The IRS Reach Now Extends Into Canada

I was watching the news and was able to watch a very interesting story that really got me question our countries sovereignty, both the United States of America and Canada. Especially When the Internal Revenue Agency is able to go after people no longer residing in America and then tax those people for every dollar they made outside of the U.S. Anyways, here's the story.

Janet Selby never imagined she was anything other than a Canadian. After all, she has lived in Canada for all of her 47 years. She went to school here, voted in elections, travelled on a Canadian passport and built a successful career as an accountant and corporate recruiter.

But a recent call from her online broker forced her to confront a long-forgotten past. Ms. Selby spent the first four days of her life in the United States, born in 1963 to two Canadians pursuing graduate work at the University of Illinois in Champaign, Ill.

That makes Ms. Selby an accidental American – a reality that comes with sweeping tax and reporting obligations that could now cost her thousands of dollars and a monster headache. “It’s frustrating,” Ms. Selby said from Toronto, where she has lived most of her life. “I’m a responsible citizen. I’ve paid my taxes dutifully since I’ve been earning money. It makes me feel like it’s an overreaching tax grab by the Americans.”

IRS Bearing Down on Americans in Canada

reply to post by Subbam


I hate the IRS with a passion. Bachmann was former IRS, for the record. They are the epitomy of nastiness and they are basically the attack dogs of the federal mafia. I may move to Canada before I get a truck driving job, and I will be damn sure to try and get citizenship there ASAP cause I am sick of what the people in charge of our beautiful country have done with the place. Great thread, S&F.
p.s. I don't want to go, and my parents will still be here, so I may not be able to leave, but if I can and can bring them with me, I will. As a resident of the state of NY (central ny to be specific) we are taxed into oblivion and are just dead sick of the way things are going and the irresponsibility of those in power. Me moreso than my family, but I know they share my concerns with regards to taxing.

Reminds me of crossing state boundaries to get a slave back before the civil war.

But it is a double edged sword. We have extradition laws because there's some really evil people out there who use boundaries as an effective way to combat their capture. Like some Serial Killers.

The IRS Reach Now Extends Into Canada

For US citizens, the IRS reach extends worldwide. US citizens are taxed on worldwide income...

With regards to the IRS requiring the disclosure of foreign bank accounts, look up the Foreign Account Tax Compliance Act (FATCA).

reply to post by Subbam


It keeps getting worse. I'm getting sick of hearing a new story like this everyday. This part or your source caught my attention.

Hundreds of thousands of Americans living in Canada may soon run into the increasingly long and muscular arm of the U.S. Internal Revenue Service. Many aren’t aware of what is about to hit them as Canadian financial institutions comply with a new law that requires them to identify their U.S. customers to the IRS, tax experts warn. Banks and customers who fail to provide the information would be hit with steep penalties on all their U.S. income.

Maybe I missed it, but which new law? The article does not seem to mention the law that grants this authority. Then they throw in this tid-bit.

Starting in 2013, the IRS will require foreign financial institutions – banks, brokers, insurers and the like – to disclose all accounts held by U.S. citizens and green-card holders.

Looks like the IRS has gone global

Makes me glad I'm not a tax cheating American living in another country

reply to post by smarterthanyou

In my honest opinion, I highly suggest you look elsewhere other than north of the border. The Stephen Harper Majority Government here in Canada is no better than the fools in your country. With the exception the SHMG is better at sugar coating problems and lying to it's people. Especially for how cozy the SHMG is with the current American administration. Let me put it this way, the IRS Agency needed permission to access the bank accounts of those Canadian citizens from a Canadian counter part. Our Finance Minister didn't know anything about this until it was in the news. So somebody higher than him sanctioned the IRS to operate in Canada and to go after the finances and assets which are foreign to the IRS or else it would've been a crime for the "overreach" of the IRS on foreign soil.

reply to post by LadySkadi


But they are no longer living in America which should exclude them from being penalized for hard earned money made in another country. Let me put it this way, when you immigrate into America you pretty much have to denounce your former country for you are now an American First and Country of Origin second. That's a little #ed up if they don't expect people to do the same when they leave America to go to another country. No other foreign tax agency has authority over an American. So why should the U.S. have jurisdiction over their people no matter where they are and are able to take money that wasn't earned on her soil? Some of these people have to pay tens of thousands in back taxes to a country that more than likely didn't provide for them while they were living on her soil on top of a ten thousand dollar penalty fee for not even knowing these rules in the first place?.

reply to post by Subbam

You are talking philosophy of the tax code, not the reality. The reality is that a US citizen is taxed on worldwide income (though not double taxed) that is the law. Ignorance of the tax law will bite those who are not prepared. It is not a matter of "should be" it is what it is. There are two options really: give up US citizenship, or pay your taxes because the IRS will eventually find you. Especially in a down economy when the govt. will be actively looking for monies owed.

reply to post by Corruption Exposed


I agree. I just find it a real piss off considering you don't hear about this type of stuff until it's enacted and then enforced. It's a lovely trend between our three governments of Canada, the U.S. and Great Britain..... and it needs to stop.

it doesn't stop there

the IRS claims worldwide rights to your income

switzerland was the last holdout with bank secrecy laws, etc..and even they have now fallen

templars getting crushed by rome

reply to post by LadySkadi


That may be true to American law, but it does not extend into Canada. If a foreign government ran company wants to do anything here, it needs clearance from a Canadian counterpart. They cannot just come in and get access to bank accounts here without the proper permissions regardless of what whatever b.s. they were held accountable to in the U.S. So if you need the permission to act in that country on behalf of another government, American or not, that law is void unless it is backed and enforced and given the go ahead by a National of that country.

reply to post by Subbam


The US/Canadian tax treaty probably covers your points with regards to what the IRS is and is not able to accomplish, have you read it?

