Category Archives: FATCA

US tax reform bill appears to confiscate 12% (updated to 14%) of retained earnings of certain Canadian Controlled Private Corporations

Update November 9, 2017

Today Chairman Brady concluded the “Mark Up” period of his proposed tax legislation. The “Mark Up” period contained NO move to “territorial taxation” for individuals. It did increase increase the “proposed confiscation” of the retained earnings of certain Canadian Controlled Private Corporation, from 12% to 14%.

See the “Manager’s Amendment” here:

summary_of_chairman_amendment_2

Now back to our regular programming …

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Kudos to Max Reed for his quick analysis of the how the proposed U.S. tax reform bill might affect Canadians citizen/residents who also have hold U.S. citizenship. You will find the bill here. His analysis, which has been widely discussed at the Isaac Brock Society (beginning here) includes provisions that are very damaging to those who are the owners of Canadian Controlled Private Corporations (noting they are also under assault from Messrs Trudeau and Morneau). The damaging provisions are both prospective and retrospective.

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The Green Card and the “Oh My God” Moment: You know you want to leave the USA? Not so fast!

Well he won the lottery. Specifically he won the “Green Card” lottery. He and his wife came all the way from an Asian country to “Live The Dream” – specifically the dream of living in the United States of America.

He spoke English. His wife did not speak English. He believed in strict compliance in the law. His wife relied on him to ensure her compliance with the law.

As a Green Card holder he was vaguely aware that he could be deported if he were convicted of certain kinds of offenses. But, mainly he believed in compliance with the law for its own sake.

As a Green Card holder and as a U.S. resident he was subject to laws that were never explained to him. He didn’t realize that he was taxable on his WORLD income (including a small pension that he received from his country of citizenship).

In 2009 the “Offshore Jihad” began. He didn’t think of himself as having “offshore accounts”. After all, he was a just citizen of another country. Surely it could NOT be criminal to have a bank account in his country of origin. Did he have to report his small foreign pension to the IRS? That pension was in no way related to the United States of America? And then he learned about the alphabet soup of “reporting requirements” – Mr. FBAR, Uncle FATCA, etc. He began to learn what the “reporting requirements” were. But, the penalties (as least described) were certain. He could not believe the extent of the penalties.

It was at this moment that his “Oh My God” moment began. He was confused and mentally disorganized. At that moment, all of his life assumptions were reversed.

Assumption 1: He had always believed that he was a good, moral “law abiding” person. How could it be that he was NOT in compliance with the law. He had no reason to believe that the reporting requirements would even exist.

Welcome to the United States of America where any involvement with anything “foreign” makes you a presumptive criminal.

Assumption 2: He had always believed that the United States was a “just nation”. How could the United States threaten to impose such penalties on a person in his situation?

Welcome to the United States of America where justice is NOT the norm.

What’s a poor “Green Card” holder to do?

He was ill prepared to deal with the situation in which he found himself.

He strived to learn what he could. The IRS would not answer his questions – suggesting that he go to a “tax professional”

The “tax professionals” gave him different, conflicting and contradictory answers.

His greatest frustration was that he could NOT completely understand what was expected of him – although he did understand the threat of penalties, penalties and more penalties.

He eventually decided that he had to move back to his home country. He did this NOT to escape U.S. taxation, but because:

  1. He could not completely understand what was required of him to be U.S. tax complaint; and
  2. He was worried that he would die and leave his wife in a situation where she would not know how to be U.S. tax compliant.

In order to prepare for leaving he:

  • entered the streamlined program (domestic  version) and “back filed” for 3 years
  • stayed in America for two more years so that he could certify the “five years of tax compliance” when he handed in the I-407
  • even filed the “Sailing Permit” (The 1040C) that is required of ALL aliens (resident or nonresident) when they leave the United States

He in now trying to file his final return and 8854. Fortunately he will not be subject to the S. 877A Exit Tax. He is currently focusing on staying alive long enough to complete his U.S. tax filings. He feels that it is important that he NOT die and leave the U.S. tax compliance problem to his wife.

His emotional state:

Like many he is living in a state of fear. I pointed out to him that he was a small insignificant person and that nobody in the U.S. Government cared about him. He thanked me for telling him that “nobody in the U.S. Government cared about him”. He said that it was the first time in his life that he felt good that nobody cared about him.

Epilogue:

One more day. One more life ruined. One more person chased out of America because of the Internal Revenue Code.

His greatest wish is that he lives long enough to file Form 8854 to log him and his wife out of America.

Nobody, but nobody should move to America without reading the fine print!

#YouCantMakeThisUp!

John Richardson

 

 

 

 

 

The worldwide trend of attacking the use of corporations as a way to reduce or defer taxation for individuals

Introduction – The war against corporations and the shareholders of those corporations

Corporations as entities that are separate from their shareholder/owners

As every law students knows, a corporation is a legal entity that is separate from its owner. As a legal entity that is separate from its owner, a corporation is capable of holding assets, carrying on a business and investing in a way that results in separation of the shareholder(s) from the business itself. It is a mistake to infer that the corporation’s status as a separate legal entity means that the corporation’s income will not be taxed to its shareholders.

Corporations as legal instruments of tax deferral

When corporate tax rates are lower than individual tax rates, there is incentive for individuals to earn and invest through corporations rather than to earn and invest as individuals. In other words, in certain circumstances, corporations can be used to pay less taxes.

Corporations as instruments of tax evasion

In many jurisdictions is it possible to create a Corporation and NOT disclose the identities of the beneficial owners. Because of this circumstance:

1. Corporations (as was made clear in the “Panama Papers Story”) can be used to hide income and assets for either legitimate or illegitimate reasons; and

2. Corporations can be used to avoid the attribution of income earned by the corporation to the shareholders.

Corporations and the rise of @TaxHavenUSA
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Dewees 2: Why did he participate in the 2009 #OVDP Horror Show?

