my sister who lives in Vancouver.  My parents along with their 7 children immigrated to Canada in 1966 from the United States.  Each of our individual citizenship status is different so we cannot pursue information and apply it to all.  This is very disturbing on so many levels.  For those of us who became Canadian citizens through the naturalization process we just assumed we were Canadians.  We file our taxes in Canada and abide by the laws of this country.  To find out on the 20th of August that we will have to pay a 5% penalty or a 25% penalty on the size of our bank account is insane.  What is more insane is that between now and then it is absolutely impossible to find any professional to gather some much needed advice.  And as equally insane is to consider that a person who considers themselves Canadian, is married to a Canadian, and has Canadian born children, actively supporting this fine country in terms of being gainfully employed and therefore contributing to the maintenance of this country by paying taxes............in 11 days could potentially be wiped out financially through a penalty based on nothing more than not knowing that we needed to file a nil tax return in the US.  Not one of us meets their income threshold requirement but the penalties for not filing are criminal.  

I strongly agree that Prime Minister Harper must step in immediately on behalf of all of us who are being caught in this crossfire.  Quite frankly if my Canadian citizenship does not pass their scrutiny and I have to pay these penalties, I will be forced to declare bankruptcy.  How does that serve Canada.

I think that this needs to be dealt with at a Prime Minister, Presidential level and the activity needs to be broadcast on our National and Local News Stations.  I watch the news all the time and I heard of this by word of mouth.

Thank you so much for your time and listening to my frustration.  I will do what I can to figure out where I stand personally during the next ten days and just pray for the rest of my fellow Canadians to find their own peace in the midst of this insanity.

 

 

Taxes

Dom't worry, you are NOT a US citizen.  Quote their own law.

TITLE 8 > CHAPTER 12 > SUBCHAPTER III > Part III > § 1481

Prev | Next

§ 1481. Loss of nationality by native-born or naturalized citizen; voluntary action; burden of proof; presumptions

(a) A person who is a national of the United States whether by birth or naturalization, shall lose his nationality by voluntarily performing any of the following acts with the intention of relinquishing United States nationality—

(1) obtaining naturalization in a foreign state upon his own application or upon an application filed by a duly authorized agent, after having attained the age of eighteen years; or

(2) taking an oath or making an affirmation or other formal declaration of allegiance to a foreign state or a political subdivision thereof, after having attained the age of eighteen years; or

(3) entering, or serving in, the armed forces of a foreign state if

(A) such armed forces are engaged in hostilities against the United States, or

(B) such persons serve as a commissioned or non-commissioned officer; or

(4)

(A) accepting, serving in, or performing the duties of any office, post, or employment under the government of a foreign state or a political subdivision thereof, after attaining the age of eighteen years if he has or acquires the nationality of such foreign state; or

(B) accepting, serving in, or performing the duties of any office, post, or employment under the government of a foreign state or a political subdivision thereof, after attaining the age of eighteen years for which office, post, or employment an oath, affirmation, or declaration of allegiance is required; or

(5) making a formal renunciation of nationality before a diplomatic or consular officer of the United States in a foreign state, in such form as may be prescribed by the Secretary of State; or

(6) making in the United States a formal written renunciation of nationality in such form as may be prescribed by, and before such officer as may be designated by, the Attorney General, whenever the United States shall be in a state of war and the Attorney General shall approve such renunciation as not contrary to the interests of national defense; or

(7) committing any act of treason against, or attempting by force to overthrow, or bearing arms against, the United States, violating or conspiring to violate any of the provisions of section 2383 of title 18, or willfully performing any act in violation of section 2385 of title 18, or violating section 2384 of title 18 by engaging in a conspiracy to overthrow, put down, or to destroy by force the Government of the United States, or to levy war against them, if and when he is convicted thereof by a court martial or by a court of competent jurisdiction.

(b) Whenever the loss of United States nationality is put in issue in any action or proceeding commenced on or after September 26, 1961 under, or by virtue of, the provisions of this chapter or any other Act, the burden shall be upon the person or party claiming that such loss occurred, to establish such claim by a preponderance of the evidence. Any person who commits or performs, or who has committed or performed, any act of expatriation under the provisions of this chapter or any other Act shall be presumed to have done so voluntarily, but such presumption may be rebutted upon a showing, by a preponderance of the evidence, that the act or acts committed or performed were not done voluntarily.

