Pensions Rentals

Post # 5 / Damage Control

In the last post HCBT had recommended S1 & S2 access the Voluntary Disclosure Program [VDP] to possibly reduce the penalty component of their $20,000 tax problem.  However, timing was an issue.

CRA public information states that most Certificate of Compliance [CofC] requests will be processed in 30 days.  The 30-day target presumes no unresolved prior year issues.  After receiving the offer, consulting with the lawyer / HCBT less than 30 days remained before closing date.  The CofCs must be presented to the purchaser’s lawyer on closing to avoid withholding from the sale proceeds.

The VDP submission to correct the 2013 to 2015 deficiencies must be completed and submitted before the CofC request.  S1 & S2 had to scramble at the last minute to assemble old financial information from 2013 to 2016 so the proper reporting on departure and rental reporting can be completed/submitted.  Even with professional help and utilization of the VDP there was a real risk the CofC review would not be completed on time to prevent withholding of sale proceeds.  If so, the process could be extended for several months, delaying the tax refund.

S1 & S2 also needed to understand why the sale of their family home was not tax free, which is what most of the Canadian tax paying public thinks.  The theory is that 1 family unit [2 spouses plus children under 18] can own 1 family home / principal residence without paying tax on any gains realized on that home.  The tax mechanics to accomplish this are based on a formula

Exempt Gain =   Total Gain Realized   x     Principal Residence Years / Total years of ownership

Principal residence years are the years the taxpayer used the property as a family home plus 1 bonus year to allow for mid-year transactions.  In most cases the years of usage and the years of ownership are the same, so 100% of the gain is exempt.  However, in Expat or rental conversion situations a problem results.  Any year after ceasing to be a resident of Canada does not count in the top half of the fraction.  S1 & S2 had a change of use to a rental property just after departure.  Rental years do not count in the top half of the fraction.  The mechanics of the formula are such that the sheltered gain percentage gets smaller with each passing year after departure from Canada.

US Implications:  The use of the family home as a rental property and subsequent sale will also have US tax consequences, which are not discussed as part of this series of posts.

 If you want to know how HCBT can help, see post # 6.


Post # 4 / Financial Damage Control

In the last post we outlined the tax compliance and reporting issues that S1 & S2 had not dealt with in tax years 2013-2015 inclusive.  This created over $20,000 in tax, penalties and interest.  Here are the main points of our discussions.

S1 & S2 were primarily concerned with getting the Certificate of Compliance [CofC] so that no funds are withheld from the sale proceeds – they want to submit the CofC request and hope the issues in 2013 to 2015 are not questioned.  They were unsure why this process was so onerous when the sale of their family home should be tax free.

HCBT Response: The documentation required to obtain a CofC is quite extensive.  The submission form specifically asks the following:

  • how the property was used while the owner was non-resident [ e.g., personal use, business use, rental, etc];
  • about Canadian tax reports filed for business and rental activities of the property;
  • a proforma calculation of the capital gain and/or income earned and the tax owing on the disposition of the property;

CRA essentially conducts a desk audit of S1 & S2 Canadian tax compliance to ensure all required returns / reports have been filed, any tax has been collected, before funds leave Canada.  CRA will use S1 & S2’s social insurance number to check all activities that might have a Canadian tax balance owing.  With this information it will be obvious to CRA that there are compliance problems in the year of departure and subsequent.  If no CofCs are obtained substantial funds will be withheld from the sale and placed on deposit with CRA.  S1 & S2 will have to file Canadian personal tax returns to recover the excess withholding.  After receiving the returns CRA will do essentially the same desk audit before processing the refund.

HCBT Alternative Approach:  CRA has a voluntary disclosure program [VDP] that allows taxpayers to correct prior year tax deficiencies.  If certain conditions are met, only the tax and interest must be paid but not penalties.  Given that penalties are a significant portion of the $20,000 financial exposure using this program could be of serious  benefit to S1 & S2.  To be accepted the taxpayer has to voluntarily initiate the corrections before CRA is investigating the taxpayer.  Secondly, complete disclosure of all issues is required.  The taxpayer cannot selectively disclose tax problems.

