Canadian warns U.S. citizens abroad of new tax collector

Former American Peter Dunn wants Americans living in Canada to ask themselves an important question.

“Am I really an American citizen?”

Dunn, 50, has recently co-founded the Isaac Brock Society, a group raising awareness about the Foreign Account Tax Compliance Act (FATCA). Dunn settled permanently in Canada in 1994.

FATCA, designed to hinder tax evasion, forces American-Canadian residents to file taxes with the Internal Revenue Service (IRS). Dunn believes FATCA takes advantage of Americans abroad.

“The reason why (the U.S.) is in the wrong,” Dunn said, “is because they aren’t making a distinction between people who are residents in other countries and people who are creating offshore bank accounts.”

The initial penalty for failing to report an account is $10,000, with continued penalties of up to $50,000.

The U.S. is one of two countries to use citizenship-based taxation; the other is Eritrea. Because of this, FATCA targets not only American permanent residents in Canada, but Canadian citizens with green cards, Canadians with American parents and Canadians born in the U.S. accidentally. Citizenship lawyer John Richardson sees FATCA as a catch-all.

“You can call them U.S. persons if you like,” he said, “but the truth is … they’re Canadian citizens who’ve lived all their lives in Canada but just have some U.S. connection in their past.”

Peter Dunn came to Canada to attend Regent College in 1986, and he settled here in 1994. He married a Canadian, and in 2011 he became a Canadian citizen, thus relinquishing his American citizenship. The IRS can no longer tax Dunn, but the same may not be true for an estimated 1 million Americans living in Canada.

On Feb. 5, 2014, Canada and the U.S. signed an intergovernmental agreement (IGA) requiring Canadian banks to share Americans’ account information with the Canada Revenue Agency (CRA), which will then turn it over to the IRS.

The decision has Emily Gilbert, a specialist in cross-border relations at the University of Toronto, worried.

“There’s a danger about the precedent it sets around the kinds of information we share with foreign bodies,” she said.

Richardson added that when the Canadian government changes laws at the request of another country there’s a serious problem. Canadian banks must reveal Americans’ accounts to the CRA by July 1, 2014.

Richardson added that many Americans in Canada were unaware they were required to file American taxes. When they learn about FATCA they fear the IRS will confiscate their life savings.

Peter Dunn, and others at the Isaac Brock Society, blog to help Americans living aboard understand FATCA and protect their assets from the IRS. As a new Canadian, Dunn feels betrayed by the Canadian government’s compliance with FATCA.

“I’m scandalized by the fact that the Canadian government signed the IGA,” he said, “and basically, in writing, accepted that the U.S. has the right to assert their sovereignty over Canadian citizens… The Isaac Brock Society is doing what the government won’t do—and that is protect people living in Canada.”

Credit: Toronto Observer