 

talking

We'd like to interview people who are caught up in this.  Please contact us at editor@thevancouverobserver.com if we can call you for an interview.  Thanks.

Penalties?

The article seems to talk exclusively of penalties. What does the IRS expect to collect if you report your Canadian assets?

Let's say you earn 35k over the year on Canada and have 2k in the bank? Let us also say that you filed your US taxes for the year. What do they expect to take in taxes?

I don't live in Canada, but this is of particular interest to me because I hope to live there in the coming years and I probably wouldn't have even thought to file US taxes after my first full year working in Canada.

 

in the middle

linda wrote:

We'd like to interview people who are caught up in this.  Please contact us at editor@thevancouverobserver.com if we can call you for an interview.  Thanks.

I am in the process of

I am in the process of finding out if there is a Class Action in Canada or in the U.S. regarding this obsurd injustice to dual citizens. If one isn't in progress, I will make all effort to propose to law firms, who hopefully can network this news between firms, to stimulate an action.

All evidence indicates that the IRS purposely initiated these massive fines in 2004, took action 7 years later (statute of limitations), to entrap un-knowing working Canadian citizens and landed immigrants with crippling penalties mainly for late filing of U.S. tax forms.

Might the IRS be guilty of grand theft and extortion? No judge or jury could possibly agree that these penalties are justified. Political and/ legal intervention needs to happen soon. I will post on this site any news of actions supporting this "cruel and unusual" financial punishment from the IRS.

IRS

Philip wrote:

The article seems to talk exclusively of penalties. What does the IRS expect to collect if you report your Canadian assets?

Let's say you earn 35k over the year on Canada and have 2k in the bank? Let us also say that you filed your US taxes for the year. What do they expect to take in taxes?

I don't live in Canada, but this is of particular interest to me because I hope to live there in the coming years and I probably wouldn't have even thought to file US taxes after my first full year working in Canada.

 

 

It's not the fact of having to pay taxes to the IRS the main thing is you have to report all foreign bank accounts (FBAR) when the aggregated amount is >9'999$ at anytime during the tax year. If you don't it's a 10'000$ penalty per account if you unwillfully did not report them or either 100'000$ or 50% (which ever is greater) of each and every account back to 2003 per year if you willfully forgot to :-)

Tax penalties on U.S.-Canadian citizens in Canada

I too just learned of my US tax filing "obligations."  Born in US, Canadian citizen for 40 years working, paying taxes, with house and family here.  Suddenly out of the red-white-and-blue comes this news!  Apparently a 2009 "amnesty" yielded some 10,000 previously non-compliant ex-pats, therefore this latest OVDI (Offshore Voluntary Disclusure Initiative).  Only good news so far: Hurricane Irene caused deadline extension to Sept. 9.  Oh wow, another week to sweat, not to mention worrying how much longer my Canadian passport would let me across the border ("Born in the USA?  Have you been meeting your FBAR obligations?")  Just gives me one more reason to be very glad I left!
With that off my chest, I'll add that there are some practical resources on the internet, besides the IRA's Publication 54.  There's also a very good checklist and other info on the late David Ingram's tax site, Centa.com   

These US expats better hope

These US expats better hope the Harperites fall before legal action against them can come to completion as this government will be happy to allow them to gut Canadian citizens of US origin to win favour with the US . Right or wrong is of no concern to them .

lost

How can bank accounts and investments, that were created in my name in Canada(which are, were and will be funded totally with Canadian EARNED income) and are thus under the rules of the Canadian government, be considered a foreign account? Foreign to who, the IRS? My point is that these accounts are in my country and in my name, in Canada with not an American penny in them. People like myself were not evading any tax, we honestly didnt know. In fact, the marginal tax rates for income and capital gains are higher here than in the USA, and therefore we would not have any tax owing anyway. I want to make things right, I want to file my back taxes and show I owe them nothing since I already pay more tax here at home. Yet now that I understand my responsbility, I am threatened with financial ruin?...this is madness. 

The expats who voted in previous elections

There is a large number of US citizens in Canada who have cast absentee ballots in previous US elections.  I would bet the majority voted Democrat at both the congressional levels (Senate & House) and who voted for Democrat for President too, especially for Obuttcrack last time.  It's highly probable that he isn't even legally eligible to hold office.

