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John Richardson Interview With Danielle Smith About FATCA and @Citizenshiptax

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On November 12, 2019 CBC Reporter Elizabeth Thompson published an interesting article. The article, reported that “Nearly a million bank records sent to IRS“. Ms. Thompson’s article is quite brilliant for one simple reason. The article focuses on the fact that it is the bank records of CANADIAN RESIDENTS that are being sent to the IRS. Specifically the article leads with:

Number of government transfers of records of bank accounts held by Canadian residents to U.S. has been rising.

The number of banking records the Canadian government is sharing with U.S. tax authorities under a controversial information-sharing deal has increased sharply, CBC News has learned.
The Canada Revenue Agency sent 900,000 financial records belonging to Canadian residents to the Internal Revenue Service in September — nearly a third more than it sent the previous year. The records were for the 2018 tax year.

It also has updated the number of records shared for the 2017 tax year to 700,000 from the 600,000 originally reported.

“That’s a lot,” said John Richardson, a Toronto lawyer and co-chair of the Alliance for the Defence of Canadian Sovereignty, which is fighting the information-sharing deal. “That’s a lot of files.”

The number of financial records of Canadian residents being shared with the IRS has risen steadily since the information sharing agreement began — from 150,000 in 2014 to 300,000 in 2015 and 600,000 for the 2016 tax year.

Now, that (as reflected in the comments) is what got people’s attention! The article does not focus on FATCA (which is often portrayed in the media as tax evasion law). Rather the article focuses on the effect of FATCA and describes FATCA as:

The information transfer is the result of a controversial information-sharing agreement between Canada and the U.S. that was negotiated after the U.S. government adopted the Foreign Account Tax Compliance Act (FATCA).

The law, adopted in a bid to curb offshore tax evasion, obliges foreign financial institutions to report information about accounts held by people who could be subject to U.S. taxes.

Unlike most countries, the United States levies income taxes based on citizenship rather than residency; some Canadians end up facing U.S. taxes because of an American parent, or because they were born in a hospital on the other side of the border.

The article makes the connection between the transfer of information to the IRS and the imposition of U.S. tax on the holders of those accounts! In other words, this information sharing agreement (called FATCA) is described as being for the purpose of helping the United States of America (that “Great Citadel of Freedom and Justice”) impose direction taxation on Canadian residents. Yes, it’s true.

First, the United States imposes worldwide taxation, according to the U.S. Internal Revenue Code, on certain residents of other countries.

Second, the U.S. Internal Revenue Code imposes a separate and more punitive tax system on residents of other countries (here are 12 different examples) than it does on U.S. residents (“Separate but equal” anybody).

Third, the information sharing agreement (referenced in the article) called FATCA is a tool to enable imposing U.S. taxation on the residents of Canada and other countries.

Fourth, the primary impact of FATCA is on individuals who were born in the United States but do not live in the United States. Individuals experience the impact of FATCA in the following two ways:

1. Impact Via The Tax Compliance Industry: It pressures them to comply with the tax and reporting provisions of the Internal Revenue Code. Some people enter the U.S. tax system and effectively agree to U.S. taxation.

2. Impact Via The Banks: In some countries people have experienced limited access to bank (and other financial) accounts unless they are willing to supply U.S. tax identification numbers.

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John Richardson – Follow me on Twitter @Expatriationlaw

#Citizide? Letting Go And Moving On – Online Renunciation Discussion

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The situation for many Americans abroad has reached the boiling point. On Saturday November 9, 2019 I will be hosting an online discussion about renunciation generally and HOW TO DECIDE WHETHER IT MAKES SENSE FOR YOU SPECIFICALLY. The time will be 7:00 a.m. EST (Toronto time). This means that it should work for people in most parts of the world. Although, general in nature, I will attempt to answer as many individual questions as time permits. I recognize that this is a very difficult issue for people – spanning the emotional, financial, identity, etc. That said, the U.S. Government is forcing Americans abroad to consider renunciation as a defensive measure to protect themselves and their families.
See the announcement on Twitter below.

If you are not on Twitter feel free to email me at: expatriationlaw at outlook dot com for registration.