If S1 and S2 are going to access the benefits of the VDP they must submit most if not all of the corrective information on the 2013 to 2015 issues before the is CofC submission request is made.

If you want to know how this story ended, see post # 5.


Post # 3 / What Went Wrong – Specifics / Financial Risk Created

In the last post S1 & S2 were dealing with the shock of over $20,000 in tax, penalties and interest plus the possible delay of the sale of the family home.  These following compliance deficiencies were identified.

Tax Year of Departure 2013

  • S1 did not file prescribed “List of Properties by Emigrant of Canada” to disclose 50% interest in family home plus $75,000 RV personal use property. Penalty for failure to file $2,500;
  • S2 did not file prescribed “List of Properties by Emigrant of Canada” to disclose 50% interest in family home plus 1,000 shares of previous employer. Penalty for failure to file $2,500;
  • S2 did not file prescribed “Deemed Disposition of Property by Emigrant of Canada” or a tax return to report $55,000 accrued gain on 1,000 shares of previous employer. S2 will owe CRA approximately $4,500 for unpaid tax, late filing penalty, and interest because no return was filed in 2013;
  • S1’s return will be adjusted to disallow the spouse credit because S2 revised income exceeds allowable limit. S1 will owe CRA approximately $2,300 for unpaid tax and interest.

Tax Year 2014

Because they were renting their family home on a breakeven basis S1 & S2 did not think they had to report this activity to the US or Canadian tax authorities.  For Canadian purposes the gross rental income is subject to non-resident withholding tax of 25%.  This should have been remitted to CRA in the month following the rent receipt, unless elective procedures followed and a special rent return is submitted by June 30, 2015.  The elective return reports rental income net of expenses and tax is charged at normal Canadian marginal tax rates on the net profit only. Often the tax owing at marginal rates on a net basis, is relatively nominal compared to the 25 % withholding

  • No elective procedures or special rental return has been filed. CRA can charge $5,400 [$1,800 per month for 12 months @ 25%] plus interest for late payment;
  • S1 & S2 held the property jointly. Both should have elected and filed special rental return on their respective share;

Tax Year 2015

  •  No elective procedures or special rental return has been filed by June 30, 2016. CRA can charge $5,400 plus interest for late payment;

 This looks really bad, if you want to know how Hanson Cross Border Tax helped S1 & S2 minimize the financial damage, see post # 4 next week.

expanding into the US

Compliance Lapse / What Went Wrong / Financial Risk Created

In the last post we described sanitized facts based on a real client situation.  This scenario is typical of what Canadian Expats face on a foreign work transfer.  There are unique Canadian and US tax and disclosure requirements upon relocation from Canada to the USA.  It is unlikely that even the most financially knowledgeable individuals would properly discharge these responsibilities without seeking professional help in advance.   Failure to satisfy disclosure requirements can and do result in substantial penalties, even if no tax is owing.  This post uses a Canada / USA relocation to illustrate but the same principles apply when departing Canada for any country.

In August 2016, S1 & S2 consulted a lawyer about the upcoming sale of the family home.  The lawyer advised that because they were non-residents, each would need a Certificate of Compliance [CofC] obtained from Canada Revenue Agency [CRA].  Otherwise the purchaser would have to deduct $225,000 [$900,000 x 25%] from the sale proceeds of the family home and remit these funds to CRA.  The lawyer advised that this is a standard process for real estate purchases from a non-resident.  S1 & S2 cannot avoid the CofC requirements by selling the property to another purchaser.

S1 & S2 consulted Hanson Cross Border Tax.   Based on a preliminary review of their fact situation, the potential tax, penalties and interest on reporting deficiencies exceeded $20,000.  S1 & S2 were shocked because they had always been told the sale of the family home is tax free.  They thought the sale would be straightforward.

