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Uncle Sam wants (a bit of) your money!


Alekbaylee
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Thought some board members may be interested by this :

 

Americans living in Canada are discovering that even if they haven't lived or worked in the United States in years, they're still required to fill out a U.S. tax return, and if they don't file returns by August 31, they could be facing some stiff financial penalties.

 

Christina Simmons is a U.S. citizen who has been living and working in Windsor, Ont., as a professor for more than 25 years. She didn't learn until recently that the IRS has been cracking down on Americans who don't file forms declaring what's in their bank accounts along with their U.S. tax returns.

 

"They're really enforcing it and there's going to be these really big fines if you don't do it," said Simmons. "I decided to get some help with it since I had never done the form before," she said.

 

 

 

The Internal Revenue Service website has a 22-page document to help Americans living abroad, but there are no easy answers to be found there and many don't even know they have to file in the U.S. — a law which has been in place for years.

 

The IRS has set up the Offshore Voluntary Disclosure Initiative, which is giving those who have broken the law, knowingly or not, a bit of a break.

 

Applicants have until Aug. 31 to voluntarily file taxes and banking information dating back to 2003 in exchange for less severe civil penalties.

 

"If it's an effort to solve the U.S. financial problems that's not going to help," said Simmons. "They just need to raise their tax rates which are incredibly low for the developed world, so that's what really bothers me. Canada, Europe, you know, people pay a lot more in taxes for good reasons."

 

Gordon Lee, a Windsor, chartered accountant said he has been helping clients meet the Wednesday deadline. What confuses people is that most countries base taxation on residency, but in the U.S. taxation is based on citizenship, said Lee — citizens have to file from whatever country they live in, for as long as they live.

 

"I think the undercurrent is they detest it," Lee said. "This is not what I do, telling people they have to pay penalties, but unfortunately the law is there and you better to pay the smaller penalties rather than the big penalties later."

 

Lee said the U.S. government wants a piece of what's in Canadian retirement savings accounts, bank and investment accounts.

 

"It's either five per cent, 12 and a half [percent], or 25 per cent depending on the circumstances," he said.

 

In 2006 there were almost 7,000 Americans living in Windsor. Lee said those who cross the border into Michigan could be getting stopped in the near future if they haven't paid their dues to Uncle Sam.

 

The chances of the IRS catching those who don't voluntarily file will go up in 2013 when a law requiring Canadian banks to share client information with the U.S. government takes effect.

 

http://ca.finance.yahoo.com/news/Americans-Canada-unknowing-cbc-3885617959.html

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They also take a cut of your unrealized gains when you renounce your citizenship.  Unless, like me, you are a dual citizen since birth and are leaving for your other country of citizenship.

 

I think I read that even after renouncing citizenship they will tax any of your gifts for the next five years.  So to avoid US estate tax, I will need to renounce my U S citizenship, then reside in Australia for five years, and then give the gifts to my children.  Australia has no gift tax.

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They also take a cut of your unrealized gains when you renounce your citizenship.  Unless, like me, you are a dual citizen since birth and are leaving for your other country of citizenship.

 

I think I read that even after renouncing citizenship they will tax any of your gifts for the next five years.  So to avoid US estate tax, I will need to renounce my U S citizenship, then reside in Australia for five years, and then give the gifts to my children.  Australia has no gift tax.

 

Isn't it 10 years these days?  (My memory is hazy.)

 

 

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They also take a cut of your unrealized gains when you renounce your citizenship.  Unless, like me, you are a dual citizen since birth and are leaving for your other country of citizenship.

 

I think I read that even after renouncing citizenship they will tax any of your gifts for the next five years.  So to avoid US estate tax, I will need to renounce my U S citizenship, then reside in Australia for five years, and then give the gifts to my children.  Australia has no gift tax.

 

Isn't it 10 years these days?  (My memory is hazy.)

 

I believe I had the 5 stuck in my head because that is what I remember as being applicable to me, only I said the wrong thing.  I need to first pay resident taxes there for at least 5 years out of the prior 15, then revoke my US citizenship.  That's the way I avoid the expatriation tax.

 

From IRS i8854.pdf:

 

Certain dual-citizens. You may qualify for the exception described above if you meet the following requirements. • You became at birth a U.S. citizen and a citizen of another country and you continue to be a citizen of, and are taxed as a resident of, that other country.

• You were a resident of the United States for not more than 10 years during the 15-tax-year period ending with the tax year during which the expatriation occurred. For the purpose of determining U.S. residency, use the substantial presence test described in chapter 1 of Pub. 519.

 

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And you guys (Yanks) are getting increased duty free allotment when coming back from Canada of $1000!

 

Probably bad news for state and muni debt of US border states that rely in part on collection of sales tax.

Yes, when i heard that I was wondering with whom the benefit lay but then i realized perhaps it is the fact that less than $1000 duty wasnt easily enforced and time consuming from a benefits std pt. May have to do with border resources allocation - streamline the coming from Canadas pay more attention to the Mexican border? Thats my guess.

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And you guys (Yanks) are getting increased duty free allotment when coming back from Canada of $1000!

 

Probably bad news for state and muni debt of US border states that rely in part on collection of sales tax.

Yes, when i heard that I was wondering with whom the benefit lay but then i realized perhaps it is the fact that less than $1000 duty wasnt easily enforced and time consuming from a benefits std pt. May have to do with border resources allocation - streamline the coming from Canadas pay more attention to the Mexican border? Thats my guess.

 

We have been visiting Canada every winter for a week in Sun Peaks near Kamloops.  It is a ski resort.

 

They are hurting very much from the dollar exchange rates.  The US ski tourists now consider it not worth the drive -- it was once a significant cost savings, but now it's on par with the big US resorts.  Might as well save the driving they figure.  But we like it because the slopes are empty, rentals are easy to find, and the place is very beautiful.  Plus it's packed with cute Aussie girls, even if I'm not officially allowed to look.

 

Suspect it has something to do with that -- soften the blow for US tourists visiting Canada.

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And you guys (Yanks) are getting increased duty free allotment when coming back from Canada of $1000!

 

Probably bad news for state and muni debt of US border states that rely in part on collection of sales tax.

Yes, when i heard that I was wondering with whom the benefit lay but then i realized perhaps it is the fact that less than $1000 duty wasnt easily enforced and time consuming from a benefits std pt. May have to do with border resources allocation - streamline the coming from Canadas pay more attention to the Mexican border? Thats my guess.

 

Isn't it because it doesn't make sense for an American to shop in Canada because of higher prices and sales taxes? In reality, they probably haven't been collecting much taxes in the past anyway. What would benefit the US more is if they got Canadian Customs to provide a reciprocal $1,000 duty free allowance for Canadians crossing the border - maybe this is what they are after.

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Isn't it because it doesn't make sense for an American to shop in Canada because of higher prices and sales taxes? In reality, they probably haven't been collecting much taxes in the past anyway. What would benefit the US more is if they got Canadian Customs to provide a reciprocal $1,000 duty free allowance for Canadians crossing the border - maybe this is what they are after.

 

I shop many times in Niag Falls NY and in their grocery stores and the only thing that is cheaper in that grocery store is Eggs, Milk and Beer. I'll stick to my orig theory that the amt in duties you collect on small items compared to the amt of resources you use for this is not worth it.

The reciprocating 1000 duty free would be a good idea - but i think it would have had to come up in some kind of unilateral trade talks.

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