# Compliancy - It's begun (for me)!



## KeithCAN1 (Mar 26, 2013)

Well I finally did it today... in my quest for compliancy (with the IRS and US Treasury), I mailed out a stack of FBAR forms (current and 6 years past) + a note explaining why I was clueless. It was an anxious moment... I was shaking at Canada Post office as I paid for postage. But at least it is done. Still anxious but some relief too. Next up is filing my current 1040 and slew of 1040X amendments. I have an accountant to help me with this. Once they get these filed, maybe I can go on with my life! 

Thanks to everyone on this forum for all the great advice. It's not over yet... but at least I took a step forward today. Hope it turns out well.

:fingerscrossed:


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## WhatAmI (Jun 17, 2013)

KeithCAN1 said:


> Well I finally did it today... in my quest for compliancy (with the IRS and US Treasury), I mailed out a stack of FBAR forms (current and 6 years past) + a note explaining why I was clueless.


Is your filing part of the Streamlined Procedure? It requires "Tax returns for the last three years for which a U.S. tax return is due, and FBARs for the last six years for which an FBAR is due". I'm wondering why you sent 7 FBARs instead of just 6.


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## Nononymous (Jul 12, 2011)

KeithCAN1 said:


> It was an anxious moment... I was shaking at Canada Post office as I paid for postage. But at least it is done. Still anxious but some relief too. Next up is filing my current 1040 and slew of 1040X amendments.


Do remember that FBAR fines cannot be collected in Canada. Not that they would likely ever be assessed.


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## WhatAmI (Jun 17, 2013)

Nononymous said:


> Do remember that FBAR fines cannot be collected in Canada.


I think this is only true for Canadian citizens. A USC resident in Canada but not a Canadian citizen is somewhat different, but I haven't tried to understand what might actually happen.


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## Nononymous (Jul 12, 2011)

WhatAmI said:


> I think this is only true for Canadian citizens. A USC resident in Canada but not a Canadian citizen is somewhat different, but I haven't tried to understand what might actually happen.


Correct. Dual citizens are apparently protected from any attempt to touch Canadian assets.


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## WhatAmI (Jun 17, 2013)

Nononymous said:


> Correct. Dual citizens are apparently protected from any attempt to touch Canadian assets.


If only our Feds would remember this when deciding what to do about FATCA.


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## Nononymous (Jul 12, 2011)

WhatAmI said:


> If only our Feds would remember this when deciding what to do about FATCA.


One can hope. The reaction to FBAR was encouraging - we won't collect, don't lose sleep - so I expect FATCA will be greatly watered down whenever it finally appears.


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## Pacifica (Oct 19, 2011)

For further information, here are links to some source and background material regarding the fact that Canada Revenue Agency will not assist IRS is collecting tax against a Canadian citizen who was a Canadian citizen at the time the tax liability arose and they will not assist IRS in collecting FBAR penalties against anyone in Canada.

***

Convention Between Canada and the United States of America*With Respect to Taxes on Income and on Capital
Article XXVI A
Assistance in Collection
8. No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that
(a) where the taxpayer is an individual, the revenue claim relates to a taxable period in which the taxpayer was a citizen of the requested State

***

Don Cayo of the Vancouver Sun posted a statement received from the Ministry of Finance:
Reposting: Canadian government won’t hound residents for the IRS | Vancouver Sun

***
Expatsinca posted a letter received from Finance Minister Flaherty containing this paragraph. The full text is at Encouraging letter from Finance Minister Jim Flaherty | Expats in Canada

“Please be aware, we have been clear that penalties imposed by the IRS under FBAR will not be collected by the Canada Revenue Agency (CRA) on their behalf. While the Canada-United States Income Tax Convention contains a provision that allows for the collection by a country of taxes imposed by the other country, this does not apply to penalties imposed under laws that impose only a reporting requirement. Furthermore, the CRA does not and will not collect the U.S. tax liability of a Canadian citizen if the individual was a Canadian citizen at the time the liability arose (whether or not the individual was also a U.S. citizen at the time).”


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## BBCWatcher (Dec 28, 2012)

That might work as long as neither you nor your financial assets become subject to U.S. jurisdiction. "Will not assist" (at present) is far away from "Can help you if you're arrested in the U.S. or if your Apple stock dividends are garnished."


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## Nononymous (Jul 12, 2011)

Yes, it goes without saying that the Canadian government cannot protect your US assets. 

