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September 23, 2023

Don’t mess with…Canada

a cliche moose to represent Canada

As CPA Canada’s Collaboration Accord Fails to Collaborate, Who Gets the Profession’s Credibility in the Divorce?

We should have written about this months ago but didn’t get around to it, there’s some new news so let’s get to the backstory and what’s happening next with the various CPA bodies of Canada. TL;DR: CPA Ontario and CPA Quebec want to break up with CPA Canada. It’s relevant to us as down here […]

Blue Jays baseball field

The Canadian Revenue Agency Has No Love For Toronto Blue Jays Players’ Retirement Strategies

On his best days, former Toronto Blue Jays’ player José Bautista was pounding homers, flipping bats and making a mockery of Major League pitching. I mean, let’s face it, his blast against the Texas Rangers in the 2015 American League playoffs is the stuff of Canadian legend. Now it seems that Bautista’s bat flip is […]

Here’s What Happened At the Big 4 Battle of the Bands

The following is a guest post about Big 4 Battle of the Bands by Krupo, who spent three times as many years training as a pianist than as a Chartered Accountant. Krupo writes at A Counting School and enjoys photography, making pithy observations and being Canadian. The Kool Haus is one of Toronto’s best concert […]

The Big 4 Battle of the Bands Is The One Thing That Might Make You Wish You Were Canadian

Great white north chartered accountant and friend of GC Krupo reports from the Big 4 Battle of the Bands in Toronto last night: Every band had an intro video. Deloitte recounted its "League of Rock," and the others introduced their bands in their own particular way. Here's Ernst and Young's take on an intro video […]

Is the IRS Going to War with Canada?

Wars with Canada turn out badly. While the Canadians are a seemingly peaceful people, content with their Tim Horton’s and their hockey, they seem to come out on top in a fight. Ethan Allen and Benedict Arnold learned that lesson early on, and things went no better in 1812.

Now IRS Commissioner Shulman is baiting Canada for another war:

Premier David Alward, one of New Brunswick’s best known dual citizens, says he has been caught in the same broad net U.S. officials have cast to catch international tax evaders.

This prominent Canadian has been dragged into a U.S. tax nightmare the same way as thousands of other well-meaning expats:

Alward was born in Beverly, Mass., and spent his early years in the United States before his family settled in New Brunswick.

“I’ve had to scramble like thousands of other people,” Alward said, adding that he is complying with the U.S. demand for tax returns going back years and detailed disclosures.

The IRS is going after offshore tax violators in a big way. It’s natural that there are more in Canada than anywhere else because of geography and economics. But the IRS approach has been to enforce traffic safety by shooting jaywalkers.

While the US taxes its citizens on worldwide income, many, maybe most, expatriates have little or no U.S. tax liability. The foreign earned income exclusion and the foreign tax credit take care of that. But the long-obscure “FBAR” requirement to report foreign financial accounts over $10,000 threatens to impoverish many of these people anyway. The penalties for failing to file the FBAR Form, Form TD 09.22-1, are the greater of $10,000 or half the value of the account. The IRS is freely asserting these penalties even when little or no tax is due, and is even applying them to Canadian retirement accounts of U.S. expats like Alward.

The IRS has had two “amnesties” to draw expats into its loving arms, and the program has been a disaster for many ordinary folks who have signed up to try to clean up their records. Taxpayers living in Canada since childhood are presumed to be tax cheats, and penalized accordingly.

The IRS could learn a lot from states in handling these issues. The IRS “amnesties” have been progressively more restrictive, with higher penalties, making it more and more dangerous for folks with trivial paperwork violations to come out of the cold. Many states, in contrast, have standing deals where out-of-state taxpayers can clean up their tax histories by filing a few years of back tax returns, no questions asked. If the IRS would take this approach, and waive FBAR penalties for accounts under, say, $200,000 — and for all retirement accounts –maybe we won’t have to worry about the White House getting sacked again.