In an earlier post I explained why the Canada Revenue Agency assisted the IRS in collecting a $133,000 U.S. dollar penalty on a Canadian resident. The bottom line was that he was presumably NOT a Canadian citizen and therefore did NOT have the benefits of the tax treaty. This post is to explain where the penalty came from in the first place.
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The biggest cost of being a “dual Canada/U.S. tax filer” is the “lost opportunity” available to pure Canadians

The reality of being a “DUAL” Canada U.S. tax filer is that you are a “DUEL” tax filer

“It’s not the taxes they take from you. It’s that the U.S. tax system leaves you with few opportunities for financial planning”.

I was recently asked “what exactly are the issues facing “Canada U.S. dual tax filers?” This is my attempt to condense this topic into a short answer. There are a number of “obvious issues facing U.S. citizens living in Canada.” There are a number of issues that are less obvious. Here goes …

There are (at least) five obvious issues facing “dual Canada U.S. tax filers in Canada”.

At the very least the issues include:
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Wisdom of “Three Monkeys” explains why: Although there is little support for “citizenship-based taxation” repeal is difficult

The uniquely American practice of “imposing direct taxation on the citizen/residents of other nations” (“citizenship-based taxation”) has NO identifiable group of supporters (with the exception of a few academics who have never experienced it and do not understand it).

The Uniquely American practice of imposing direct taxation on the citizen/residents of other nations has large numbers of opponents (every person and/or entity affected by it). In addition to the submissions of Jackie Bugnion, “American Citizens Abroad“, “Democrats Abroad“, Bernard Schneider there is significant opposition found in the submissions of a large number of individuals. It is highly probable that the submissions come from those who are attempting compliance with the U.S. tax system.

The “imposition of direct taxation” on the “citizen/residents of other nations” evolved from “citizenship-based taxation”. “Citizenship-based taxation” was originally conceived as a “punishment” for those who attempted to leave the United States and avoid the Civil War. I repeat, it’s origins are rooted in PUNISHMENT and PENALTY and not as sound tax policy.

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Jackie Bugnion 2017 Residence Based Taxation: To Chairman Hatch’s request for tax reform proposals

Introduction: It’s tax reform season and Senator Orrin Hatch wants to hear from you (again)

As reported on the Isaac Brock Society and other digital resources for those impacted by U.S. taxes, you have until July 17, 2017 to tell Senator Hatch what you think needs to be changed in the Internal Revenue Code. After great deliberation, it occurred to me that people who either are (or are accused of being) U.S. citizens or Green Card holders living outside the United States, might want the USA to stop taxing them. After all, they already pay taxes to the countries where they reside. This is your opportunity to “Let your voices be heard” (well maybe).

The Senate Finance Committee is yet again asking the general public to send comments on tax reform. The deadline is July 17, and the email address is taxreform2017@finance.senate.gov.

https://www.finance.senate.gov/chairmans-news/hatch-calls-for-feedback-on-tax-reform

(July 17, 2017 is coming quickly. Please take a few moments to send your thoughts to Senator Hatch. Tell him you feel about FATCA, citizenship-based taxation, FBAR, etc.)

Speaking of “tax reform”: Introducing Jackie Bugion

Jackie Bugnion is a U.S. citizen who has lived in Switzerland for many many years. She has been a tireless advocate for “residence based taxation”. She worked with “American Citizens Abroad” for many years and has recently retired. She was recently honoured with the Eugene Abrams award by ACA – an event that was the subject of a post at the Isaac Brock Society – that described her many achievements (over a long career).

She was the principal organizer of the “Conference on Citizenship Taxation” which took place in Toronto, Canada in May of 2014. The Conference was widely discussed on the Isaac Brock Society here and here. The live video of the “Kirsch Schneider debate” is here.

I have reproduced a number of her written submissions and posts on this blog, specifically:

Jackie Bugnion – 2013 Submission to the House Ways and Means Committee – Explains the upcoming New American Revolution

The submission referenced in the above tweet describes the history of the construction of the U.S. “fiscal prison” brick by legislative brick! (Forward it to anybody and everybody with a interest in this.)

Jackie has returned with her 2017 submission to Senator Hatch.

Jackie Bugnion – 2017 submission to Chairman Hatch – reproduced with permission of Jackie Bugnion

 

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Whether through regulation or legislation #FATCA Same Country Exemption won’t work

In the beginning there was Facebook …

and from a second Facebook group:

 

Introduction: If you were to REPEAL FATCA

A previous post discussing the what exactly is meant by FATCA and the Mark Meadows “Repeal FATCA” bill, described:

FATCA is the collective effect of a number of specific amendments to the Internal Revenue Code which are designed to target both (1) Foreign Financial Institutions and (2) Those “U.S. Persons” who are their customers.

1. There are “Three Faces To FATCA” which include:

– Face 1: Legislation targeting Foreign Financial Institutions (Internal Revenue Code Chapter 4)

– Face 2: The FATCA IGAs (which for practical purposes have replaced Chapter 4)

– Face 3: Legislation targeting individuals (primarily Americans abroad who commit “Personal Finance Abroad – While Living Abroad” – Internal Revenue Code 6038D which mandates Form 8938)

2. The amendments to the Internal Revenue Code that would be necessary to reverse the sections of the Internal Revenue that created FATCA.

Legislative FATCA vs. Regulatory FATCA

The sections of the Internal Revenue Code that comprise “FATCA” are surprisingly few.

FATCA Face 1: Internal Revenue Code S. 1474(f) gives Treasury broad authority to make “FATCA regulations”.
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