What US tax compliance means for #Americansabroad who have lived their whole lives in Canada

The above tweet references the following comment at the Isaac Brock Society. It explains why (if the U.S. is really serious about encouraging Americans abroad to enter the U.S. tax system, it will have to offer a serious amnesty program. This commenter is brutally honest and explains the reality of the situation very well. (Note I have added various links to the comment.)

@WhiteKat – Personally, I have told relatives to simply stay off the USG radar No passports, no letters, no nothing. That is not as easy for those with passports, SS numbers, work history in the US etc I admit. If you renounce, they now have a file open with your name on it. They may be inefficient and do nothing. Indeed, the more people that renounce, the more likely they are to do nothing because too much paper to push, but I am disinclined to kick a sleeping dog.

While a CLN is a pretty piece of paper to show banks, consider that (a) banks are – at least under current rules and draft guidelines – not going to be asking any questions deeper than “are you a US Person” to which anyone with an expatriating event in their back pocket can simply and forthrightly answer “no”. Were you to want a pretty piece of paper for the banks (not the USG) to look at, you could get a lawyer to do a simple declaration of expatriation including – for good measure – a repeat of your citizenship oath of allegiance to the Queen. That ought to impress any bank – I suspect the USG would ignore it though.

Canada has made it clear that lip service is all that is on offer here – as long as potential US Persons don’t lie in the middle of the road, I don’t think many will be run over. I repeat as always – the law is a bad one and we are collectively right to stop it in its tracks because there is no telling where they will take it later if they get their foot in the door.

As for CLN’s – everyone has to make the tough call based on their own facts and comfort level. Where compliance is possible, some have chosen to do it.

For anyone who has lived their whole life in Canada, I can confidently say that compliance with the IRS mad-house rule system is simply not an option. The outcome would be equivalent to saying “here is my house, my retirement savings and everything I own. Take what you think you should, please try to leave me something so I can feed my family”. Where the alternative is to stay clear of the US for life (at worst – not required now since I have never seen any difficulty crossing the border with a Canadian passport and US place of birth; that could, of course, change in future), the choice is not that hard. It’s not the tax (which is bad enough) – it is ten years of FBAR’s and related “form torture” that gives them the unfettered right to confiscate virtually anyone’s net worth. Just look at yesterday’s thread about gathering pension and FBAR data to fight them on PFIC’s. A nightmare. I hear those who say that the penalties are unenforceable in Canada and unconstitutional in the US. Easy enough for an Edward Savarin who can litigate for 20 years with his walking around money. Our group shall be hard pressed enough to fight one discrete court battle on the Charter challenge.


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