Richardson Kish COMMENTS OF AMERICANS ABROAD ON CITIZENSHIP TAXATION April 15, 2015 - International Tax This is submission 3 of 7 total submissions The other submissions are: (1) “Richardson Kish Main Citizenship Taxation April 15 2015 International Tax” (2) “ Richardson Kish Video Testimonials of Americans Abroad - April 15,2015 – International Tax”  (4) “Richardson Kish The S. 877A Exit Tax - April 15, 2015 – International Tax” (5) “ Richardson Kish Revenue Raising Measures - April 15, 2015 – International Tax” (6) “ Richardson Kish Mutual Fund Comparison: Canada vs. United States – April 15, 2015 – International Tax” (7) “ Richardson Kish Complaint to United Nations Re: United States Citizenship Taxation Richardson Kish Comments of Americans Abroad on Citizenship Taxation TABLE OF CONTENTS OPENING STATEMENT .................................................................................................................................4 ACCIDENTALS ...............................................................................................................................................8 BANKING .....................................................................................................................................................18 BUSINESS ..................................................................................................................................................... 25 CHILDREN & LETTER ................................................................................................................................. 31 CONFUSION, COMPLIANCE & COSTS .......................................................................................................37 DISABLED CHILDREN ................................................................................................................................ 45 FAMILY. ........................................................................................................................................................ 53 GENERAL ..................................................................................................................................................... 60 GREEN CARDS AND IMMIGRANTS. ...........................................................................................................70 IMMIGRANTS .............................................................................................................................................. 76 INCOMPATIBILITY OF TAX SYSTEMS ........................................................................................................77 IMPOSSIBLE TO SAVE FOR RETIREMENT .................................................................................................97 PENALTIES THREATS AND DISCRIMINATION ........................................................................................ 105 PSYCHOLOGICAL EFFECTS ......................................................................................................................119 RELINQUISHED NON US CITIZENS.........................................................................................................142 RENOUNCING ........................................................................................................................................... 145 RESPONSES TO A CONSULAR OFFICER .................................................................................................. 169 Submission to the United States Senate Finance Committee - International Tax April 15, 2015 3 Richardson Kish Comments of Americans Abroad on Citizenship Taxation OPENING STATEMENT COMMENTS REGARDING SOME DESTRUCTIVE EFFECTS OF THE CURRENT TAX SYSTEM ON AMERICANS ABROAD PRESENTED TO MEMBERS OF THE SENATE FINANCE COMMITTEE, JOINT COMMITTEE ON TAXATION, AND SENATE STAFF APRIL 9, 2015 Good morning and thank you for the opportunity to speak with you today. My name is Marilyn Ginsburg. I will be 70 years old next month and I renounced my U.S. citizenship, with great regret, in my 69th year. I was born in St. Louis, grew up in Denver, and moved to Canada when I was 26 years old. My husband and I left the United States in June, 1971, a month after we had both finished graduate school, I with a law degree and my husband with a PhD. in American history. We both obtained jobs teaching in our fields at a Canadian University. We assumed we would stay in Canada for a few interesting years, living in another country, and then return to hearth and home. One thing led to another and this never happened, and we have now lived in Canada for 44 years. In 1977 our daughter was born in Toronto and we registered her at the U.S. consulate as an American citizen. In 1985, in order to become a member of the Ontario Bar, I was required to become a Canadian citizen. I delivered an affidavit to the U.S. Consulate indicating that I did not intend to relinquish my U.S. citizenship by the act of acquiring Canadian citizenship. Eventually my husband also became a Canadian citizen because it was clear we were there to stay and he wanted to be able to vote in Canadian elections. However, he and I also continued to vote in U.S. elections and we traveled on our U.S. passports. We have never failed, in 44 years of living outside the country, to file U.S. tax returns. I don’t remember why I knew to do this, but clearly we were among the lucky ones. In other words, we