 This discovery was only the beginning, if you want to know where S1 & S2 further went wrong, come back next week to see post # 3.


american citizens in canada

Our website and letterhead uses “HCBT” as an abbreviation for Hanson Crossborder Tax Inc.  After the next few posts HCBT could also mean Hanson Cross Border Tragedies.  These are real life sanitized client stories to illustrate the financial and emotional burden created if cross border tax situations receive inadequate care and attention. The first in the series involves a typical Canadian family in which the main breadwinner gets the chance of a lifetime to relocate to the USA at a substantially higher salary.   Canadian Expat Post #1 will summarize the facts, common to many Canadians that relocate to the US for career purposes.

Post #1 Background 

  • Family of two Canadian spouses plus 2 young children lives Ontario [S1; S2; C1; C2];
  • Family home is owned jointly by S1 & S2. Purchased in 2008 for $450,000; Estimated value in December 2013 $600,000;  Expected value increases $50,000 in each subsequent year;
  • S2 employed in previous years. Primary responsibility now is care of C1 & C2;
  • S2 owns 1,000 shares from a previous employer stock option program. Shares cost basis is $5,000.  Estimated value in December 2013 is $60,000;
  • S1 employed by Canadian employer for $150,000 CDN per year;
  • S1 has self-directed RRSP with $100,000 in mutual funds / ETF’s. Maximum contribution has already been made earlier in 2013;
  • S1 purchased a recreational vehicle for $75,000 in August 2013;
  • In early December 2013, S1 is offered a position with Texas company with an annual base compensation of $225,000 USD;
  • Family relocates to Texas in December 2013; rents apartment so S1 can start a new job on January 2nd, 2014;
  • S1 & S2 decide to rent the Ontario family home rather than sell it. S2-B, brother of S2, lives near the family home.  S2-B will obtain tenants, repair and maintain property, collect / deposit rents for fee of $200 per month.  S2-B has no previous experience in rental property management.
  • Tenants move in on January 2, 2014 and pay rent $1,800 per month. S1 & S2 expect that they will breakeven costs versus rent.  Tenant rent is deposited into joint bank account of S1 and S2 at an existing Canadian bank account.
  • S1 & S2 did not seek legal or financial advice about selling or renting the family home;
  • S1 prepared and filed a 2013 T1 return reporting employment income, RRSP deduction, spousal credit;
  • S2 had no income and therefore did not file a 2013 T1 return;
  • S1 & S2 prepared and filed joint US returns for each 2014 & 2015, reporting only US income, i.e. Texas employment earnings;
  • On August 30, 2016, S1 and S2 receive an offer to sell the Family home for $900,000 with closing date on September 30, 2016.

Unfortunately, tax planning was not considered by the family described above. Next week please come back to read post #2 of this series and let’s see what happened.

Outstanding or incomplete returns haunt some of us, and the IRS knows it. For those of you living abroad according to a completely different calendar, you have a better excuse than your peers living on American soil. But even so, chances are you can never quite forget that perhaps you haven’t filed a return in years or reported that foreign bank account. If this is you, do not despair — there is salvation that will mute your guilty conscience and save you the hefty penalties you’re dreading: Your saviour is called the Streamlined Filing Compliance Procedures.

The Streamlined Procedures is a special program designed for delinquents like you who have yet to file years worth of returns. The program is an amnesty-style program that tax delinquents have to voluntarily enter into.  And here’s why people do it voluntarily; if you reside outside of the U.S., there are no late penalties. I repeat, there are NO late penalties.

To begin clearing your slate with the IRS through the Streamlined Procedures you must file delinquent income tax returns for the last 3 years (2012, 2013, 2014) and FBAR forms (aka FinCen form 114) for the last 6 years (2009 – 2014), if filed before June 15 and June 30, 2016, respectively (or past the said due dates if tax year 2015 is filed or extended timely).

