# Birth Right American and Taxes



## aj90

Hi all, I am new to the forum and have a few questions regarding American taxes but I cannot find any threads specific to my situation.

I was born to Canadian parents while they were working in America and brought to Canada when I was 2 years old. I have never lived or worked in America or even held an American passport. I have recently learned that I am to file taxes but I have missed the grace period. Now I don't plan to live in America but I am sure that I will travel there in the future so I would like to resolve this. Will there be a penalty for not filing in time? And how many years might I have to backfile in order to resolve this issue? I have either been a student or in lower income jobs so I won't exceed the taxable foreign income limit. Like I said I have not earned any money inside the US, just in Canada and now Australia on a working holiday.

If anyone has had any experience or advice, it would be greatly appreciated. I am just worried that I will be hit with large fines or rack up major accounting fees which I am not currently in the position to afford. I am hoping that there might be a cost effective and straight forward way to resolve this  Thanks in advance!


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## Bevdeforges

No, you shouldn't run into any fines or penalties, and you're precisely the "audience" for the Streamlined program: Streamlined Filing Compliance Procedures

If you have been a student or in really low income jobs, make sure you check the filing thresholds. As a single person, you don't need to file if your worldwide income was less than $10,000. 

There is no "taxable foreign income limit" but I think what you're referring to is the Foreign Earned Income Exclusion. This applies only to "earned" income (i.e. salary type income) and allows you to exclude up to $97K or so of earned income from taxation if you choose to file a form 2555. If most of your income in previous years was from salary, this is usually the quickest and easiest way to "prove" that you don't owe any income tax under the streamlined compliance program.

And, you may be able to use one of the free online tax preparation services to whip up your returns for the last three years and possibly even to e-file them.
Cheers,
Bev


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## aj90

Bevdeforges said:


> No, you shouldn't run into any fines or penalties, and you're precisely the "audience" for the Streamlined program: Filing Compliance Procedures
> 
> If you have been a student or in really low income jobs, make sure you check the filing thresholds. As a single person, you don't need to file if your worldwide income was less than $10,000.
> 
> There is no "taxable foreign income limit" but I think what you're referring to is the Foreign Earned Income Exclusion. This applies only to "earned" income (i.e. salary type income) and allows you to exclude up to $97K or so of earned income from taxation if you choose to file a form 2555. If most of your income in previous years was from salary, this is usually the quickest and easiest way to "prove" that you don't owe any income tax under the streamlined compliance program.
> 
> And, you may be able to use one of the free online tax preparation services to whip up your returns for the last three years and possibly even to e-file them.
> Cheers,
> Bev


Thanks Bev! Makes me feel a lot more comfortable as I was a bit anxious about the whole situation. I will have a look at the link you mention. I would be making over 10K annually but far less than the 'Foreign Earned Income Exclusion'. I checked out a few other threads and have seen some mixed reviews on filing vs staying off the radar. I was wondering what your opinion on this was... I have never had a US passport and generally don't get hassled when I visit the US with my Canadian one. Sounds tempting but I also feel as though sorting it out now would mitigate potentially larger issues if and when my financial situation changes.

Regards


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## BBCWatcher

I think Canada has a relatively high income tax rate, so I'd run your U.S. tax calculation with the Foreign Earned Income Exclusion and without (i.e. with the Foreign Tax Credit). If the latter yields zero U.S. tax liability, it's probably the better option because you'll bank excess "credits" that can be used to offset future U.S. taxes and because it preserves access to any refundable tax credits you might qualify for (i.e. free money from the IRS).

It's easy enough to run the tax calculation both ways using even the free online tax preparation software like TaxAct.

Note that as a U.S. citizen, even a currently "latent" one, you are legally required to use a U.S. passport to enter the United States. Not any other country's passport. If you're only going to enter the U.S. by land or sea (not air) you can get a U.S. passport card instead of a U.S. passport book. It's more portable and slightly less expensive. However, it's occasionally handy to have a U.S. passport book elsewhere -- visa free entry to Kuwait!  -- so almost always that's the wise choice.

If you're a young adult male under the age of 25 be sure to register with U.S. Selective Service online. It takes all of about 5 minutes. If you're too old, well, "water under the bridge," and maybe you won't get that U.S. federal government student loan I know you were counting on.


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## DavidMcKeegan

I would not recommend staying "off the radar", especially when it is so easy to get caught up on everything (via the Streamlined program). Simply file the last three years of returns and appropriate FBAR's (up to the last six years) and rest easy!

Now that banks are obligated to report accounts held by US persons, it is difficult to say how easy it will be to stay off the radar as a US citizen in the future. Banks are in the beginning stages of FATCA compliance, so I would definitely get caught up before it is fully rolled out and the US knows about the accounts held by US citizens abroad.

Good luck!


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## Nononymous

I seem to be the official voice of staying off the radar (I'm in exactly the same situation, moved north at age two). In your case it would be fairly painless to get caught up, but at the same time, once you've made yourself visible, you're visible forever. You could also take a wait-and-see attitude. Your only bureaucratic contact with the US would be limited to applying for a passport, which you don't need to do until some future day when US customs tells you that you need one. It's unlikely that FATCA will change, but who knows. If you have no current plans to live and work in the US, that may be okay. However it's also possible that one day you'll try to open an investment account and the bank will ask for your place of birth (in which case you can lie, or deal with it). Renouncing while your affairs are still uncomplicated is another good option, though it just got more expensive (approximately $2300).


