Canadian Income needs to be taxes paid to the IRS?

[William Ashley]

http://www.ctvbc.ctv.ca/servlet/an/local/CTVNews/20110917/bc_irs_targeting_dual_citizens_110917/20110917?hub=BritishColumbiaHome

I'm just stunned the US is harassing people - and putting out information contrary to existing tax treaties between Canada and the US.

WORSE they have contacted Canadian Banks in contravention of Canadian Privacy laws and threatened them for information on their customers...

what is going on with this?

http://www.fin.gc.ca/treaties-conventions/usa_-eng.asp

In the case of the United States, subject to the provisions of paragraphs 4, 5 and 6, double taxation shall be avoided as follows: In accordance with the provisions and subject to the limitations of the law of the United States (as it may be amended from time to time without changing the general principle hereof), the United States shall allow to a citizen or resident of the United States, or to a company electing to be treated as a domestic corporation, as a credit against the United States tax on income the appropriate amount of income tax paid or accrued to Canada; and, in the case of a company which is a resident of the United States owning at least 10 per cent of the voting stock of a company which is a resident of Canada from which it receives dividends in any taxable year, the United States shall allow as a credit against the United States tax on income the appropriate amount of income tax paid or accrued to Canada by that company with respect to the profits out of which such dividends are paid.

Where a United States citizen is a resident of Canada, the following rules shall apply:

(a) Canada shall allow a deduction from the Canadian tax in respect of income tax paid or accrued to the United States in respect of profits, income or gains which arise (within the meaning of paragraph 3) in the United States, except that such deduction need not exceed the amount of the tax that would be paid to the United States if the resident were not a United States citizen; and

(.B.) for the purposes of computing the United States tax, the United States shall allow as a credit against United States tax the income tax paid or accrued to Canada after the deduction referred to in subparagraph (a). The credit so allowed shall not reduce that portion of the United States tax that is deductible from Canadian tax in accordance with subparagraph (a).

5. Notwithstanding the provisions of paragraph 4, where a United States citizen is a resident of Canada, the following rules shall apply in respect of the items of income referred to in Article X (Dividends), XI (Interest) or XII (Royalties) that arise (within the meaning of paragraph 3) in the United States and that would be subject to United States tax if the resident of Canada were not a citizen of the United States, as long as the law in force in Canada allows a deduction in computing income for the portion of any foreign tax paid in respect of such items which exceeds 15 per cent of the amount thereof:

(a) the deduction so allowed in Canada shall not be reduced by any credit or deduction for income tax paid or accrued to Canada allowed in computing the United States tax on such items;

(.B.) Canada shall allow a deduction from Canadian tax on such items in respect of income tax paid or accrued to the United States on such items, except that such deduction need not exceed the amount of the tax that would be paid on such items to the United States if the resident of Canada were not a United States citizen; and

© for the purposes of computing the United States tax on such items, the United States shall allow as a credit against United States tax the income tax paid or accrued to Canada after the deduction referred to in subparagraph (.B.). The credit so allowed shall reduce only that portion of the United States tax on such items which exceeds the amount of tax that would be paid to the United States on such items if the resident of Canada were not a United States citizen.

6. Where a United States citizen is a resident of Canada, items of income referred to in paragraph 4 or 5 shall, notwithstanding the provisions of paragraph 3, be deemed to arise in Canada to the extent necessary to avoid the double taxation of such income under paragraph 4(.B.) or paragraph 5©.

Check this out re 2013.... US law over Canadian banks...

Cross-border monitoring

Under HIRE, American taxpayers with foreign assets will have nowhere to hide. In fact, as of January 1, 2013,

Canadian banks or investment firms doing business with Americans have to ask if they’re U.S. citizens or residents.

If the client is an American citizen (or resident under U.S. tax rules), the bank will be required to report information related to the account to the IRS. If an account holder refuses to answer, the bank or investment firm will withhold 30% of any investment earnings and remit that to the IRS. Advisors should encourage American clients who haven’t been filing annual U.S. returns to meet the compliance requirements of the IRS prior to this legislation coming into force.

The US GOVERNMENT HIRE ACT ( that they say governs Canadian Banking Practice --- since when does the US government pass acts on how Canadian Financial Institutions Operate???)

http://goo.gl/rI4O

What I don't get is, how do they know to ask if they are US citizens if they don't know if they are American?