The discussion will last approximately one hour.

John Richardson – Follow me on Twitter at @Expatriationlaw

If you are not on Twitter feel free to email me at: expatriationlaw at outlook dot com for registration.

To be FORMWarned is to be FORMArmed! The easiest way to receive a Form 3520A penalty would be to file a Form 3520

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There is evidence from both tax practitioners and from individuals that Americans abroad are suffering from a “Form 3520A” penalty epidemic. Some of the best discussion of both the scope and technicalities of this problem may be found at Tax Connections. See particularly the posts here, here and here. (Mr. Carter’s original post was also reproduced at American Expat Finance.) The posts have attracted commentary from a number of tax professionals. The IRS Taxpayer Advocate has been invited to intervene.

“Tax Compliant” Americans Abroad are just a penalty waiting to happen!

Americans abroad are potentially required a very large number of IRS forms.

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The Moore case – A recent Form #T1135 taxpayer victory

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This is the fifth post in my series of posts about Canada’s Foreign Asset reporting requirements. The first post described the range of Foreign Asset reporting requirements. The second post discussed the conditions which trigger the requirement to file Form T1135. The third post focuses on how to complete and file Form T1135. The fourth post was a short summery of the penalties for failing to file T1135. This fifth post is about the recent Moore case which was an example of taxpayer victory in resisting the draconian and unreasonable Form T1135 penalties.

The Judgement of Boyle, J really speaks for itself.

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Failure to file Canada Foreign Property Returns – #T1135 – Penalties and voluntary disclosure

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Introduction – Form T1135 is a “Penalty Jackpot” for the Canada Revenue Agency

To be FORMwarned is to be FORMarmed!

On July 14, 2019 the text on the page referenced in the above tweet included:

Penalties

This page provides information (including a table of penalties and frequently asked questions) about penalties for late or improperly filed forms and information returns.

Failing to file

The penalty for failing to file a return is $25 per day for up to 100 days (minimum $100 and maximum $2,500). This penalty does apply to Form T1142.

When failing to file is done knowingly or under circumstances amounting to gross negligence, the penalty is $500 per month for up to 24 months (maximum $12,000), less any penalties already levied. This penalty does not apply to Form T1142.

After 24 months, the penalty is 5% of whichever of the following resulted in the requirement to file the information return, less any penalties mentioned above already levied:

– the cost of the foreign property

– the fair market value of the property transferred or loaned to the trust

– the cost of the shares and indebtedness of the foreign affiliate

– Note – This penalty does not apply to Form T1142.

The CRA may issue a demand to file a return to a person or partnership under subsection 233(1) of the Income Tax Act. If so, and if the person or partnership knowingly or under circumstances amounting to gross negligence fails to comply with the demand, the penalty is $1,000 per month for up to 24 months (maximum $24,000), less any penalties already levied.This penalty does apply to Form T1142.

False statements or omissions

A penalty applies to people who knowingly or under circumstances amounting to gross negligence make false statements or omissions in an information return.

For Form T1142, the penalty is the greater of either:

– $2,500 or
– 5% of whichever of the following the false statement or omission was made about:
– the fair market value of the distributed property or
– the indebtedness

For the other information returns, the penalty is the greater of either:

– $24,000 or
– 5% of whichever of the following the false statement or omission was made about:
– the cost of the foreign property
– the fair market value of the property transferred or loaned to the trust or
– the cost of the shares and indebtedness of the foreign affiliate

Due diligence exception for penalties

The penalty for omissions on Forms T1134 and T1141 does not apply to taxpayers who make diligent efforts to get the requested information and who:

– disclose in the return the unavailability of the information and file the information within 90 days of it later becoming available

A “Table Of Penalties” may be found here.

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John Richardson – Follow me on Twitter @Expatriationlaw

A Form T1135 Primer – How to complete and file Form T1135

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Possible Updates!! Note that this was written in July of 2019. You should use this as a guide but make sure to work with the current rules (they have likely changed).

