US Citizens and Income Taxes

SawMan wrote:

LLGM wrote:

So, one is not forced but there sure seems to be an economic Berlin-Wall there keeping taxpayers inside the fence.

The administrative fees are nothing compared to the so-called "exit tax" that may be due.

In general, "covered expatriates" are treated as if they had liquidated all of their assets on the date prior to their expatriation. The taxpayer's net gain is computed as if he or she had actually liquidated their assets, that is, the difference between the fair market value (theoretical selling price) and the taxpayer's cost basis (actual purchase price). Once net gain is calculated, any net gain greater than $600,000 will be taxed as income in that calendar year. The tax applies whether or not an actual sale is made by the taxpayer, and regardless when the unrealized gains arose.

Ah yes, the potential Exit Tax.  For 2014, the Exemption on Capital Gains at the time of expatriation has been $680,000 (increases annually with inflation), but that is only one of the tests for whether or not you get the '"gift" of an Exit Tax.  The others are:
(1) over the past 5 years has your average level of US taxes owed been equal to or greater than $150,000 (I think it is this number)  AND
(2) "when you tally up all your assets as of the day prior to your renunciation (including all those above-mentioned "capital gains"  PLUS your owned residence and/or vacation property, the value of your pension going forward, your car, art, furniture, jewelry, china and silver, collectibles, race horses, whatever), do all your worldly assets total $2,000,000 or more? 
If so, then you become a Covered Expat and have the joy of being awarded an Exit Tax plus some ongoing IRS monitoring for taxes for a while.  If your calculations of all these things comes out below these numbers, an Exit Tax is avoided and you are done/released (except for your final IRS tax filing and 8854 in April the year after renunciation).

mugtech wrote:

all citizens must file form 1040...

From Investopedia:

"This may come as a surprise to many individuals, but not everyone needs to file a federal tax return.

"According to the IRS, many individuals who do not need to file tax returns still do, because they are not aware of the requirements."

A chart showing which individuals are exempt from filing is available at

www.investopedia.com(forward-slash)ask(forward-slash)answers(forward-slash)07(forward-slash)taxtipfederal.asp

cccmedia wrote:

mugtech wrote:

all citizens must file form 1040...

From Investopedia:

"This may come as a surprise to many individuals, but not everyone needs to file a federal tax return.

"According to the IRS, many individuals who do not need to file tax returns still do, because they are not aware of the requirements."

A chart showing which individuals are exempt from filing is available at

www.investopedia.com(forward-slash)ask(forward-slash)answers(forward-slash)07(forward-slash)taxtipfederal.asp

True, many can avoid filing, but if you had taxes withheld you need to file or the refund will disappear three years after the original due date.  If a couple has adjusted gross income less than $20,000 and does not have self employment income more than $400 and did not make any withdrawals from a Health Savings Account, then they can avoid filing.  Also if one half the ss benefits plus the adjusted gross income is less than $32,000 and the adjusted gross income w/o SS is less than $20,000, then no filing is required.  These amounts are adjusted for inflation each year plus the standard deduction increases when one of the taxpayers is over 65 and even more when both are.  For a single person the amounts are $10,000 instead of $20,000 and half the SS plus AGI less than $24,000.  So an expat collecting $2,000/month SS and less than $10,000 in other income for the year owes no taxes and need not file.  Many file when not required to file simply to go on record as having reported all of their income rather than have to explain to the IRS in a few years why they did not file.

BobH wrote:

LLGM:

Interesting. I had heard some joking talk among expats that someone ought to sue the US government for human rights violations as a result of FATCA, etc. Looks like it was not entirely a joke.

I doubt it will go very far, but nonetheless, I wish them well.

It doesn't have to go very far Bob, only as far as the Supreme Court of Canada.

Just as in the USA nothing in law has force that is not permitted by the Constitution. We are talking about the (Canada) Constitution Act - 1982 and the Charter of Rights and Freedoms which is part thereof. The Constitution of the United States of America does not apply to Canada as much as your government might wish it to. You might be surprised to know that the Constitution of the United States of America is NOT THE ONLY ONE in the world and that it does not apply everywhere in the world, Munroe Doctrine and Manifest Destiny notwithstanding.