Can't wait to see the ANTISPAM MAILING LAWS ENACTED TO FINE THE IRS

http://www.email-marketing-reports.com/canspam/canada/

Wonder how many unauthorized mailings were sent.. that could add up.

Passive revenue for the Canadian Government

47. (1) Every person who commits an offence under section 43 or 44 is guilty of an offence punishable on summary conviction and is liable

(a) to a fine of not more than $10,000 for a first offence or $25,000 for a subsequent offence, in the case of an individual; or

( to a fine of not more than $100,000 for a first offence or $250,000 for a subsequent offence, in the case of any other person.

43. Every person who refuses or fails to comply with a demand made under section 16 or a notice issued under section 18 or who contravenes subsection 20(4) commits an offence.

43. Commet une infraction quiconque refuse ou omet de se conformer à une demande présentée en vertu de l’article 16 ou à un avis établi en vertu de l’article 18 ou contrevient au paragraphe 20(4).

Non-conformité

Obstruction and false information

44. Every person who obstructs or hinders, or knowingly makes a false or misleading statement or provides false or misleading information to, a designated person who is carrying out their duties and functions under this Act commits an offence.

Edited September 18, 2011 by William Ashley

[bush_cheney2004]

I'm just stunned the US is harassing people - and putting out information contrary to existing tax treaties between Canada and the US.

WORSE they have contacted Canadian Banks in contravention of Canadian Privacy laws and threatened them for information on their customers...

what is going on with this?

You know, for a guy who wants nothing to do with the United States and is barred from legal entry, you sure do worry about this kind of stuff. The vast majority of Americans (and Canadians too I suspect) manage to live their lives without concern for such things. If you want to cheat on your taxes, you're on your own regardless of which side of the border you reside or work on.

[CPCFTW]

You know, for a guy who wants nothing to do with the United States and is barred from legal entry, you sure do worry about this kind of stuff. The vast majority of Americans (and Canadians too I suspect) manage to live their lives without concern for such things. If you want to cheat on your taxes, you're on your own regardless of which side of the border you reside or work on.

"Cheat on your taxes"?

If you don't want the IRS to chase you down for taxes, you have to contact the IRS and Department of Homeland Security to renounce your American citizenship.

The IRS is chasing after retired Canadians who immigrated here 20+ years ago and didn't bother jumping through the IRS's hoops for renouncing your citizenship when they did.

[CPCFTW]

http://www.ctvbc.ctv.ca/servlet/an/local/CTVNews/20110917/bc_irs_targeting_dual_citizens_110917/20110917?hub=BritishColumbiaHome

I'm just stunned the US is harassing people - and putting out information contrary to existing tax treaties between Canada and the US.

WORSE they have contacted Canadian Banks in contravention of Canadian Privacy laws and threatened them for information on their customers...

what is going on with this?

Why are you stunned? The US is on the verge of bankruptcy and the Dems control the White House. Raise taxes on the wealthiest 1% who contribute more than 20% of tax revenue, circumvent NAFTA with "Buy America" provisions, chase after retired Canadians who immigrated from America and didn't renounce their citizenship. Obama and his socialist advisors will do anything to minimize cutbacks to the entitled welfare class.

[GostHacked]

You know, for a guy who wants nothing to do with the United States and is barred from legal entry, you sure do worry about this kind of stuff. The vast majority of Americans (and Canadians too I suspect) manage to live their lives without concern for such things. If you want to cheat on your taxes, you're on your own regardless of which side of the border you reside or work on.

Actually this seems to be aimed at Americans living/working in Canada.

[CPCFTW]

Actually this seems to be aimed at Americans living/working in Canada.

Actually it's aimed at Americans who emigrated and never renounced their American citizenship.

[bush_cheney2004]

Actually it's aimed at Americans who emigrated and never renounced their American citizenship.

Seems that way....there will always be a group of people who made/make choices in life and then are surprised at the ramifications of those choices. They are doomed to eternal unhappiness!

[GostHacked]

Actually it's aimed at Americans who emigrated and never renounced their American citizenship.

Interesting.

[Guest American Woman]

American citizens have to pay income tax according to American laws, yet this issue may not be as 'bad' as it sounds:

If you are a U.S. citizen resident in Canada, you are subject to exactly the same filing requirements that you would be subject to in the U.S.

This means you must file U.S. Form 1040 every year, reporting your worldwide income. This fact may come as a surprise to you if you have been accustomed to Canadian rules, which tax on the basis of residency rather than citizenship.

