Dear Mr. President, Why I’m Leaving America

Posted on August 31, 2014 by admin

I noticed this letter on www.Forbes.com and thought I should reproduce it in full to all my clients to show that you are not alone.

“Dear Mr. President,

I am writing with a heavy heart as I, my husband, and our daughter are all seriously contemplating giving up our U.S. citizenship. We are doing this not to avoid paying U.S. taxes but because we strongly object to a system that is blatantly discriminatory and unfair to law-abiding Americans living outside the country. In addition, it has become too expensive, too difficult, and frankly, too frightening, to try to comply with all of the tax filing requirements that now apply to citizens living abroad.

My husband is 70 years old and I am 69. I was born in St. Louis, my husband in Denver, and our daughter in Toronto. When my husband graduated with a PhD in history from the University of Pennsylvania, and I with a law degree from Villanova, both in 1971, he received a job offer to teach U.S. history to Canadian university students. I began teaching law at the same university. We never expected to stay in Canada but, as you know, life is often unpredictable and we have now happily lived here for 43 years. I retired many years ago and my husband more recently.

In order to practice my profession I had to become a member of the Ontario Bar, which I did in 1985 and which required me to become a Canadian citizen. My husband did so some years later because he also wanted the right to vote in a country where we were living and raising our daughter. We have continued to vote in U.S. federal elections, we hold U.S. passports as well as Canadian, and we have never failed, in 43 years, to comply with U.S. laws that require American citizens anywhere in the world to file U.S. tax returns. Of course, that obligation does not exempt us from also having to file Canadian tax returns each year, and in some instances, paying taxes to both countries. (Please note, neither one of us receives U.S. Social Security or Medicare, so we take nothing in return from the U.S.)

And yet, we now feel like second class citizens at best, or criminals at worst. The FBAR forms that we must file every year, detailing the amount in every single financial account we have, from savings to checking to investment to retirement accounts, are filed with the Fraud Division of the U.S. Treasury Department. The message given here, along with the enormous fines for improper filing, make U.S. citizens feel like they are guilty until proven innocent.

Recently I learned that, on top of all the other tax disadvantages of being dual citizens, Americans living and working in Canada can now hold Canadian mutual funds only at their financial peril. These funds carry onerous, expensive tax filing requirements for every single fund owned, as well as attracting much higher taxes than U.S. mutual funds (which we are not allowed to hold in our Canadian investment accounts.) What this new obstacle means for U.S. citizens in Canada is that, in addition to being prohibited from buying U.S. mutual funds, we must now sell the Canadian mutual funds in our investment portfolios for a reason that has nothing to do with their inherent value or what they add to our savings and retirement strategies.

To my knowledge the IRS does not tell U.S. citizens living in America that they will be penalized for owning mutual funds domiciled in that country. So why does it feel it is fair or appropriate to penalize Americans living in Canada for simply investing in mutual funds domiciled in Canada? Let us be clear. These are not funds that are investing in terrorist activities in the Mideast. These are funds that are invested heavily in U.S. bonds and U.S. companies, as well as in Canadian bonds and companies. While the IRS looks at Canadian mutual funds as “foreign investments“, obviously for those living in Canada they are local investments!

Nevertheless, I must now instruct our investment advisor to sell them. Americans living in the U.S. pay 15% in capital gains on U.S. domiciled mutual funds. Americans living in Canada will now pay over 38% in capital gains on Canadian domiciled mutual funds, even though both funds might contain very similar investments. This places American citizens living in Canada at a distinct disadvantage in planning and saving for our retirement. What have we done to deserve this discriminatory and second class treatment? Are we to save for our old age by hiding our money under the mattress?

For many years we have been willing to pay the substantial expenses involved in using tax accountants who are qualified to file our tax returns in both countries. As you can imagine, dual citizens cannot use just any tax accountant and still feel confident that they are complying with the very confusing U.S. tax laws, tax treaty, and all of the special requirements that apply only to Americans living outside the country. This is especially true when it is the Fraud Division that investigates even the most innocent errors in filing some of the necessary forms.

However, now the overall burden and the unfairness have become too heavy to reasonably bear. My earliest known American ancestor, who sailed from Europe and settled in Kentucky 166 years ago, is probably “rolling over in his grave” to think that I am giving up my U.S. citizenship. However, growing up in Colorado I was raised and educated to stand up for what is right. I have been doing that ever since.

What America is doing to its own citizens living in other countries is not right and we have had enough. What I have outlined here is only part of the problem. All we want in return for fulfilling our responsibilities as Americans is to be treated fairly and equally. We are performing our part of the bargain. America is not.

There are approximately one million Americans living and working in Canada, and millions more in other parts of the world. I understand from our specialized tax accountant, and our cross-border consultant, that we are not alone in contemplating or taking this very dramatic and previously inconceivable step of relinquishing our U.S. citizenship. What a sad state of affairs for America and for its citizens everywhere.

Regretfully yours,

Marilyn
Ontario, Canada”

Last Chance for FBAR

Posted on December 3, 2012 by admin

Time is running out for FBARs, but we can help.