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## maz57

Your first roadblock is going to be getting a Social Security number from your present location in Australia if you don't already have one. I don't have direct experience with this but I have heard that it can be very difficult to do if you are not living in the US.

Apparently, SS requires you to document a lot of historical residence information---information you might have on file in Canada, but possibly not accessible to you in Australia. People in Canada often find they wind up having to travel to the US and appear in person at a SS office to get it straightened out. Not very handy if you don't live close to the border.

I guess if they make it too hard the temptation will be to just forget about it. No SSN, you don't exist as far as the US government and the IRS are concerned.

Folks on this forum will interested in hearing about your progress.


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## Nononymous

For what it's worth, you can apply for a US passport without the SSN, you just enter all zeroes. Do this from an Australian address and you're basically untraceable once you get back to Canada.


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## aj90

This has all been very informative and has helped calm my nerves. For what its worth I have my SSN, just not my passport. 

I have looked into it a bit further and talked to a family friend that is a CPA. He said that I shouldn't worry as I haven't made any money in the US and haven't made anywhere near enough to be taxed on. He said that once I start making more money I can then backfile or renounce my citizenship. He said that he gets a lot of people asking the same question.

As far as what I will do, it is hard to say at this point. I am living in Australia and going to applying for permanent residence here and have no plans to live or work in the US. Part of me feels as though I don't need the added hassle but the other half of me feels it wouldn't be a bad idea to get it sorted. I only worry because I will be heading to the US for a wedding right around tax season.

I will let people know what I do in the future. Thanks again!


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## Nononymous

Travel to the US won't be an issue if you have a US passport; likely won't be a problem with a Canadian but it's possible. US border agents have no access to tax records. There's no evidence that the SSN data collected with passport applications is actually followed up on; it might not even be passed to the IRS.


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## aj90

I travel to the US quite frequently and have only been asked about why I am not travelling under a US passport once when I had a connecting flight at JFK. When I started to explain my situation to the customs officer he seemed confused and wished me luck on sorting it out. During the summer of 2013 I crossed overland 3 times and via air once and didn't have any issues.


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## BBCWatcher

aj90 said:


> He said that once I start making more money I can then backfile or renounce my citizenship.


That's not quite correct. The choices in that event are:

1. File your U.S. tax return (if required to file);
2. File the past several years of U.S. tax returns and renounce.

It's not _generally_ possible to get a Certificate of Loss of Nationality (CLN) in your particular circumstances (and similar) without first filing several years of U.S. tax returns. Or, said another way, you can "renounce" (in the colloquial sense), but the U.S. government may not accept that renunciation without your being current (going back a few years) on your tax returns.

In short(ish) form: "He (should have) said that once I start making more money I can then file; or I can file, backfile, pay the exit tax (if applicable), and pay the administrative fee (currently US$2350) and appear at a U.S. embassy or U.S. consulate to obtain a Certificate of Loss of Nationality to terminate my U.S. citizenship."


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## aj90

BBCWatcher said:


> That's not quite correct. The choices in that event are:
> 
> 1. File your U.S. tax return (if required to file);
> 2. File the past several years of U.S. tax returns and renounce.
> 
> It's not _generally_ possible to get a Certificate of Loss of Nationality (CLN) in your particular circumstances (and similar) without first filing several years of U.S. tax returns. Or, said another way, you can "renounce" (in the colloquial sense), but the U.S. government may not accept that renunciation without your being current (going back a few years) on your tax returns.
> 
> In short(ish) form: "He (should have) said that once I start making more money I can then file; or I can file, backfile, pay the exit tax (if applicable), and pay the administrative fee (currently US$2350) and appear at a U.S. embassy or U.S. consulate to obtain a Certificate of Loss of Nationality to terminate my U.S. citizenship."


From other reading I have done on the matter, I came to that conclusion. I would need to settle up with the US government, otherwise they would deny it on the grounds I am doing it to avoid taxation.

At this point I won't owe any tax as I haven't made anywhere near enough and my accounts don't need to be declared (FBARS) as they haven't held over 10K. The only account that ever did was an education savings fund that was under my parents name that I continued to contribute to once I started working.


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## CdnAllTheWay

BBCWatcher said:


> It's not _generally_ possible to get a Certificate of Loss of Nationality (CLN) in your particular circumstances (and similar) without first filing several years of U.S. tax returns. Or, said another way, you can "renounce" (in the colloquial sense), but the U.S. government may not accept that renunciation without your being current (going back a few years) on your tax returns.


This is incorrect information. There is NO requirement to file any forms with the US government to relinquish or renounce US citizenship EXCEPT those documents required by the Dept. of State regarding giving up citizenship, or informing them one has given up citizenship. Tax compliance is NOT required to renounce. There is no generally about it.


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## aj90

CdnAllTheWay said:


> This is incorrect information. There is NO requirement to file any forms with the US government to relinquish or renounce US citizenship EXCEPT those documents required by the Dept. of State regarding giving up citizenship, or informing them one has given up citizenship. Tax compliance is NOT required to renounce. There is no generally about it.


My understanding was that they could reject your renunciation of citizenship if they believed it was on grounds of tax evasion. If I hadn't filed, I would suspect that this might raise some suspicion?


