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| Subject: US citizens living in Canada - tax issues |
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U.S. taxman finally eases pressure on American citizens in Canada
BY DON CAYO, VANCOUVER SUN JUNE 28, 2012
Uncle Sam is promising a break for some - but not all - of the hundreds of thousands of Americans or dual citizens who live in Canada and who haven´t been filing U.S. tax returns and financial disclosures.
The U.S. Internal Revenue Service announced a none-too-detailed plan Tuesday to streamline penalty-free procedures for non-filers who are "low compliance risk" to con-form to the law.
The issue involves rules that were intended to catch American tax cheaters who live out-side the U.S., but that also imposed onerous filing obligations and potentially huge penalties on ordinary citizens, many of whom were unaware of the law.
Some Canadians who were born in this country didn´t even know - and perhaps some still don´t - they were dual citizens by virtue of having an American-born parent.
Now, as of Sept. 1, says Warren Dueck, a Richmond tax accountant who specializes in U.S.-Canada tax issues and who brought this issue to my attention almost a year ago when it wasn´t yet on the public radar, low-risk filers can cover themselves by simply filing three years of back tax returns and six years of financial disclosures.
That may be a hassle, but given the five-and six-figure penalties some Canadians of ordinary means were potentially facing, it´s a huge improvement.
The problem, Dueck said, is that IRS hasn´t defined what it means by low-risk.
A statement from the U.S. Consulate in Vancouver says, "These people generally will have simple tax returns and owe $1,500 or less for any given tax year."
But most Americans living in Canada who are compliant with Canadian tax laws owe less than $1,500 a year; a great many owe nothing as the taxes paid here count against their liability in the U.S.
Yet, Dueck says, many with little or no U.S. tax liability have returns that are anything but simple.
The IRS statement covers RRSPs, which were previously a matter of huge concern because the money they earn is sheltered from tax in Canada, but did not appear to be in the U.S. However, the statement is silent on other legal tax-deferral mechanisms in Canada such as Registered Education Savings Plans and Registered Disability Savings Plans.
As well, many high-net-worth people have business holdings that can be quite complex. And, unlike Canada, the U.S. taxes things such as capital gains on the sale of homes and lottery winnings, which aren´t mentioned in the statement.
So, "for most people with American citizenship who live in Canada, this is much better," Dueck said.
But for a substantial group of people whose financial affairs, though they may be honest and above board, aren´t simple, "their lives haven´t changed very much because of this announcement."
The IRS was, in my view, slow to the point of negligence in determining some kind of relief for people who were put in a terrible situation through no wilful wrongdoing. And the agency still needs to clarify the details.
But both Dueck and Ed Shaw-chuk of AG Tax Chartered Accountants noted the IRS hasn´t been acting as heavy-handedly as its often-tough language might imply.
Both firms, like many others in the city and across Canada, have been working with long lists of clients who were scrambling to become compliant under the old rules. Both report that the IRS has not been handing out those big potential penalties willy-nilly.
So it may be that this announcement is just con-firming what was already an operating policy: to go easy on the small fry who haven´t been deliberately defying an ill-understood law. But, what-ever the case, the easing of the pressure is as welcome as it is overdue.
dcayo@vancouversun.com
Blog: www.vancouversun.com/economy
© Copyright (c) The Vancouver Sun
[28-06-2012,14:03]
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Sharon |
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(in reply to: US citizens living in Canada - tax issues)
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[30-06-2012,23:05]
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Il clandestino |
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