The lawsuit is against the Attorney General of Canada and maintains that inking the agreement with the US government violates both the Constitution Act - 1982 and several provisions of the Charter of Rights and Freedoms, that the AG did not have the Constitutional Authority to sign such an agreement and as such the agreement is ULTRA VIRES, and null and void from the outset. That is the ONLY legal test that the application must satisfy, and it clearly will do so, unless of course the present government in Canada tries to change the Constitution.

This will mean that Canadian financial institutions will be prohibited from and/or exempt from complying with an extraterritorial foreign law which is aimed at trampling on not only the sovereignty of our country, but on the rights of all who reside there.

Your government may do whatever they wish to do within the territorial limits of the USA, but in Canada your laws mean little. If Canadian law prohibits Canadian financial institutions from complying then they will simply have to suffer whatever consequences are imposed on them within the USA, or challenge your government's legal authority to impose them. At the end of the day, within Canada should the application be upheld (which it should be) FATCA will have no effect in law.

I too wish the parties to the application luck, but really luck has little to do with it since they have the law on their side.

Cheers,
James        Expat-blog Experts Team

James, thanks for these words of support; overall, I couldn't agree more!!!  Just to clarify a couple issues:

The Canadian constitutional challenge has to go to Federal Court first; it is likely that if the Government gets it's knuckles whacked it will appeal, so it will have to go to a higher court.  I do not know how many step are involved before it gets right up to the Supreme Court, but it is likely that (if we can persist and have enough funds to carry this forth), it will rise to the Supreme Court.

Unfortunately, in both the US and Canada there seem to be governmental factions that can push laws that are non-Constitutional and have everyone else be so afraid that they just fall over and let these illegal laws ride without question.  Certainly, FATCA (as it now stands) is WELL BEYOND THE LEGAL PALE in that IGAs signed with foreign countries are not treaties (tho many countries have viewed them as such) as these documents NEVER went through the US Senate (the body responsible for international treaty-making).  So what legality do these IGAs have?  Just the force of bully-threat/intimidation run rampant from the Executive Branch's henchmen.  It will take fighting back (in Canada and the US and elsewhere) to bring it tumbling down - - and that takes money to make it happen.  Currently, the Alliance for the Defense of Canadian Sovereignty needs $42,000 before Feb 1 to make it's next legal payment to keep this action going.....

What Canadian financial institutions will do following this court case (if we are successful) is a big question.  Many of these banks are deeply tied up in the US (the TD bank has more branches in the US than in Canada!!) but likely they would have to move to a type-1 IGA where each bank has to have it's own independent connection with the IRS.  They then would be in violation with privacy laws within Canada and would only offer financial services to those clients who signed a "waiver of rights" document with their bank/investment house.  That would be a mess too but at least the mess would be on the shoulders of the banks instead of the Gov of Canada relieving the burden of the banks only to destroy the rights of 1 million minnow-folk in Canada. 

Maybe the Canadian banks (which certainly were vocally against FATCA initially) will help to mount an international banking protest against this USA incursion.  Do you have any idea how much the banking industry has spent of their own country's assets (around the world) to salve the Obama/IRS rage against "tax cheats and money-launderers" , and this, in comparison with what small amount of money the IRS will collect through this extortion?  At least 10 times as much as the IRS will gain!  Outrageous theft of international wealth!!!  And, ironically, the USA is the biggest financial-hiding country in the world, and most of the wealthy US folks who have been hiding money abroad ARE LIVING IN THE USA.

Enough ranting.  This is supposed to be a friendly site.  But if anyone wants to know more about the FATCA thinking going on in Canada, let me know or go to the websites I've mentioned before.      

