Tax chal­lenges for dual cit­i­zens

Stanstead Journal - - NEWS BRIEF - Vic­to­ria Vanier

There are many peo­ple living in Stanstead and nearby who have dual Canadian and Amer­i­can cit­i­zen­ship, pri­mar­ily be­cause their par­ents were en­cour­aged by the pro­vin­cial gov­ern­ment for decades to go to the hos­pi­tal in New­port, Ver­mont, which was the clos­est, when it came time to give birth. Hav­ing dual cit­i­zen­ship seemed to be an ad­van­tage, how­ever, thanks to FATCA, the For­eign Ac­counts Tax Com­pli­ance Act, this no longer seems the case.

FATCA is a United States fed­eral law that re­quires all Amer­i­cans, in­clud­ing those living out­side of the coun­try, to re­port and pay taxes on all of their for­eign fi­nan­cial ac­counts and also re­quires for­eign fi­nan­cial in­sti­tu­tions to share in­for­ma­tion about Amer­i­can cit­i­zens (which in­cludes dual cit­i­zens) with the IRS (In­ter­nal Rev­enue Ser­vice).

Amer­i­can cit­i­zens living abroad are now re­quired to file in­come tax for the last three years and to de­clare all bank ac­counts and in­vest­ments go­ing back six years. Be­sides the ex­pense of hav­ing to hire a pro­fes­sional to help them wade through the pa­per­work, which typ­i­cally costs about $1,200 to $1,500 the first year and then about $350 a year af­ter that, some peo­ple may dis­cover that they also owe U.S. in­come tax. Even some­one who sells their pri­mary place of res­i­dence could be sub­ject to Amer­i­can cap­i­tal gains tax.

One way that dual cit­i­zens and even Amer­i­cans living abroad are avoid­ing this ex­tra tax bur­den is by re­nounc­ing their Amer­i­can cit­i­zen­ship, and they are do­ing it in large num­bers. Un­for­tu­nately, this also comes with a hefty fee, hav­ing just gone up last year from $450 to $2,350.

There is presently a law suit, sup­ported by the Al­liance for the De­fense of Canadian Sovereignty, chal­leng­ing the Canadian law that al­lowed for the Canadian FATCA agree­ment. It has also been re­ported in the Amer­i­can me­dia that the IRS is not ready to han­dle the ex­tra work­load this new law will en­tail.

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