Despite my fondness for flouting their various laws, I'll be the first one to agree that pissing off the US is not a good idea if you spend time there or have assets there. However, the point remains that if you're a dual US-Canadian citizen in Canada, your Canadian assets are (currently) safe from the long arm of the US government.


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## KeithCAN1 (Mar 26, 2013)

WhatAmI said:


> Is your filing part of the Streamlined Procedure? It requires "Tax returns for the last three years for which a U.S. tax return is due, and FBARs for the last six years for which an FBAR is due". I'm wondering why you sent 7 FBARs instead of just 6.


I don't quite qualify for the Streamlined Procedure because I actually have been filing my 1040 forums. The problem is that I was filing them incorrectly (I didn't report RRSP, TSFA, RPP, etc) and I didn't know about FBAR and FATCA. The Streamlined is applicable for people who never filed anything.

Hence my accountant recommended current + 6 back years of FBARS and a current 1040 + 6 years back 1040X (and FATCA where applicable)


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## KeithCAN1 (Mar 26, 2013)

Nononymous said:


> Despite my fondness for flouting their various laws, I'll be the first one to agree that pissing off the US is not a good idea if you spend time there or have assets there. However, the point remains that if you're a dual US-Canadian citizen in Canada, your Canadian assets are (currently) safe from the long arm of the US government.


Yep, I'm one of those where it is in my best interest to stay in good standing with the US. Not only do I have a lot of family in the US, but I do a lot of business in the US also. I also have accounts in the US. I can't just tell the US to go ****** off...


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## Nononymous (Jul 12, 2011)

Well there you go.

I do feel I have a certain moral duty to tell people to calm down, relax, not worry, and above all, make an informed decision about whether it's in their best interests to become compliant.

If I was a US citizen but was not born in the US, had little or no intention to live in the US, and had another citizenship, I would think long and hard about whether I wanted to make my existence known to the IRS. 

But if you have significant work and family connections, then obviously it's the smart thing to do.

Mostly though, it's important that people relax; particularly they need to realize that the penalties exist only on paper (for now, at least) and are not easily collected outside of the US.

FATCA is going to be such a <poop>-show when it finally hits the headlines in Canada. Personally, I can't wait. It will be hilarious. I seriously think eggs will be thrown at the US embassy.


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## KeithCAN1 (Mar 26, 2013)

Nononymous said:


> FATCA is going to be such a <poop>-show when it finally hits the headlines in Canada. Personally, I can't wait. It will be hilarious. I seriously think eggs will be thrown at the US embassy.


I certainly hope so. Maybe the US govt will get the message then. With all the recent fiasco of spying and snooping and such, FATCA would be treated with more hostility than ever.


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## BBCWatcher (Dec 28, 2012)

Nononymous said:


> I seriously think eggs will be thrown at the US embassy.


What, Fabergé eggs? 

I think you're seriously overestimating the level of popular political support for the idea that the Canadian government and/or Canadian banks must go to the mat to shield relatively wealthy (and very wealthy) Americans from disclosure of their finances to American tax authorities.

Singapore reached an "amicable" agreement with the U.S. for FATCA reporting, and Singapore (unlike Canada) actually has strong bank secrecy laws.

I just don't see it.


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## Bevdeforges (Nov 16, 2007)

I have to say I agree with BBCWatcher on this one. The US isn't going to back down on this stuff - especially with the OECD and other countries praising the FATCA legislation for aiding the fight against money laundering and tax evasion.

What we can hope for is that the limited resources available to the IRS will continue to keep them focused on the "well to do" so that those of us of more modest means will be left alone. However, it pays to bear in mind the fact the FATCA is merely disclosure, and that it is cheap insurance to disclose all relevant foreign accounts as long as you aren't using them to avoid taxation. 

The real issue is that of taxation based on citizenship, which I don't think there is much we can do about. It sucks, it bites, it's unfair - but it's the way it is and something we have to deal with. OTOH, it's not that easy to enforce if you are of modest means...
Cheers,
Bev


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## Nononymous (Jul 12, 2011)

Oh I don't think anything will change too hugely, it will be watered down though. What's somewhat unique about Canada is the sheer number of dual citizens, possibly as high as one million, and "mixed marriages" with one dual citizen. There are in particular three situations that seem to provoke a lot of outrage:

1. Americans who came here in the 70s, naturalized, assumed they had given up their US citizenship, but have recently learned that the US retroactively restored that citizenship at some point and suddenly they have reporting obligations. (I have no idea how this works or even if it's true, I'm just reporting what I've heard.) Given how many left during Vietnam, that's a sizable group.