PS  There’s a poll “Do you think the US government needs to rethink its taxation rules for non-resident U.S. citizens? You might want to vote!

http://blogs.wsj.com/expat/2014/12/16/  u-s-expats-find-hope- in-senate-finance-tax-reform-proposal/? mod=WSJ_article_outbrain&obref=obinsite

LLGM wrote:

James, thanks for these words of support; overall, I couldn't agree more!!!  Just to clarify a couple issues:

The Canadian constitutional challenge has to go to Federal Court first; it is likely that if the Government gets it's knuckles whacked it will appeal, so it will have to go to a higher court.  I do not know how many step are involved before it gets right up to the Supreme Court, but it is likely that (if we can persist and have enough funds to carry this forth), it will rise to the Supreme Court.

Unfortunately, in both the US and Canada there seem to be governmental factions that can push laws that are non-Constitutional and have everyone else be so afraid that they just fall over and let these illegal laws ride without question.  Certainly, FATCA (as it now stands) is WELL BEYOND THE LEGAL PALE in that IGAs signed with foreign countries are not treaties (tho many countries have viewed them as such) as these documents NEVER went through the US Senate (the body responsible for international treaty-making).  So what legality do these IGAs have?  Just the force of bully-threat/intimidation run rampant from the Executive Branch's henchmen.  It will take fighting back (in Canada and the US and elsewhere) to bring it tumbling down - - and that takes money to make it happen.  Currently, the Alliance for the Defense of Canadian Sovereignty needs $42,000 before Feb 1 to make it's next legal payment to keep this action going.....

What Canadian financial institutions will do following this court case (if we are successful) is a big question.  Many of these banks are deeply tied up in the US (the TD bank has more branches in the US than in Canada!!) but likely they would have to move to a type-1 IGA where each bank has to have it's own independent connection with the IRS.  They then would be in violation with privacy laws within Canada and would only offer financial services to those clients who signed a "waiver of rights" document with their bank/investment house.  That would be a mess too but at least the mess would be on the shoulders of the banks instead of the Gov of Canada relieving the burden of the banks only to destroy the rights of 1 million minnow-folk in Canada. 

Maybe the Canadian banks (which certainly were vocally against FATCA initially) will help to mount an international banking protest against this USA incursion.  Do you have any idea how much the banking industry has spent of their own country's assets (around the world) to salve the Obama/IRS rage against "tax cheats and money-launderers" , and this, in comparison with what small amount of money the IRS will collect through this extortion?  At least 10 times as much as the IRS will gain!  Outrageous theft of international wealth!!!  And, ironically, the USA is the biggest financial-hiding country in the world, and most of the wealthy US folks who have been hiding money abroad ARE LIVING IN THE USA.

Enough ranting.  This is supposed to be a friendly site.  But if anyone wants to know more about the FATCA thinking going on in Canada, let me know or go to the websites I've mentioned before.      

PS  There’s a poll “Do you think the US government needs to rethink its taxation rules for non-resident U.S. citizens? You might want to vote!

http://blogs.wsj.com/expat/2014/12/16/  u-s-expats-find-hope- in-senate-finance-tax-reform-proposal/? mod=WSJ_article_outbrain&obref=obinsite

And this isn't politics?

mugtech wrote:

LLGM wrote:

James, thanks for these words of support; overall, I couldn't agree more!!!  Just to clarify a couple issues:

The Canadian constitutional challenge has to go to Federal Court first; it is likely that if the Government gets it's knuckles whacked it will appeal, so it will have to go to a higher court.  I do not know how many step are involved before it gets right up to the Supreme Court, but it is likely that (if we can persist and have enough funds to carry this forth), it will rise to the Supreme Court.

Unfortunately, in both the US and Canada there seem to be governmental factions that can push laws that are non-Constitutional and have everyone else be so afraid that they just fall over and let these illegal laws ride without question.  Certainly, FATCA (as it now stands) is WELL BEYOND THE LEGAL PALE in that IGAs signed with foreign countries are not treaties (tho many countries have viewed them as such) as these documents NEVER went through the US Senate (the body responsible for international treaty-making).  So what legality do these IGAs have?  Just the force of bully-threat/intimidation run rampant from the Executive Branch's henchmen.  It will take fighting back (in Canada and the US and elsewhere) to bring it tumbling down - - and that takes money to make it happen.  Currently, the Alliance for the Defense of Canadian Sovereignty needs $42,000 before Feb 1 to make it's next legal payment to keep this action going.....