Link

reply to post by LadySkadi


Then why is our Finance Minister in such opposition if these are legit agreements between the two governments. If so, our Finance Minister would abide by any agreed upon historical agreements between the two nations if this wasn't an overreach.

Mr. Flaherty also took issue with another U.S. Internal Revenue Service crackdown aimed at dual U.S.-Canadian citizens and their relatives living in Canada.
The “threat of prohibitive fines for simply failing to file a return they were unaware they had to file, is a frightening prospect that is causing unnecessary stress and fear among law abiding hardworking dual citizens,” Mr. Flaherty wrote.
He said most of these Canadian citizens — many with only distant links to the United States — have a very limited knowledge of their tax reporting obligations to the United States. They are “honest and law-abiding people, including many senior citizens now caught in a nerve-wracking situation,” Mr. Flaherty wrote.

He noted that many work and pay taxes in Canada, meaning they do not owe any taxes in the United States in any event.

Hence the last line. They ARE double taxing people too btw.

Finance Minister Takes On IRS Over Tax Crackdown

It is and will continue to be an ever-growing bureaucratic nightmare in which some law abiding citizens will be caught up in. No arguments there. Personally, I think the IRS is walking a very fine line. We shall see how it plays out, 2014 is not far away and I would not be surprised if the issue continues to be pushed out further... This will continue to be a gray-area situation, for the foreseeable future...

Well, here's a couple of possible solutions to tax problems...

If you already have money. start an IBC and have it controlled from a seemingly blind trust which is majority controlled by "hidden" trusts, meaning ones that are only traceable back to offshore accounts. Make the IBC the responsible agent that collects all of your income as well as the "products of labour" and also have the IBC hold any IP and royalty accounts. Open the IBC account in an offshore like the Caymans and make sure any financial control is exercised through another out-of-country like in Panama, Bermuda, etc. Have you final stash placed in an interest bearing account in some place like the Barbados where the tax rate is in the lower single digits (at least it used to be, things may have changed, do your own homework).

Another option is to set up a formal corporation (the cost if you do it yourself is generally less than $200) where you as the owner of the corporation have a product (you) and then using the tax law accordingly write off all of your allowable expenses. Let's say you make $100k per year and are in the "supertax area," meaning around 50%. You can probably legitimately reduce your taxable income by between $25,000 and $50,000 a year, which puts you in a much lower tax bracket in their tax racket. It also allows you to accumulate shareholder equity from providing investment and shareholder loans to the company you own as well as develop a business loss profile (shareholder loans are repaid sans tax as the tax is deemed already paid). There are many things formal corporations can write off right down to the interest on credit cards and a percentage of entertainment and meals as well as gas, insurance, depreciation on capital assets, etc. In any event you will have to keep all of your receipts for 10 years or more.

Be aware however that if you reduce your taxable income, you also reduce the amounts of available government pension and possibly other benefits like unemployment insurance. So if you do either these make sure you store away a very well sized "nest egg" because the government isn't going to help you much when you contributed little or nothing to their "services program" that may or may not exist in another few months or few years.

Cheers - Dave

Read this:- thecrowhouse.com...

Contact from the IRS is nothing other than a legal invitation to contract, which can (and should) be declined. As an organisation, their legal foundation is pure thin air.

These days at least, they also only go after easy prey. After the initial contact, she should have bluntly told them to [snip]. If they then wanted to have to screw around with extradition proceedings or whatever else, that would be their perogative.

The majority of people are brainless sheep, who assume that organisations like the IRS have some type of magical, inherent moral legitimacy. They don't. They are racketeers. If a person is willing to concede to their demands quietly, then I have no sympathy.

I think the tax treaty means that if You pay taxes to the country of residence, the other countries tax collectors have to leave You alone.

reply to post by jondave

Not exactly. As an example, the foreign income tax credit does attempt to offset taxes paid to the foreign nation against the US tax obligation of US citizens. The credit may completely offset the US taxes, but it might not. It depends on tax rates of each country, etc. Also, it's not automatically applied. Taxes must be filed with the country of residence and with the IRS.

Solution for this woman: Don't even respond to the IRS. Don't pay. Just totally ignore it, and go on with life like nothing ever happened.

What's the IRS gonna do? Send the hounds into Canada to recover her? Nope. IRS can just F right off in this instance, and F right off HARD...

Cheers