have been model U.S. citizens in every way. Nevertheless, all three of us have since renounced our U.S. citizenship. Why?i First, there is the expense of continuing to be tax compliant. We have to use the services of a specialized and expensive tax accountant who can complete and reconcile our tax returns for both countries. This service is not cheap. As a matter of fact, our accountant estimates that it costs at least twice as much for Americans living in Canada to file their U.S. returns than an American living in the U.S., due to the complexity and number of forms that must be filed. Last year I had to retain the services of a second highly qualified tax accountant because we owned Canadian mutual funds. I had no idea this was an issue, and apparently neither did my first tax accountant. I chose not to be the one to pay him to do his first IRS form 8621, which according to the IRS website can take 41 hours to complete. Therefore, I found the second accountant, with experience in completing this form, to bring us up to date. Of course, we also must pay taxes to both countries. Since we are both retired now, and the tax treaty does not address pension income in the same way it addresses employment income, we now owe taxes to the U.S. in 4 Submission to the United States Senate Finance Committee - International Tax April 15, 2015 Richardson Kish Comments of Americans Abroad on Citizenship Taxation addition to our sizeable tax bill to Canada. Some of this is covered by the foreign tax credit on our Canadian returns, but not all. If we combine the cost of accounting fees, and U.S. taxes, including the higher tax rate on any gains from our Canadian mutual funds, we estimate that just to remain U.S. citizens would cost us more than $125,000 of our retirement money over the next 15-20 years. Please note that we are not entitled to any U.S. Social Security or Medicare. We moved to Canada when we were too young to have accumulated sufficient credits, so we have been filing tax returns all those years for no future economic benefit whatsoever. The second reason we renounced our U.S. citizenship was because we felt the U.S. was treating us unfairly. I will cite one example of many. Why should our Canadian mutual funds be treated as Passive Foreign Investment Corporations, requiring us to pay higher taxes on any gains than my sister in New York pays on her U.S. mutual funds? Why should I have to pay an accountant for 41 hours of work to try to figure out how to report my small gains on every Canadian mutual fund I own? Mutual funds are an important part of most peoples’ retirement savings because they spread the risk, and, as a resident of Canada, I am not allowed to own U.S. mutual funds. The law makes no sense. I live in Canada so a Canadian mutual fund is not a foreign investment for me; it is a local investment like a U.S. mutual fund is for my sister. Is it fair for the United States to make it more expensive and more difficult for its citizens living abroad to save for their retirements than citizens living in America? That is discriminatory treatment and one reason why U.S. citizens living abroad feel like they are treated as second class citizens. The third reason that I renounced is because I wanted to sleep better at night. I am not saying this jokingly. I am quite serious. When I read that the penalty for a non-willful failure to properly file our FBAR forms was $10,000 I decided it was simply no longer worth the worry. These forms require me to give our tax account very detailed information for every bank, retirement, savings, chequing and investment account we own. My accountant relies totally on what I tell him. What if, as I get older, I forget? Some days I go to our downstairs pantry and can’t remember why I went. However, no one is fining me $10,000 for forgetting that I went downstairs for a bag of sugar. These forms are filed with the Financial Crimes Enforcement Network of the Department of the Treasury. They were originally, in 1970, intended to uncover criminal activity by those who were using secret bank accounts for money laundering, securities manipulation, insider trading, and other illegal activities. But ordinary Americans living abroad are not criminals using secret bank accounts to hide illegal activity. I was recently made aware of the horrendous experience of an American woman, living in Canada, who, in an attempt to be totally tax compliant, entered into an IRS “amnesty” program. This was not because she was a tax cheat, or was hiding money off shore; it was just because she had not known, when filing her yearly U.S. tax returns that she also had to file the annual FBAR form. The manner is which this woman was treated by the IRS is enough to make one weep. Any member of Congress who truly wishes to understand the damage being done to Americans abroad by the present tax regime, and the way in which it is being enforced by the IRS, must read Ms. d’Addario’s complete letter to House Representatives Adrian Smith and John Larson. http://waysandmeans.house.gov/uploadedfiles/patricia_anderson_daddario.pdf iii While discussing the disproportionate nature of fines under FATCA, including the filing of these FBAR forms, Nina Olson, the U.S. Taxpayer Advocate, asked in October, 2014, “…why are we doing this to folks? Why are we tormenting them in this way”? iv Submission to the United States Senate Finance Committee - International Tax April 15, 2015 5 Richardson Kish Comments of Americans Abroad on Citizenship Taxation I wish I knew the answer to that question. What would have happened if I hadn’t, by chance, read in a seniors’ magazine that Americans living in Canada, who own Canadian mutual funds, are in big trouble? I lost sleep about that until I found our second accountant who brought us into compliance on that form, the IRS instructions for which are 13 pages long. I just can’t afford this amount of time and money and this level of anxiety trying to remain tax compliant any longer. I have never been anything other than a loyal and law abiding American and yet I really began to worry. I have read horror stories about how the IRS treats people and frankly, I did not ever want to be one of those people. In 2014, even former IRS Commissioner, Steven Miller, when discussing his cost benefit analysis of FATCA and its reporting requirements, concluded that the costs may well outweigh the benefit.v Americans all over the world are doing their own personal analyses and they are not just about dollars and cents. They are about the stresses involved for non-American spouses, for children who have inherited American citizenship and must now make important tax and citizenship decisions; they are about fear and feelings of being treated unjustly. I have many American friends living in Canada, most of whom have or will be renouncing their U.S. Citizenship. Others would like to, but for one reason or another, find it impossible to do so. I can tell you today that not one single dual citizen I know is hiding money off shore or has ever knowingly cheated the United States out of a single penny. Most of them didn’t realize, until recently, that they were still U.S. citizens, or they did know, but did not understand they had to file U.S. tax returns while living abroad. They are now caught in the cross hairs of a tax weapon that was meant to catch wealthy Americans hiding money outside the country, not my lovely neighbor, who married a Canadian 45 years ago and is now a retired teacher living on a pension. Was it easy for me to renounce? I cried when signing the renunciation oath at the U.S. consulate in Quebec City, where we flew because the wait time to renounce at the consulate in Toronto is now over a year. It hurt then and it still hurts. My mother, who is nearly 93, was terribly upset that I renounced my citizenship, other relatives didn’t understand, and I am bitter and angry that a country my family has lived in since before the Civil War is treating its own citizens abroad like criminals and tax cheats and making their lives miserable because of an unfair tax regime. I believe that my earliest known American ancestor, who settled in Bowling Green, Kentucky in 1848, would understand my predicament. Ms. Olson, the U.S. Taxpayer Advocate, when speaking about the possible future consequences of FATCA and all of its related reporting requirements, said, “I don’t think we’ll know [what they are] for years. And by that point we’ll actually be a little too late to go, ‘Oops, my bad, we shouldn’t have done this,’ and then try to unwind it.” vi In the meantime, how many Americans living abroad, who have represented this country proudly all over the world, will have renounced their U.S. citizenship? Is this what you want? 6 Submission to the United States Senate Finance Committee - International Tax April 15, 2015 Richardson Kish Comments of Americans Abroad on Citizenship Taxation RECOMMENDATION: In my opinion, the only way to remedy the untenable situation in which Americans abroad find themselves is to eliminate citizenship based taxation. It simply does not work in the modern world in which we live, where Americans are employed by international companies and live with their nuclear families in foreign countries around the globe. These people are the unpaid emissaries of America and should be treated with the respect they deserve. While the goal of moving to residence based taxation cannot be achieved overnight, those members of Congress who are intelligent, well meaning, thoughtful and compassionate, could begin to gradually unravel the mess that exists, so as to eliminate some of the most onerous and blatantly discriminatory requirements imposed on Americans abroad. Only such action will stem the flow of economically fragile and emotionally terrified U.S. citizens around the world who are justifiably heading for the exit door, or alternatively, cowering in fear, hoping to stay under the radar. Watching the greatest nation in the world systematically persecuting its own citizens, for nothing more than innocent ignorance, mistake, or marrying a citizen of another country, is a sad thing indeed. It truly is beneath the United States and does it no credit. Thank you for your time and attention. Marilyn Ginsburg Ontario, Canada _________________________________________________________ _________ 1Before we took the drastic step of renouncing our U.S. citizenship, I wrote a letter to President Obama expressing our feelings. I was hoping to hear back that the tax situation for Americans abroad might be changing for the better. Although I never heard back from the President, my letter somehow found its way into Forbes Magazine, where it has now been read by over 168,000 people. www.forbes.com/ sites/robertwood/2014/08/15/dear-mr-president-why-im-leaving-america 1There is ample evidence that Americans abroad who inadvertently fail to properly complete or file an FBAR are subjected to disproportionately high penalties and unfair procedures that erode trust in the IRS and erode taxpayer rights. See “Offshore Voluntary Disclosure (OVD): The OVD Programs Initially Undermined the Law and Still Violate Taxpayer Rights” a 2014 report to Congress by the Taxpayer Advocate. 