2012 Offshore Voluntary Disclosure Initiative Announced by IRS

IRS OVDI Tax Collector

1. A USA Citizen
2. A Dual USA Citizen Living Abroad
3. A USA Resident
4. A USA Green Card Holder Living Abroad

United States Internal Revenue Service (IRS) has been aggressively pursuing US persons (including US citizens and green-card holders living abroad) who have failed to report foreign income on their US income-tax returns and/or failed to report foreign bank and investment accounts on a Foreign Bank Account Report (FBAR). A US Person, must file income tax return with IRS, regardless of their residency.

IRS implemented amnesty programs since 2009 for US citizens to come forward with their foreign income reporting. More than 30,000 people have voluntarily complied since 2009, at least 30 have been criminally indicted and the IRS has netted a total of $4.4 billion in unpaid taxes, interest and penalties.

The State Department estimates that more than 6 million citizens live overseas, excluding those in the military, yet the IRS receives only 1.6 million tax returns each year with foreign addresses. And just over 500,000 FBARs were filed in 2009.

On January 9, 2012 the IRS announced a third amnesty, formally known as the Offshore Voluntary Disclosure Program. It is substantially the same as the 2011 amnesty (aka 2011 OVDI), with some exceptions:
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IRS Calling! US Citizens in Canada File Your Tax Return

Income Tax

The USA tax collector Internal Revenue Service (IRS) has stepped up their search for U.S. citizens living outside of the country and not filing their returns.

Thousands of “lost” U.S. citizens living in Canada are getting the call from the IRS.

Here are some tips on how to get caught up:

*Dual citizens: Even if you moved to Canada and became a citizen or resident, unless you go through the formal process of renouncing your U.S. citizenship, you are considered a dual citizen. The IRS still expects you to file your annual income tax return form 1040.
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Obama Tax Cut Deal Will Cost U.S. For The Long Run

The Bush tax cut has been extended for two more years and it is now called the Obama Tax Deal.

Bush tax cut has been effective since 2002 when the U.S. economy was doing rather good. But since then, with housing market collapse and unemployment of millions of people, the economy has been spiraling downward.

It does not make any logical sense to me to claim that extending the Bush cut will create jobs for American People.
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Tax Issues To Consider By Canadians Investing In US Real Estate Market

I am often being approached by many Canadians asking about the current investment opportunity in US real estate market.

The opportunity might be very attractive, but investing in US or any other country for that matter is very complex for ordinary Canadians.

There are major tax implications to consider for investment property from both US and Canadian Tax agencies.

As a Canadian investor, you must report all your foreign investment over $100,000 to Canada Revenue Agency and also your income from your foreign investment sources to determine tax payer taxable income,

In US, Canadian investor must also file US income tax return and report all income from investment property to the US tax authority. Canadians also must obtain a US tax payer identification number (TIN) from IRS. Without a TIN, Canadian investor would not be able to realize the income from the property and transfer it to Canada. There is also the possibility of 30% source deduction of any profit from the investment property by the IRS.

If you are considering investing in US properties, it would be prudent to seek advice from a qualified tax or investment advisor, who are experts in cross border taxation.

Income Tax on World Series of Poker Winner

You probably heard from any of your favourite Canadian news sources that Jonathan Duhamel, 23 year old from Canada has won the World Series of Poker in Las Vegas. The winning awards him US$8.9 million in prize money.

Unlike the Vancouver Lotto Jackpot winners, who don’t have to pay any income tax on their $50 million winning, Duhamel, will have to pay tax in USA, Canada and his province of residence. There have been interesting developments in tax on Poker winnings in Canada for last few years.

An increasing number of Canadians are playing online poker regularly and winning. To begin with, lottery and gambling winnings in Canada are not subject to income tax, as I mentioned in my previous post, since these income are not from an “income from a source” of employment, business or investment income.

This all changes when Poker or Gambling winning becomes a source of income from a running a business. If you spend a significant amount of time, playing poker, spend a substantial amount of money for playing poker and pay for your living expenses from your poker winning you are in a business and you must report your income from playing poke to Canada Revenue Agency. Canada Revenue Agency can decide if your poker winnings are taxable or not by reviewing taxpayer’s poker playing habit.

Regarding Jonathan Duhamel’s winning, he won in a professional poker tournament that makes his winning taxable both in Canada and USA. Since he won the prize money in USA, he will get the prize money after tax. If he has a Social Security number, he can get all the winning but he will have to report the winning in his USA tax filing and pay tax on the winning.

Since he is a Canadian citizen, and assuming he does not have a US Social Security no., he will get his prize money after 30% tax deduction by IRS. He will have to request for a US non resident Tax Payer Identification (TIN) no. and file a US tax return and could get some of the tax deduction back from IRS.

In Canada, he will have to report his winning in his Income Tax Return and also the taxes that he has paid in USA. Since Canada and USA have income tax treaty, he will get credit for taxes paid on his winning in USA and will pay a smaller amount of Tax to the Federal Government. Then the Province of his residence will come after him for their share of Dhuamel’s winning.

After doing a rough calculation, he is expected to net $4.6 million after tax from his $8.9 million prize winning.

I am assuming that he will claim that he is not a professional poker player, to avoid reporting his income in Canada. So far, all the news I have reviewed about Jonathan Duhamel, I don’t think his claim is going to fly over CRA. His Tax Advisors will have a hard time to prove that he is not a professional poker player.

Bloomberg news reported that there is an evilcpa, and Las Vegas poker players bring her to keep their poker winnings from IRS’s tax grab. Jonathan Duhamel should seek her help too.