What Canadian financial institutions will do following this court case (if we are successful) is a big question.  Many of these banks are deeply tied up in the US (the TD bank has more branches in the US than in Canada!!) but likely they would have to move to a type-1 IGA where each bank has to have it's own independent connection with the IRS.  They then would be in violation with privacy laws within Canada and would only offer financial services to those clients who signed a "waiver of rights" document with their bank/investment house.  That would be a mess too but at least the mess would be on the shoulders of the banks instead of the Gov of Canada relieving the burden of the banks only to destroy the rights of 1 million minnow-folk in Canada. 

Maybe the Canadian banks (which certainly were vocally against FATCA initially) will help to mount an international banking protest against this USA incursion.  Do you have any idea how much the banking industry has spent of their own country's assets (around the world) to salve the Obama/IRS rage against "tax cheats and money-launderers" , and this, in comparison with what small amount of money the IRS will collect through this extortion?  At least 10 times as much as the IRS will gain!  Outrageous theft of international wealth!!!  And, ironically, the USA is the biggest financial-hiding country in the world, and most of the wealthy US folks who have been hiding money abroad ARE LIVING IN THE USA.

Enough ranting.  This is supposed to be a friendly site.  But if anyone wants to know more about the FATCA thinking going on in Canada, let me know or go to the websites I've mentioned before.      

PS  There’s a poll “Do you think the US government needs to rethink its taxation rules for non-resident U.S. citizens? You might want to vote!

http://blogs.wsj.com/expat/2014/12/16/  u-s-expats-find-hope- in-senate-finance-tax-reform-proposal/? mod=WSJ_article_outbrain&obref=obinsite

And this isn't politics?

To answer the question, of course it is politics.
Any US taxpayer who contributes to this "cause" is making a political contribution,
so don't try to claim it as a charitable donation on Schedule A.

Lets take a look at this "crusade" and the possible outcomes.
1.  The lawsuit could lose, so all anyone did was waste their time and a couple million bucks.
2.  The lawsuit could win, and as a result the "tainted" USA citizens in Canada will be seen as equal under the law.  Of course as US Citizens they must still report and pay income tax on their world wide income, so they have gained nothing financially.  The banks in Canada do not have to report anything, so the clock has been turned back 10 years.  Of course now the USA citizens residing in Canada can no longer use USA banks to transfer money to a Canadian bank without having 30% of it withheld as taxes.

Conclusion:  No matter what the outcome, the whole "crusade" has been nothing but mental masturbation.  Of all the terrible and ugly things going on on this planet, couldn't you better spend your time and money on something that really matters?

mugtech wrote:

Lets take a look at this "crusade" and the possible outcomes.
1.  The lawsuit could lose, so all anyone did was waste their time and a couple million bucks.
2.  The lawsuit could win, and as a result the "tainted" USA citizens in Canada will be seen as equal under the law.  Of course as US Citizens they must still report and pay income tax on their world wide income, so they have gained nothing financially.  The banks in Canada do not have to report anything, so the clock has been turned back 10 years.  Of course now the USA citizens residing in Canada can no longer use USA banks to transfer money to a Canadian bank without having 30% of it withheld as taxes.

Conclusion:  No matter what the outcome, the whole "crusade" has been nothing but mental masturbation.  Of all the terrible and ugly things going on on this planet, couldn't you better spend your time and money on something that really matters?

Just to correct one fundamental error in your thinking mugtech:

1.  Foreign taxes are not enforceable under existing Canadian law in the first place.
2.  FATCA is not a Tax Treaty, it is an extraterritorial law enacted in the USA that does not have any legal effect in Canada.
3.  The IGA between Canada and the USA was signed by someone who may or may not have the Constitutional right to do so. This is the whole thrust of the claim and will ultimately be decided by the Canadian Courts.
4.  Account holder information is "taxpayer information" for purposes of Sec. 241 of the Income Tax Act.
5. The automatic providing of account holder information violates sec.241(1) of the Income Tax Act.

FATCA and the IGA must be proven to be Constitutional, which is going to be quite difficult. In most cases the burden of proof is on the Government.

