EFFORTS OF A CANADIAN MEMBER OF PARLIAMENT TO HELP U.S. CITIZENS AND DUAL NATIONALS WITH CITIZENSHIP-BASED U.S. TAX OBLIGATIONS DEAR OVERSEAS AMERICAN FRIENDS.
While we live abroad, and struggle to compete ever farther and farther from a level playing field in world markets, thanks to the incredibly self-destructive laws and regulations of the United States, it is very interesting to see what a Member of Parliament of another country has been willing to do to try to help protect U.S. citizens and dual nationals living in her country.
These messages and attachments are available on this Canadian Parliamentarian’s website.
Imagine what a different world it could be if overseas Americans had our own direct participants in the U.S. Congress. Perhaps then at least some of the incredible current abuse could be toned down, or far better, totally eliminated.
What is particularly interesting is the attached letter that this Canadian Parliamentarian sent to President Obama last year. There does not seem to have been a response so far.
Enjoy and contemplate the real reasons why the United States is now so deeply into such a nasty fiscal hegemony mode today, and what might be the best therapy to try to treat this potentially suicidal syndrome.
Please also share your thoughts and suggestions too. Take care, Andy
US TAX INFORMATION
From the website of:
Member of the Canadian Parliament
From British Columbia
970 Blanshard Street, Victoria, BC V8W 2H3
While I've covered the bulk of new developments in previous posts, I wanted to provide you with a further information update.
On December 14, 2011, at the initiative of Alex Atamanenko, who has been working very hard on this file, Alex Atamanenko, Peter Julian and Hoang Mai met with U.S. Ambassador David Jacobson to address the harsh penalties.
The Ambassador confirmed that while requirements to file will not be relaxed, there was an indication of a possible loosening of the interpretation regarding the application of penalties.
IRS December memo
As I have mentioned previously, In December, the IRS confirmed that U.S. and dual citizens who failed to file their annual income tax returns and/or file under FBAR or pay their tax may be exempted from paying penalties, provided that they are able to show that the failure was due to reasonable cause, not wilful neglect.
Below is a brief outline of the memo, although I encourage you to read the memo in its entirety to get all the details. You can find further information by reading the IRS memo “Information for U.S. Citizens or Dual Citizens Residing Outside the U.S.” at http://www.irs.gov/newsroom/article/0,,id=250788,00.html.
According to the U.S. Ambassador and the IRS memo, the IRS may consider reasonable cause for noncompliance to include being unaware of the requirement to file or pay tax.
The memo further states:
“Whether a failure to file or failure to pay is due to reasonable cause is based on a consideration of the facts and circumstances. Reasonable cause relief is generally granted by the IRS when you demonstrate that you exercised ordinary business care and prudence in meeting your tax obligations but nevertheless failed to meet them. In determining whether you exercised ordinary business care and prudence, the IRS will consider all available information, including:
For further information regarding the U.S. Examining Process for FBAR, please see http://www.irs.gov/irm/part4/irm_04-026-016.html.
You may wish to keep abreast of developments through the U.S. Embassy in Ottawa website for Taxpayers Assistance at http://canada.usembassy.gov/service/taxpayer-assistance2.html.
I hope you find this update helpful. I will continue to post updates as new information becomes available.
While I'm pleased about the US government's decision to back down from their heavy-handed approach to penalizing Canadians with US who have not yet filed with the IRS, I am still very concerned about legislation that could force Canadian financial institutions to pass on financial information to the IRS. These regulations aren't scheduled to come into force until 2014, but their implications would be serious.
I am concerned that the requirements would force banks to choose between complying and breaking Canadian privacy laws by collecting and passing on Canadians' personal information to the IRS, or suffering the huge penalties the US law would impose.
Many major financial institutions in Canada and Europe are fighting the laws because they would impose a huge burden on them and their customers, and could place them in conflict with the laws of other countries, including Canada's. Some are already dropping US customers because compliance would be too costly.
However, according to a story in the Globe and Mail, the IRS is beginning to realize that the legislation is going to cause major problems. This is partly because some banks are threatening to pull all their business out of the US instead of complying, so they can escape any penalties the US would impose. In a recent speech, the commissioner of the IRS acknowledged the problem and says he will work in a practical way to resolve the problems.
To view the article, visit: http://www.theglobeandmail.com/report-on-business/commentary/barrie-mckenna/why-the-irs-crackdown-puts-canadian-banks-in-a-tight-spot/article2275481/
I am hopeful that the international pressure that is being brought to bear will again force the IRS and the US government to moderate their heavy-handed position. I will continue to monitor this situation and push the federal government to continue its efforts to negotiate a better deal for Canadians. I hope that you will continue to write the federal government and your US representatives to push them to continue to work on these issues. I am optimistic, given our success at pressuring both Canadian and US governments on the more pressing tax filing issue that we can achieve success if we continue to work together.