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## Nononymous

I think there are competing views on this. The "safe" approach is to clear up the tax filing obligations (and pay money if owed) before and immediately following renunciation.

However, some take the view that renunciation happens the moment you fill out the form and swear the oath at the consulate. All the tax stuff is simply to "log out" of the US tax system, and has nothing to do with citizenship. (I have a hunch that this is all correct under a strict interpretation of the law, though not the recommended practice.) If you don't deal with the taxes, you might have the IRS sending you letters for the rest of your life. Though this is not totally clear, the State Department may not issue the CLN if you haven't done the tax work. 

This is quite different from renunciation being denied because it's intended to avoid taxation. I think that only happens in a very small number of cases, where very large sums of money are involved.

If you don't have US assets, don't have any US travel plans, or otherwise expect to be hassled by the US (they can't touch your money in Canada) then you can throw down $2350 and renounce, without bothering to deal with tax paperwork. On the other hand, you don't really gain much, plus you've spent a fair sum of money and given the US your name and address, so you're probably better off just staying quiet.

Regarding travel and passports. The law requiring US citizens to enter the country on a US passport has been on the books for decades, but was widely ignored, at least for Canadians. Recently though they have stepped up enforcement, citing something called the Western Hemisphere Travel Initiative. I was warned at the airport two years ago (when I was almost denied entry on a business trip for attending a meeting without a work visa - sigh - and had to pull out an expired US passport to get in). After that I crossed six more times with the Canadian passport without anyone blinking. It's still very inconsistent, though I expect it to become increasingly strict in the coming years.


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## Bevdeforges

I also wouldn't worry too much about being denied renunciation if they think you're doing it "for tax reasons." Back when they started getting tacky about this stuff (about 1996 with a change in the law), the new laws basically stated that they would "assume" that you were renouncing "for tax reasons" except in certain specific circumstances. And if they decided you were renouncing for tax reasons, then they would invoke the thing about requiring you to file US taxes for an additional 10 years.

I suspect the "expatriation tax" may have put an end to the 10 year period of limbo after renunciation, but I'm not sure as I've heard reference to that 10 year thing fairly recently.

Actually, you'll probably find that the Consulate folks are fairly sympathetic to those who feel they have to renounce due to "financial considerations." They are supposedly obligated to try to talk you out of it, but lately they only make a sort of token effort.
Cheers,
Bev


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## aj90

I appreciate the feedback. As it stands right now, I don't think I will renounce. I would be more likely to backfile as I won't owe anything. I am just afraid to do it this year because I am in Australia and looking at applying for permanent residence with my partner. The last thing I need is the hassle of trying to file my US taxes for the last 6 years.... The next time I plan to be in Canada is over the Christmas holidays and I would rather not be trying to sort that out then.

Renouncing would be something that I might consider in the future when I have a better idea as to where I will settle. Although I don't see myself in the US, I am still young and don't want to make that decision quite yet.


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## Nononymous

I don't think there's any rush on any of this. You can easily wait a year or two, see how things develop, make up your mind when or if to get caught up. Your only potential issue would be travel without the US passport. I might be inclined to do that while in Australia, if you plan on moving back to Canada in a few years. (I renewed mine last year while temporarily living in Europe. Hypothetical future correspondence from the IRS will disappear into a void.)


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## the_mighty_tim

Nononymous said:


> Regarding travel and passports. The law requiring US citizens to enter the country on a US passport has been on the books for decades, but was widely ignored, at least for Canadians. Recently though they have stepped up enforcement, citing something called the Western Hemisphere Travel Initiative. I was warned at the airport two years ago (when I was almost denied entry on a business trip for attending a meeting without a work visa - sigh - and had to pull out an expired US passport to get in). After that I crossed six more times with the Canadian passport without anyone blinking. It's still very inconsistent, though I expect it to become increasingly strict in the coming years.


As an aside, when I discovered I was a US citizen, I went and got my US passport, as I was travelling there. I had to visit the US embassy in London, with a whole bunch of paperwork, including my UK passport. 

When dealing with my application, the embassy guy looked through my UK passport and said "ah, it seems you've entered the US on your UK passport. You do realise that's illegal, right?". I explained the situation, and he said that he'd let me off this time, but that I wasn't to do it in the future.


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## StewartPatton

Guys: there's so much bad information on the internet about renouncing U.S. citizenship--let's not add to it.

The State Department's view of things and the IRS's view of things are completely and absolutely different. They are parallel systems. So, the status of a person's tax compliance has absolutely nothing to do with whether they will be allowed to renounce U.S. citizenship.

You can walk into a U.S. Embassy and renounce your U.S. citizenship even if you have never filed tax returns or FBARs. The State Department does not care about your tax situation--they won't ask you about it, and it's just completely irrelevant to what you are doing there at the embassy.

Now, if you don't file an IRS Form 8854 or you do file one and cannot certify 5 years of tax compliance, you may have issues with the IRS, and the potential severity of those issues depends on your particular facts. 

I am by no means saying that renouncing without first getting caught up on taxes is the best course of action or even a good idea to do at all (in fact, I almost always advise against it). I am only saying that it is possible to do so since the legal act of renouncing and the tax aspects are two completely separate systems.


