What’s U.S. expat to do? Time for the IRS to generate trust!

Can the IRS be trusted?

“When I read all of this I was concerned. So last week I called the Commissioner of the United States Internal Revenue Service to see what we could do. I explained the problem to him.

The result is that both he and I are sympathetic to the concerns. We are going to work together to see if we can’t find a way to accommodate grandma — and others — here in Canada. But we have to figure out a way to do it without letting the person who is trying to evade taxes in the Cayman Islands off the hook.

My message on this one is to sit tight. We are not unreasonable. We are not unsympathetic. We are not irresponsible.”


David Jacobson – U.S. Ambassador t0 Canada – October 18, 2011


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Recent events have caused expats to live in a state of confusion, panic and fear. It is impossible to get consistent and credible advice from accountants and lawyers. Ambassador Jacobson has told expats to “sit tight” – that some solution will be offered – Canada is not a tax haven like the Cayman Islands. Well, so far, no solution, no answers on what to do. A large number of U.S. citizens are planning to renounce U.S. citizenship – not because of an unwillingness to pay taxes (no person who objects to paying taxes lives in Canada) – but because of a fear of FBAR penalties and the ramifications of FATCA.

The “jackboot” attitude of the IRS has made honest, patriotic, law abiding expats reluctant to come into compliance. They simply don’t know what will happen. The participation in OVDI was  low. People simply don’t trust the IRS. Lawyers do not know how to advise clients. This is not helpful to anyone. If the goal of the IRS is to bring people back into compliance, the logical course of action would to offer a real amnesty for U.S. expats.

When it comes to U.S. expats (who use bank accounts in the country they reside):

1. Very few have any intention to evade taxes; and

2. Most have every intention and desire to be tax compliant

At the present time both expats and the IRS are experiencing the worst of all possible worlds. Some of the most loyal American patriots have been deemed to be criminals by the IRS. Expats are afraid to “come in” and the IRS is not successful in bringing people into the system.

The IRS needs to clarify its objective. Does the IRS want to being expats into compliance or does the IRS want to “hunt U.S. expats” in the hopes orchestrating a massive shakedown. To put it another way: the time has come for the IRS to decide whether to bring people into compliance (which will have long term benefits for the U.S. Treasury) or behave like vicious thugs (which will discourage compliance and encourage renunciation of citizenship). So far, the evidence suggests that the latter.

I came across a poll that appeared in the Globe and Mail in September of 2011 just after the OVDI deadline. The results certainly reflect how confused people are.

This poll appeared either in conjunction with or at the same time as the infamous Margaret Wente Globe article.

Here are the poll results as of September 23, 2011:

“If you are an American citizen living in Canada, how are you planning to deal with the IRS cross-border tax crackdown?:

* I applied for the limited-time amnesty: 6% (136 votes)

* I am still working out a plan with a financial professional: 8% (160 votes)

* I am not sure what my options are: 22%
(456 votes)

* Nothing, how will they find me?: 65% (1368 votes)

Click on the link to the poll below to see where the results are today.


4 thoughts on “What’s U.S. expat to do? Time for the IRS to generate trust!

  1. CA Freeb

    I am only renouncing due to the bullying language in the FBAR penalty portion of the law AND because FATCA will require me to not have a joint checking account with my spouse in Canada or have to report HIS income. He is not American and I do not work outside our home. So I’d be reporting on a Canadian and he of course objects to this, not being American and never having lived or worked there. No one should have been put in this position in the first place. I did not want to renounce, and now that will also lead me to further inspection every time I want to travel to the U.S. to visit my family there. I want to know what Jacobson has done or heard about any amnesty for Canada. There are nearly Americans here and we are waiting to find out what he meant by “sit tight” If we sit tight too long Mr. Jacobson we’re the ones in trouble with the treasury, on the hook for huge FBAR fines and perhaps in trouble with the IRS. We’re the ones having to choose between our Canadian family and our country of birth, not you Mr. Jacobson. Some of these decisions cannot be undone and in any case affect us for the rest of our lives. Where are the details! “Sit Tight” is not a detail nor is it the law like FBAR penalties and FATCA are. Can I refer to your “sit tight” comment to the treasury dept if I am assessed penalties on no taxes owed because I am late filing an FBAR which I never heard of until late this summer? I’d like to know if that’s a way to justify my non willfulness? Where’s the real answers Mr. Jacobson?


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