The net result is that if you are a U.S. citizen resident in Canada, you must file two returns each year: a Canadian return because you live here, and a U.S. return because you are a U.S. citizen. Fortunately, this does not necessarily mean you'll have to pay taxes to both countries. There are several mechanisms available to make sure you're not doubly taxed.

U.S. Citizens in Canada

[CPCFTW]

There are several mechanisms available to make sure you're not doubly taxed.[/indent]

U.S. Citizens in Canada

I couldn't open the link because I'm on my phone, but I'm pretty sure that this new law is an attempt to circumvent those mechanisms. Keep in mind that there is also a free trade agreement that is supposed to make sure Canadian exporters are immune to "buy American" protectionist provisions. That hasn't stopped Obama.

Populists like Obama don't care about free trade agreements and tax treaties. It would be unpopular to make the necessary cuts to social services, so Obama is instead trying to place the costs of these unsustainable services on citizens of other countries and the wealthy 1% of Americans who don't use social services and don't vote for him.

[msj]

I couldn't open the link because I'm on my phone, but I'm pretty sure that this new law is an attempt to circumvent those mechanisms.

I presume you mean that the US is trying to circumvent the tax treaty which reduces/eliminates double taxation between our countries.

No, this new law is in place to ensure that American citizens are, in fact, declaring all of their worldwide income to the IRS and paying tax on that.

Of course, as Canadian residents, these people should be declaring their worldwide income in Canada, too, therefore applying the appropriate tax deductions on their US tax return thereby eliminating double taxation per the treaty.

[CPCFTW]

I presume you mean that the US is trying to circumvent the tax treaty which reduces/eliminates double taxation between our countries.

No, this new law is in place to ensure that American citizens are, in fact, declaring all of their worldwide income to the IRS and paying tax on that.

Of course, as Canadian residents, these people should be declaring their worldwide income in Canada, too, therefore applying the appropriate tax deductions on their US tax return thereby eliminating double taxation per the treaty.

The very first link in the thread says the IRS is going after Canadian citizens who didn't renounce their US citizenship. I have worked for a brokerage and anyone who put a SSN in their account application had to have 30% taxes withheld on dividends to be remitted the IRS. This includes Canadians who went to university in the US and got a SSN while in school in the US. These clients were advised to contact the IRS and Department of Homeland security to renounce their American citizenship. I don't doubt the article for a second.

[Guest American Woman]

So why don't they simply renounce their American citizenship? Then they can't move back at some point and ask anything of the system they don't feel they should have to pay into. If they want nothing to do with the U.S., renouncing their citizenship shouldn't be a problem.

As long as they retain dual citizenship, why shouldn't they be expected to answer to both countries?

Edited September 20, 2011 by American Woman

[msj]

The very first link in the thread says the IRS is going after Canadian citizens who didn't renounce their US citizenship. I have worked for a brokerage and anyone who put a SSN in their account application had to have 30% taxes withheld on dividends to be remitted the IRS. This includes Canadians who went to university in the US and got a SSN while in school in the US. These clients were advised to contact the IRS and Department of Homeland security to renounce their American citizenship. I don't doubt the article for a second.

The point is that they are American citizens and are taxed on that basis.

Do I agree that it's stupid? Yes, yes I do. But that's the US for you.

As for the withholding taxes - once again there are mechanisms in place to deal with that so one is not paying tax twice. That's why we have a tax treaty. That's why we have things like box 34 on a T3 slip for example [pdf link].

So, to sum up: you are taxed in Canada based on being a resident (i.e. not from being a citizen).

You are taxed by the US based on citizenship and should file a tax return accordingly.

If you are a US citizen who resides in Canada (regardless of being a Canadian citizen) then you file a US and a Canadian tax return and follow the rules to reduce/eliminate double taxation.

[msj]

So why don't they simply renounce their American citizenship? Then they can't move back at some point and ask anything of the system they don't feel they should have to pay into. If they want nothing to do with the U.S., renouncing their citizenship shouldn't be a problem.

As long as they retain dual citizenship, why shouldn't they be expected to answer to both countries?

From a Canadian POV it goes like this: If I were to move to some far off land I would sever my residential ties from Canada, pay some taxes to the Canadian government on my way out of the country (on things like capital gains, etc...) and go on my merry way.