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## CdnAllTheWay

Correct. I renounced and received a CLN without being tax compliant. The end. I have heard absolutely nothing from the IRS in 2 years. The only way I would be in their system is from the Dept. of State informing them that I'd renounced. I have zero desire to enter that country after this ridiculous debacle, so anything they choose to do in their own country is fine. Any correspondence from them will be met with a polite "decline" to enter their game. I bet I NEVER hear from them.


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## diharv

CdnAllTheWay said:


> Correct. I renounced and received a CLN without being tax compliant. The end. I have heard absolutely nothing from the IRS in 2 years. The only way I would be in their system is from the Dept. of State informing them that I'd renounced. I have zero desire to enter that country after this ridiculous debacle, so anything they choose to do in their own country is fine. Any correspondence from them will be met with a polite "decline" to enter their game. I bet I NEVER hear from them.


God I wish I had your courage. Kudos to you and I salute you. I have relinquished and have a CLN but I have gone the compliant route. I have yet to do the 8854 garbage . I believe you wrote in past posts that you submitted an 8854 without being compliant for the previous five years , correct ? In any case I hope you never hear anything and by two different routes we wind up at the same place. However I will be alot poorer because of the route I chose.


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## BBCWatcher

To clarify, you mean "poorer" because you are paying a tax preparer to do your paperwork, because you are subject to the U.S. exit tax, because you owe non-trivial amounts of U.S. income tax on non-U.S. source income, or because of some combination of the preceding?

It's quite rare for residents of Canada who are U.S. persons to owe any U.S. income tax on non-U.S. source income. Is yours one of the rare cases?


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## Nononymous

CdnAllTheWay said:


> Correct. I renounced and received a CLN without being tax compliant. The end. I have heard absolutely nothing from the IRS in 2 years. The only way I would be in their system is from the Dept. of State informing them that I'd renounced. I have zero desire to enter that country after this ridiculous debacle, so anything they choose to do in their own country is fine. Any correspondence from them will be met with a polite "decline" to enter their game. I bet I NEVER hear from them.


I like this approach. If it wasn't for the $2350 renunciation fee, I might pursue it myself.

Otherwise I'm thinking renewed US passport for those occasional trips down south, and a Photoshopped CLN to keep the bank off my case here!


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## BBCWatcher

"My mother/father was a Canadian diplomat serving in the U.S. when I was born" is (I assume) also a lie to your financial institution but less work. Moreover, that lie would avoid the risk of U.S. criminal prosecution for forging an official U.S. government document. (It may not help you avoid Canadian criminal prosecution. That's up to Canada and its laws.)

I may be assuming this lie is plausible and that the financial institution does not further pursue the line of inquiry. Bonus points here if you were born in a U.S. place with a Canadian consulate or embassy at the time of your birth.

If you're going to play the lying game, Nononymous, I'd recommend you step up your game. 

....No, I don't recommend any of this (if that isn't obvious already). And I'm not sure why this is the one forum where open discussion of illegal activities is permitted, even encouraged. At least I'm offering a non-recommended approach that might (triple underscore) be legal, albeit totally unethical. Forging a U.S. CLN is clearly illegal.


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## diharv

BBCWatcher said:


> To clarify, you mean "poorer" because you are paying a tax preparer to do your paperwork, because you are subject to the U.S. exit tax, because you owe non-trivial amounts of U.S. income tax on non-U.S. source income, or because of some combination of the preceding?
> 
> It's quite rare for residents of Canada who are U.S. persons to owe any U.S. income tax on non-U.S. source income. Is yours one of the rare cases?


What I mean by "poorer' is the almost $23000.00 I have spent in the process of becoming "compliant".Money taken from my wife and kid's hands as far as I'm concerned all because of their old man's arrogant past belief that to be a USC was something to keep and cherish .The breakdown is $18246.39 paid to the compliance industry to get up to date thus far from 2009-2013 and $4743.00 in taxes and interest paid to the IRS. The compliance industry is horrifically expensive and I do not have a simple tax situation as I have a Professional Corporation to complicate things. I also was assessed failure to file and failure to pay penalties but to my surprise the IRS waived and reversed these charges but still charged me interest on unpaid taxes going back to 2009.I don't know if my case is rare as I would imagine there must be thousands of USC here in Canada alone with limited companies but I guess they would have to come forward first in order to get stung. The hell I've gone through is not just financial but emotional. I've been rejected for the streamlined process,audited ,assessed and reassessed and had my returns reprepared by the IRS and the notices just kept on arriving asking for more money each time.I should have just sent them a box of paper and said you figure it out. Might have saved $18246.39 !2009 was a real problem year with $3744.67 in tax for that year alone but I think it finally is straightened out.I'm glad you asked me to clarify BBCwatcher as up till now I had not added up my accountant invoices and tax bills. Now I know why we had to delay buying another vehicle for a year. I mean we do well financially but essentially taking $23000.00 of our takehome pay in the last 2 months and flushing it down the toilet is kind of hard to take.


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## Bevdeforges

Nononymous said:


> I like this approach. If it wasn't for the $2350 renunciation fee, I might pursue it myself.
> 
> Otherwise I'm thinking renewed US passport for those occasional trips down south, and a Photoshopped CLN to keep the bank off my case here!


Think about it all you want, but we both know you'd probably be in for more problems for passing a forged document. But, wait until the bank actually asks for the information in any event. (My bank here actually took my US nationality off my account when I showed them my French carte d'identité. Then again, they're one of the banks specifically exempted from reporting anyhow.)