1Letter from Ms. d’Addario to House Representatives Adrian Smith and John Larson, April 13, 2013: http://waysandmeans.house.gov/ uploadedfiles/patricia_anderson_daddario.pdf 1Securities Industry and Financial Markets Association FATCA Policy Symposium in Washington, October, 2014. 1Steven Miller’s comments were published by TaxAnalysts on October 7, 2014. 1Securities Industry and Financial Markets Association FATCA Policy Symposium in Washington, October, 2014. Submission to the United States Senate Finance Committee - International Tax April 15, 2015 7 Richardson Kish Comments of Americans Abroad on Citizenship Taxation ACCIDENTALS FEB 9, 2015 Apparently, I am an “accidental American”. I was born in 1959 to two Canadian parents who were temporarily living in the United States and who moved back to Canada when I was five years old. My father, who worked for Texaco, was frequently invited by his company to become American but always declined. As patriotic Canadians, my parents never wanted their US born children to be Americans. But in those days, dual citizenship was not allowed, so this was not really an issue. As soon as we arrived in Canada, I was registered as a Canadian born abroad. My parents kept this document preciously, as proof that I was Canadian and not American. I returned to the States in 1973 for a year (my father’s work, once again) and remember feeling very different from my American classmates. Every Monday, we stood up in homeroom to pledge allegiance to the flag. I remember standing with them out of politeness, but remaining silent. Their pledge was not my pledge, their flag not mine. A couple of years later, I began hearing from friends that dual citizenship was offered to US born individuals. Out of curiosity, I phoned the US Consulate in Ottawa in 1977 and was told categorically that I was NOT American, and that if I wanted to become American, I would have to renounce my Canadian citizenship and move to the States. This clearly was not what I wanted and I began my adult life with the confirmation that I only had one nationality. It goes without saying that I have never had an American Social Security Number or an American passport. I have lived my entire adult life in Canada, have worked very hard as a family doctor and have spent my career saving for my retirement. At the age of 55, I am finally getting to the point that I can begin to slow down a bit and concentrate on other aspects of life. One of my dreams has been to do volunteer work in developing countries, and I look forward to be able to accomplish this without having to worry about making ends meet. Several years ago, I heard from my sister in law that US born Canadians were allowed to request dual citizenship. Although I had obtained a French passport in 2003 after marrying a French citizen, I did not have any desire to become American. And life carried on for me... as a Canadian who voluntarily requested a second (French) citizenship. Imagine my shock when I realized that by some unexplainable sleight of hands, I had been transformed from a law abiding Canadian into an American tax evader! I could not believe that such a thing could happen to me, or to anyone else in my situation. The idea was simply ludicrous! Not knowing what to do, I hired an American immigration lawyer to look into the matter for me. Initially, she felt that it would be fairly easy to prove that I was not a US person, but the murkiness of the laws made her uncertain and she changed her mind. A short time later, I received information from my financial advisor that my financial institution would soon “be focusing on identification and remediation of client accounts” that were not FATCA compliant. My heart sank. What was I to do when I was contacted by the bank? I am still waiting for the letter, or the email, or the phone call. And I must confess that I do not know what to do. Do I “come clean” (how I hate that expression) and make myself known to the IRS, or do I refuse to comply? For the moment, I hope and pray that I can remain under the radar until the powers that be come to their senses and realize that what is happening is unjust and shameful. FATCA was created to track down rich Americans who were hiding their money in foreign countries. Unfortunately, millions of innocent people throughout the world are being mercilessly tracke down, fined and penalized. I feel so powerless, yet am thankful for the efforts that are being made to rectify this terrible injustice. 