Denise Savoie, MP
The IRS has released more details about its new position toward Canadians and Canadian residents caught up by US tax rules.
Please follow this link to the IRS's new position:
2 December 2011
I have very good news to report on the US Taxation problem. This is in no small part thanks to those of you who wrote the government to voice their concerns and explain how these unfair measures were affecting you and your families.
Today in question period, the government announced that the US government will show leniency on those living in Canada who are affected. We will have to wait to see the final details, but I am hopeful that this will come to a reasonable conclusion soon. Please see the link below for a Globe and Mail article on this development:
3 November 2011
I want to pass on to you two things. First, the response I recently received from Minister Flaherty's office on the US tax action (you can find it by clicking on the link at the bottom of the page). I must say that I am dissatisfied with the Finance Minister's response. While the Minister expresses concern and has taken some action, the government could be doing more to push the US to recognize the situation Canadian taxpayers are in.
Second, I have reproduced below a press release the BC Caucus -- the latest in our ongoing campaign to push the Canadian government into taking further action in support of Canadians.
FOR IMMEDIATE RELEASE
NOVEMBER 3, 2011
NDP’S BC CAUCUS PUSHES FOR GOVERNMENT ACTION ON IRS
OTTAWA - Members of the federal NDP B.C. Caucus are calling for stronger action by the federal government to protect Canadian citizens affected by a series of measures undertaken by the United States Internal Revenue Service (IRS).
“The Conservatives say that they know there is a problem but we have yet to see any action,” said BC Caucus Chair Don Davies (Vancouver Kingsway). “There are thousands of Canadian families who can no longer wait.”
According to US law, anyone who was born in the US is required to file US tax returns even though they have worked and paid taxes in Canada and have no US income. This affects Canadian citizens holding dual citizenship as well as US residents who have permanent resident status in Canada. The US law states that failure to file will result in heavy penalties that amount to little more than a seizure of their assets.
In addition, the US Foreign Account Tax Compliance Act (FATCA) requires the disclosure of all forms of Canadian bank accounts, including RESPs, RRIFs, TFSAs and chequing and savings accounts. As of 2013, Canadian financial institutions will be required by US law to report to the IRS all accounts held by US citizens in Canada.
“The federal government needs to advise US authorities that this policy is not acceptable,” said Alex Atamanenko (BC Southern Interior). “How dare the Internal Revenue Service seize the hard-earned income and pensions of law abiding Canadian citizens? The US policy is nothing but a cash grab.”
In addition to a number of letters Atamanenko has written to Finance Minister Jim Flaherty, the BC Caucus recently sent a strongly worded letter to Flaherty as well as to John Baird, Minister of Foreign Affairs. In it, the BC Caucus calls on the federal government to immediately enter into discussions with US authorities to protect Canadian citizens.
“The bottom line is that the federal government must take a strong stance to protect the hundreds of thousands of Canadians affected by this unprecedented cash grab,” said Davies.
21 October 2011
Today, I would like to share with you an article that contains some hope that the US government is seeing reason on their approach to taxing Canadians and Canadian residents (please click here to read the article). The article reports that the US Ambassador to Canada has said that the US will not be "unreasonable", "unsympathetic", or "irresponsible" when they implement their new tax legislation, and that the IRS is exploring ways of accomodating Canadians who could be affected.
However, while this statement is promising, we need more certainty on this issue from the US government. It is not fair for Canadians to have to take the US government at its word that the IRS won’t come after them, while there is a law on the books that says it can. A more permanent solution is needed – one where the Canadian and US governments sit down and negotiate a new policy or exemption for Canadians that is fair and provides certainty.
Unfortunately, while the Canadian government says it has raised the issue with the US, it has made no indication that it is actively negotiating to come up with a solution that will protect Canadians from the heavy penalties under the current US law (even for many of those who wouldn’t owe a cent), and establish clear and fair rules for down the road. I believe the Canadian government owes its citizens more clarity on what it will do to solve this problem.
Until we have a more complete solution that ensures the fair treatment of honest Canadian taxpayers, my New Democrat colleagues and I will continue to push the government to negotiate with the US. If you would like to find out more about the NDP's position on FATCA, please click here.
I hope you find this information helpful and gives you some hope that a solution may be around the corner. I would like to thank all those of you who have written the Canadian and US governments to express your concerns and call on them to act.
20 October 2011
I want to draw your attention to a letter my NDP BC Caucus colleagues and I sent to Minister Flaherty, and a letter I sent to President Obama, posted at the bottom of the page. My NDP colleagues and I will continue to push the Finance Minister to take this issue seriously and to sit down with his American counterparts to hammer out a resolution that will ensure Canadians are treated fairly.