Basically it comes down to the specific financial situation in question. And, I might say, the policies and ethics of the whole tax preparation industry and its participants. Then again, if you're making big bucks, I suppose you have to do the cost-benefit analysis to decide how much you're willing to spend on tax prep assistance in order to avoid paying out to the IRS.
Cheers,
Bev


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## BBCWatcher

diharv said:


> The breakdown is $18246.39 paid to the compliance industry to get up to date thus far from 2009-2013 and $4743.00 in taxes and interest paid to the IRS.


I have some further breakdown questions.

What portion, if any, of the $4,743 (including share of interest) is attributable to U.S. source income? What portion, if any, is attributable to the U.S. self-employment tax (or U.S. payroll tax)?

What portion of the $4,743 is the actual tax determination?

What portion, if any, of the $18,246.39 you paid for 5 years of professional assistance is attributable to your Canadian (and other non-U.S.) affairs? What portion is attributable to addressing and remediating the consequences of untimely filing, above the hypothetical cost had you timely filed?


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## Nononymous

BBCWatcher said:


> "My mother/father was a Canadian diplomat serving in the U.S. when I was born" is (I assume) also a lie to your financial institution but less work. Moreover, that lie would avoid the risk of U.S. criminal prosecution for forging an official U.S. government document. (It may not help you avoid Canadian criminal prosecution. That's up to Canada and its laws.)


That's genius. If the investment advisor wasn't inherited from my parents, I'd use it. But it might work for others. Thank you!

I'm not really planning to do a fake CLN, of course, but I do wonder what Canadian laws would be broken by forging a US document and submitting it to a Canadian bank.

Personally, as with many other Canadians here, my feeling is that whatever you do to minimize your exposure to or contact with the US authorities is *ethical* - lying, cheating, stealing, as necessary.


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## Bevdeforges

Nononymous said:


> That's genius. If the investment advisor wasn't inherited from my parents, I'd use it. But it might work for others. Thank you!
> 
> I'm not really planning to do a fake CLN, of course, but I do wonder what Canadian laws would be broken by forging a US document and submitting it to a Canadian bank.
> 
> Personally, as with many other Canadians here, my feeling is that whatever you do to minimize your exposure to or contact with the US authorities is *ethical* - lying, cheating, stealing, as necessary.


I suspect the real issue here is that, if you were to do one of those sneaky things, it would be the bank that would get into trouble with the American authorities (at least first). And if they get in trouble, they aren't going to want to keep you as a customer, and they may go to the trouble of finding some Canadian law that you've violated and that they can beat you over the head with.
Cheers,
Bev


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## maz57

Nononymous said:


> Personally, as with many other Canadians here, my feeling is that whatever you do to minimize your exposure to or contact with the US authorities is *ethical* - lying, cheating, stealing, as necessary.


Don't forget the most important one of all.....ignoring!


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## diharv

BBCWatcher said:


> I have some further breakdown questions.
> 
> What portion, if any, of the $4,743 (including share of interest) is attributable to U.S. source income? ZERO What portion, if any, is attributable to the U.S. self-employment tax (or U.S. payroll tax)? ZERO
> 
> What portion of the $4,743 is the actual tax determination? $4200 tax ,rest interest
> 
> What portion, if any, of the $18,246.39 you paid for 5 years of professional assistance is attributable to your Canadian (and other non-U.S.) affairs? ZERO What portion is attributable to addressing and remediating the consequences of untimely filing, above the hypothetical cost had you timely filed? maybe $1500


How ,where and why would I have US source income ? I live and work in Canada , almost all my life. I just had the misfortune of being born before my parents decided to immigrate to Canada.Anyway I am trying to get past being angry and bitter. By this time next year I hope to be free once and for all from the shackles. Just one more potential good will ambassador abroad for the US kicked to the curb and s#%t on.


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## BBCWatcher

It's _extremely easy_ for practically anyone in the world to have U.S. source income. For example, you can buy one or more shares in a company that trades on the New York Stock Exchange (or another U.S. exchange) and pays dividends. That's one among several examples of U.S. source income.

OK, so according to your figures you had an average of $840 per year in U.S. income tax liability(*) and, due to the complexity of your financial affairs and the (high) cost of the professional assistance you hired, an average of $3350 per year in tax preparation costs (excluding the late filing cleanup costs) attributable to U.S. filings.

Thanks for that report.

(*) I forgot to ask how much of that $840 was refunded to you, if any, via Canadian foreign tax credits that reduced your Canadian income tax.


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## diharv

BBCWatcher said:


> It's _extremely easy_ for practically anyone in the world to have U.S. source income. For example, you can buy one or more shares in a company that trades on the New York Stock Exchange (or another U.S. exchange) and pays dividends. That's one among several examples of U.S. source income.
> 
> OK, so according to your figures you had an average of $840 per year in U.S. income tax liability(*) and, due to the complexity of your financial affairs and the (high) cost of the professional assistance you hired, an average of $3350 per year in tax preparation costs (excluding the late filing cleanup costs) attributable to U.S. filings.
> 
> Thanks for that report.
> 
> (*) I forgot to ask how much of that $840 was refunded to you, if any, via Canadian foreign tax credits that reduced your Canadian income tax.


