Well, well, well. Finally a little bit of a useful “Hooray”.
Whew, that would have been a real stinker, especially if it would have been put into the hands of the current management of the IRS.
Enjoy and take care, Andy
PROVISION ALLOWING IRS TO LIFT PASSPORTS CUT FROM HIGHWAY BILL
By: Henry J. Reske, Newsmax, 5 July 2012.
A controversial amendment to the highway bill giving the IRS the power to lift the passports of American citizens who owe more than $50,000 in back taxes has been cut from the final version of the measure.
The provision would have come into play if the IRS certified that a person has “seriously delinquent taxes,” defined as in excess of $50,000. If so, the Secretary of State could then determine “whether to issue, deny, renew or revoke a passport.”
The measure, that would have taken effect January 1, 2013, sailed through the Senate with little notice on a bipartisan 74-22 vote but drew fire in the House and was cut from the final version of the $100 billion, two-year bill.
House Judiciary Committee member Rep. Jim Sensenbrenner, R-Wis., called attention to the passport provision in April. At the time he said the measure endangered due process rights and empowered the IRS to administratively restrict travel rights without a judicial hearing.
Sensenbrenner told Newmax he was happy the provision was cut from the final bill.
“I am happy to see the provision giving the IRS power over our Due Process rights was left out of the highway-funding bill,” he said. “This provision would have allowed the IRS to administratively deny Americans the ability to travel without first having their day in court. Let us consider this a reminder that we must be vigilant to protect our constitution from well-meaning but ill-conceived attacks.”
The highway bill was approved by both Houses at the end of June and President Barack Obama is set to sign it into law on Friday.
Generally speaking, revocation or denial of a passport is left to the judicial system and usually occurs in cases where there is a risk a person would flee the country. However, this would not be the first time the government has turned to restricting the right to travel to collect debt.
The welfare reform legislation of 1996 included a provision that set up the Passport Denial Program. According to information from the Department of Health and Human Services Office of Child Support Enforcement the provision
“requires the Secretary of State refuse to issue a passport to any person certified by the Secretary of the Department of Health and Human Services as owing a child support debt greater than $2,500.
“Further, the Secretary of State may take action to revoke, restrict, or limit a passport previously issued to an individual owing such a child support debt.”
The program has resulted in the collection of tens of millions of dollars. The government estimated that the passport provision for taxes could have brought in more than $500 million in its first five years of operation.
In case you might have wondered what was really going on deep in the bowels of that incredible organization with a seemingly insatiable appetite to roll out ever more harassment of uber-vulnerable overseas Americans, here is a story that will make you howl with hilarity and incredulity!!
IRS HIT WITH AUDIT
FOR MISMANAGEMENT AND FRAUD
By Bob Segall, WTHR.com, Indiana’s News Leader, 5 July 2012.
INDIANAPOLIS - 13 Investigates has learned the tables are turned on a federal agency feared for its ability to audit taxpayers. The IRS is now the focus of a year-long audit, thanks to federal employees who are blowing the whistle.
Howard Antelis does not look intimidating.
The soft-spoken, gray-haired Midwesterner stands five feet seven inches tall, wears khakis and drives an old SUV. He spends most of his free time on a softball diamond, playing with his dogs and delivering meals to the elderly. But behind the laid-back, guy-next-door image is a longtime federal employee with a dogged personality and a tenacious sense of duty.
And right now, Howard might just be the IRS's worst nightmare.
"I'm horrified and ashamed and embarrassed by what I've seen. It's not supposed to be like this," he told 13 Investigates. "We're supposed to protect taxpayers, so somebody had to say something."
Abuse and fraud
Howard is a tax examiner at the IRS's ITIN processing center in Austin, Texas.
The large, unmarked building in south Austin is where the IRS decides whether to issue an Individual Taxpayer Identification Number to the millions of illegal immigrants who apply for them. An ITIN allows undocumented workers to file tax returns and pay taxes, a legal requirement for those who earn income in the United States … even those who come to the country illegally.
But 13 Investigates discovered the ITIN system is plagued by abuse and fraud.
