Hello.

I am a US citizen who has lived and worked in Canada all my life. I have permanent resident status in Canada, and very shortly will have my Canadian citizenship.

All my accounts are in Canada, i have no criminal record, have always been law-abiding, and have always filed my taxes on time (Revenue Canada).

As with most people, I was unaware of the filing requirements but, for the last month or so, have got my paperwork in order through an Accountant firm and will be filing 6 years of income tax returns and 6 years of FBARS tomorrow morning.

I understand the FBAR penalties are stiff, but I am also aware that even for a non-willfull violation no penalties can be levied if you have a 'reasonable cause'.[/B]

Here are my two questions;

If they reject my reasonable cause and deem necessary to place penalties on me for late FBAR filings. What happens if I refuse to pay them?

If for example, I refuse to fork over my hard earned $ because of filing late paperwork, I am assuming they have little power north of the border to freeze my accounts.

I agree that I would be in trouble if I went to the US...but what can they do?

Say that FATCA comes into effect in 2014...then what? Do they have the power to take from me then???

Question 2.

Since the IRS has been employed to collect for these fines and penalties...will the IRS Tax Advocate be available to me regarding a penalty against late FBAR filing?

For those of you who have not filed as of yet...make sure when you send in your FBARs you have a strong letter outlining your reason for late filing.

I have been told that no one in Canada has been penalized yet. There is a lot of mis-information out there, be careful what you read.

The best to everyone

I'd really be interested in the answer to these questions too. I don't know anything about the question, but my understanding is that Canada will not enforce FBAR penalties and you cannot be extradited for civil or criminal FBAR penalties. I think that Canadians are among the many who have been assessed penalties under OVDI programs. I have not heard that the IRS has assessed penalties against those making quiet disclosures but just give them time: they are after all overworked with so many cases at this point.

Whether the federal officials will eventually detain at the border someone owing FBAR penalties is the big question. See this post by Phil Hodgen, as an anymous testimony is given there and some knowledgable legal minds answer that questions (Hodgen.com).

Personally, I think it better not to give them account information, because they cannot assess penalties if they don't have that information. You might also consider filing a Fifth Amendment FBAR to satisfy filing requirements.

Hi Mach 7, welcome to the forum.

If you refuse to pay them, their only recourse at this point is to instigate litigation, which would be rather difficult to actually put in play.When FATCAT comes into effect, yes, they can force the financial institutions who hold your accounts send 30% to IRS.

I don't know anything about Taxpayer Advocate - if you check out this FB page
https://www.facebook.com/groups/2813...46415/members/ and contact Paul Mend, he can probably tell you about it as he has mentioned using them

I am quite curious as to who told you there have been no penalizations in Canada yet, presuming you are referring to FUBAR, not taxes?

That is completely illegal and unenforceable under the Canada-US Tax Treaty. This has been stated repeatedly and publicly both by Canada Revenue Agency and by Jim Flaherty, our Finance Minister. Banks in Canada can NOT remit money directly to the IRS, either under that treaty or under Canadian banking legislation. For the IRS to try to collect or enforce tax liabilities or penalties directly from Canadian banks against Canadian citizens would be a clear violation of that treaty. In my non-lawyer opinion, for any Canadian financial institution to comply with a request for funds by the IRS would be illegal and eminently actionable in law in a Canadian federal court. And should be challenged, whether by individuals or in a class-action lawsuit.

Under the Canada-US Tax treaty, neither country can collect any tax liabilities or taxation information from residents of the other country except by requesting such action to be made by the other country's government (in practice, in Canada by Canada Revenue Agency). Under an article of that treaty, acknowledged in public letters by Minister Flaherty, no tax liabilities alleged by the US can be collected in Canada against anyone who was or is a Canadian citizen at the time those liabilities allegedly were incurred.

Please stop repeating as a given what the IRS (illegally) wants you to believe. What they are asking banks to do is, as far as I know (and I have asked Minister Flaherty by email to clarify this) illegal in Canada, and to my certain knowledge is also in violation of the treaty (just read the thing, if you can stand the turgid excuse for English prose in which it was written).

Let's hope our so-called "Harper Government" has the spine to uphold these facts and protect us from this.

The 30% withholding will be on payments made to non-compliant FFI (Foreign Financial Institution), and it will occur in the United states--but no Canadian bank should be able to do it. Nevertheless, I moved my accounts to a credit union. Here is a website that explains (pdf) (see #7-8).

Thanks for this. That's a wrinkle that escaped me, and also may have escaped the person who extracted some wording from a BMO-Nesbitt Burns email that I posted elsewhere on this website.

If in fact the 30% (it's stated as 28% in the Qualified Intermediary Agreement stuff from BMO/NB but close enough) is only going to be assessed on US-source income, e.g., US T-bills, savings bonds, or US-head-officed stocks or mutual funds, then there is a simple solution. As I've already advocated elsewhere, if you own any US-sourced investments, dump them now before FATCA hits and reinvest the money in Canada or maybe elsewhere not in the US. That seems too simple, too stupid -- the IRS and US government would thereby be blasting both feet off their own legs, so to speak I wish I could believe they're that dumb, and given the dysfunctionality of the US legislative process I guess I can believe it, but it seems too good to be true. Are we really sure of this point?

I do know that FATCA penalizes the FFIs 30% of their US assets if they aren't in compliance (if they haven't reported all their "US person" accounts, though how they can prove to IRS they've reported them all without in fact reporting all accounts for comparison, including accounts of Canadians who've never had any US citizenship in their lives even at birth, raises even more horrific concerns about imperialism and violation of our sovereignty). Which is why I've moved my accounts to a credit union (actually all my accounts already were with them, it's my RRSP that I moved over to them after dumping every US-anything that was in my portfolio), because they have no US assets at all so IRS can't penalize them so they aren't about to comply with FATCA. And of course no FFI wants to comply with FATCA because of the estimated millions, and with large FFIs it's estimated literally hundreds of millions, of admin costs to be in full compliance. Costs that the FFI will have to pass on to (presumably all) account-holders in (much) higher fees. If you think anti-bank and Occupy Everything protests have been big and noisy now, you ain't seen nothin' yet folks, if that happens.