8 Submission to the United States Senate Finance Committee - International Tax April 15, 2015 Richardson Kish Comments of Americans Abroad on Citizenship Taxation I know that the Senate Finance Committee will be listening to testimonies from people who have become victims of FATCA and its collateral damage. I would respectfully request that you honestly look at the problems that FATCA has created for people like myself. The United States of America claims to uphold values of Justice and Blessings of Liberty. Please right this wrong and stand up for the high standards that were espoused by your Constitution. Make the world proud of you for having the courage and integrity to amend a Federal Law that is clearly flawed. Anonymously yours, An honest Canadian **** POSTED BY NOBLEDREAMER JANUARY 30, 2015 After reading the completely unacceptable response to MP Ted Hsu’s order paper question (OPQ 816), WhiteKat decided to reach out, once again (in spite of previous communications being unsatisfying) and this time, write her story from the heart. Her MP, the Hon. John Baird is the Minister of Foreign Affairs, the Department that provided this “response.” I thought it deserved a thread of its own as this letter is a real gem. WhiteKat: “Its been awhile since I’ve emailed/mailed any government reps. I was inspired by a comment, written by Stephen Arvay on the Allison Christians post.” If you have two to four hours to watch the “Stupid Bowl” coming up on Sunday, then you have a few hours per week to read, be informed and write your representatives. We must put the pressure on in volumes of letter, emails, faxes, phone calls! “I hope lots of you do the same! Yes, the lawsuit is important, but we cannot stop our bitching either!” “Here is my latest to my MP John Baird.” I am writing to you about the FATCA IGA with the USA, that was signed by the Conservative government in Feb 2014. I am very, very sad and totally disillusioned. I cannot believe I have lived in such an innocent state of unknowing for nearly 1/2 a century in that I thought Canada would protect ALL her citizens from foreign threats – not just a subset of them. Apparently, I am a second class Canadian citizen. You really have no idea how horrible this feels unless it happens to you. It is a living nightmare that I stress about every single day. The last two Canada Days, I have found myself in tears. And if it can happen to me, it can happen to any Canadian. I don’t remember the first 20 months or so of my life, which was spent in the USA while my Canadian parents lived there. I haven’t got an American bone in my body, but had the misfortune to be born on US soil. I’ve lived and worked only in Canada since moving back ‘home’ as a toddler. Submission to the United States Senate Finance Committee - International Tax April 15, 2015 9 Richardson Kish Comments of Americans Abroad on Citizenship Taxation Can you imagine the shock I went through just over two years ago, when I heard about FATCA and discovered that not only was I a delinquent US tax-filer, but was also required to report my Canadian accounts to the FINANCIAL CRIMES ENFORCEMENT NETWORK every year? And worse, my own country was going to shine a light on me so that the IRS would have knowledge of my existence, along with the private details of my bank accounts, most of which are held jointly with my 100% pure Canadian husband. He was not too pleased to say the least, and this has caused big rifts in our marriage. Please help Mr Baird. I have done nothing wrong, unless to be born on US soil is a crime. How was I to know all these years, that USA was unique in the world with its byzantine ‘place of birth’ taxation laws? I have paid all taxes ever owed to the Canadian government and have been a law abiding citizen and productive member of Canadian society for over 50 years. I am seriously stressing out, and at age 52 this is not good for my health. I have NO IDEA what to do. I cannot afford the financial costs to get into good standing with the IRS. I estimate 15-20K as I have lots of low-value Passive Foreign Income Corporations (i.e. Canadian mutual funds), several RESPS (one for each of my 3 children), several small RRSPS, and a TFSA (all considered foreign trusts). Although I thought I was being a responsible parent and adult, saving for my children’s education and my retirement, I have in fact caused nothing but huge problems for myself and family. I am scared to death of the penalties that IRS will assess for my not reporting my and my husband’s so- called ‘foreign accounts’ to the Financial Crimes Enforcement Network, which is what will happen when my financial institution reports me to the CRA under FATCA. Did you know that the penalties for not filing FBARS (FOREIGN bank account reports) for my CANADIAN accounts are 50% of the value of the account for each of the last 6 years (i.e. 300% of the value of the account)? Will the Canadian government take care of my husband and me after we hand over our life savings to the US government? I would love to renounce US citizenship, but this does not relieve me of past compliance requirements for US tax reporting and FBARs, and in fact puts a red X on me for the IRS. Not only that, but renunciation is expensive! In 2008 it was free. In 2010 it was $450, and in 2014 it was raised to an unbelievable $2,350 (US dollars). I believe Canada charges $100 to renounce Canadian citizenship and that it can be done by mail. So basically, I am damned if I do, and damned if I don’t. There is NO painless way out of the mess I am in, yet I am just a decent person trying to live an average life. Why is this happening to me? Why is my government not protecting me? Why is it handing me over to the USA which will allow it to literally destroy me and my Canadian born spouse and children? 10 Submission to the United States Senate Finance Committee - International Tax April 15, 2015