What are the penalties you’d be facing if it wasn’t for the Streamlined Procedures? Well, let’s count it up: A missed form or an account can mean a civil penalty of $10,000 or more per account or form, including a criminal penalty. Which forms are commonly required for expats?

  • Form FinCen 114 – Foreign bank and financial accounts (aka FBARs)
  • Form 8938 – Form declaring offshore foreign financial accounts and assets (aka FATCA)
  • Form 8621 – Report by a shareholder of a Passive Foreign Investment Company (this would be for certain mutual funds held outside of pensions and RRSPs/RRIFs)
  • Form 3520 – Annual return for transactions with foreign trusts (RESPs and certain TFSAs)

(Note: If you reside within the U.S. but hold accounts outside the U.S. then there is a 5% penalty, based on the highest aggregate account balance measured over up to six years given you did not intentionally withheld such information from your originally filed returns.)

Now, if you don’t qualify to settle the score with the IRS through the Streamlined Procedures and they or one of their foreign partners have not tracked you down yet, the IRS can avail you to come forward through the ironically named Offshore Voluntary Disclosure Program. The OVDP requires more onerous paperwork and a penalty to the tune upto 50% of the aggregated highest balances in your overseas bank and financial accounts in addition to several other civil penalties.  This “awesome” deal is in exchange for a waiver from a criminal prosecution.

Though the OVDP is less of a break than the Streamlined Procedures, both processes allow for you to square off unpaid taxes without having to pay the full penalties you owe. This is a system the US government says it will keep in place for the time being. However hints are being dropped that the system will not last forever. Officials said in December that after a certain point the government will stop accepting expats claim of ignorance and begin assuming any tax delinquency as a willful evasion and presumably cease the Streamlined Procedures and the OVDP. Of course, they say they’ll give us all ample warning before this happens but as with most things it’s always prudent to act sooner rather than later.

Whistle Blower

Offshore Tax Evasion

For the past 6 years or so we have been exposed to plenty of news in the media on how the US government through its Internal Revenue Service (IRS) and the Treasury has been fighting offshore tax evasion.  One of the important administration tools in this war on tax cheats has been the Whistleblower Program, the program designed to encourage taxpayers to report on tax violations by others.

Strangely enough, despite of spending over $30 million on fighting international tax evasion, the Canada Revenue Agency (CRA) with its outreach and communication has not been as active or loud, as if such problem hardly exists here.

Canadian residents have a duty to report their income and pay taxes to the CRA. Some may have outright financial holdings abroad or possess structures with multiple offshore investments. It is not illegal to hold money or assets offshore for as long as their ownership is adequately disclosed and the tax is paid on related income.

And yes, it may be tempting to cheat the system to avoid paying extra tax.  It may even seem easy to do so by leaving out certain details on a tax return in hopes that they are outside of the Canadian borders.

Canadian Whistleblower Program: OTIP

If these thoughts ever crossed your mind, we are here to remind you that the Canadian system does too have mechanisms in place for catching and penalizing tax cheats, including through its own Whistleblower Program.

In 2014, the CRA adopted a mechanism known as the Offshore Tax Informant Program (OTIP). It was Canada’s response to an effort to fight global tax non-compliance along with all other developed nations in the G-20.  OTIP provides mechanisms to allocate rewards to anyone that can give information on those that aren’t reporting offshore wealth or paying taxes.  OTIP is focused on serious offenders that have over $100,000 CAD outstanding on their federal taxes. The program allows the informant to set up a contract with the CRA that will reward them between 5% and 15% of what is collected.

As of the end of January 2016, there has been 600 calls and 120 cases that came out of OTIP. Calls are offered in both French and English and anyone from around the world can participate in this program. Informants are advised to call OTIP if they feel they can benefit from this program. Calls are confidential as the program is meant to protect the identity of informants.