Obongo was not President when this legislation happened you might say?  Perfectly true.  But he WAS one of the Dems in the Senate who voted for it.

Don't forget that the Congress is the legislative branch, which means Democrat controlled Senates & Houses legislated this shit.

It's amazing to me that any sensible person who is a creator of wealth could be stupid enough to vote Democrat.  One can see where their mindset is.  If Americans (inside or outside the States) get people from the ghetto to run their country, what right do they have to expect anything else but robbery, extortion, and intimidation?  That, after all, is how ghettos operate.

Stay low. Do not go public.

Stay low. Do not go public. Avoid border.

 

"Apparently a 2009 "amnesty"

"Apparently a 2009 "amnesty" yielded some 10,000 previously non-compliant ex-pats, therefore this latest OVDI (Offshore Voluntary Disclusure Initiative). "

 

10,000 out of 7 million+?

 

Suckers!

Going public????

j wrote:

Stay low. Do not go public. Avoid border.

 

It would be amusing to go within a few feet of the border with a megaphone, and in disguise of course, hassle over a loud speaker the agents at the border every time they stop a car.

 

If somebody from Canada does that, they would have my support.

 

I shudder to imagine what the impact on tourist-related small businesses on the US side of the border will be all along the international line, from one end to the other, to say nothing of Canadian visits to Las Vegas, Disney Land, etc.

 

Why would they even think of going there?  People born in Canada to a US parent are potentially caught up in this too.

 

It's really difficult to imagine US lawmakers being so fucking stupid.  But the really stupid people are the ones who voted them in.

I was born in the U.S. My

I was born in the U.S. My parents moved us to Canada when I was a child. I have lived in Canada most of my life (4 decades now), work here, have raised a wonderful family and have officially become a Canadian citizen. My income would not require me to pay any taxes to the U.S. Filling out Canadian tax returns are difficult enough... multiply that by a factor of at least 10 when filling out a U.S. tax return... and in the end I still owe Uncle Sam $0.00. But, he still needs to pry, still needs to know I don't owe him anything, and worse yet somehow needs to pry into my bank accounts in Canada to see my assets? I have no intention of moving back to the U.S., no intention of working there, the U.S. serves me no purpose whatsoever and I do not cost the U.S. one single dime. I'll be damned if the U.S. has the right to pry into my Canadian financial affairs just because I was born in the U.S. I would instantly renounce my citizenship if it were easy, but it isn't. Born in the U.S.A.... owned by Uncle Sam. Give me a break!! I am a proud Canadian. Prime Minister, please I respectfully plead for your assistance! How can the U.S. impose their laws across the border like this? Outrageous.
 

Follow up for "I'm in the process of"...


I participated in an online chat hosted by the Financial Post on Tuesday, September 6, involving Christine Perry, a tax lawyer who specializes in cross border issues who practices in Toronto, and Jamie Golombeck, a tax expert for the CIBC in Toronto. I asked them if there are any class actions in process in Canada or the U.S. that are addressing the issue of injustice from the IRS. Ms. Perry replied, "Currently there are no class action suits underway, although it wouldn't be surprising if we see these in the future." So, no legal intervention at this time. Please make a post, if anyone has any knowledge of one.

Jamie Golombeck stated that, "Minister Flaherty has stated that he is lobbying the US on these cross-border tax issues for Canadian citizens, particularly as it relates to FATCA".  Our Minister, Jim Flaherty has gone public, not a day too soon. On Friday Sept.16, two columnists for the Financial Post published back to back articles, the first one titled as "Flaherty takes on IRS over tax crackdowns in Canada". Minister Flaherty has given written statements to The Washington Post, The New York Times and The Wall Street Jounal in our defense. Try entering "Minister of Finance" in the search bars of these papers to simplify finding a pertinent article. There is a glimmer of hope for us all.

The news is finally out and has swept across Canada and hopefully in the near future, across the           (u.s.)



to "Dan in Canada" The

to "Dan in Canada"

 

The analogy I would make is this:

 

(1)  It would be as if you were born a slave on an ante-bellum plantation from which your slave parents managed to escape, taking you as a toddler along with them.

(2)  Your parents then made it through non-slave states that still had the fugitive slave law, and into Canada on the Underground Railroad.