A four-month Eyewitness News investigation documented how many illegal immigrants use ITINs to get tax credits and refunds they're not entitled to. WTHR also exposed how millions of undocumented workers get their ITIN applications approved using phony documents.
The problems identified by 13 Investigates cost American taxpayers billions of dollars every year, according to a 2011 report from the U.S. Treasury Department's Inspector General for Tax Administration.
After seeing WTHR's investigations, Howard contacted 13 Investigates to say the problems inside the ITIN processing center are more serious and systemic than originally reported.
"A license to steal"
"We were being told by upper management to ignore fraud, to assign ITIN numbers and ... pay out refunds to people who are lying," Howard explained. "It's a license to steal when you allow that."
Howard and five other tax examiners at the ITIN processing center in Austin all told WTHR the same thing: for years, IRS managers have instructed them to "look the other way" while processing ITIN applications that appear to be filed fraudulently – even when those applications contain clear signs of criminal activity.
For example, Howard received a stack of ITIN applications for dozens of children attending the same school in South Carolina. (Adult tax filers can request an ITIN for a child if they want to claim that child as a dependent in order to get child tax credits and a larger tax refund.) When he researched that school, he discovered it didn't even exist. When Howard reported the apparent scam to his bosses, he claims his managers ordered him to approve the applications anyway.
"C'mon. This is fraud! Those kids weren't even real and I'm supposed to give out [ITIN] numbers?," Howard recalls asking. "We're tax examiners but the truth is we're not supposed to look into anything. We're not supposed to examine anything. It's like an assembly line. It's just ‘Get it out of here. Boom. Boom. Boom. Get it out of here and don't worry about the fraud. Fraud slows us down.'"
After years of reporting that fraud directly to his bosses -- with no success -- Howard decided to take drastic action.
"I've been working for the federal government for 23 years and I signed an ethical standard of conduct when I went to work that says if you see fraud, you need to report it. I tried and tried and tried, couldn't get anywhere so … I went into a quiet room and started making phone calls."
Those phone calls went to the Inspector General's office in Washington, D.C.
The IG's office confirms it then dispatched auditors to Texas to interview Howard and dozens of other tax examiners. That's when investigators learned IRS employees were actually encouraged to ignore signs of fraud.
The Inspector General's latest investigation has taken more than a year. A final audit will be released this summer, and it's expected to give further proof of what Eyewitness News first exposed this spring – that millions of undocumented workers can get ITINs by filing fraudulent paperwork.
"The IRS is not doing something as simple as requesting sufficient documentation," Inspector General Russell George told WTHR this spring. "It's very troubling."
New details about mismanagement at the IRS's ITIN processing center provide even more cause for concern.
"It's pure negligence by management and they've been trying to keep it quiet," Howard said. "There is a criminal element that is defrauding the U.S. government by filing mountains and mountains of these fraudulent applications. We see them in piles in bulk every day that are obviously not legitimate documents and not legitimate tax returns and not legitimate wages … and [IRS managers] don't want to deal with it. That's where all the fraud is. The fraud is in the fake notary stamps and fake documents which we've been accepting."
In order to obtain an ITIN, applicants must send the IRS documents that show proof of identification and residency. Among the acceptable documents are original or notarized photocopies of birth certificates, driving records, voter ID cards, school records and vaccination records.
Howard and other ITIN tax examiners say those documents are easily forged and notary stamps on the paperwork are meaningless because many of those are fraudulent, too.
"There is a state-by-state list of notaries that shows which are registered and legitimate, but the IRS won't let us check those registries. We're not supposed to Google anything or look anything up," Howard said. "The basic problem is they give [tax examiners] no training and no tools to even know what they're looking for."
That is about to change.
Just days after WTHR first reported on ITIN mismanagement and fraud, the IRS sent senior officials from Washington to the ITIN processing center in Austin.
Steve Miller, the agency's Deputy Commissioner for Services and Enforcement, met with more than 100 ITIN tax examiners and, according to IRS staff who attended the meeting, Miller promised to address problems identified by workers and WTHR.
Despite repeated requests for an interview, Miller and IRS management will not meet with WTHR to discuss those problems.
