Tuesday, January 10, 2012

Press Release for Canadian-Americans

Press Release: Isaac Brock Society

Posted by Petros — January 10, 2012

Caution to U.S. Citizens and U.S./Canada dual citizens who are residents of Canada about the IRS announcement (IR-2012-5) January 9, 2012, regarding Offshore Voluntary Disclosure

On January 9, 2012, the IRS announced a renewed Offshore Voluntary Disclosure program. This is an IRS program designed to bring tax cheats into compliance. During the last two disclosure programs in 2009 and 2011, a significant number of unsuspecting Canadian residents entered these programs to “make it right” with IRS. We strongly warn law-abiding Canadian residents of the dangers of entering this program which is intended to attract tax cheats who live in the United States but have undisclosed offshore accounts.

The United States has dusted off a long neglected, possibly unconstitutional law which requires all United States persons to file a yearly disclosure of foreign financial accounts (FBAR). There is widespread ignorance of FBAR, and up until recently, very limited compliance. A significant number of Canadians learned about the 2011 Offshore Voluntary Disclosure program from the Canadian media and entered it in fear, not realizing that the IRS had every intention of levying fines of 25% of their net worth (or in some cases 5% for those who were unaware that they were United States citizens), even though in most cases they owed no taxes to the United States, had no knowledge of the FBAR reporting requirement, and had innocent and necessary bank accounts in accordance with the laws of Canada. As a result of this crackdown by the IRS, Finance Minister Jim Flaherty went to bat for Canadian residents, insisting that the IRS get off the backs of hard working Canadian residents who had done no wrong and who were abiding by the tax and banking laws of Canada. “Canada is not a tax haven”, he insisted. As a result of Flaherty’s efforts, United States Ambassador to Canada, David Jacobson tried to assure Canadians that the IRS was not out to get grandma’s bank accounts. He said, “My message on this is to sit tight. We are not unreasonable. We are not unsympathetic. We are not irresponsible.” Law abiding residents of Canada, please do “sit tight”. Do not enter this program out of fear, and do not allow a lawyer to enter you into this program without clearly explaining why you should. If you enter the program, the IRS will surely fine you up to 27.5% of all of your monetary and non-monetary financial assets.

All residents of Canada, who may be affected by the extra-territorial reporting requirements of the United States, should also know the following points:

(1) The Canadian government has said it will not enforce the collection of FBAR fines. Thus the IRS has no means to collect fines from any accounts in Canada.

(2) The Canadian government has said it will not collect taxes for the IRS from Canadian citizens, provided that the person incurred the tax liability while a Canadian citizen.

(3) The IRS cannot be trusted. The Tax Advocate Service, the ombudsman service within the IRS, issued a rare Tax Advocate Directive rebuking the IRS and ordering them to respect the terms of the program and be more lenient, returning to the policy of the FAQ 35 which said that those who enter the program would not be fined more than they would have under existing statutes. To date the IRS has ignored the Taxpayer Advocate Directive. This suggests that the IRS has decided that Offshore Voluntary Disclosure should be a revenue generating instrument and apply the fines of 20% and 25% without regard to the innocence of the people that entered into the program. The IRS presumes that everyone who enters these programs is a tax cheat.

(4) We must stress that the Offshore Voluntary Disclosure program, which the IRS has announced, is not a mandatory law but a voluntary program. Therefore, enter it only if you wish to relinquish voluntarily 27.5% of your hard earned savings and other assets to the IRS.

(5) If you are a United States citizen or Green Card holder and are or were unaware of your filing requirements, we urge you to get sound information regarding your rights and responsibilities from reliable sources. If you are living in Canada and abiding by Canadian tax laws, you are not a criminal nor should you permit the government in Washington D. C. to treat you as one. Know also that “cross border” accountants and lawyers do not have equal standards of competency or morality. Buyer beware!

