Why Taxes are Prompting Some Americans in Canada to Renounce their US Citizenship

By ⋅ November 11, 2011 ⋅ Post a comment
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A small but growing numbers of Americans in Canada are renouncing their US citizenship. They are doing it to avoid having to pay US taxes. Anchor Marco Werman speaks with Mark Wittgen. He lives in Canada and is in the process of renouncing his citizenship.

Why Taxes are Prompting Some Americans in Canada to Renounce their US Citizenship

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Marco Werman: I’m Marco Werman, this is The World. In tough economic times governments crank up their tax collection efforts. The US government for instance, is trying to increase its take on the money some Americans keep in foreign bank and brokerage accounts. Sounds like a worthy fiscal cause. Well, not to a growing number of Americans who live in Canada. They’re lining up to renounce their US citizenship. Mark Wittgen is one of them. He’s lived in Canada for 30 years and has dual American-Canadian citizenship, but not for much longer. Mark Wittgen, why are you renouncing your citizenship.

Mark Wittgen: My reason to renounce my citizenship is based upon the requirement from the US government to disclose my personal banking, my personal retirement savings plans accounts that I have created here in Canada, they’re both my own accounts as well as joint accounts that I have with my wife, who is a Canadian citizen. So, we’re both Canadian citizens and yet I am being forced to provide and disclose that information to the US on an annual basis under threat of all sorts of charges for noncompliance. So, I’ve decided to renounce because I don’t want to continue to provide that information to the US government.

Werman: And when do you realize you may owe money to the IRS?

Wittgen: Well, I moved to Canada over 30 years ago and I’ve been paying taxes in Canada as a Canadian citizen on my Canadian income. I’ve received no income from the US. And I haven’t filed a US income tax in 30 years. And I found out about it back in August of this year while reading a newspaper article, so I filed five years of income taxes from 2010 backwards. And for three of the five years I owe additional tax for about $3,600. And I wrote them a check, said thank you very much, have a good day. And then I proceeded to start the renunciation process.

Werman: So you paid your back taxes that they asked for and now you don’t want to pay anymore taxes, so you’re gonna renounce your US citizenship. That’s how it works?

Wittgen: I don’t, not necessarily I don’t want to pay the taxes because I am an honest tax paying individual here in Canada. And if the US says I owe these taxes, I paid them.

Werman: Now, I don’t want you to disclose all your finances to us, but let’s just be clear, you’re not like some multi millionaire billionaire that wants to shelter a lot of money in the Cayman Islands?

Wittgen: No, I came to Canada as an official penniless immigrant. I had $.47 in my pocket. It’s on my record of landing. Now, through the years my wife and I have saved money, but nowhere near a multi million dollar portfolio. I’m a salesperson for a high tech company here in Canada, but I have no accounts overseas. The US considers Canada a foreign account or a foreign tax environment.

Werman: Let me ask you how difficult it was to you know, finally come up with the decision to renounce your citizenship?

Wittgen: Well, I grew up you know, in the midwest. And for eight years of grade school every day you would start the day out with the pledge of allegiance to the flag, and there’s a lot of patriotism built into the American culture. That’s part of who you become over time. And so when I moved to Canada 30 years ago I really didn’t think about renouncing my US citizenship. So when this requirement to file income tax information and personal savings information to the US brought to my attention back in August, it was quite a shock, quite an agonizing decision…very stressful situation for myself and my wife. I mean we even considered getting a divorce ourselves so that financially the US couldn’t come after her and our kids.So, you know, it’s protecting my family. They come before my country. And I have been in Canada for 30 years. I am a proud Canadian and I’m sad that I have to turn my back on my US citizenship, but my family is in the states, they still support me, they still love me, and they’re still with me on what I’ve done.

Werman: Mark Wittgen, thanks very much for your time indeed.

Wittgen: Thank you.

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Discussion

6 comments for “Why Taxes are Prompting Some Americans in Canada to Renounce their US Citizenship”

  • CA Free

    Great interview! For me it’s nothing to do with “taxes” It’s FBAR and the penalty that goes along with it. The penalties on FBAR reporting are so onerous that few could afford them. FBAR reporting was meant to deal with drug lords, criminals and those who off shore millions from within the U.S. but,it’s being used in such a ham fisted manner against people who didn’t even owe any tax, it’s hard to go along with such threats. The second reason has to do with having to report, like Mark my Canadian spouses accounts. I don’t mind reporting income I’ve made but, I haven’t made any. I have a joint account I pay bills out of but, all the money in the account was made by a foreign person and the treasury and IRS want me to report HIS accounts too. Also, any account my child has that I had my name on would be reported even though my child is not American. The same as Mark, I do not want to have to report on my foreign family to the IRS. Just because I have “signing rights” on an account doesn’t mean I made any monies in the account or can spend that money any way I want to. It’s too far over reaching with regard to the new “Hire” legislation and FATCA/FBAR. I fear what they will require next as this is quite unfair already. I don’t feel I have any choice here either. I can either report on my foreign family *not just me* or I can renounce. I’ll renounce though I never would have owed them any tax, and I never would have done it if not for this new legislation and penalties. Thank you for covering this and thank you to Mark for telling your story. Canada is hardly a “tax haven” so the reasoning for using a hammer to go after minnow escapes me.

