Before a so-called amnesty expired on Sept. 9, the options were bleak for hundreds of thousands of “U.S. persons” living in Canada — mostly American or dual citizens, plus some others with immigration green cards or part-time U.S. homes — who hadn’t filed regular tax returns or asset declarations to the IRS.
Now the choices left for those who let the deadline slip by are even worse.
The issue isn’t unpaid taxes. The people I’m writing about do not, and most of them never have, owed the American government a penny in income tax.
The issue is penalties — huge when the “amnesty” was in effect, and much larger now that it has ended — for failing to file pieces of paper with the Internal Revenue Service bureaucrats.
Some of those affected knew they were supposed to file but, after years of filling in returns showing no taxes owing, they stopped because they saw no point.
And many didn’t know the IRS imposed on them a requirement to file. Some didn’t even know the IRS could do such a thing to them because they had no idea they were considered U.S. citizens.
Some were born in the States, or in Canada to one or more U.S. citizens, and never looked into their dual nationality. Some presumed — with good cause at the time — that they severed their U.S. connection when they embraced Canadian citizenship in the 1950s, ’60s, ’70s or early ’80s.
And probably they did, at least until the mid-1980s when a U.S. Supreme Court decision restored their citizenship — without their consent, and even without their knowledge.
Now, says Ron MacDonald, a cross-border tax expert at Deloitte’s Vancouver office, not only have the probable penalties increased several times over, but non-compliant filers could also face the possibility of criminal prosecution, even jail.
Not only are the options both limited and unpalatable, he told me in an interview, but nobody knows how — or how fast or how aggressively — the IRS will act.
On one hand, the U.S. tax collection agency is reported to be acutely short-staffed, and it may not have the resources to pursue most of the many, many thousands of non-compliant non-resident “U.S. persons.”
On the other hand, the American government is desperately short of revenue, and the American media are treating the issue as one involving tax-dodging criminals, which means public sympathy for the law-abiding majority is in short supply. As well, the IRS is known for playing hardball, and is far more prone than the Canada Revenue Agency to prosecute and jail people who fall afoul of its rules.
MacDonald’s colleague, Jyothi Rao, said her firm’s clients in Vancouver were all referred to tax lawyers as well as the Deloitte advisers they consulted, and she estimated that about half decided not to proceed with filing.
MacDonald said the combined fees for Deloitte and lawyer’s services could hit $100,000 or more, but it was the prospect of the penalties — up to 20 per cent of the money people have accumulated in a variety of accounts and investments — that influenced most who decided to take no more action.
Non-compliant filers can still make voluntary disclosures, he said, but the prospect that the penalty might be reduced to five per cent is no longer on the table.
Or — and these are not strategies he recommends as he has no basis to predict a probable outcome — non-compliant Canadian residents could simply start filing going forward and wait to see if the IRS comes back at them for previous years’ filings and penalties. Or they could continue to do nothing, particularly if they can avoid ever again going to the U.S.
Neither MacDonald nor Rao nor I have ever heard of people being stopped at the border for non-compliance with tax-filing rules.
But, “It wouldn’t surprise me if at some point they integrate the systems,” MacDonald said. “You’ll drive up to your friendly border guard and he’ll pull up your name and it’ll come up as a delinquent filer. And that’ll be it. And you won’t have the option of going back into Canada at that point — you’ll be arrested and thrown in jail.”
A final option might be for U.S. citizens to formally renounce their citizenship, though one sticky rule may make this impractical for people who’ve accumulated many assets — and a correspondingly large liability for non-compliance penalties — over the years.
Read more: http://www.vancouversun.com/options+worsen+resident+citizens+targeted/5466178/story.html#ixzz1ZGXE5BDi
hostgator coupon 2011
No comments:
Post a Comment