But facing growing pressure, the IRS has now announced it will begin cracking down on ITIN fraud.
13 Investigates has learned tax examiners are now getting more training and much-needed tools to help identify bogus paperwork. Their work stations will soon be equipped with ultraviolent lights and magnifying glasses to help them better inspect documents. ITIN managers and trainers are going to Washington this week to learn about fraud prevention.
At the same time, the IRS has tightened its ITIN application process. Effective immediately, undocumented workers must prove their identity through original, certified documents. Notarized photocopies, which are much easier to forge, will no longer be accepted. In a written statement, the IRS announced it will spend the next six months reviewing all areas of the ITIN program. By the end of the year, the agency will issue more comprehensive rules to further reduce fraud.
"That's a huge step in the right direction," Howard said. "Because of the Inspector General and all of the media attention, things are finally starting to change. For the first time in a long time, I feel like this might get fixed."
Simply by speaking out, the quiet tax examiner could save taxpayers billions -- but at a personal cost.
A few days after Howard met with WTHR, the IRS slashed his job performance rating which will affect his paycheck. The IRS claims every aspect of Howard's job performance dropped during the past six months, shifting his overall rating from "exceeds fully successful" to "minimally successful." Howard believes the poor review is retaliation for blowing the whistle on his managers. He wonders what might happen next.
"I'm a little nervous, but not really. I guess they could try to fire me, but I don't think they will," he said, vowing to continue his fight for ITIN reform. "I just want to see things fixed. We've been allowing the U.S. taxpayer to get robbed for years now and those days appear to be over."
| | US, SWISS LAUNCH FATCA NEGOTIATIONS: US TAXPAYERS, SWISS BANKS AFFECTED
By Ellen Wallace, GenevaLunch, 21 June 2012.
BERN, SWITZERLAND – The United States and Switzerland jointly issued a declaration Thursday on their agreement to start negotiations on the implementation of Fatca (Foreign Account Tax Compliance Act ).
Fatca, which is strongly opposed by some groups of Americans, notably American Citizens Abroad, is US tax legislation that goes into effect in 2014. In addition, the two countries say they are still negotiating outstanding past bank and tax issues. Eleven Swiss banks are currently being investigated by the US for suspicion of helping US citizens evade taxes.
ACA notes that “foreign financial institutions will be required by the US government under the Foreign Account Tax Compliance Act (Fatca) to report information regarding accounts of US citizens to the IRS.
This law requires foreign financial institutions (FFI) such as your local bank, stock brokers, hedge funds, pension funds, insurance companies, trusts, etc – to report directly to the IRS all their clients who are ‘US persons’ (citizens and green card holders living in the USA or abroad). The penalties for the institutions that do not cooperate are steep.”
The statement issued by Bern is reproduced here in its entirety because of the major impact the new agreement has on Americans living in Switzerland. ACA has repeatedly cautioned that banks may soon refuse US citizens as clients, not just in Switzerland, but in other countries as well, to save themselves the risk and expense involved in meeting IRS (US tax arm) requirements.
We are publishing, as a companion piece, an article by Amy Webster, a Swiss-American living in Morges. Hers is one of several cases GenevaLunch has had drawn to its attention in the past month, as Swiss banks step up their efforts to identify US clients. Ed. note:
I was speaking to a French woman and a Dutch man, both of whom have moved to Switzerland in the past two months, in separate conversations this morning. Both say that when they opened bank accounts they were asked if they are American and were told that if they have green cards or US passports they would not be able to open accounts. THE PRESS RELEASE FROM THE SWISS STATE SECRETARIAT FOR INTERNATIONAL TAX MATTERS Switzerland and United States announce declaration on FATCA implementation
Bern, 21.06.2012 – Today, Switzerland and the United States announced a joint declaration on the implementation of the US tax legislation known as FATCA. The details are to be negotiated in the months ahead. The Federal Council will adopt a mandate for negotiating an intergovernmental agreement beforehand. This should increase legal certainty for affected financial institutions and reduce implementation costs.
