# My situation



## Calgary1 (Mar 14, 2014)

Hi there,
I want to thank you for your feedback in advance. I was born in Washington while my dad (Canadian) worked there until the time I was 12. At that point, we moved to Canada where I became a dual citizen. I'm 27 and have lived and worked in Canada since I was 12.

I was in university until 2008 and never made any income prior, and became self employed in 2010. My wife (Canadian only), and I started a company together as shared owners. From 2010-2012 we've paid myself about $70,000 in net dividends. I just found out about this voluntary disclosure program, and that somehow because I was born there they may be subject to take taxes from me. I am extremely stressed as I have also abided by the law, and find the whole tax complacency a huge frustration. In 2013, I spoke to my accountant and told her the situation. She determined that it would be better to pay me a full salary of $60,000 in 2013- I paid much more tax than in years prior because of this. I've read that dividends are passive income, which may not make me eligable for the new program as one of the stipulations is "Do you owe more than $1500?"

My accountant referred me to another accountant in her office which wouldn't be consider a US only expert, but is older and knows how to file US taxes correctly. He's handling all of my FBAR and tax filing stuff. I think he's getting ready to file them for me within the next few weeks. Our company account reached just over 6 figures at one point in 2013 but all of the years prior never increased more than $50,000. I don't have any RSPs.

My question is, do you have any advice for me? Should I be worried? I was told that they are looking for "big fish" which certainly wouldn't be me, but I don't want to get caught in the net. Also, since my whole family is Canadian, and I consider myself Canadian, all of my in-laws are Canadian, I plan to live only in Canada for my whole life, but would like to visit the USA for vacation, is there a process after my taxes become up to date, that I could relinquish/renounce (I don't know the difference), my citizenship? I don't not like the USA, but I was simply born there and don't want/need any of the benefits of being a US citizen.


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## BBCWatcher (Dec 28, 2012)

Nothing to worry about. It sounds like you've just got some paperwork to file, and it's fairly unlikely you'll owe U.S. tax. Take some time to get familiar with U.S. tax filing and financial reporting and see if you can start to do this yourself, perhaps with tax preparation Web sites like TurboTax or TaxAct, as most Americans do.

If you're subject to U.S. exit taxes then renunciation of U.S. citizenship can be expensive. Otherwise it requires current tax filings and settlement of any tax owed, a fee, and (typically) a couple personal appearances at a U.S. consulate. It's rarely done -- there is substantial contingency value at least associated with U.S. citizenship (and other high value citizenships for that matter) -- but it's an option.


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## Nononymous (Jul 12, 2011)

It's at this point that I chime in with my piece. You can also consider doing what many, many thousands of people in your situation are doing - nothing. Non-compliance is a perfectly viable option, at least for the time being. Make no hasty moves, do not lose sleep, stop paying accountants (sounds like it's a bit late for that advice). 

1. Stay a million miles away from the voluntary disclosure program (OVDI, OVDP) as it's intended for actual criminal tax evaders. If you do decide to file, go the quiet disclosure route (just file old returns and be done with it) or explore the "streamlined program" option.

2. The IRS does not know that you exist. If you file, they will know about you, and you will be filing until the end of time. Think long and hard about giving up that anonymity. FATCA is potentially a concern, but the way the agreement is written actually makes it look pretty toothless, as it's not touching all the tax-sheltered accounts, and it's not clear that banks will be compelled to retroactively request citizenship information for accounts that do not hit a fairly large balance, on the order of a million.

3. If it helps you sleep nights, know that the US government has zero ability to collect fines, penalties or taxes due from dual US-Canada citizens living in Canada. If you had US assets, that's a different story, but for now, you're completely safe. 

4. If you don't already, you should probably have a US passport for travel south of the border, as they are getting stickier about this (it's the law!) and if you have a US birthplace on a Canadian passport, you may encounter grief. The passport application includes a spot for your SSN, if you have one, and technically this information can be passed on to the IRS. But there's no indication that the IRS follows up to find delinquent taxpayers abroad, so likely very little risk there.

5. Renunciation is pretty straightforward, but you need to have your tax affairs in order. You might find that simply ignoring the problem is an easier solution. It might also be the case that your business may one day expand into the US, where having citizenship could be useful, in which case becoming tax compliant might be a smart move.