There has been quite a bit of press recently relating the US Treasury trying to find additional tax revenue related to non-US financial accounts. For those of you that have been using the “head in the sand” approach to deal with this issue, the time to take action is now… and quickly.

The American Jobs Creation Act of 2004 changed the landscape for filing the Report of Foreign Bank and Financial Account (FBAR) forever. This act changed the penalties for not timely filing the annual reporting form (Form 90-22.1) dramatically.

Under the prior law, a taxpayer had to “willfully” violate the reporting requirement. With the new law, non-willful violators can also receive a penalty of up to $10,000 per violation. Plus, it increased the penalty where there was willfulness was increased from $10,000 to the greater of $100,000 or 50% of the account at the time of the account.

While these penalty changes attracted some attention, many taxpayers decided to take no action. In many cases, the thought was that the IRS would never actually learn about their account. So, why voluntarily exposure yourself to the penalties?

Then in 2010, the US congress passed the Foreign Account Tax Compliance Act (FATCA). This act requires foreign institutions to report the account information held by US persons. This reporting will begin in Jan. 2013. Countries will be phased in, and all countries will need to be reporting by 2014.

This created some anxiety with non-filers. However, many countries were lobbying the US to change the laws. So, there was a feeling that many countries would not comply.

In November of 2012, the US treasury confirmed that they are in contact with 50 different jurisdictions to get bilateral agreements in place. They also announced that an agreement is in place with the United Kingdom, and they expect to have 16 more agreements in place by the end of this year (France, Germany, Italy, Spain, Japan, Switzerland, Canada, Denmark, Finland, Guernsey, Ireland, Isle of Man, Jersey, Mexico, the Netherlands, and Norway). The next group of countries is slightly behind, but many of them could also be completed by the end of this year (Argentina, Australia, Belgium, the Cayman Islands, Cyprus, Estonia, Hungary, Israel, Korea, Liechtenstein, Malaysia, Malta, New Zealand, the Slovak Republic, Singapore, and Sweden).

It should be noted that just because an agreement is not close, it doesn’t mean that one will not be put into place. The Treasury is actively trying to work with dozens of other jurisdictions to work out an agreement. So, it will likely only be a matter of time before they are on the list.

Still not enough? The Treasury has demonstrated little to no leniency in cases where they discover the foreign account on their own. In most cases they seek the maximum penalty.

So, the answer is to voluntary disclose your accounts and correct your tax returns as required. But, there are several programs out there. Picking the wrong one could cost you a lot of your hard earned money. Let us review your situation and pick the right program for you. We have helped many other clients in your situation get reduced and/or no penalties assessed.

The bottom line is that you want to disclose your account before the Treasury learns about it….. and you’re running out of time.

FBARs and June Extensions due this Month

Posted on June 1, 2012 by admin

June News Letter

I cannot believe June is here already – kids are out of school, summer vacations are well in swing, and I hope you are all enjoying your summer …

Below is a list of hot tax topics. We hope you find the information helpful and useful.

INDIVIDUAL INCOME TAX – JUNE 15th EXTENSION

Taxpayers who live outside the United States and Pureto Rico and whose main place of work is outside the United States, have an automatic extension of time to file until June 15th to file their US individual tax returns.

This June deadline also applies to those in military service on duty outside the U.S., but not in a combat zone or a qualified hazardous duty area. (A special longer extension applies to those individuals.)

Taxpayers with a June deadline can file a Form 4868 by June 15th to get an additional four months to file. Mererly being outside the United States on the April deadline does not give a person an extension to June 15th.

Please understand this is only an extension to file your returns and this is NOT an extension of payment. That is, if there is a balance due with your tax returns, penalties and interest will continue accruing. Therefore, we request you provide your information as soon as possible and we will file your returns as soon as possible.

FOREIGN BANK ACCOUNT RETUNS – JUNE 30th DUE

The Individual U.S. person’s Foreign Bank Account Return (FBAR) is due June 30, 2012 for the 2011 calendar year and there are no extensions to delay filing.

Further, this is not your Individual Income Tax Return (Form 1040). The FBAR is a report of your foreign (i.e. non-US) bank accounts. We often prepare this return along with the individual INCOME tax return but these are two separate returns sent to 2 separate tax authorities.

United States persons are required to file an FBAR if:

1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and

2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year.

You can read more about the FBAR here - http://www.irs.gov/businesses/small/article/0,,id=148849,00.html

Here is a link to the Form TD F 90-22.1 – http://www.irs.gov/pub/irs-pdf/f90221.pdf

Failure to file could include penalties of $10,000 per account not reported and/or jail time.

If you need assistance filing this return, please contact our office asap.

As always please feel free to contact us if you have any problems, questions, or concerns.

IRS Voluntary Disclosure Extended

Posted on January 27, 2012 by admin

WASHINGTON – The Internal Revenue Service today reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes and announced the collection of more than $4.4 billion so far from the two previous international programs.

This is the third run of this program and I would anticipant the last so make it count.

Read me here – http://www.irs.gov/newsroom/article/0,,id=252162,00.html

GEMMS

Expatriate Tax Specialist

Tag Archives: FBAR