With the enactment of the Foreign Account Tax Compliance Act (FATCA) on 18 March 2010, the United States wishes to ensure that all accounts held abroad by US taxpayers are actually taxed. FATCA basically requires foreign financial institutions (FFIs) to enter into a FATCA agreement with the Internal Revenue Service that imposes reporting requirements on them regarding US accounts. A financial institution has to obtain the client’s consent in order to submit such reports. A client who does not consent is considered recalcitrant. In the case of such clients, financial institutions have to withhold 30% on all payments coming from the United States.
The implementation of these provisions is generating high costs and legal uncertainty worldwide. Switzerland’s refusal to implement FATCA would cause major disadvantages for the financial centre. The prohibitive withholding tax of 30% on all payments from the United States and the likely consequence that foreign financial institutions would terminate their business relationships with Swiss financial institutions in the medium term would result in exclusion from the world’s largest capital market.
The key points of the declaration signed today are based on a model developed by Switzerland and Japan in collaboration with the United States that accommodates the needs of both countries. Unlike the implementation model of five large EU countries (Germany, France, Italy, Spain, United Kingdom), the exchange of information is to take place directly between the financial institutions and the Internal Revenue Service rather than via centralised government data gathering.
Simplifications could be provided for within the scope of an intergovernmental agreement.
The following facilitation measures are sought under the joint declaration:
- Certain financial institutions such as social security funds, pension funds and property insurers should be exempt from FATCA (so-called exempt FFIs).
- Certain financial institutions that operate primarily on a local or regional basis will be deemed compliant with FATCA, (deemed-compliant FFIs).
- Financial institutions are not obliged to report the names of recalcitrant US clients, make a tax deduction or close the client’s account. The United States can request administrative assistance concerning such recalcitrant clients by means of group requests.
- The easing of other requirements for Swiss financial institutions, e.g. regarding the identification of existing clients as US persons, is also to be included.
Negotiations between Switzerland and the United States on the resolution of outstanding tax issues concerning the past are still ongoing. It is hoped that an agreement will be reached by year-end.
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
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|File Type: || pdf| US TAX INFORMATION *UPDATE*
From the website of: DENISE SAVOIE
Member of the Canadian Parliament
From British Columbia
970 Blanshard Street, Victoria, BC V8W 2H3
Email: firstname.lastname@example.org://denisesavoie.ca/us-tax-information Dear Constituents,
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
. “Reasonable cause”
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:
- The reasons given for not meeting your tax obligations;
- Your compliance history;
- The length of time between your failure to meet your tax obligations and your subsequent compliance; and
- Circumstances beyond your control.
Reasonable cause may be established if you show that you were not aware of specific obligations to file returns or pay taxes, depending on the facts and circumstances. Among the facts and circumstances that will be considered are:
- Your education;
- Whether you have previously been subject to the tax;
- Whether you have been penalized before;
- Whether there were recent changes in the tax forms or law that you could not reasonably be expected to know; and
- The level of complexity of a tax or compliance issue.
You may have reasonable cause for noncompliance due to ignorance of the law if a reasonable and good faith effort was made to comply with the law or you were unaware of the requirement and could not reasonably be expected to know of the requirement.” (http://www.irs.gov/newsroom/article/0,,id=250788,00.html
) Additional information
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.
--------------------------------------------------------------------- Dear Constituents,
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
--------------------------------------------------------------------- Dear Constituents,
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: http://www.irs.gov/newsroom/article/0,,id=250788,00.html
--------------------------------------------------------------------- 2 December 2011 Dear Constituents,
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: http://www.theglobeandmail.com/globe-investor/personal-finance/taxes/us-taxman-to-go-easy-on-american-residents-in-canada/article2257395/
--------------------------------------------------------------------- 3 November 2011 Dear Constituents,
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.
Denise Savoie 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 Dear Constituents,
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 Dear Constituents,
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.
