Moodys Gartner musings


Personal tax credits and all-inclusive resorts

So what does tax and all-inclusive resorts have in common? While away, it got me thinking how some of the recent personal tax credits announced by the Conservative Government resemble certain characteristics of an all-inclusive resort. All-inclusive resorts are a people-watching mecca but more famously are known for their numerous all you can eat buffets and unlimited alcohol (good, bad and ugly). To parallel the two, while there are certainly good sides to the recent amendments to the Children’s Fitness Tax Credit, the Universal Child Care Benefit (“UCCB”), Child Care Expense Deduction and the new “Family Tax Cut” credit, there are many distasteful aspects as well.

Am I still a US citizen? Confusion regarding loss of US citizenship for tax purposes

Unlike virtually every other developed country, the United States bestows upon its citizens the unique pleasure of being taxed on their worldwide income, regardless of where that income is earned. To sweeten the pot, Uncle Sam also imposes estate and gift taxes on the value of property transferred by a U.S. citizen by gift or upon death regardless of the location of those assets.1 Even if a U.S. citizen in Canada (and elsewhere abroad) has a limited amount of income or pays foreign taxes such that the U.S. tax returns to be filed would show zero tax liability owing, citizens must file a complex web of income and informational returns or potentially face severe penalties.2 These intricate and confusing requirements often result in substantial and burdensome tax compliance costs for U.S. citizens living in Canada, and create ongoing risks of harsh penalties due to noncompliance.

New draft legislation will have a great impact on traditional estate planning for Canadians

On August 29, 2014, the Department of Finance released 100+ pages of draft legislation. Much of the draft legislation was to enact the 2014 Federal Budget proposals. However, there were a couple of nasty surprises, one of which will have a great impact on traditional estate planning for Canadians. The Department of Finance gave interested parties until September 28, 2014 to provide comments.

Updated IRS streamlined filing program: snowbirds beware

On October 8, 2014, the IRS issued FAQs clarifying its amnesty programs for non-compliant taxpayers who want to catch-up on their U.S. tax filing obligations.1 These FAQs address the recently amended streamlined filing compliance procedures, offshore voluntary disclosure program (OVDP), and delinquent information return and FBAR submission procedures.2 The FAQs are not relatively enlightening, except for the FAQ on the nonresident streamlined procedures (dubbed the “Streamlined Foreign Offshore Procedures” by the IRS). After briefly summarizing some relevant general rules regarding streamlined, this blog will address the consequences of that FAQ for snowbirds who have not filed during the three-year period for which tax returns must be submitted under streamlined and, according to the IRS, spend too much time in the United States. Ultimately, these snowbirds are ineligible for streamlined and must find an alternative way to catch-up with their U.S. tax filing obligations.

IRS’s new procedure for Canadian retirement plans: not all good news

On October 7, 2014 the IRS released Revenue Procedure 2014-55, which purports to make US tax filing easier for US citizens or residents who own Canadian Registered Retirement Savings Plans (“RRSPs”) or Registered Retirement Income Funds (“RRIFs”). Almost immediately, journalists and commentators breathlessly heralded the development as a softened and practical solution for individuals that own these Canadian retirement plans. You can’t blame the commentators for their ebullience: the prior procedures for electing tax deferral were complex, expensive, and produced uncertain results. Further, even the IRS’s press release hinted at merciful relief: IRS Simplifies Procedures for Favorable Tax Treatment on Canadian Retirement Plans and Annual Reporting Requirements. Close examination of the new procedures, however, reveals a mixed offering of good, bad, and outright confusion.

Does the increased fee for renouncing US citizenship indicate a change in attitude toward expatriates?

Uncle Sam just managed to dig out a quarter hiding in his couch. Or maybe his patience is just running thin with renouncers. On August 28, 2014, the United States Department of State published an interim final rule raising the application processing fee for renunciation of US citizenship from $450 to $2,350, a 422% increase. Read More »

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