(3)  Your parents acquired a farm in Canada, and then later left it you.

(4)  You farmed it successfully, and build up a handsome bank account.

(5)  You acquire more property and businesses in Canada with your legitimately acquired wealth.

 

Then along comes the owners of the plantation, demanding that the Canadian government do the following:

 

(1)  Because you and/or your parents were born as slaves on their plantation, they demand to know the identity of former slaves and their descendents who have acquired property in and other forms of wealth in Canada.

(2)  Because you and/or your parents were born as slaves on their plantation, they demand to have a look at farm records, crop records, crop and livestock inventory, bank records, life insurance brokerage records, safety deposit boxes, etc. all located in Canadian territory and/or institutions.

(3)  If you fail to cooperate with them, they can issue trans-national fines that equate to more than the net worth you have built up in Canada.

(4)  They charge you with the crime of failing to report your whereabouts after you and/or your parents left the plantation.

 

So many Americans like to brag to the world that they are free.  What a crock of shit.  They are not even free to leave.  Even if they physically leave, they must tell fuckface Uncle Sam what they are doing in another land.  They cannot even stop telling Uncle Sam what they are doing unless Uncle Sam himself says it’s OK.

 

I go to Canada often enough to see that in 2008, the lib-left Canadian media had a love-in with Obongo too.  Now Obuttcrack is the Head of State of a country that wants to wants to break down the door and do a home invasion of its neighbor and steal his wealth.  Now why would that piece of shit want to do that?

 

It’s because he caters to tax consumers (i.e., people sucking at the government tit) rather than tax payers.  Has anybody noticed what he has been saying in the last few months?  During the debt ceiling debate, King Barry Soetoro talked about stopping Social Security checks.  He talked about suspending payments to members of the American armed forces.  He didn’t say a word about welfare.

 

Americans should be more concerned about whether that crackhead is even legally eligible to hold office.  Instead, the media is pretty much giving him a free pass on just about everything.

 

I would bet most American ex-pats who reside in Canada voted for Obongo in the last election.  I am sure, like most Americans, they fell for all that media hype bullshit too.  All the foreign press did.  Nobel even gave that scumbag a peace prize.

 

It would not be different under any other President one might say?  That may very well be true, but he nevertheless is Head of State now, which means the buck stops with him right now with respect to this bald-faced attempt at International Piracy. 

 

Like it or not, he is captain of the pirate ship.

 

 

Brian

Brian wrote:


I participated in an online chat hosted by the Financial Post on Tuesday, September 6, involving Christine Perry, a tax lawyer who specializes in cross border issues who practices in Toronto, and Jamie Golombeck, a tax expert for the CIBC in Toronto. I asked them if there are any class actions in process in Canada or the U.S. that are addressing the issue of injustice from the IRS. Ms. Perry replied, "Currently there are no class action suits underway, although it wouldn't be surprising if we see these in the future." So, no legal intervention at this time. Please make a post, if anyone has any knowledge of one.

Jamie Golombeck stated that, "Minister Flaherty has stated that he is lobbying the US on these cross-border tax issues for Canadian citizens, particularly as it relates to FATCA".  Our Minister, Jim Flaherty has gone public, not a day too soon. On Friday Sept.16, two columnists for the Financial Post published back to back articles, the first one titled as "Flaherty takes on IRS over tax crackdowns in Canada". Minister Flaherty has given written statements to The Washington Post, The New York Times and The Wall Street Jounal in our defense. Try entering "Minister of Finance" in the search bars of these papers to simplify finding a pertinent article. There is a glimmer of hope for us all.

The news is finally out and has swept across Canada and hopefully in the near future, across the           (u.s.)



Do you seriously believe that King Barry Soetoro really gives a rat's ass what Flaherty and/or Harper may think? 

 

The only thing that scumbag is interested in is getting his grubby hands on as much money as he can.  He doesn't care whose money it is or how or where he gets it.

 

It's as if you expect honesty from a man whose very presence in the Oval Office is most likely unconstitutional.  He needs money.  He doesn't care how he gets it.  He needs to keep those welfare checks going out to his voters in the ghetto.  He needs those votes to win next time.

OMBUDSMAN needed for U.S. tax crackdown

Our Government needs to step in firmly.