  • Anon5percent

    All the power to Mark! He and CA Free are right. It’s not taxes. It is the FBAR reporting and associated life altering penalties that are forcing people to make this decision.

    In my case, in addition to the fact that I have to live under the threat of huge penalties for a possible minor mistake, FBAR is making my life a real pain when it comes to daily life.

    I can no longer live a normal life in the country where I reside and of which I am a citizen because I also have a US passport. It seems that many things which are a normal part of daily life in the electronic world we live in are considered “financial accounts” by the US Treasury and their highest balances must be reported. Among these things are a prepaid phone card, my supermarket card and a lunch card I buy from my company. All are debit cards because money can be put on them and used to pay for things in different places. In the case of my supermarket card, there is no way to find the highest balance out other than to buy something every day and check the balance in a reader in the supermarket. I gave mine up because of this and now probably pay 10-20% more than my fellow countrymen for my groceries. Yes, it is a small inconvenience, but the amount of these small inconveniences seems to grow as societies become more wired and the US Treasury does not take the time to differentiate reporting on what are essentially tax evasion vehicles and what are not.

    While it is not the intent of the FBAR regulation to report on cards like I mentioned above, technically they must be reported or bingo – a $10,000 fine for each one of them.

    FATCA is making it even worse. I just won a battle with my bank because they told me that Americans could no longer open investment accounts and I refused to accept it and was capitulated to, but the question is for how long?

    And then we get to Form 8938 which becomes a part of our tax returns in 2011 and will require reporting on loans, house, car, etc., just because one lives “offshore” and all under threat of $50,000 penalties if a mistake is made. The instructions are not very clear to me, so I am afraid. It also seems that since this type of reporting will now be part of a tax form, the US can force foreign countries to collect penalties for mistakes under tax treaties.

    The requirements, threats and invasiveness are exhausting. The only relief in sight appears to be to renounce.

  • Anon5percent

    All the power to Mark! He and CA Free are right. It’s not taxes. It is the FBAR reporting and associated life altering penalties that are forcing people to make this decision.

    In my case, in addition to the fact that I have to live under the threat of huge penalties for a possible minor mistake, FBAR is making my life a real pain when it comes to daily life.

    I can no longer live a normal life in the country where I reside and of which I am a citizen because I also have a US passport. It seems that many things which are a normal part of daily life in the electronic world we live in are considered “financial accounts” by the US Treasury and their highest balances must be reported. Among these things are a prepaid phone card, my supermarket card and a lunch card I buy from my company. All are debit cards because money can be put on them and used to pay for things in different places. In the case of my supermarket card, there is no way to find the highest balance out other than to buy something every day and check the balance in a reader in the supermarket. I gave mine up because of this and now probably pay 10-20% more than my fellow countrymen for my groceries. Yes, it is a small inconvenience, but the amount of these small inconveniences seems to grow as societies become more wired and the US Treasury does not take the time to differentiate reporting on what are essentially tax evasion vehicles and what are not.

    While it is not the intent of the FBAR regulation to report on cards like I mentioned above, technically they must be reported or bingo – a $10,000 fine for each one of them.

    FATCA is making it even worse. I just won a battle with my bank because they told me that Americans could no longer open investment accounts and I refused to accept it and was capitulated to, but the question is for how long?

    And then we get to Form 8938 which becomes a part of our tax returns in 2011 and will require reporting on loans, house, car, etc., just because one lives “offshore” and all under threat of $50,000 penalties if a mistake is made. The instructions are not very clear to me, so I am afraid. It also seems that since this type of reporting will now be part of a tax form, the US can force foreign countries to collect penalties for mistakes under tax treaties.

    The requirements, threats and invasiveness are exhausting. The only relief in sight appears to be to renounce.

  • Anon5percent

    It seems my comment about Form 8938 requiring reporting on non-financial assets is no longer valid. New instructions were released on October 26. You can find them on ACA’s website under “Warning to all Overseas Americans”
    http://www.aca.ch/joomla/index.php?option=com_content&task=view&id=492&Itemid=46

    The fact does not change that it still is a complicated form and seems to duplicate the FBAR, certainly in terms of penalties. The much loved number of $10,000 is thrown around again, increasing to $50,000.

    • Anonymous

      Also, a new post with a compulsive response to the new “Son of FBAR” the SFFA form 8938 is also posted here…  
      http://www.aca.ch/fatcacomm2.pdf
      It covers 5 areas.
      a) Whether the information is necessary for the agency to perform its dutiesb) The accuracy of the time estimatec) Ways to enhance quality and clarityd) Ways to minimize burden including electronic meanse) Estimates of costs to purchase services to provide information

  • CA Free

    Happy Thanksgiving to all you American ex pats and soon to be renounced ex pats. Someone remarked today how hard this holiday is on all of us. Jacobson’s remarks seem especially cold right now. What hollow words given the situation we find ourselves in.