This is the third post in my series of posts about Canada’s Foreign Asset reporting requirements. The first post described the range of Foreign Asset reporting requirements. The second post discussed the conditions which trigger the requirement to file Form T1135. This third post focuses on how to complete and file Form T1135.

For many individuals, the threshold question of WHETHER you are required to file Form T1135 will be more difficult than HOW to file Form T1135.

This post ASSUMES that you have met the reporting threshold and focuses on:

1. A review of whether Form T1135 is required

2. What information is required to be reported on the T1135

3. How to complete Form T1135

4. Where/how to file Form T1135

Form T1135 is available on the Canada Revenue Agency site here.

I have also uploaded the form.

t1135-17e

You should print the form and have it available while you read this post. Form T1135 has broken the different categories of assets into seven different categories of foreign property.

Here we go …

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Part 9 of series: How do US Tax Rules Constrain the Investment Choices of US Taxpayers Living in Australia?

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Before moving to the post, if you believe that Americans abroad are being treated unjustly by the United States Government: Join me on May 17, 2019 for a discussion of U.S. “citizenship-based taxation” as follows:

You are invited to submit your questions in advance. In fact, PLEASE submit questions. This is an opportunity to engage with Homelanders in general and the U.S. tax compliance community in particular.

Thanks to Professor Zelinsky for his willingness to engage in this discussion. Thanks to Kat Jennings of Tax Connections for hosting this discussion. Thanks to Professor William Byrnes for his willingness to moderate this discussion.

Tax Connections has published a large number of posts that I have written over the years (yes, hard to believe it has been years). As you may know I oppose FATCA, U.S. citizenship-based taxation and the use of FATCA to impose U.S. taxation on tax residents of other countries.
Tax Connections has also published a number of posts written by Professor Zelinsky (who apparently takes a contrary view).

This is post 9 in my series leading up to the May 17 Tax Connections discussion. The first eight posts have been for the purpose of demonstrating:

– in posts 1 to 4, Laura Snyder did a wonderful job in explaining how the U.S. tax system impacts the lives of Americans abroad. Her specific focus was on those individuals who identify as being U.S. citizens

– in post 5, I extended the discussion to reinforce that what the U.S. calls “citizenship-based taxation” is actually a system that impacts far more than those who identify as being U.S. citizens. In fact it burdens every individual on the planet who can’t demonstrate that he is a “nonresident” alien (people are renouncing U.S. citizenship because they can save themselves ONLY if they become a “nonresident alien”).

– in Post 6, I added the thoughts of Toronto Tax Professional Peter Megoudis who explained how those who are connected to “U.S. persons” (through family or business arrangements) can be impacted by the U.S. tax system

In Post 7, I extended the analysis to explain that:

1. Not only does the United States impose worldwide taxation on individuals who don’t live in the United States; but

2. The system of worldwide taxation imposed is in reality and separate and far more punitive collection of taxes than is imposed on Homeland Americans.
Think of it! With the exception of the United States, when a person moves away from the country and establishes tax residency in another country, they will no longer be taxed as a resident of the first country.

But in the case of the United States: If a U.S. citizen moves from the United States and establishes tax residency in a new country: (1) he will STILL be taxable as a tax resident of the United States (2) he will be subjected to a separate and more punitive system of taxation! (3) he will have to engage in financial planning according to the rules of the tax system where he resides. #YouCantMakeThisUp! I recently discussed this on Quora as follows …

Read John Richardson's answer to What would I, as an American citizen, need to do to manage my finances (such as an investment portfolio) if I decided to move to Canada? What pitfalls await? on Quora

We will now see how being subject to the U.S. tax system disables the individual, from being able to engage in the normal financial planning, that is optimal under the tax system where he resides. In effect, he will lose the tax benefits which are available to “non-U.S.” residents of his country of residence. The biggest cost of this is NOT the additional tax. The biggest cost is the opportunity cost of being disabled from normal financial planning. A discussion of “lost investing opportunity” in Canada is here.

Dr. Karen Alpert will now explain how the “loss of opportunity” works in an Australian context.

