Americans living in Canada could face thousands of dollars in penalties for each year they failed to file a tax return in the U.S., under a new IRS enforcement policy that starts next month.

 

"As far as I'm concerned, they've gone on a witch hunt to find average citizens who have really done nothing wrong," said Gordon Lee, a Windsor accountant who specializes in Canada-U.S. tax issues.

 

"They're not seeking to avoid tax liabilities because there rarely are any. Many are simply not aware of the rules."

 

An Aug. 31 (it's been extended to September 9th btw) deadline looms for an untold number of Americans living in Canada - including Canadian-born individuals with dual citizenship - who are at risk of massive penalties from the IRS, even if they have no U.S. income, owe no back taxes and haven't lived in the United States for years.

 

Huge numbers of Americans don't know the IRS requires all U.S. citizens living abroad to file annual tax returns.

 

They must disclose their foreign bank accounts and other holdings even if they have no American tax liability.

 

And, although the law has been on the books for years, the issue is being brought to a head by a new push to enforce this provision more vigorously than in the past.

 

The Aug. 31 deadline is for an Offshore Voluntary Disclosure Initiative introduced last winter to encourage non-resident Americans to make the required disclosures. For those who meet the deadline, it provides for reduced - but still hefty - penalties, although it also holds out at least some hope that the penalties could be waived.

 

Lee said he has been advising his clients for years to make the information available to the IRS on an annual basis.

 

"Many find it repugnant to do so," said Lee. "Most hate filling out these forms but it's becoming more and more onerous not to do so."

 

Americans who have filed annual tax returns disclosing their foreign bank account information face no penalties but those who haven't filed in the past could be hit with penalties of up to 25 per cent of the greatest amount of their financial holdings between 2003 and 2011.

 

Cyndee Todgham-Cherniak, a tax and trade lawyer and sessional instructor at the University of Windsor's law school, said "as with any compliance issue, when a government needs money, it often grants incentives to encourage people to come forward or it conducts an audit and assesses you anyway.

 

"U.S. citizens, regardless of where they live, are still subject to the same taxation regulations as any other U.S. citizen," said Todgham-Cherniak. "This deadline is designed to encourage them to come forward and comply voluntarily."

 

Those who fail to meet the Aug. 31 deadline could face stiffer financial penalties if they haven't filed with the IRS in the past.

 

"Now, for those who have never filed, they can be hit with penalties dating back to 2003 just for complying with the deadline and coming clean with their bank account and investment information," said Lee.

 

The Offshore Voluntary Disclosure Initiative could reduce the penalties by as much as 90 per cent, but it comes with three conditions. To be eligible, American citizens must establish that they lived outside the U.S. from 2003 to 2010, that they made a good-faith effort to comply with tax laws in the country or countries where they've been residing, and that they had less than $10,000 of U.S.-source income. People who meet those criteria may be able to apply for an extension to get all the paperwork done, but it is not automatically granted.

 

In a statement on the IRS website, commissioner Doug Shulman said "the time has come to get back into compliance with the U.S. tax system because the risks of hiding money offshore keeps going up.

 

"Our goal is to get people back into the system," added Shulman "The voluntary initiative gives people a fair way to resolve their tax problems."

 

Lee said he's been getting weekly calls from non-clients asking for advice. "I just tell them the rules, what the penalties are and then it's up to them whether or not they file," said Lee.

 

In general, since tax rates are higher in Canada than in the U.S., there's no tax owing to the IRS on Canadianderived income for making these disclosures but there could be on capital gains and lottery winnings which are treated differently on each side of the border.

 

Penalties for wilful non-compliance could be as high as $10,000 for every year a person has failed to file and for each account, trust or investment.

 

It's been estimated there could be between 600,000 and one million U.S. citizens living in Canada.

 

Some - Canadian-born children of American citizens - carry dual citizenship and this rule covers them as well.

 

In two years, when the U.S. Foreign Account Tax Compliance Act comes into effect, Canadian banks will be required to inform the IRS about any of their clients who are U.S. citizens.

 

Lee said that if this information finds its way into computers accessed by U.S. border patrol agents, dual citizens who flash their U.S. passports when re-entering the U.S. could be flagged for failing to file tax returns. It's the second time the IRS has launched a voluntary disclosure initiative. In 2009, more than 15,000 disclosures were submitted involving accounts in banks in over 60 countries.

 

http://www.windsorstar.com/sports/rules+could+penalize+Americans+here/5282418/story.html

 

 

wut

Welp. The US government does have an enormous debt it needs to pay off :|

Going after someone living somewhere else who does nothing in this country is very bad.

600,000 - 1 million U.S. citizens living in Canada? I somehow doubt that. And even if it's someone who has dual citizenship, but basically has nothing to do with the U.S. anymore, why should they file a tax return? Seriously?

 

I work with someone who lives in Canada and drives over here each day. I've always wondered whether he has dual citizenship or a work visa, whether he has to pay income taxes if he's not a citizen, etc. Of course, it's not like I'm going to ask him that. "Hey bro, do you get to keep all of your paycheck?" No.

Welp. The US government does have an enormous debt it needs to pay off :|

 

I'm guessing this or something along those lines is the reason. It feels almost as though they set us up. I mean, I bet 90% of the people this affects still have no idea about it.

edit: nvm

How stupid can you get?