When/if I came back to Canada then I would come back, be subject to any of the rules for coming back into Canada (eg. fair market value of investments would become my cost base for tax purposes) and I would start filing Canadian tax returns again.

So, this is what we think as normal. We don't have to file tax returns based on being citizens so the Canadian government doesn't get that type of information on us when we sever our residency ties.

The US comes across as being like "Big Brother."

So, even if you are a citizen because your parents happened to be in the US for the first 10 months of your life before moving to Canada, well you better file US tax/information returns or renounce your US citizenship.

To us it's absurd. To you it's probably normal.

[bush_cheney2004]

....So, even if you are a citizen because your parents happened to be in the US for the first 10 months of your life before moving to Canada, well you better file US tax/information returns or renounce your US citizenship.

To us it's absurd. To you it's probably normal.

It is perfectly normal for US citizens to pay taxes. Citizenship conveys rights and responsibilities, not some half-ass globe trekking game of dual or poly-citizenship of convenience. With examples like Mr. and Mrs. Ignatieff, it's no wonder some think the American perspective is "absurd".

[Guest American Woman]

From a Canadian POV it goes like this: If I were to move to some far off land I would sever my residential ties from Canada, pay some taxes to the Canadian government on my way out of the country (on things like capital gains, etc...) and go on my merry way.

When/if I came back to Canada then I would come back, be subject to any of the rules for coming back into Canada (eg. fair market value of investments would become my cost base for tax purposes) and I would start filing Canadian tax returns again.

The key words there are "from a Canadian POV." FYI, "Canadian point of view" and "the only right way to do something" are not synonymous.

So, this is what we think as normal.

Again, what you think is "normal" doesn't mean it's the only way that can be "normal." For example. We think it's "normal" to elect our senators. Does that make Canada abnormal?

We don't have to file tax returns based on being citizens so the Canadian government doesn't get that type of information on us when we sever our residency ties.

I understand that. It's that way because of Canadian law. U.S. law is different.

The US comes across as being like "Big Brother."

If you say so. But here's the thing. Your saying so doesn't make it so.

So, even if you are a citizen because your parents happened to be in the US for the first 10 months of your life before moving to Canada, well you better file US tax/information returns or renounce your US citizenship.

What's the problem with renouncing the citizenship? The only reason not to renounce it would be because they think they're getting something out of it. Bottom line. It's their choice.

To us it's absurd. To you it's probably normal.

Yep. .

Now. You know what's absurd to us?

- Being able to leave the country, hole up with al Qaeda in Afghanistan, insult Canadian culture - and come back when injured and be able to use the health care system - as the Khadr family did.

- Being able to leave the country, go live in Lebanon - and then call on the Canadian government to evacuate everyone when danger arises - at the government's expense. And then go back when it's deemed safe to do so.

To you it's probably normal.

[msj]

The key words there are "from a Canadian POV." FYI, "Canadian point of view" and "the only right way to do something" are not synonymous.

Um, you're being kinda weird here.

That's the point of saying from my (i.e. Canadian) POV.

You remind of that TV show "The Good Wife" where one of the judges expects the lawyers to end phrases with the words "in my opinion."

Of course it's my opinion - that's a given! But, to some, obviously not....

Again, what you think is "normal" doesn't mean it's the only way that can be "normal." For example. We think it's "normal" to elect our senators. Does that make Canada abnormal?

Not sure what kind of pissing match you want to get into here.

I was just using the ever day bland version of "normal."

Of course what is done in one country is going to be normal and what is done in another will be normal there.

Keep in mind, however, that most countries tax based on residency and few (I have heard only the US but have also heard of the possibility of one other country) tax based on citizenship.

So, on that basis, and, in my opinion, I think taxing based on citizenship is not normal.

I understand that. It's that way because of Canadian law. U.S. law is different.

Really? Like, no sh!t sherlock, I did not know that.

Who would have thunk it?

That Canadian and US law would be different. I mean, really, who could have known?

You do realize that I was trying to show the differences between how Canada and the US do things so people who don't know would have an idea that things are done differently?

If you say so. But here's the thing. Your saying so doesn't make it so.

Obviously forgot to put the "in my opinion" behind that statement!

What's the problem with renouncing the citizenship? The only reason not to renounce it would be because they think they're getting something out of it. Bottom line. It's their choice.

No problem at all.

Other than the frustration of suddenly realizing that you happen to be a US citizen and that you should have filed tax returns your entire adult life it's no problem at all.