None. I think that I can only claim this credit here if I paid foreign taxes on income I received from outside Canada and reported on my Canadian tax return . !00% of my income is earned in Canada and I'm paying foreign taxes on it. Go figure , the US is stealing its pound of flesh from Canadian money earned on Canadian soil ! I'm so grateful I can contribute "my fair share'":welcome: (sarcasm)


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## StewartPatton

BBCWatcher said:


> due to the complexity of your financial affairs and the (high) cost of the professional assistance you hired, an average of $3350 per year in tax preparation costs (excluding the late filing cleanup costs) attributable to U.S. filings.


Wow! Maybe my fees are too low . . .


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## Nononymous

diharv said:


> None. I think that I can only claim this credit here if I paid foreign taxes on income I received from outside Canada and reported on my Canadian tax return . !00% of my income is earned in Canada and I'm paying foreign taxes on it. Go figure , the US is stealing its pound of flesh from Canadian money earned on Canadian soil ! I'm so grateful I can contribute "my fair share'":welcome: (sarcasm)


I think we have our poster child for "negative benefit to that unwanted citizenship".

On to my next project: Photoshopping my wife's BC birth certificate so that I can have one of my own if and when I need to move my investment accounts. Goodbye FATCA. Looks pretty easy.


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## StewartPatton

Nononymous said:


> I think we have our poster child for "negative benefit to that unwanted citizenship".
> 
> On to my next project: Photoshopping my wife's BC birth certificate so that I can have one of my own if and when I need to move my investment accounts. Goodbye FATCA. Looks pretty easy.


It's cute how you think anonymity on the internet is still a thing. I could tell you stories . . .


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## maz57

StewartPatton said:


> It's cute how you think anonymity on the internet is still a thing. I could tell you stories . . .


Well, desperate times require desperate measures. I don't think our refusnik is suggesting using a photoshopped birth certificate to get something he's not entitled to.

I think its a strategy to prevent the personal harm that will occur if and when that broker asks him an illegal question for the express purpose of discriminating against him because of his place of birth. The damage that FATCA and CBT inflicts upon innocent people is the real crime.

When the general public wakes up and realizes the damage FATCA is causing, there will be so many ways people (and financial institutions) find to skirt the rules my guess is the whole sorry mess will collapse.


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## StewartPatton

maz57 said:


> Well, desperate times require desperate measures. I don't think our refusnik is suggesting using a photoshopped birth certificate to get something he's not entitled to.
> 
> I think its a strategy to prevent the personal harm that will occur if and when that broker asks him an illegal question for the express purpose of discriminating against him because of his place of birth. The damage that FATCA and CBT inflicts upon innocent people is the real crime.
> 
> When the general public wakes up and realizes the damage FATCA is causing, there will be so many ways people (and financial institutions) find to skirt the rules my guess is the whole sorry mess will collapse.


A crime is still a crime even if one feels justified in committing it.

Look, I don't really care if Nononymous or anyone else lies to their Canadian bank. They can knock themselves out. But as a lawyer who really tries to help people any way I can, I couldn't help but point out that this is a dangerous course of action. But he knows that, so I should probably just shut up.


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## maz57

I agree, such a strategy involves risk. Nononymous is more knowledgeable about the situation than most; he can take care of himself. I'll shut up as well.


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## Nononymous

I am of course having some fun here.

Seriously, however, there are many hundreds of thousands of people in this country whose interests are, in my view, best served by refusing to cooperate with FATCA and US tax compliance. Ignoring it, staying off the radar, fudging the truth with your Canadian bank (possibly with a wink and a nod) - whatever it takes.

The best case I can foresee is that enforcement is so difficult for the banks that it becomes another widely ignored law that's still on the books, rather like how the US (until recently) treated the requirement that its citizens enter the country with a US passport.


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## diharv

Nononymous said:


> I think we have our poster child for "negative benefit to that unwanted citizenship".
> 
> On to my next project: Photoshopping my wife's BC birth certificate so that I can have one of my own if and when I need to move my investment accounts. Goodbye FATCA. Looks pretty easy.


I would definitely have to agree that I could be the poster child on this forum of getting royally financially hosed solely because of birthplace with absolutely zero net benefit to myself or my family . I get to see my last e pay IRS payments on my credit card bill today , all $1945.00 worth.What fun that is when I'm looking at possibly buying a pellet stove to supplement our warmth this coming winter. When was the last time you spent that much and walked away with absolutely nothing ? Peace of mind ? More like a piece of my mind along with a pound of flesh.Has anyone else out here on this forum come close to feeling my pain ? (Note to all everything that has happened to me is true and yes I am bitter and resentful but I can laugh about it and say the things I do with tongue in cheek. After all what else can one do , you can't cry over spilt milk whether it's a glass or the truck overturns !)


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## BBCWatcher

If you feel you are not getting a good deal with your U.S. citizenship or U.S. nationality, then you have the option to terminate your U.S. citizenship or U.S. nationality. It's really quite simple.

But again, there's nothing _uniquely_ onerous in degree about the obligations associated with U.S. citizenship/U.S. nationality. For perspective, there are at least a score of countries on this planet -- not the U.S. -- that require their male citizens to dedicate two years of their adult lives in unpaid (or poorly paid) service to the state in hazardous roles routinely resulting in serious injury or death. Military conscription, in other words. Yet somehow the forums are not filled with complaints about that much more onerous citizenship-based obligation that's quite common around the world. Why is that? Instead, the (mostly) well-to-do (living in comparatively low income tax jurisdictions) are railing against the U.S. tax system that they _have the full power to exit at any time_.