6. Most folks want to be law abiding, but if you have no connection to the US and no desire to live there, then why cost yourself money following a foreign law that you really shouldn't have to care about? Paying accountants, changing the payment structure of your company so that you are liable for more Canadian tax, and so on - sounds like it's already cost you some money.


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## BBCWatcher (Dec 28, 2012)

Nononymous said:


> The IRS does not know that you exist. If you file, they will know about you, and you will be filing until the end of time.


I don't think I agree with that. The IRS knows you exist because your parents took you as a tax deduction (with a Social Security number) in most cases. They perhaps know you exist from a U.S. passport database. They often know you exist from FATCA data sharing (when that starts soon).

I don't think there's a serious _existential_ question here. Chances are really quite excellent the IRS knows you exist _if they bother checking_.

I think the real issue is whether the IRS might think you ought to be filing or not, and that depends, in simple terms, on whether you're a high income earner and/or wealthy. But I don't think it particularly depends on whether you have or have not filed a tax return in the recent past. People frequently lose their jobs and fall below the filing threshold. Some people even die. A $50K earning Canadian resident filer in tax year 2012 isn't particularly suspicious as a non-filer in tax year 2013. A $5 million earner? That's different, perhaps.

Said another way, for any/every tax agency the truthful information you report is the most boring information they have.



> If it helps you sleep nights, know that the US government has zero ability to collect fines, penalties or taxes due from dual US-Canada citizens living in Canada. If you had US assets, that's a different story, but for now, you're completely safe.


Or if you are physically present on U.S. territory. "Zero ability" is too strong. There are outstanding individual arrest warrants for tax evasion -- there's something of an "IRS Most Wanted" list. But if you don't have an outstanding warrant (or wouldn't be likely to attract one), then stepping foot in the U.S. is probably OK.

I guess another possibility is if there's an outstanding arrest warrant and you step foot in a country that has a suitable extradition treaty with the U.S.

Having an outstanding arrest warrant for U.S. tax evasion requires that you really screw up. We're not talking about an everyday event here.


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## Bevdeforges (Nov 16, 2007)

And, a middle ground - you could just start filing this year, with your salary information (since salary is subject to the FEIE and excludable up to about $97K) and file going forward - or re-characterize your "dividends" as salary and back file, taking the FEIE. As long as you are actively involved in the running of your business, you can probably justify it.

You will, of course, need a US SSN and that can take a while to get.

But the ability of the IRS to investigate these cross border things is vastly exaggerated. File something that is "reasonable" looking and chances are, you'll be done with it and never hear anything from the IRS.
Cheers,
Bev


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## Nononymous (Jul 12, 2011)

There, you have three options laid out for you:

1. full compliance
2. partial compliance
3. non-compliance

All are viable approaches. What you choose depends on your tolerance for risk versus your tolerance for BS.


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## Pacifica (Oct 19, 2011)

@ Calgary1,

Some general information on your question about renunciation and relinquishment.

Renunciation is one of seven ways in which a person can relinquish their US citizenship and obtain a Certificate of Loss of Nationality, and is set out in the Immigration and Nationality Act, s. 349(a).

Renunciation (INA s. 349(a)(5)) is signing an oath of renunciation at a consulate. It is the only form of relinquishment where the relinquishing act itself takes place at a consulate.

There are six other potentially relinquishing acts (I’m leaving out the war and treason ones). Very briefly and paraphrased, these remaining four are:

(1)	Naturalising in a foreign country after age 18
(2)	Oath to a foreign government after age 18
(3)	Being a commissioned or non-commissioned officer in the military after age 18
(4) Working for the government after age 18

In these cases, you essentially notify a consulate after you have performed the act, with the intention of relinquishing your US citizenship. “Notification” is basically by filling out some forms and meeting with a consulate official. 

Procedures vary somewhat between consulate and can change over time. Currently with Calgary, you e-mail them and they e-mail back instructions and forms. If it’s a renunciation, you’ll get a short questionnaire (13 questions, mainly name, address, date of birth stuff). If it’s for one of the other relinquishing acts, you’ll get a 4 page questionnaire (DS-4079) as they need more information for that. 

In either case, it’s done in one meeting at Calgary. Usually these meetings are about 5-10 minutes with a clerk, wait in the waiting area, then about 10-15 minutes with a consul or vice consul. The consul or vice consul reads your file before meeting you, so usually they don’t have much, if anything, to ask you. Mainly they want to make sure you know what you’re doing, so they’ll ask about that. It’s a pretty brief cut-and-dried procedure.


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