Sometime mistakes are made; you may have been misinformed of your reporting obligations, information on offshore investments may have been missed, income may have not been freely available by the reporting due date…  Next thing you know, you are an offshore tax delinquent.  Irrespective of the reasons, you are breaking the law and risk significant penalties if you are not taking action to resolve your tax obligations.  By coming forward voluntarily and paying taxes under the CRA voluntary disclosure program you may be able to get away with reduced penalties instead of facing much harsher consequences that could come from programs like OTIP.

Have More Questions

If you have questions about the above post, please let us know and we would be happy to help you. get-a-free-consultation

passport to be revoked

Obama and Republicans finally agreed on something in common: Passing the Fixing America’s Surface Transportation Act in order to continue the crackdown on tax evaders, aka Americans living abroad.

The FAST Act is a 5-year policy that enables the government to collect taxes to pay for transportation-related projects such as roads, bridges or rail networks. In the past, policy for transportation relied on financing from gas tax. However, cars are getting more efficient which has limited the amount of funding the government can generate. So, staring a $16 billion shortfall in the face, the government decided to add a mechanism to the Act that ensures the IRS can collect from a guaranteed 6 to 8 million Americans.

The mechanism they came up with? The ability for the State Department to deny, revoke or limit a passport for any American who is “seriously delinquent” in paying their taxes. FAST defines delinquent as anyone who owes $50,000 USD or more in unpaid taxes, including penalties and interest. (Individuals paying off debts in a timely manner or who have requested a hearing to contest a collection are exempted.)

Before FAST, the IRS could not disclose tax information to the State Department and, in turn, the State Department could not deny, revoke or limit a passport based on a citizen’s tax payments. Now, the IRS will be sharing tax information with the State Department and issuing a certificate that orders the State Department to deny, revoke or limit a passport so its holder can only travel back to the U.S.

Besides delinquency, Americans applying or renewing passports can expect fines if they owe a child support payment over $2,500 USD or any other type of federal debt or if they fail to provide their social security number.

FAST’s provision to deny or limit a passport is a harmful way for the IRS to ensure Americans living outside the U.S., particularly in Canada, for whom having a valid passport is critical, remain vigilant in filing their returns.

Reminder: US law requires US citizens, including dual nationals, to enter and depart the U.S. with proper US documentation to avoid being barred or delayed at the port of entry.

delinquent tax and citizenship

Posted on Oct. 15, 2015 on

Janice A. Flynn is an attorney with US Visa Solutions — Law Office of Janice A. Flynn.  In this article, the author discusses how tax law and immigration law intersect to affect U.S. citizens or lawful permanent residents living abroad who may not be up-to-date with their U.S. tax compliance.

* * * * *

U.S. taxpayers living outside the United States have been in the news a lot recently, whether because of the Foreign Account Tax Compliance Act, London Mayor Boris Johnson making U.S. citizens living in the United Kingdom aware that they are delinquent tax filers, or U.S. citizens renouncing their citizenship. This flood of information is bringing U.S. citizens and lawful permanent residents who may not be up-to-date with their U.S. tax compliance out of the woodwork. For those who did not know they had to file a U.S. tax return — and even for those who did know — this is creating a lot of fear around what will happen if they try to reenter the United States while owing U.S. tax.The Department of Homeland Security and its enforcement and customs collection arm, Customs and Border Protection (CBP), oversee the admission of people into, and deportation from, the United States. The IRS is responsible for collecting U.S. federal tax. CBP assists with the responsibility to collect customs duties but not to enforce U.S. tax compliance for individual taxpayers. The many U.S. agencies and departments all have specific responsibilities as set out by the Constitution and Congress, but the rules do not allow the agencies to share information as freely as one would think.

