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Thread: INSANITY: USA tax grab in Canada

  1. #21
    Tommy Yonley is offline Gold Club Member (1000+ posts)
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    The primary issue here that of dual citizenship. In the not-so-distant past, the USA did not allow dual citizenship--that is to say, the fact that you became a citizen of Canada would legally be considered you renouncing your US citizenship. Although the laws prohibiting dual citizenship have generally been struck down by the courts, and now dual citizenship is legally accepted, the US government still dislikes and discourages dual citizenship--and the present tax code certainly reflects this reality. So from the US government's point of view, the proper thing for you to do would have been to renounce your citizenship way back when you acquired your Canadian citizenship, and then, there would be no tax issues.

    The fact is that you made the choice to keep your US citizenship, while pledging your allegiance to Canada, because of the potential advantages available to US citizens. Of course, in addition to advantages of US citizenship, there are also downsides--and one of those downsides is that you are legally required to file for taxes; and even though you live and earn your money in another country, you are possibly required to pay some taxes on annual wages over your first ~$80k.

    For self employed individuals, things are a bit more complicated. As I understand, self employed people are required to pay Social Security and Medicare taxes (this is called "Self-Employment Tax") on the order of ~15%. However, as I understand, there is a special agreement between the USA and Canada such that workers only pay social security taxes into the respective country in which they work. (http://www.irs.gov/pub/irs-pdf/p54.pdf , http://socialsecurity.gov/pubs/10137.html )

    Of course, given the agreements preventing double taxation such that odds are very good that you owe no taxes anyway, so basically we are talking about a cost/benefit ratio of having to file with the IRS every year (or not) vs. retaining USA/Canada dual citizenship (or not). Personally I do not think that this is necessarily an over reach of the US government, rather it reflects the US government's desire to not retain citizens who have pledged their allegiance to a foreign nation.

    However, since you haven't been keeping up with the required paperwork (not getting a totalization agreement documented prior to making your foreign earnings, and not filing those earnings), you may be up a creek with the IRS. Personally, I think that you should go ahead and get things sorted out so that you don't have this hanging over you. IMO, the fact that you don't have a social security number is not actually in your favor whatsoever because your Canadian financial activities wouldn't be associated with a US SSN anyway. Based on a few minutes of research, it seems that the correct steps are to #1) have a lawyer look over everything, #2) get a SSN, #3) get a totalization agreement for your social security to cover your future earnings #4) going forward, file with the IRS or renounce your US citizenship #5) consider the cost/benefit of cleaning up the mess of the previous years lack of filing and choose accordingly.

    ---

    I know someone who is a citizen of the UK (US permanent resident married to a US citizen) who has never become a US citizen as a matter of principle because he is not willing to truly pledge his allegiance exclusively to the USA. Sometimes sticking to such seemingly ridiculously stringent principle can have practical benefits.
    Last edited by Tommy Yonley; 09-27-2011 at 07:45 PM.

  2. #22
    PookyNR is offline 3D VIP 2005, '06, '07, '08, '09, '10, '11, '12, '13, '14
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    Quote Originally Posted by Tommy Yonley View Post
    The fact is that you made the choice to keep your US citizenship, while pledging your allegiance to Canada, because of the potential advantages available to US citizens.
    No. I chose to keep my US citizenship because I:
    1) saw no reason to go through the incredible hassle to renounce it, and
    2) I still personally identify with the US as a matter of connection with the rest of my entire family and cultural heritage.

    That's it. I get ZERO benefits from US citizenship other than ever so slightly easier/faster entry at the boarder - which saving those 30 seconds isn't such a big deal. As it stands, I'm even currently ineligible to receive a great number of benefits from my citizenship.

    Quote Originally Posted by Tommy Yonley View Post
    Personally I do not think that this is necessarily an over reach of the US government, rather it reflects the US government's desire to not retain citizens who have pledged their allegiance to a foreign nation.
    I'm extremely confident that this latest move to suddenly enforce this tax grab has everything to do with money to finance a bankrupt government and not 'patriotism.'

    If the US didn't desire to retain citizens who have another citizenship, they'd certainly enforce a single citizenship rule - as they already do in a number of circumstances.

    No, this is purely about money.
    Am I the only one without a small type signature?

    Nathan

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