But yes, if in fact the witholding occurs only at source for US-source investments, by gum they could enforce withholding from your RRSP or RRIF without violating the Canada-US treaty, I guess. But then if that is the case, who in their right noodle is going to keep one penny of their hard-earned-in-Canada savings in a US-source anything? And what will THAT do to the US economy?

This is starting to sound like a script reject from an ancient "Dumb, Dumber and Dummbest" flick.

I read a column a few months ago, I forget whether it was in Economist or in the Guardian, suggesting that Obama and his cabinet are in way over their heads in terms of having a clue how to run a government or a country. It's possibilities like the above that start me wondering whether that column was rhetoric, wishful thinking, or the awful truth. If the latter, are these the people the world really wants sleeping with a black suitcase with a red button on it next to the bed?

I am quite curious as to who told you there have been no penalizations in Canada yet, presuming you are referring to FUBAR, not taxes?

I actually did my own research by calling Accountant firms all over the country (Canada). It seems that the words of our Finance Minister and the US ambassador to Canada might have had some effect...who knows.

Basically no one that has filed a 'quiet disclosure' has been penalized or fined. These individuals also attached a letter stating reasonable cause.

As far as I was told, (and read). non-willful violations have a penalty attachment of not more than 10k per account.

In order for the IRS to attach a non-willful penalty, they must first ensure there was no reasonable cause, and your filed FBARs are in order (you didn't lie about your accounts) and you paid all investment income on said accounts.

The 'resonable cause' attachment letter is the big one. I actually got an Accountant firm to write mine up to make sure I had the 'buzz' words right.

The people that went into the OVDI program were basically fined and penalized. The way it was explained to me is that...if you have nothing to hide and have not evaded taxes...DO NOT GO INTO THE PROGRAM.

The Program assumes you have something to hide and is offering you amnesty.

Unfortunatley, for us up here in Canada, we are not steeped in the American way of (tax) life...so how the hell are we supposed to be up on IRS current affairs!

There is your reasonable cause.

So...i will play there game, i have filed my 1040's and fedex'd my FBARs to Detroit accuratley.

But there is no way I am parting with my money that I earned with my own sweat because someone in Washington decided to dip into my bank account. The yanks are losin it!

My opinion of FATCA is this. It WILL be instituted, but in a water down version.

IMHO

I think that's exactly right; I read another report that said the US would lose 14 trillion in private foreign investment because of FATCA (see here). Let's face it, the world's banks can't comply with the information disclosure without violating the laws in their own countries. And since they can't comply, then foreign FFIs won't be able to do US transactions in the states.

Now there may soon be other solutions if you still want to trade US equities, bonds or other instruments (US dollars are a great thing to short right now). Other markets will open up US dollar transactions: so you will be able to trade US,CDN and international equities/options on the TSX/MSX or some alternative markets in Canada and elsewhere and the transactions will take place in US dollars--but they won't happen in the US. That means that non-US markets will get all the commissions. Right now, I trade CDN oil and gold mining equities and options on the US markets. But I won't be doing that once FATCA is implemented. But I am with you. I'm already 100% out of US investments since the day Obama announced his government's first budget.

I also believe a strong barrier to FATCA in Canada is our Human Rights legislation.

For many Canadian citizens of US nationality, their only tie to US is "national or ethnic origin": place of birth.

In Canada, banks and financial institution are governed by both the Charter and the Canadian Human Rights Act.

The Human Rights Act specifically prohibits discrimination based on "nationality or ethnic origin". FATCA requires discrimination against US-born Canadian citizens by their banks, because they would "differentiate adversely in relation to any individual" based on "nationality or ethnic origin".

To be rhetorical: Imagine if the US asked Canadian banks to identify all Canadian citizen customers who were born in Pakistan, and to then subject Canadians born in Pakistan to a US reporting and withholding regime which is different than any other nationality!

That's what FATCA asks banks to do – just substitute "Canadians Born in US" for "Canadians Born in Pakistan".

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Here are the specific sections from the Human Rights Act:

"Prohibited grounds of discrimination
3. (1) For all purposes of this Act, the prohibited grounds of discrimination are race, national or ethnic origin, colour, religion, age, sex, sexual orientation, marital status, family status, disability and conviction for which a pardon has been granted.

Denial of good, service, facility or accommodation

5. It is a discriminatory practice in the provision of goods, services, facilities or accommodation customarily available to the general public

(a) to deny, or to deny access to, any such good, service, facility or accommodation to any individual, or

(b) to differentiate adversely in relation to any individual, on a prohibited ground of discrimination.

If you don't pay the FBAR penalties after they knowingly waste their time and money to take it through a US Civil court, they can't do anything to you before or after FCAT to collect, unless you have US property in which case it can be seized. If you travel to the US they still can't do anything. You can't be arrested for a civil debt.

The only reason Canadians aren't specifically excluded from all this is that this one big scary phantom, but toothless boogeymen scares people like you and me into filing.

The only ones that need to be concerned about FBAR are those that are bona fide tax cheats and those that must file an amended tax return because they made a "mistake" and forgot about some income on their previous returns.

It's a sham for the rest of us so don't worry about it. As some have said no one that has filed quietly has had a problem and it's not just Canadians but anyone paying their fair share of taxes in a non-tax haven country.