WTF? I don't get it. Exit if you're upset! In 2013, 2999 individuals did according to the U.S. government. It's your right, and I'll defend that right.


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## Bevdeforges

Conscription seems to be on its way out these days, so is something of a red herring in this discussion.

The US is very nearly the only country that taxes based on citizenship AND residence, and even The Economist has called FATCA excessive in its intended scope and remarked on the "uniqueness" of the US approach to taxation overall. There are all sorts of considerations to giving up US citizenship (not least of which is the expense).

You're entitled to your Candide take on the situation, but for some folks this is most definitely NOT the "best of all possible worlds." I don't know how things are currently in Canada, but in many other places it may simply be easier to fly under the radar, at least for those in modest financial circumstances.
Cheers,
Bev


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## BBCWatcher

Bevdeforges said:


> Conscription seems to be on its way out these days, so is something of a red herring in this discussion.


I disagree. The most recent conscription-related news on the planet is the addition of Ukraine to the list of countries with compulsory military service.



> The US is very nearly the only country that taxes based on citizenship AND residence....


Hungary is another example. Several other countries do on selective bases, and still other countries are progressively making it much harder to switch to non-residence status.

If the U.S. is unique, it's getting less unique in kind.



> and even The Economist has called FATCA excessive in its intended scope and remarked on the "uniqueness" of the US approach to taxation overall.


Yes, and The Economist is rather infamous in making basic factual errors in its reporting on U.S. taxation and fiscal policy. It's quite embarrassing, really.

Look, the U.S. is quite simply unique in being the world's largest economy with a hugely outsized planetary cultural influence. It's the planet's dominant military superpower. It's a very wealthy country, and it has more of the planet's wealthiest people than any other country. Many countries are unique, and the U.S. certainly is. (I'm just making factual statements without any value judgments here.)

That U.S. position also means that invariably it will take an aggressive position on combatting global tax evasion, financing of terrorism, money laundering, funding for organized crime and other criminal enterprises, and all other facets of the financial world involving illegal activities that are _broadly agreed to be illegal_ no matter what country you live in. FATCA is a manifestation of that position of global leadership. That's what leaders do: they lead. Insert Country X here -- it's not about the U.S. specifically. The U.S. just happens to be, factually, the leading country in so many ways. (Previously the United Kingdom was. Maybe in the future some other country or countries will be.)

I'm not thrilled with FATCA, but I understand it. The problems I just described need to be addressed, and governments around the world must cooperate in combatting those problems. The U.S. was unsatisfied with the global, glacial pace of progress in addressing those problems, and that's not an unreasonable view. So the U.S. flexed its muscles and decided to do something about those problems. Enter FATCA -- and some other financial initiatives of a similar theme. And, what do you know? We're already seeing other countries piggyback on FATCA, demanding the same financial data sharing that the U.S. has so frequently successfully demanded.

For those governments that aren't happy with FATCA, what have they done to advance and promote global cooperation to combat financial crimes? _Now_ there seems to be some movement -- in the OECD, most recently -- but, for better or worse, the world probably needed the United States to start the ball rolling.



> There are all sorts of considerations to giving up US citizenship (not least of which is the expense).


Well sure! A CLN costs $2350 or $30 (going from memory), depending on the circumstances. The exit tax may be $0 or something more than zero depending on one's circumstances. But all that's part of the deal, too, and I'll vigorously defend that set of option. This is not a prison camp here -- unlike some countries on our planet. Check out is available and reasonably so.


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## Bevdeforges

Rah, rah America, sis boom bah. Thank you for that rousing call to patriotism.

Your citizenship is an accident of birth. (Or at least the first one is.) You may have and maintain strong ties back to the motherland. Others never had much in the way of ties in the first place or have dropped or lost what ties they had after several years of living overseas. And most US citizens living back in the US have no idea what the tax obligations of overseas residents might be. (Most I've spoken with are surprised to hear that we're still required to file tax returns decades after moving out.)

I have my own ways of dealing with the situation. The folks I feel bad for are those who have only recently discovered their status and their ongoing obligations and who seem to feel they "must" pay out large sums of money for tax preparers to stave off prosecution from the IRS. And what's really sad about the situation is that it seems to have resulted from the well-meaning efforts of some of the US expat groups to share their citizenship with their foreign-born children and grandchildren. 
Cheers,
Bev


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## Nononymous

Ditto message posted to other thread.

The great advantage that foreign-born children of Americans have is of course the non-US birthplace on their non-US passport. With minimal risk they can effectively ignore their US citizenship, should they never wish to live in the US (as my own daughter likely will do). About the only glitch I can foresee is travelling to the US with the US parent but with different passports.

(I await the counter-argument: because they have the right to move to the US at any time in their lives, or be rescued by its helicopters, they have the obligation to follow its laws and remain tax-complaint to the end of their days; if they don't like this deal, they must renounce.)


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## Nononymous

In one sense both problems, conscription and US tax policy, have the same solution - if you don't like it, don't go to the damn country. Even with FATCA reporting, the US can't touch your money in Canada. So you can thumb your nose at the IRS, the Ukrainian military and anyone else you want from the safety of Canadian soil.


