A tax crackdown by the United States has sent more than one million Americans and green-card holders living in Canada scrambling to figure out how to comply.
The move is part of a push by the U.S. Internal Revenue Service (IRS) to make sure U.S. taxpayers are paying what they owe on foreign accounts. Unlike most countries, the U.S. requires its citizens to file annual tax returns based on their worldwide income, regardless of where they live.
I've filed taxes in the US only during the couple of years I lived there. I was under the very common mistaken impression that Canada and the US had some kinda reciprocal deal, shuffling tax dough back and forth.
Well, they may well do, but I've missed filing more than 30 years.
Then, next problemo, new crackdown. The US considers my savings 'offshore accounts' on the order of Bernie Madoff's Cayman Islands holdings (if he has any).
Starting in 2013, the IRS will require financial institutions outside the United States to disclose all accounts held by current and former U.S. citizens and green-card holders. They will likely have to file years of U.S. tax returns and detailed annual account disclosure.
Finance Minister Jim Flaherty said Friday that Canada is not a tax haven and that the U.S. Foreign Account Tax Compliance Act will place an onerous burden on Canadian financial institutions.
“Unfortunately, U.S. tax law does little to distinguish between U.S. citizens living on sandy beaches in Caribbean tax havens and those living in a relatively high-tax country like Canada,” said Warren Dueck, a certified public accountant and chartered accountant with W.L. Dueck & Co. in Richmond, B.C.
The IRS has issued a limited amnesty for U.S. citizens, residents and green-card holders to report their foreign bank accounts. Under the Offshore Voluntary Disclosure Initiative, which ends on Aug. 31, penalties are reduced to a range of zero to 25 per cent of the balance of all non-U.S. financial accounts and assets in 2010.
So. I've gotta figure out what to do and do it in the next two weeks or face losing one-quarter of my life savings.
I guess I'll be eating cat food a little earlier than I expected.
For the masochists among you, here's the IRS Tax Guide for US Citizens and Resident Aliens Abroad.
UPDATE: I consulted with an expert in USian tax madness. Things are not so dire. First, because I'm a nice Canadian -- not a Bay Street fraudster or drug lord -- the penalty would be only 5% if I get in under the amnesty. Plus accountant fees. Situations will vary, so people should consult their own tax expert to decide what to do. Consult cost $100 and was well worth it.
12 comments:
Good luck, fern. For all their tax hatred, the US has probably the most draconian tax laws when it comes to ex-pats. I guess they've been lax about using them.
Thanks, BY.
And not just tax hatred, tax lunacy. I downloaded some stuff. The individual tax form is two pages, or one page front and back. The instruction guide is 179 pages! Unbelievable minutiae.
WTF? You aren't benefitting from any services from this country and don't vote here for representation in the government, yet you need to pay taxes for those unused services and non-representation?!? I had no idea.
Yes, good luck.
Actually, Mrs. B., I do vote, but just for President. I figure since I don't live in the district the more local pols represent, the people affected by their policies should speak, not me. I could vote for all of them, I just don't.
Whoever is President of the US of A, however, does affect me and everyone else on the planet.
But services (such as they are), nope. I pay Canada, Ontario, and Toronto for those.
I continue to file returns (and pay McGuinty Tax) in Ontario/Canada even though I've been out of Canada for years and not coming back in the very near future. Canada *does* require expats to file returns unless they claim exemptions, and does *not* permit too-long-expats like myself to vote absentee. (Not kidding, I couldn't vote in the last election without flying/driving back.) If you are really sure you won't return, you can do some sort of thing to sever tax ties with Canada. I come to Canada often enough and use some of its services while I'm there, so I haven't.
Aside from McGuinty Tax (the health "premium"), which cannot be avoided, I am able to cut my owed Canadian taxes to zero because I am allowed to claim the employer-withheld US and state income taxes as a deduction.
You can't claim your paid Canadian taxes on the US form? I'd be shocked if there were no foreign tax credit. And our income levels (ie, not rich), US federal taxes and Canadian federal taxes aren't really all that different, plus you are paying provincial tax in Canada but not state tax in the USA, as the state return is usually totally separate from the federal return.
I assume you are obliged to pay tax in Canada. There is here the document on the IRS foreign tax credit.
I had to quickly become an expert on matters taxation when I moved to the USA and earned income in multiple jurisdiction. At one point I filled out five different tax returns, with complex interactions of residency between them!
Needless to say, I Am Not A Tax Lawyer---just for the benefit of any bystanders.
You should incorporate. American *people* might have to pay taxes on income made and held in other countries, but American *corporations* don't, they only pay on money they bring back to the US. And even there, the government is talking about doing an amnesty to beg them pretty please to bring some of the money home. As usual, corporations are only persons when it comes to the fun, profitable stuff, not when it comes to responsibilities.
Corporations are "people" only to get at the goodies. On top of the "people" goodies, they then add all sorts of corp-specific stuff. Much of it is complicated tricks involving loopholes that you need enough spare cash to pay a tax lawyer to get right.
If you have enough money and a lawyer, there's games you can play with your house, your transportation, and your income to hide ownership and reduce taxes for example. Another neat trick is a corp in the US that recently formed itself, donated $1 million to a political candidate, and then dissolved itself. All that's left is the lawyers from the board of directors, and they don't have to talk.
Somehow corporations have even managed to dodge all the responsibilities of being a "person" - imprisonment and the death penalty for example. Once upon a time a corporation could be dissolved for misusing its charter. Corporate personhood wasn't achieved with even a thin veneer of lawfulness, ethics, or morality. A court clerk altered the notes of a Supreme Court case in the US that didn't even touch on the subject, but that "decision" was subsequently used as precedent.
But don't worry: a corp is the same thing as the group of you, your buddy Fred, and your buddy Joe. It would be obviously unfair to not grant it the rights possessed by you and your buddies. That's the sort of thing a dirty communist would do.
After that little debacle in Florida, fern hill filed incorporation papers for her uterus. Does that count?
Here we go again with the new world order. Where this government it's getting their noses in other governments and peoples accounts where they have no business in sucking they hard ear money. Now if you money over seas have to pay taxes in both countries at the same time; so keep working slave!!!!!!!
If people are wondering what deBeauxOs is referring to, it's this.
Post a Comment