In general, the IRS may not share U.S. federal tax return information, except in specific circumstances as set out in section 6103. In particular, under section 6103(l)(14), the IRS, when requested, may disclose tax return information to CBP officers to ascertain “the correctness of any entry in audits as provided for in section 509 of the Tariff Act of 1930 or other actions to recover any loss of revenue or collecting duties, taxes, and fees determined to be due and owing under such audits.” Internal Revenue Manual section requires that a request made under that section:

  • be in writing and signed by the commissioner of CBP;
  • identify the particular taxpayer to whom the return relates;
  • identify the tax period or date to which the return information relates;
  • identify the particular items of return information to be disclosed; and
  • provide a need and use statement for each item requested.

The IRS must follow specific procedures if it wants CBP to stop and apprehend a person entering the United States at a land border, in an airport, or at a pre-clearance location outside the United States.1 IRS officers can request that taxpayers with a delinquent balance be entered into TECS, a database maintained by DHS that contains information about individuals and businesses suspected of, or involved in, violations of federal law. These taxpayers will be placed on a DHS lookout list, and DHS will advise the IRS when they travel into the United States for business, employment, or personal reasons. It is the responsibility of IRS employees to maintain the TECS database by requesting that the appropriate taxpayers be entered into TECS or deleted from it. IRS officers can also request information from TECS on a taxpayer’s previous travel to or from the United States.2Those who reside outside the United States, including U.S. citizens, and are not tax compliant often wonder what the U.S. government knows about them and what will happen if they enter the United States. Many may have only recently become aware that they needed to file and may be taking advantage of the streamlined disclosure program to get into compliance. Most delinquent tax filers need not be concerned because of the numerous requirements that must be met before the IRS can disclose taxpayer information to CBP and thereby put the taxpayer into the TECS database:3

1. The taxpayer must reside outside the United States, U.S. commonwealths, and U.S. territories or be about to depart to reside in a foreign country.

2. The taxpayer must not have voluntarily resolved the case by full payment or other action, including an installment agreement.

3. A notice of federal tax lien must have been filed for all balance due modules.

4. The total unpaid balance of assessment must equal or exceed $50,000 for international cases or $100,000 for U.S.-based cases. The dollar threshold may be lowered if the IRS agent makes that request and the agent’s group manager concurs that there are significant compliance issues.

5. The taxpayer cannot be in bankruptcy.

6. The IRS cannot have accepted an offer in compromise to settle the taxpayer’s liabilities.

7. The taxpayer’s case must be in status 26 or reported as currently not collectible with closing code 06, 03, or 12.

As the above list shows, the requirements to get a taxpayer on the TECS list are fairly onerous. The IRS must meet a heavy burden before it can ask CBP to apprehend or provide entry information about a U.S. taxpayer coming across the border.The IRS must promptly follow a procedure to have the taxpayer removed from the TECS database if the tax liability has been satisfied, the taxpayer dies, or the taxpayer enters into an arrangement with the IRS.4

Enforcement Through Denial of Passports

The IRS can direct the State Department to deny the issuance of U.S. passports to taxpayers whose delinquencies have escalated to criminal investigations.5 There have been various legislative attempts to extend the denial of passports to taxpayers who are seriously delinquent but not yet in criminal investigations; however, none of those proposals has passed. Most recently, in May Senate Finance Committee Chair Orrin G. Hatch, R-Utah, filed a substitute to the already passed H.R. 644, the Trade Facilitation and Trade Enforcement Act of 2015, that would direct the secretary of state to deny and revoke passports issued to U.S. citizens who are seriously delinquent — that is, those who owe more than $50,000 to the IRS. Both the Senate and the House have passed the act, but the two versions are awaiting reconciliation.Although a U.S. citizen is not required to provide a Social Security number on the application form for a U.S. passport (State Department Form DS-11), the State Department reports the failure to do so to the IRS, which may impose a $500 fine.6 The IRS allows the passport applicant 60 days (90 days if the applicant lives outside the United States) to respond to a notice requesting the person’s SSN. However, the IRS will not assess the penalty if it finds there was reasonable cause for the taxpayer’s inability to provide the information and that the failure was not a result of willful neglect. Also, section 6039E indicates that a person applying for a passport must provide a taxpayer identification number only if the person has one. Logically, if a U.S. passport applicant does not have a TIN, the applicant does not have to include one on the passport application form and would not be subject to the $500 fine.