Australia – A Study
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Part 8 of series: Former ACA Tax Director Jackie Bugnion recalls the 2014 Kirsch Schneider debate on "citizenship-based taxation"

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Before moving to the post, if you believe that Americans abroad are being treated unjustly by the United States Government: Join me on May 17, 2019 for a discussion of U.S. “citizenship-based taxation” as follows:

You are invited to submit your questions in advance. In fact, PLEASE submit questions. This is an opportunity to engage with Homelanders in general and the U.S. tax compliance community in particular.

Thanks to Professor Zelinsky for his willingness to engage in this discussion. Thanks to Kat Jennings of Tax Connections for hosting this discussion. Thanks to Professor William Byrnes for his willingness to moderate this discussion.

Tax Connections has published a large number of posts that I have written over the years (yes, hard to believe it has been years). As you may know I oppose FATCA, U.S. citizenship-based taxation and the use of FATCA to impose U.S. taxation on tax residents of other countries.
Tax Connections has also published a number of posts written by Professor Zelinsky (who apparently takes a contrary view).

This is the eigth of a series of post I have written as a run up to the May 17, 2019 Tax Connections discussion about U.S. citizenship-based taxation. You can read the previous posts here.

Introducing Jackie Bugnion …

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Part 7 of series: Tax Law to American Abroad – “How Do I Hate Thee, Let Me Count the Ways

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Before moving to the post, if you believe that Americans abroad are being treated unjustly by the United States Government: Join me on May 17, 2019 for a discussion of U.S. “citizenship-based taxation” as follows:

You are invited to submit your questions in advance. In fact, PLEASE submit questions. This is an opportunity to engage with Homelanders in general and the U.S. tax compliance community in particular.

Thanks to Professor Zelinsky for his willingness to engage in this discussion. Thanks to Kat Jennings of Tax Connections for hosting this discussion. Thanks to Professor William Byrnes for his willingness to moderate this discussion.

Tax Connections has published a large number of posts that I have written over the years (yes, hard to believe it has been years). As you may know I oppose FATCA, U.S. citizenship-based taxation and the use of FATCA to impose U.S. taxation on tax residents of other countries.
Tax Connections has also published a number of posts written by Professor Zelinsky (who apparently takes a contrary view).

This is post 7 in my series leading up to the May 17 Tax Connections discussion. The first six posts have been for the purpose of demonstrating:

– in posts 1 to 4, Laura Snyder did a wonderful job in explaining how the U.S. tax system impacts the lives of Americans abroad. Her specific focus was on those individuals who identify as being U.S. citizens

– in post 5, I extended the discussion to reinforce that what the U.S. calls “citizenship-based taxation” is actually a system that impacts far more than those who identify as being U.S. citizens. In fact it burdens every individual on the planet who can’t demonstrate that he is a “nonresident” alien (people are renouncing U.S. citizenship because they can save themselves ONLY if they become a “nonresident alien”).

– in Post 6, I added the thoughts of Toronto Tax Professional Peter Megoudis who explained how those who are connected to “U.S. persons” (through family or business arrangements) can be impacted by the U.S. tax system

In this, Post 7, I am extending the discussion to explain that:

1. Not only does the United States impose worldwide taxation on individuals who don’t live in the United States; but

2. The system of worldwide taxation imposed is in reality and separate and far more punitive collection of taxes than is imposed on Homeland Americans.

I have previously written on this topic at Tax Connections:

Think of it! With the exception of the United States, when a person moves away from the country and establishes tax residency in another country, they will no longer be taxed as a resident of the first country.

But in the case of the United States: If a U.S. citizen moves from the United States and establishes tax residency in a new country, (1) he will STILL be taxable as a tax resident of the United States and (2) will be subjected to a separate and more punitive system of taxation! #YouCantMakeThisUp!

Although this truth is rarely understood and is rarely stated (it’s one of America’s “dirty little secrets”) here is an excerpt from a discussion I had with three international tax experts:

In this series of posts I am incorporating the thinking and writing of guest bloggers. In order to guide us in this discussion I welcome Virginia La Torre Jeker, a U.S. tax lawyer based in Dubai. I have previously featured Virginia in my “Unsung Heroes Of Life” Series.

Now on to Virginia La Torre Jeker …

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