Is anyone else sick of dealing with bureaucratic machines that are absolutely terrible at what they are trying to accomplish? To catch a few of you up, I am one of the million or so Canadian citizens that has been residing in Canada and paying my fair share of taxes for my entire life, yet has been told I have to file a ridiculous amount of paperwork on a yearly basis because I was born in the USA. My significant other and extended family are in the same boat. To understand some of the details read this background piece on the trials and tribulations of trying to become aware of my supposed duties as an American citizen check this out.
A Screw Up So Bad Only a Bureaucrat Could Love It
I actually am kind of fascinated by the incredible gong show that this whole ordeal has turned into for the IRS. Can you imagine the huge cost in manpower and resources that the IRS is going to need to go through these filings, as well as to enforce their new FATCA rules on Canadian banks? Now think about the fact that the vast majority of Canadian/American citizens are just like me and owe no taxes. Who in the world would take out Canadian citizenship as a tax haven move? It makes no sense at all. Does the IRS really think that anyone with enough wealth to try to hide it in Canada won’t simply find another place to hide it altogether? Billionaires have the means to hire lawyers and accountants to switch their citizenship to something more advantageous while making up BS reasons why they did so, or else find untraceable tax havens and loopholes all around the world. Their own Presidential candidate has dozens of foreign bank accounts and paid an effective tax rate of 14.7% for crying out loud! So ultimately one has to conclude that the big fish the IRS is chasing they have almost no hope of ever catching, while at the same time they induce the costs of having to process hundreds of thousands of “0 rated” tax forms that are pretty complicated. The only people that are actually making money here are the super high in-demand tax specialists that have taken $3,000 from my uncle, $1,400 from my dad, and $300 from me (and I did the majority of my own paper work – after several hours of frustration). What a waste.
Just to give people some idea of the ridiculousness that this has on your life besides the obvious stomach punch that is paying high fees to an accountant to prepare a tax return that says you don’t owe anything, I thought I would look at two great Canadian programs that my citizenship impacts. Both RESPs and TFSAs are very cool financial tools that Canada allows citizens to use as a means of encouraging savings. While the US and Canadian governments have worked out a sort of hands-off reciprocal treaty concerning RRSP and 401K accounts, the same cannot be said for RESPs and TFSAs. If you want to use these financial vehicles in Canada and you have to file a USA tax form, get ready for the incredibly complicated world of income trusts. Since those accounts are not really income trusts they don’t fit into the bureaucratic conundrum that is the USA tax code. Just writing this gets me incredibly frustrating since no American in their right mind would use a TFSA to hide money from the American government! Continue Reading →