I like how Americans like to defend and justify their bureaucracy, even of the "hated" IRS.

Yep. .

Now. You know what's absurd to us?

- Being able to leave the country, hole up with al Qaeda in Afghanistan, insult Canadian culture - and come back when injured and be able to use the health care system - as the Khadr family did.

- Being able to leave the country, go live in Lebanon - and then call on the Canadian government to evacuate everyone when danger arises - at the government's expense. And then go back when it's deemed safe to do so.

To you it's probably normal.

Strange segue.

I suppose this is where I come in and point out how normal it is for a country to detain foreigners and even three Americans, in a base in Cuba and how normal it is to send a Canadian to Syria for torture?

Nah, we know this kind of shit happens but it's not normal and not relevant to the discussion.

[TimG]

It is perfectly normal for US citizens to pay taxes. Citizenship conveys rights and responsibilities, not some half-ass globe trekking game of dual or poly-citizenship of convenience. With examples like Mr. and Mrs. Ignatieff, it's no wonder some think the American perspective is "absurd".

I think people are getting distracted here. Obviously the US has every right to require its citizens to file tax reports even if they mean the citizen owes nothing. This story is really about the outrageous penaties being levied for failing to file these reports - penalties that have no connection to the taxes owed. If the US government was only collecting the taxes owed this would not be a story. Edited September 21, 2011 by TimG

[bush_cheney2004]

...Strange segue.

I suppose this is where I come in and point out how normal it is for a country to detain foreigners and even three Americans, in a base in Cuba and how normal it is to send a Canadian to Syria for torture?

Nah, we know this kind of shit happens but it's not normal and not relevant to the discussion.

Well, it is normal for Canada and the US...both were complicit in such actions, so that really doesn't count. Hell, you guys tried to politicize the very same torture schtick for Afghan prisoner repatriation.

But I get it...different for some Canadians...it all makes sense now....even Ignatieff's Yankee cloaking device. Must be hard on the other Canadians who want to just be....Canadian.

[msj]

I think people are getting distracted here. Obviously the US has every right to require its citizens to file tax reports even if they mean the citizen owes nothing. This story is really about the outrageous penaties being levied for failing to file these reports - penalties that have no connection to the taxes owed. If the US government was only collecting the taxes owed this would not be a story.

Well stated TimG.

Good way to get the topic back on track, too....

[bush_cheney2004]

I think people are getting distracted here. Obviously the US has every right to require its citizens to file tax reports even if they mean the citizen owes nothing. This story is really about the outrageous penaties being levied for failing to file these reports - penalties that have no connection to the taxes owed. If the US government was only collecting the taxes owed this would not be a story.

OK..but the larger point still stands...US citizens are required to file...even to get earned income credit with no taxes owed. "Death and taxes" are a must do. I've been filing since age 16...no big deal.

[TimG]

OK..but the larger point still stands...US citizens are required to file...even to get earned income credit with no taxes owed. "Death and taxes" are a must do. I've been filing since age 16...no big deal.

I agree it is no big deal but the trouble is the US has not been enforcing these rules for decades and it is not reasonable to expect people who don't even carry a US passport to know that they have such an obligation. What would be fair would be an amnesty where citizens that would have owed nothing can make up for their oversight and pay a penality of a $1000 or so. As it is these penalities that can reach 6 figures. The punishment does NOT fit the crime. Edited September 21, 2011 by TimG

[bush_cheney2004]

I agree it is no big deal but the trouble is the US has not been enforcing these rules for decades and it is not reasonable to expect people who don't even carry a US passport to know that they have such an obligation.

But the judge said, "Ignorance of the law is not a defense."

What would be fair would be an amnesty where citizens that would have owed nothing can make up for their oversight and pay a penality of a $1000 or so. As it is these penalities that can reach 6 figures. The punishment does NOT fit the crime.

I'm quite certain that the variation in punishment is far exceeded by the expats variation in income/unpaid taxes! The IRS is quite reasonable these days...there is an amnesty period about to expire.

[TimG]

I'm quite certain that the variation in punishment is far exceeded by the expats variation in income/unpaid taxes! The IRS is quite reasonable these days...there is an amnesty period about to expire.

So do you generally take the position that any penalty that a government wishes to impose is, by definition reasonable, since that is what the government decided?

Is there any situation where you judge the actions of government by standards other than the standards government sets for itself?

Edited September 21, 2011 by TimG