Thanks to the many of you who contacted me to express your concern to me over the tax action by the United States government on dual Canadian and US citizens, former green-card holders and their families living in Canada.
You are not alone. There are tens of thousands of Canadians who hold US passports or green cards. Unlike in Canada, the US places tax requirements on its citizens based on citizenship, regardless of where they live, and may not recognize as tax exempt important programs Canadians benefit from, such as RRSPs and RESPs. So while it is a longstanding policy that US citizens have to file with the IRS, few are aware of this requirement—especially those who haven’t lived in the US for years or even decades.
I am also concerned about the privacy of dual citizens and residents like you because the US has passed legislation that in the future could require Canadian banks and other financial institutions to disclose personal information of account holders to the US government. The Canadian Privacy Commissioner has signalled that the law could conflict with Canadian privacy law. I encourage you to write the Privacy Commissioner to express your concern about the security of your personal information.
In support of the many constituents who have contacted me on this issue, I’ve joined with my NDP caucus colleagues Peggy Nash, Alex Atamanenko and Don Davies to press the Conservative government to broker a better deal for you and other Canadians affected by this tax policy, and to provide clarity on the protection of Canadians’ personal information. You can see the letter I sent to Minister Flaherty by clicking on the link at the bottom of this page.
So far, the conservative government has taken only minimal steps to address the problem, in the form of a letter to some US newspapers, which does not appear to have been printed anywhere but in Canada's Financial Post. Here is a link to the letter:
Minister Flaherty has also talked to Timothy Geithner about the matter, but it's unclear what exactly he said and how much pressure he brought to bear. What is clear is that, given the significant impact this could have on so many Canadians, the government needs to do more.
While the Canadian government has a role to play, it is important to recognize that this is a problem caused by US tax law and policy that affects you by virtue of your US citizenship, and not because of your status in relation to Canada or the Canadian government. So far, the conservative government has taken only minimal steps to address the problem, in the form of a letter to some US newspapers, which does not appear to have been printed anywhere. It's clear given the significant impact this could have on so many Canadians that the government needs to do more.
As a US citizen, you have a more direct route to the US government: your congressional representatives. I encourage you to seek out and relay your concerns to the lawmakers that have the jurisdiction to directly influence the laws and policies that are affecting you.
Unfortunately, the amnesty deadline to comply under the Offshore Voluntary Disclosure Initiative is September 9, 2011. Furthermore, the US government has signalled that it has little interest in granting exemptions to particular states like Canada.
It is important to be prepared in case the US government does not change its mind or recognize the unfairness and impracticality of its tax policy. Even if they change their policy, it could take time, and the IRS could come knocking in the meantime.
Because timelines are tight, it is very important that you take steps to protect yourself as much as possible from the potential consequences of running afoul of this new level of enforcement. If you have not yet done so, I urge you to consult your bank, financial adviser or financial institution as soon as possible to get expert advice on your best course of action.
One good place to start is by consulting the Taxpayer Advocate Service, an independent body within the IRS that helps taxpayers who believe they are being treated unfairly (www.irs.gov/advocate/).
You may also want to look up Americans Living Abroad (www.aca.ch), an organization that has been lobbying Washington on this issue.
Another organization, Americans in France has some helpful information on this issue (http://www.americansinfrance.net/DailyLife/Expat-Tax-Filing-Requirements.cfm).
And here are two links to two private websites which have clear summaries of the situation:
I would also like to pass on some information of my own on the tax crackdown that I hope you will find helpful in understanding how this affects Canadians like you (please see below for a link to the FATCA package).
Finally, I would encourage all of you to write Jim Flaherty, Minister of Finance and John Baird, Minister of Foreign Affairs to express your concerns and demand action:
The Honourable James Flaherty P.C., M.P.
Minister of Finance
House of Commons
Ottawa, ON K1A 0A6 email: James.Flaherty@parl.gc.ca
The Honourable John Baird P.C., M.P.
Minister of Foreign Affairs
House of Commons
Ottawa, ON K1A 0A6 email: John.Baird@parl.gc.ca
I also encourage you to write the Privacy Commissioner of Canada to express your concerns about US legislation that could force Canadian financial institutions to provide your private financial information to the US tax authorities:
Office of the Privacy Commissioner of Canada
112 Kent Street
Place de Ville
Tower B, 3rd Floor
Denise Savoie, MP
Letter to Minister Flaherty.pdf
Letter to President Obama.pdf
BC Caucus Letter.pdf
Response from Minister Flaherty.pdf
Response from Flaherty to BC Caucus.pdf