IRS: Shock & Awe

by JL Beeken on 8-29-2011

Here’s one for the genealogists of the future.

As a person who’s lived in Canada for 44 years it never occurred to me that my U.S. citizenship requires me to file U.S. tax returns with the IRS. I’ve never worked there. Nor did it occur to an estimated 1 million other U.S citizens living, working and paying their taxes in Canada.

For some reason this news was only recently flung into the airwaves here causing something akin to a stampede of elephants that were formerly sleeping comfortably in the tall marsh grass. The fireball comes with deadlines threatening horrific fines. The kind of fines that could wipe out your entire life savings, take your car away, put your house in foreclosure and send you directly to a cardboard box on the street. The U.S. is the only country in the world that taxes by citizenship.

I have two sisters who became Canadian citizens, one of them about five years ago, the other 17 years ago. They were told they’d lost their U.S. citizenship in the process only to find out recently that they had not. They, in fact, have dual citizenship.

So, a few weeks ago, they made an appointment with the nearest U.S. Consulate, got on a plane together and flew 900 miles to renounce their U.S. citizenship. The person at the Consulate refused their request, telling them to go away for a month and ‘think about it’. They, of course, said, “We’ve already thought about it, give us the damn papers!”

They were able to make another appointment to see the Consul General a few days later. They just had to pay for somewhere to stay instead of getting on the next flight home as they had expected.

At the second appointment they were able to make their application but were still not granted their freedom. This involves another waiting period. Apparently, it’s not easy to stop being an American.

Further to the U.S. tax returns is a Treasury Department gift called the Offshore Voluntary Disclosure Initiative. Although it’s not exactly what I’d describe as ‘voluntary’. This requires full disclosure annually of any ‘foreign’ bank accounts with an aggregate value exceeding $10,000. Not filing is a criminal offense and subject to criminal penalties, civil penalties or both. I don’t know anything about the U.S. justice system either but it sounds scary enough considering the exorbitance of the fines would put me out of house and home and possibly into a foreign jail cell.

I found out just yesterday the deadline for the OVDI is August 31. Today’s the 29th. It has now been extended to September 9th due to an East Coast hurricane. Filings are expected to go back as far as 2003. Fortunately, given the time constraints, there’s now an e-filing system for them.

But still, it’s only eleven days. I’m very calm, don’t you think?

I can’t help wondering about people who can’t speak English or can’t navigate the IRS in any language. The one million U.S. citizens living in Canada is only Canada.

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