--------------------------------------------------------------------- Dear Constituents,
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: http://business.financialpost.com/2011/09/16/read-jim-flahertys-letter-on-americans-in-canada/
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: http://www.grantthornton.ca/resources/insights/articles/IRS_amnesty_program_ends_in_August.pdf http://www.collinsbarrow.com/news_showArticle.asp?articleID=436
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 Attachments
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 http://denisesavoie.ca/us-tax-information
| | MY TAX AND SPENDING REFORM PLAN Individuals will have the option of paying a 20% flat-rate income tax and I'll cap spending at 18% of GDP.
By Rick Perry, WSJ, 25 October 2011. Mr. Perry, a Republican, is the governor of Texas and a candidate for president.
The folks in Washington might not like to hear it, but the plain truth is the U.S. government spends too much. Taxes are too high, too complex, and too riddled with special interest loopholes. And our expensive entitlement system is unsustainable in the long run.
Without significant change quickly, our nation will go the way of some in Europe: mired in debt and unable to pay our bills. President Obama and many in Washington seem unable or unwilling to tackle these issues, either out of fear of alienating the left or because they want Americans to be dependent on big government.
On Tuesday I will announce my "Cut, Balance and Grow"
plan to scrap the current tax code, lower and simplify tax rates, cut spending and balance the federal budget, reform entitlements, and grow jobs and economic opportunity.
The plan starts with giving Americans a choice between a new, flat tax rate of 20% or their current income tax rate. The new flat tax preserves mortgage interest, charitable and state and local tax exemptions for families earning less than $500,000 annually, and it increases the standard deduction to $12,500 for individuals and dependents.
This simple 20% flat tax will allow Americans to file their taxes on a postcard, saving up to $483 billion in compliance costs. By eliminating the dozens of carve-outs that make the current code so incomprehensible, we will renew incentives for entrepreneurial risk-taking and investment that creates jobs, inspires Americans to work hard and forms the foundation of a strong economy. My plan also abolishes the death tax once and for all, providing needed certainty to American family farms and small businesses.
My plan restores American competitiveness in the global marketplace and provides strong incentives for U.S.-based employers to build new factories and create thousands of jobs here at home.
- First, we will lower the corporate tax rate to 20%—dropping it from the second highest in the developed world to a rate on par with our global competitors.
- Second, we will encourage the swift repatriation of some of the $1.4 trillion estimated to be parked overseas by temporarily lowering the rate to 5.25%.
- And third, we will transition to a "territorial tax system"--as seen in Hong Kong and France, for example—that only taxes in-country income.
The mind-boggling complexity of the current tax code helps large corporations with lawyers and accountants devise the best tax-avoidance strategies money can buy. That is why Cut, Balance and Grow also phases out corporate loopholes and special-interest tax breaks to provide a level playing field for employers of all sizes.
To help older Americans, we will eliminate the tax on Social Security benefits, boosting the incomes of 17 million current beneficiaries who see their benefits taxed if they continue to work and earn income in addition to Social Security earnings.
We will eliminate the tax on qualified dividends and long-term capital gains to free up the billions of dollars Americans are sitting on to avoid taxes on the gain.
All of these tax cuts will be meaningless if we do not control federal spending. Last year the government spent $1.3 trillion more than it collected, and total federal debt now approaches $15 trillion. By the end of 2011, the Office of Management and Budget expects the gross amount of federal debt to exceed the size of America's entire economy for the first time in over 65 years.
Under my plan, we will establish a clear goal of balancing the budget by 2020. It will be an extremely difficult task exacerbated by the current economic crisis and our need for significant tax cuts to spur growth. But that growth is what will get us to balance, if we are willing to make the hard decisions of cutting.
We should start moving toward fiscal responsibility by capping federal spending at 18% of our gross domestic product, banning earmarks and future bailouts, and passing a Balanced Budget Amendment to the Constitution. My plan freezes federal civilian hiring and salaries until the budget is balanced. And to fix the regulatory excess of the Obama administration and its predecessors, my plan puts an immediate moratorium on pending federal regulations and provides a full audit of all regulations passed since 2008 to determine their need, impact and effect on job creation.
ObamaCare, Dodd-Frank and Section 404 of Sarbanes-Oxley must be quickly repealed and, if necessary, replaced by market-oriented, common-sense measures.