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## theOAP

Two random thoughts. I won't name names since I've been in the UK too long and have learned the manners of not encouraging foolishness.

There seems to be a repetitive theme to some comments; "...fine! Just exit!" or "but if you disagree, no problem! Settle up, and check out.", amongst others. I would suggest anyone making such comments might stand back and measure in terms of intellectual arguments, those phrases rank only a step or two above "If y'all don't like the way we is a doin' things 'round here, y'all can just git on ya donkey and go back to where ya come from". Both are factually accurate statements that imply a thoughtless dismissal of the complaint.

There also seems to be a tendency to make some rather generalised arguments. My favourite is the argument which states the US provided you with a birth in the one of the greatest, economically dynamic countries on earth where you were provided nurturing, care, an education, a moral upbringing, an advanced education, and an abundance of opportunities to make something of your life. It's always followed by the conclusion these "benefits" were paid for out of the US public purse, and you owe the US, perpetually, repayment for those benefits received no matter where on earth you live.

I believe I'm correct in saying the US encourages immigration from Australia, Canada, the UK, Europe, et al, where similar "benefits" were given to citizens; the US doesn't think twice about harvesting the rewards of the public cost provided by those nations. The US never considers the fact those nations support Resident Based Taxation, and those immigrants never have to worry about being able to support two tax systems. It believes Citizenship Based Taxation is fine as long as it benefits the US, even if it means taxing its own expats foreign income and assets which contribute, as payback, to the services still being provided to care, nurture, and educate the young of those other nations. If the others don't tax in the same way, well, "tough on them, it's a dog eat dog world".


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## Bevdeforges

Good points. I must say that I've always been kind of puzzled about the big switchover from the idea that US citizenship could/should be taken away from those who commit certain "expatriating acts" (like serving in a foreign army, taking a second nationality or working for a foreign government - and let's not forget the campaign to strip Jane Fonda of her citizenship after she visited North Vietnam) to the current situation where it's difficult and expensive to voluntarily renounce. 

Giving up one's birth nationality is a huge decision for most people and involves not only certain financial and legal consequences and risks, but also a whole range of psychological issues related to identity. 
Cheers,
Bev


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## BBCWatcher

theOAP said:


> If the others don't tax in the same way, well, "tough on them, it's a dog eat dog world".


Well, yes. If you're the big dog in the world, you get to make the big dog's decisions.

Again, _all_ citizenships come with some assortment of rights, privileges, and obligations. United States citizenship has these obligations applicable to its citizens living overseas -- and I think I've got them all:

1. Obey the laws of the United States, including (notably) the Foreign Corrupt Practices Act;

2. If a young male, register with U.S. Selective Service at age 18;

3. If you hold or have authority over non-U.S. financial accounts valued at $10,000 or more in the aggregate at any point in time during the year, file an annual report with the U.S. Treasury;

4. If you father or give birth to a child overseas who is eligible for U.S. citizenship, document that child's citizenship;

5. If you ever travel to the U.S., enter the U.S. only with a U.S. passport;

6. Pay U.S. tax on your U.S. source income. In the fairly unlikely event you owe U.S. income tax and/or social security payroll tax on your non-U.S. source income -- more likely if you're relatively well-to-do or better and living in a comparatively lower tax jurisdiction -- then pay it.

I've _never_ met a U.S. citizen who enjoys obligation #6, but there it is. I certainly don't enjoy it. And yes, if you don't like that obligation, the exit door is open and available. If you don't like the obligations associated with any particular citizenship -- not just U.S. -- then don't continue that citizenship. The rights and privileges come with obligations. Always. Don't like one or more of the obligations? Then you don't get to enjoy the rights and privileges. It's a package deal, not a la carte.

Sorry, but that's just _reasonable and logical_. No, it's not dismissive to point this stuff out. I'd argue the same thing about Australian citizenship or Ugandan citizenship. Work within the respective political processes to modify the assortment of rights, privileges, and obligations you experience, or reject the total package deal if you've got another package deal available. Yes, exactly, millions of people choose the U.S. package deal over others when they emigrate to the United States.

Now, if the _second_ century with obligation #6 ends up causing the United States pain, grief, loss, or whatever, then so it does. It's a democratic republic, and all democratic republics -- all governments -- at least occasionally err. But I've heard the U.S. has done pretty well over the past century. You've at least got to _consider_ that the world's #1 economy might have at least a couple good ideas.

By the way, there used to be a live obligation #7 up until about 1972: military conscription. On a per capita basis at least that was a much bigger motivation for U.S. citizenship terminations.


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## Bevdeforges

Your obligation #6 is pretty common in many other countries, too. Even NRAs pay US tax on US source income. And investment accounts that offer "foreign" stocks and bonds generally pay income to investors net of the taxes paid to the source jurisdiction. I don't think anyone is objecting to that.

And I only wish that the requirement were only to pay tax on US source income. I think we'd eliminate all the _angoisse_ here (and elsewhere) if that were the case.
Cheers,
Bev


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## byline

Bevdeforges said:


> And I only wish that the requirement were only to pay tax on US source income. I think we'd eliminate all the _angoisse_ here (and elsewhere) if that were the case.


Hear, hear!


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