Many “accidental U.S. citizens” who do not have an SSN are trying to obtain one because of FATCA. However, they are encountering delays of up to six months because of the extra documentation required for adults applying for an SSN for the first time.

Renunciation of Citizenship and Entry Issues

More and more people each year are choosing to renounce their U.S. citizenship, most likely to simplify their lives in light of the FATCA compliance requirements that became law in March 2010. A person who renounces U.S. citizenship must have citizenship in another country so as not to be rendered stateless. Further, once a person renounces, that person becomes subject to the same U.S. entry and excludability requirements as aliens. To be admissible into the United States, an alien must not have a criminal history concerning controlled substances or crimes involving moral turpitude. Those who plan to renounce and have a criminal history of this type should first seek legal advice.Assuming the person is otherwise admissible, the person who renounced may travel to the United States under a visitor visa. Also, under the State Department’s visa waiver program, nationals of some countries can visit the United States without a visa for the purpose of business or tourism. If an immigration officer questions a person’s U.S. citizenship, it is up to the former U.S. citizen to demonstrate that he has renounced. Therefore, former U.S. citizens should carry with them a copy of their certificate of loss of nationality (CLN). The final determination of renunciation is effective as of the date of the renunciation interview but is not official until the issuance of the CLN. Those who urgently need to travel to the United States should ask at the renunciation interview to keep their passports, as it can take several months to get the CLN.

The Immigration and Nationality Act provides that people who renounced their U.S. citizenship on or after September 30, 1996, for the purpose of U.S. tax avoidance, as determined by DHS, are inadmissible.7 The State Department, which oversees the process of renunciation, provides information to Treasury, which then coordinates with DHS. To date, there are no procedures implementing this law, and it is therefore unlikely to be enforced. But from an immigration law perspective, a person should be up-to-date with U.S. tax compliance before renouncing so as to avoid any potential claim of tax avoidance.


U.S. tax law and immigration law are increasingly crossing paths. It can be fascinating to watch how the U.S. government agencies work together (or do not) to fulfill their legal obligations. A firm understanding of how the U.S. government can enforce tax compliance at ports of entry or through the non-issuance of passports can allay the fears of those who wish to enter the country.


1See IRM section 5.1.18. Starting in 2015, there will be more pre-clearance locations outside the United States. For the list, see IRM section

3 IRM section

4See IRM section

5 20 CFR section 51.60.

6See section 6039E.

7See Immigration and Nationality Act, section 212(a)(10)(E).

tax amnesty

Both US and Canadian tax systems are based on self-assessment when individuals voluntarily complete their income tax returns and make applicable disclosures. When a taxpayer has previously filed an incorrect or incomplete tax return or failed to disclose certain tax details, the taxpayer may under certain circumstances be permitted to come forward and voluntarily disclose past reporting errors or omissions in exchange for partially or completely reduced penalties and occasionally, interest. The relief is available under voluntary tax amnesty programs offered by the CRA and the IRS. Some of these programs are permanent while others are offered on a temporary basis with or without a definitive timeline.

A disclosure will not be considered to be voluntary where, prior to making the disclosure, a taxpayer was aware of, or had knowledge of the enforcement action set forth by the tax authorities with respect to the information disclosed. In addition, no partial or complete penalty abatement is available to a taxpayer who gets approached with respect to an error by the government body first.

Currently the IRS is administering several tax amnesty programs allowing American citizens, Green card holders and American residents to come forward with previous inaccuracies and omissions related to their foreign income, accounts and assets. These programs are called Offshore Voluntary Disclosure Program, Offshore Streamline Procedures and Domestic Streamlined Procedures.

We have experience assisting taxpayers who wish to come forward with US tax delinquent compliance from the time the IRS introduced the first offshore program in 2009.