2. The "accidental Americans" born in Canada with a US citizen parent or parents, who are learning of citizenship obligations despite never having lived in the country. They are not very pleased, some of them. Again, there are a lot.

3. Canadians with dual-citizen spouses (i.e. my wife) who are learning that they would be required to report information about joint financial accounts to the US government. Trust me, this really, really pisses people off. It's one thing to hear about FATCA when you know you have the citizenship (annoying but on some level you probably figure it's the price you pay for having the passport) but when you are exclusively Canadian and suddenly your spouse tells you that they are supposed to be sending your account information south of the border, the reaction tends to be rather visceral.


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## maz57 (Apr 17, 2012)

Canada has a long standing agreement with the US for exchange of information about the two country's respective tax residents. The difference between the existing agreement and FATCA is that FATCA (as it's written) will require Canadian financial institutions to report the information of those deemed to be US persons directly to the IRS instead of to the Canada Revenue Agency. It is, in effect, a warrantless search. Reporting such information to an agency of a foreign government without the person's consent would be a breach of Canada's privacy laws. I doubt many Canadians would give such consent.

The existing agreement already allows the IRS to ask the CRA for information on specific US taxpayers. It's certainly not a blanket reporting of anyone deemed to be a US person like FATCA. If the IRS makes a proper request the information will be forthcoming from the CRA. The idea that an American would choose Canada to evade US taxes is ludicrous, hence the application of FATCA to Canada is equally ludicrous. 

The much vaunted citizenship-based taxation of the US is already partially derailed in Canada because of the long standing CRA policy of refusing to assist the IRS in the collection of a tax debt of a US person resident in Canada if that debt was incurred while that person was also a Canadian citizen. So duals are saved harmless unless, of course, they try to enter the US. The IRS could theoretically take the matter before a Canadian court and try to get a favorable judgement but the chances of that are slim to none. The judgement of a US court would have no standing in Canada.  There is also little chance that Canada will water down their privacy laws to accommodate the application of an extra-territorial law of the US. Canadian constitutional lawyers have already opined that handing that sort information over to a foreign government would be a breach of the Canadian Charter of Rights and Freedoms. The only option would be to amend the Charter, not something that is easily done. 

Supposedly the IRS and the Canadian government are working on an IGA, but there has been no news of any progress. Parliament has already adjourned for summer recess and there can be no agreement until next fall at the earliest. And it's a matter that would have to be debated and voted on in Parliament first. Even though the US and Canada are supposed to be BFF's, apparently Obama and Harper dislike each other as they are from opposite ends of the political spectrum. There is already friction from a number of other files, most notably Keystone, a Harper pet project. Unlike Obama, Harper and his Conservative Party still adhere to a few fundamantal principals of freedom and justice. If an agreement on FATCA between the US and Canada can't even be reached, the prospects for FATCA for the rest of the world going forward look considerably diminished.

And how about Russia and China? We've seen recently how willing they are to cooperate with the US on the Snowden affair. Think they are going be amenable to the application of extra-territorial US law? What would FATCA look like without Russia and China? I think it would go a long way toward a shift of financial activity from the US. After this snooping story broke and confirmed what many already suspected, the stock of the US government in Canada took a serious hit. A perceived concession of Canadian sovereignty on FATCA would be so politically unpopular that no politician would touch it with a ten foot pole.

And the notion that Americans in Canada are all wealthy tax evaders is just so ridiculous I'm surprised you even mention it, BBC. I'm sure there are a few wealthy Americans in Canada; I'm also sure they have a cadre of tax lawyers and accountants on staff and are in full compliance. We're talking here about Canadians who just want to live their Canadian lives without interference from "form nation" south of the border. Most of these people wouldn't actually owe US tax. It's the endless, expensive, time consuming filing of useless forms and restriction of investment options that is the real issue. Not to mention the gross violation of financial privacy by a foreign government. So, to answer your question, if and when Canadian banks start sending the private financial data of Canadians to a foreign government, they won't be Faberge eggs, they will be regular eggs thrown by regular people. 

And yeah, the Europeans are pretty keen to get things rolling on the tax evasion front. But they aren't likely to do deals with the US unless they get reciprocity. When Delaware, Florida, and Nevada corporations start having to hand over private information to the European tax authorities, the FATCA blowback will begin and Congress will really understand the full implication of what they have done. The US is one of the largest tax havens in the world. What's good for the goose is good for the gander.


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