US Person for Tax Reasons? Need advice on FATCA

[Lorelyrra]

I moved to Canada from the US on October 1st of this year. I'm fully settled here, living and working full-time in Canada. I have a bank account here, but I did leave my US bank account open and active because it is the easiest way to pay off my US-based credit cards without paying hefty fees to wire money to myself. I recently received a letter from my bank asking me to fill out forms if I'm a 'US person for tax reasons'. I don't believe I fall under that category, however, they tell me if I'm not a US person for tax reasons, I have to fill out another form and send a copy of my 'Certificate of Loss of Nationality' or a copy of my 'Abandonment of Lawful Permanent Resident Status' form, neither of which I have or have ever heard of. I tried contacting my bank but the person I spoke to knew nothing about the FATCA and directed me to a website which didn't even come close to answering my questions.

Am I going to be paying US taxes on my Canadian income until I'm able to become a full citizen of Canada? Because that's what it's sounding like and I'm very, very confused. Any help would be amazing!

 

[scylla]

What's your nationality? Are you a US citizen or something else?

 

[Lorelyrra]

I'm still currently a US citizen/Canadian PR

 

[zardoz]

I'm still currently a US citizen/Canadian PR

In that case, you ARE a "US Person for Tax Reasons". Sorry but there's no escaping from the IRS while you have US citizenship.

 

[Lorelyrra]

That sucks. Taxes next year are going to be so complicated @_@ Thanks for the help!

 

[scylla]

In that case, you ARE a "US Person for Tax Reasons". Sorry but there's no escaping from the IRS while you have US citizenship.

Agreed. You have to file a US tax return for the rest of your life no matter where you are living. The only way to avoid this is to officially give up your US citizenship (FYI - this process takes quite a bit of time and costs a few thousand dollars).

 

[Lorelyrra]

And I thought immigrating would be the hard part!

 

[zardoz]

Agreed. You have to file a US tax return for the rest of your life no matter where you are living. The only way to avoid this is to officially give up your US citizenship (FYI - this process takes quite a bit of time and costs a few thousand dollars).

I believe that this applies to any US citizen even if they are citizens by descent and have never/will never visit the USA.

 

[pie_vancouver]

You will file income tax return in Canada and US and there is a tax treaty to prevent double taxation, it is best to contact CRA on how to get this tax credit.

 

[Johnny Marshmallow]

...knew nothing about the FATCA and directed me to a website which didn't even come close to answering my questions. Am I going to be paying US taxes on my Canadian income until I'm able to become a full citizen of Canada? Because that's what it's sounding like and I'm very, very confused. Any help would be amazing!

Imagine a US citizen still living in the US. Imagine that such a person was quietly opening foreign bank accounts in Canada and transferring money from US accounts to Canada. The IRS will assume that such a person is wealthy and is trying to avoid taxes by hiding away money in a foreign country (Canada). I know. Sounds crazy. Now imagine all the paperwork that such a person would need to fill out, besides the run-of-the-mill tax return, to satisfy the IRS. Many types of forms. Complex forms. A specialized Canadian/US accountant will need to be hired. Such a person wouldn't want to have even the slightest mistake. The penalties for making mistakes on the complex forms would shock you. Thousands of dollars, if not tens of thousands, potentially. Not in taxes, but in *penalties*. Such a person will need to divulge all bank balances, investment accounts, RESPs, etc., and file forms with the Financial Crimes Enforcement Network. Seriously. When such a person sells their Canadian house, the IRS will expect them to pay capital gains tax. It doesn't matter that the Canadian government does not levy such a tax.

Now, if you live in Canada (as a Canadian Citizen or Landed or anything), but are a still US citizen, you are in the same boat as the theoretical person in the above paragraph. You happen to live in a foreign country (Canada), but all the IRS sees is "US Citizen socking away money in a foreign bank account. Warning! Warning! Tax evader! Tax evader!"

Becoming a Canadian Citizen will not change a thing from the point of view of the IRS. They don't care. But becoming a Canadian Citizen with the "intent" to relinquish your US citizenship can help with the process of getting your CLN. Read all you can about that process. You will want to do it the right way with no wiggle room for the State Department.

I was born in USA and later became Canadian. I recently managed to attain my CLN through no small cost or effort. I never owed US taxes, but the forms and threats of penalties and the cost to hire accountants each year were killing me.

I would say if there is less than a 30% chance you will ever really want/need to move back to the USA, then start divesting yourself of US citizenship now. You may need to adjust that percentage depending on your personal comfort level. Visit isaacbrocksociety.ca to read all about FATCA and the mess you are now in thanks to the IRS, and how to get out of it.

I'm so sorry for you.

Note: I'm not a lawyer. If information on isaacbrocksociety.ca or contradicts what I've said, then go with the former. But I think you'll find I am not far off the mark, if at all.