America must also once and for all face up to entitlement reform. To preserve benefits for current and near-term Social Security beneficiaries, my plan permanently stops politicians from raiding the program's trust fund. Congressional IOUs are no substitute for workers' Social Security payments. We should use the federal Highway Trust Fund as a model for protecting the integrity of a pay-as-you-go system.
Cut, Balance and Grow also gives younger workers the option to own their Social Security contributions through personal retirement accounts that Washington politicians can never raid. Because young workers will own their contributions, they will be free to seek a market rate of return if they choose, and to leave their retirement savings to their dependents when they die.
Fixing America's tax, spending and entitlement cultures will not be easy. But the status quo of byzantine taxes, loose spending and the perpetual delay of entitlement reform is a recipe for disaster.
Cut, Balance and Grow strikes a major blow against the Washington-knows-best mindset. It takes money from spendthrift bureaucrats and returns it to families. It puts fewer job-killing regulations on employers and more restrictions on politicians. It gives more freedom to Americans to control their own destiny. And just as importantly, the Cut, Balance and Grow plan paves the way for the job creation, balanced budgets and fiscal responsibility we need to get America working again.
MORE FOR THE FISCAL SADISM FILES
The IRS Issues a New Set of FAQs on the Offshore Voluntary Disclosure Initiative Plus More Details on the Consequences of Opting Out
DEAR BUBBAS AND BUBBETTES,
Coming Forward With a Voluntary Disclosure: On June 2, 2011, the IRS issued an updated list of frequently asked questions on the 2011 Offshore Voluntary Disclosure Initiative.
Opting Out of Such a Disclosure: On June 1, 2011, the IRS issued more guidance on how a U.S. taxpayer should proceed both before and after choosing to opt out of the current voluntary offshore account disclosure initiative, or if the individual is removed from the civil settlement structure of the 2009 offshore voluntary disclosure program and the 2011 offshore voluntary disclosure initiative. This Guidance includes several attachments to assist those preparing a taxpayer's documents and discusses the applicable Statute of Limitations.
Both of these IRS publications are attached and should be carefully read. One is a pdf file and the other is a Word document.
Open a Bottle of Good Scotch: You might want start sipping a stiff glass of Scotch, however, while you dive into these shocking new revelations.
Penalties for Ignorant Americans: Each is stunning in the extent to which it elaborates on the very nasty penalties that will be applied to Americans living overseas who may not have ever known they had to be filing these reports. Such ignorance seems to be, by definition, their inexcusable fault and they will now be appropriately punished.
Penalties for Those Who Didn’t Even Know They Were Americans: An even bigger howler is that there are also penalties for individuals who never even knew they were American citizens until some administrative procedure brought this fact to their attention! They too obviously deserve all the punishment that awaits them now.
An Enduring Mystery: It nonetheless remains a great and enduring mystery why any government, especially that of the United States, which sees itself as the ideal model for everyone else to emulate, would want to treat its overseas citizens in such a nasty, brutal and unfair way. No other country has ever done this before, and, most interestingly, none seems to be in a hurry to copy our behaviour here either.
Future Nasty Nuggets: Also, one can only imagine how many other toxic nuggets have also been skilfully hidden in the more than 71,000 pages of the current U.S. tax code. Undoubtedly, inspired by this current example, some future zealots will trot these other similar gems and launch yet more fiscal catastrophes.
How is This Helping Our Trade Performance: And, just for fun, while we try to put some balm on these wounds, how is this supposed to be helping improve the trade situation of a country that now has an unbroken 36 year record of trade deficits that aggregate to more than $7 trillion? This too remains an enduring mystery.
A Manifestation of Insanity? Then again, by making life ever more miserable, expensive and legally dangerous for its own citizens, who have already been long denied the chance to compete on a level playing field in world markets, this does rather clearly seem to be just another shocking manifestation of national institutional insanity on a planetary scale.
But Why? What in the world could be driving such bizarre behaviour, other than profound self-hatred at the highest levels?
What Do You Think About This? Your thoughts and suggestions would be most appreciated.
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I received this today and thought you would find it most interesting.