The IRS says on its website that those people failing to adhere to the rules could face other legal trouble. We could be convicted of criminal tax evasion facing a prison term of up to five years and a maximum fine of $250,000. We are damed if we do and dam if we don't. 

I am ashame of my own country, I never new I had to file their U.S. taxes and worst with August 31, 2011 deadline.

I wish we could have an OMBUDSMAN advise for our actions for help needed.

 

 

@ Corine

Corine wrote:

Our Government needs to step in firmly.

The IRS says on its website that those people failing to adhere to the rules could face other legal trouble. We could be convicted of criminal tax evasion facing a prison term of up to five years and a maximum fine of $250,000. We are damed if we do and dam if we don't. 

I am ashame of my own country, I never new I had to file their U.S. taxes and worst with August 31, 2011 deadline.

I wish we could have an OMBUDSMAN advise for our actions for help needed.

 

 

 

Where I live, most Americans are not even aware of this.  If they were aware, I seriously doubt that most of them would care.  If they don't care, why the hell should their body politic care?  After all, enough of them were stupid enough to fall for all the Main Stream Media (MSM) bullshit hype that gave us Obuttcrack in the first place.  They managed to convince enough voters that the peculiarities of Sarah Palin's family were somehow more important than whether Obongo was constitutionally even able to run.

 

The media gave Obuttcrack a free pass of lots of things, such as his Columbia University records, his surrender of his lawyer's license in Illinois, his homosexual dalliances with Larry Sinclair, and his fake birth certificate.  There is lots more.  You can be damn sure that the MSM will give him a free pass on this issue too.

 

If you want protection, have your own Canadian government legislate the required protection.  If any dual nationals are prosecuted in your country, have your own CBC media trumpet the coverage.  Get your own body politic involved.  Publish the names of the Judges in Canadian courts who might be hearing any particular case.  Center them out.  Embarrass them.  Make them look like assholes.  Publish the names of IRS agents who may be snooping around.  Lobby hotels, restaurants, gas stations, etc. to deny them service. 

 

Any Ombudsman of yours lobbying the US government to represent your interests will be useless.  Obongo will not listen to you.  He is not intersted in justice.  He doesn't have to be interested. 

 

He only wants your money.

US Tax grab

I have lived in Canada for 45 years and have been a citizen for 35 years.  I have never worked in the US and have never filed a tax form in the US and was totally unaware it was necessary until now.  I didn't even realize I was still considered a US citizen until I crossed the border to attend a wedding a few years ago.  I AM CANADIAN!!!  The border guard actually argued with me and was very curt when I told her I was Canadian and she told me I was NOT, I was American.  I was very confused.  These proposed fines are very frightening.  How can sane people even think of doing something like this to normal law abiding citizens of ANOTHER country let alone to their own citizens as they seem to consider me.

Avoid border?

j wrote:

Stay low. Do not go public. Avoid border.

 

That is no solution for those with elderly parents in the U.S. My father is frail and over seventy years old! Am I not to visit him because of this? I am afraid.

Help on this please.

anyone know who i can talk to about this. i live in canada, (born in canada) 1 parent from us and one from canada. i am very worried for my familys well being and would like some advice. never herd of this till now. i have both canadian and american social security and social insurance. canadian and american passports, (all updated). i just returned from the us nothing was said to me at the boarder crossings. looking for advice i may never go back again. can they get me liveing in canada?

I will file for five years of

I will file for five years of ZEROS since I've been a stay at home mom for years and would have owed no taxes, I will file the ONE FBAR I would need to since one day last year my Canadian husband let some funds pass through from his Canadian mother to help with a debt we had. If I am fined on an amount I had no access to just because I have signing rights on that one account I cannot pay it. In any case the fine would come out of a Canadian persons income. So the U.S. is essentially taxing and fining our foreign spouses and children in cases where the American in the family does not work! And when I am done settling my mothers estate I will march down to the embassy and begin the process to renounce my so called "citizenship" I am looked down upon in the U.S. as an ex pat anyway, no one in congress listens to our concerns and god knows Potus doesn't care how many of us are harmed by this so what is the so called "advantage" to being American here? None whatsoever. I can't wait to have all this off my families back. This FBAR crap is a draconian and heinous penalty cash grab on people who owed them zero taxes for the most part in Canada.

Bona Fide Resident

Go onto the IRS website and search for "Bona Fide Resident" It explains what must be done.