Peter W. Dunn has written this press release on behalf of the Isaac Brock Society, which is an informal group of individuals who are concerned about the treatment by the United States government of US persons who live in Canada and abroad. We have come together to fight the overreach of the IRS and to provide one another with accurate information, peer-to-peer advice and comfort. Our website is http://isaacbrocksociety.wordpress.com.


Anonymous said...

If you don't like American law, give up your citizenship.

Don't sit and whine like a liberal.

I'm a proud American with Canadian citizenship as well and I have no problems filing yearly tax returns for both countries.

It's not very hard at all.

Anonymous said...

Dear Anonymous,
But just to be safe buddy, stay anonymous. I note too that you say you are a proud American and a Canadian citizen, not a proud Canadian and an American citizen.

Anonymous said...

If it is that easy, then why are the forms for those 'abroad' - outside of the US so much more difficult and so much more extensive - even in the absence of any US source income, and without actually owing any US tax?

It's not about being a liberal or conservative. Even conservatives don't agree with being subject to tax and penalties without representation - which we don't have (many states don't allow for citizens abroad to register or vote). Even the archest conservative does not want to be subject to arbitrary whims of government without good reason. You can't think that most of those who object are criminals or millionaires, but just ordinary people?

It is mostly about the FBAR and FATCA reporting. Do you think you should have to report any and all accounts (workplace, charitable org., children's b'day money acct, power of attorney accts, non-US spouse joint acct, etc.) just because you are a 'signatory' even if the assets aren't actually yours? What if the accounts belong to Canadians living in Canada - who are not dual or US citizens? Isn't that a breach of their privacy and an infringement on Canadian sovereignty? People in Kansas bank in Kansas, people in Canada, bank in Canada - it's not an 'offshore' 'tax haven' - we already pay our taxes here. Only the US and Eritrea make citizens file and pay taxes outside of their country of residence. http://expatsinca.wordpress.com/2011/11/19/eritreas-extortion/

And then on top of that, paying a penalty that surpasses the asset total - simply for not filing a form, or for not knowing it existed? http://www.pappasontaxes.com/index.php/2010/10/20/19508/http://online.wsj.com/article/SB10001424052748703643104576291003798203320.html

By the way, the US Supreme Court retroactively (by many years) restored citizenship to many who had lost it - by striking down provisions in place when they became Canadians - which they could not have known. http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&vol=444&invol=252
The laws that decide who is a citizen have been changed many times http://www.aca.ch/citizhis.pdf

US and British tax systems are considered the most complex in the world, and continue to become even more so. http://usgovinfo.about.com/od/incometaxandtheirs/a/Tax-Code-Complexity.htm http://www.cbsnews.com/stories/2011/04/17/sunday/main20054697.shtml

Giving up the citizenship is very difficult now - made more so since 2008, involves an exit tax, and mandatory IRS compliance for an extended number of years - and all for what? http://renunciationguide.com/Background-and-History-of-Tax-On-Expatriation.html

Even the IRS Taxpayer Advocate is censuring the OVDI programs for unfairness, inconsistency, and automatic presumption of guilt - without any evidence.

Yappa said...
This comment has been removed by the author.
Yappa said...

Giving up your citizenship only can help you escape liability for past years if you can prove that you didn't think you had US citizenship during those years that you didn't file. So say you took out Canadian citizenship before 1980, back in the days when doing so caused you to lose your US citizenship. Then after that you never did anything like vote or apply for a passport. Then you MIGHT be able to clear your name by renouncing your citizenship. You might still be fined. Someone decides on a case by case basis.

But if you have done anything like vote or apply for a passport that recognizes you were a US citizen, and if you have missed any filings, then you are liable for fines - even if you never owed any US taxes and even if you now renounce your citizenship.

As a matter of fact, when I applied to get my US citizenship back (in the early 80s) I asked at the consulate if I had to file tax returns, and I was told no - not unless I had a huge income. Since then I have asked tax lawyers and been told the same thing.

So anyway, the doofus who signed himself as anonymous at 11:41 is probably liable for fines but is too busy acting like an asse to realize it. To the other anonymouses: thanks! Interesting comments.