Uncle Sam is shaking me down

MARGARET WENTE

Uncle Sam is shaking me down

Jun. 24 2014

Source Link

The other day, my accountant called me with bad news. I have to write a cheque for $593.12 to the U.S. government.

I was floored. I’m Canadian. I have a Canadian passport. I haven’t lived in the United States since I was 14. I pay a pile of taxes here. Why should I pay money to a foreign power?

“It’s a new investment tax,” he said. “It’s supposed to help pay for Obamacare.”

Welcome to the nightmare of U.S. citizens abroad. There are hundreds of thousands of us in Canada, and millions more worldwide. Most of us are law-abiding people. But the U.S. government is treating us like tax cheats. It also says that any “U.S. person” (meaning anyone born in the United States, or even anyone with American parents) must keep filing U.S. tax returns, forever – or else.

This news has come as a nasty shock. Take the case of Carol Tapanila, a former American who lives in Calgary. Her developmentally disabled son, now an adult, is also deemed to be American, even though he was born in Canada. As she put it in an interview with the CBC, “he’s entrapped.” Trying to figure out how to comply with U.S. tax laws has already cost her tens of thousands of dollars, and she’s had to pay taxes on her son’s disability savings plan, which the U.S. government has called an “offshore trust.”

It gets worse, because now there will be no place to hide. On July 1, the loathsome FATCA (Foreign Account Tax Compliance Act) kicks in. It requires banks around the world to cough up the financial information of any client suspected of being a U.S. person. This means your RESPs, your mutual funds, your bank accounts. To its shame, Canada did not resist this extraterritorial abuse of power and privacy. The banks can’t resist, either – they’re on the hook for heavy fines if they don’t comply.

When I first heard about this stuff a couple of years ago, I thought it was a paranoid fantasy. But it was for real. When I wrote about my own dilemma about whether to comply, I was inundated with e-mails from terrified little old ladies who were afraid they’d be arrested at the border on their way to Florida. They won’t be. But the truth is bad enough. Even though the IRS has now promised not to treat them like criminals, simply complying with the law can cost thousands of dollars. On top of that, some people have been on the hook for taxes on assets that are tax-free in Canada. Plus, all the assets you hold jointly with your spouse have to be reported as if you owned them all.

The only way out is to formally renounce your U.S. citizenship – a serious and expensive business. “People really need to extricate themselves,” John Richardson, a Toronto lawyer who’s an expert on citizenship and taxation, told me in an interview.

My own view is that the people in charge down there don’t have a clue. As usual, America is a big blundering giant that goes out to get the bad guy and wreaks collateral damage on the innocent without even noticing. They have no idea how many of us there are, and they probably don’t care. Americans truly can’t imagine why anyone born there would choose to live somewhere else.

I used to be quite proud of the country where I was born. But now it’s stomping all over me. That hurts. Enough to cut the cord? I’m thinking about it.