My, oh my, how things just keep getting more and more extraordinary. There seems to be no limit to their efforts to turn us all into assumed criminals who have an obligation to denounce ourselves too. A most provocative constitutional issue for sure.
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One of the attorney’s I work with gave me a copy of the attached; one of his friends is on the “right” side…
The IRS is trying to bypass the 5th amendment rights by what is called the required records doctrine…essentially compelling defendants to hang themselves without any right against self incrimination…
The reading is not for the lighthearted but I thought a slice of your distribution list would find this interesting…
All the best,
SEE IF YOU CAN DECRYPT THIS ENIGMATIC PROMISE !!
2010 IRS DATA BOOK
Here attached is a very interesting data book prepared by the IRS for 2010.
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You may have already seen this article below. It is well worth reading and contemplating.
Attached also are two other documents that pertain to the newly formed Alliance for a Competitive Tax Policy. The organizers are hoping that other overseas American organizations will join forces with them in this endeavor.
One thing that we should all keep in mind is that while the DeMint-Meeks proposal goes a long way toward solving the problem of some overseas Americans, but it, alas, does nothing to help U.S. retirees abroad who do not gain any benefit from the foreign earned income exclusion and who therefore will be just as much out in the cold as we are today.
Let’s join forces with these people and robustly reinforce this argument by urging a total repeal of double taxation and full reintegration of all the American Diaspora members back onto a truly equitable and fully level playing field for everyone of every nationality all over the world.
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U.S. Expats Fight Their Soaring Tax Burden
By Brian Knowlton, IHT, Wednesday, April 2, 2008
WASHINGTON: Tami Overby, a 20-year-resident of Seoul, is as much the face of the United States abroad as anyone could be. She drives an American car, uses a Motorola phone, purchases American appliances, eats at McDonald's, drinks Diet Cokes - and even rides a Harley-Davidson motorcycle. She brags about all these things to her Korean friends.
She is also the president of the American Chamber of Commerce in Korea, the face of American business there - which makes it all the more surprising that her board of directors recently had a rather anguished discussion, as she describes it, about replacing her with a local hire.
The reason: a change in the American tax code two years ago that has raised considerably the tax burden facing many American expatriates - and which, in turn, often makes it more expensive for U.S. companies operating abroad to keep Americans on their payrolls.
"It makes absolutely no sense," said Senator Jim DeMint, Republican of South Carolina, of a system that makes the United States the sole developed country to tax income earned by its citizens abroad.
He is sponsoring legislation to remove the limit - currently $82,400 - on the amount of foreign-earned income exempt from taxation.
"Why put Americans at a disadvantage in a globally competitive economy?" he said.
Overby can put a precise number on that disadvantage. She said her yearly tax bill rose by $28,604, most of which her employer had to absorb - "and I'm fully taxed in Korea."
That amount, Overby said Monday, is just $3,000 or so above the average hit that Americans have taken in places like Seoul, Hong Kong and Singapore, where sky-high housing expenses are often paid for by employers.
Overby was in Washington as part of a newly formed coalition, the Alliance for a Competitive Tax Policy. The group, which opposes the double taxation of Americans living abroad, comprises several American Chambers of Commerce in Asia and the Asia-Pacific Council of American Chambers of Commerce.
Her own tenuous position, Overby said, illustrates how severe the problem is for American companies, especially with a change in 2006 that subjected a larger part of expats' housing reimbursements to taxation.
While a few American Chambers of Commerce, notably in South Asia, are already headed by non-Americans, she sees the pressure on her employer as dire and symptomatic.
Not only have Americans working for big multinationals been hit, Overby said, but so have some English teachers, professors, entrepreneurs and missionaries.
A few Americans have even renounced their citizenship because of soaring tax bills.
"For everyone last year, it was a huge, unexpected shock," Overby said.
Whether the legislation backed by DeMint, and a similar bill in the House sponsored by Representative Gregory Meeks, Democrat of New York, stand much chance to draw attention in a year when the Congress faces an array of enormous economic crises remains unclear.
"If Congress can't fix this," DeMint said, then its prospects for dealing with its larger economic challenges "seem rather dismal."