So while you're sitting back there at a comfortable distance in Bethlehem armchair quarterbacking both in Ecuador and Canada now, let me ask you a few simple questions.

Just what, as a US citizen is YOUR Constitution worth to you? I'm sure that YOU would say it's worth fighting for. I'm sure you'd say that many Americans have even died defending it.

What makes you think for one second that OUR Canadian Constitution is any less important or worth fighting for?

Wouldn't you be more than just a bit miffed if anyone suggested to you that defending your Constitution was "mental masturbation"?

Can this armchair quarterback now defend the calls he's making Mug? As a proud Canadian I will be very interested to see your reply to the above questions.

Cheers,
James        Expat-blog Experts Team

Gee mugtech, we're waiting for your enlightened reply.

LLGM wrote:

James, thanks for these words of support; overall, I couldn't agree more!!!  Just to clarify a couple issues:

The Canadian constitutional challenge has to go to Federal Court first; it is likely that if the Government gets it's knuckles whacked it will appeal, so it will have to go to a higher court.  I do not know how many step are involved before it gets right up to the Supreme Court, but it is likely that (if we can persist and have enough funds to carry this forth), it will rise to the Supreme Court.

Unfortunately, in both the US and Canada there seem to be governmental factions that can push laws that are non-Constitutional and have everyone else be so afraid that they just fall over and let these illegal laws ride without question.  Certainly, FATCA (as it now stands) is WELL BEYOND THE LEGAL PALE in that IGAs signed with foreign countries are not treaties (tho many countries have viewed them as such) as these documents NEVER went through the US Senate (the body responsible for international treaty-making).  So what legality do these IGAs have?  Just the force of bully-threat/intimidation run rampant from the Executive Branch's henchmen.  It will take fighting back (in Canada and the US and elsewhere) to bring it tumbling down - - and that takes money to make it happen.  Currently, the Alliance for the Defense of Canadian Sovereignty needs $42,000 before Feb 1 to make it's next legal payment to keep this action going.....

What Canadian financial institutions will do following this court case (if we are successful) is a big question.  Many of these banks are deeply tied up in the US (the TD bank has more branches in the US than in Canada!!) but likely they would have to move to a type-1 IGA where each bank has to have it's own independent connection with the IRS.  They then would be in violation with privacy laws within Canada and would only offer financial services to those clients who signed a "waiver of rights" document with their bank/investment house.  That would be a mess too but at least the mess would be on the shoulders of the banks instead of the Gov of Canada relieving the burden of the banks only to destroy the rights of 1 million minnow-folk in Canada. 

Maybe the Canadian banks (which certainly were vocally against FATCA initially) will help to mount an international banking protest against this USA incursion.  Do you have any idea how much the banking industry has spent of their own country's assets (around the world) to salve the Obama/IRS rage against "tax cheats and money-launderers" , and this, in comparison with what small amount of money the IRS will collect through this extortion?  At least 10 times as much as the IRS will gain!  Outrageous theft of international wealth!!!  And, ironically, the USA is the biggest financial-hiding country in the world, and most of the wealthy US folks who have been hiding money abroad ARE LIVING IN THE USA.

Enough ranting.  This is supposed to be a friendly site.  But if anyone wants to know more about the FATCA thinking going on in Canada, let me know or go to the websites I've mentioned before.      

PS  There’s a poll “Do you think the US government needs to rethink its taxation rules for non-resident U.S. citizens? You might want to vote!

http://blogs.wsj.com/expat/2014/12/16/  u-s-expats-find-hope- in-senate-finance-tax-reform-proposal/? mod=WSJ_article_outbrain&obref=obinsite

And this isn't politics?

Could it be that mugtech, like many of his countrymen thinks that the Constitution of the United States of America is the ONLY one in the world, or that it's the only one that matters?

Wonder why he won't go on record and reply to the questions????

Hi everybody,

Please note that there are too many political posts here, therefore we have no other choice apart from closing this topic.

Please bear in mind that debates on politics are NOT welcomed on Expat.com.

Thanks

Priscilla

(Topic closed )