There must be a better way, a former American says

“I still do not understand why the IRS needed to know how much money was in my Canadian bank accounts six years ago for me to become tax compliant. My online banking records did not go that far back!”

— Jordan Leith

Dear Congress,

I was born to Canadian parents in New Hampshire while my father was studying there. We moved to Toronto when I was 10 months old, and I still live there today.

I have no memory of my birthplace.

Five years ago, I married a US citizen.  In the process of merging our finances, a major global accounting firm told me that I risked being fined into bankruptcy if I did not become U.S. tax compliant.

Remaining a U.S. citizen would result in significant ongoing accounting fees and have major consequences for my financial situation. 

Fear of bankruptcy

I hold mutual funds from a Canadian financial institution. While these are very standard investment products in Canada, the IRS views them as PFICs. This is just one of many complex aspects of the over 75,000-page U.S. tax code.  My straightforward Canadian investments translate into significant accounting fees for U.S. tax returns and higher U.S. tax bills. Additionally, discrepancies between real estate taxes in the two countries would be a burden on my financial planning. 

With only a technical connection to a country that has not provided me any services, I refused to continue with such an onerous tax system. Renouncing my U.S. citizenship became a priority. Becoming U.S. tax-compliant would allow me to live without fear of being fined into bankruptcy. Complicated by PFICs, my compliance process took several years and cost an egregious amount of legal, accounting and U.S. government renunciation fees. 

I still do not understand why the IRS needed to know how much money was in my Canadian bank accounts six years ago for me to become tax compliant. My online banking records did not go that far back!

Conflicting advice

Throughout the compliance process, I received conflicting guidance from numerous advisors. On one occasion, an accountant told me that I could spend the rest of my life in litigation with the IRS and be in the Supreme Court if I followed my lawyer’s advice. This issue eventually became irrelevant because of how I long I waited for my renunciation appointment.

After years of waiting, I had my appointment to reannounce my U.S. citizenship in Toronto. That same week, my son was born, weeks earlier than expected. With my infant in the neonatal intensive care unit, I contemplated moving the appointment, but I had waited years to get my freedom from America and did not know the implications of waiting indefinitely for another appointment. Thankfully the hospital was just minutes from the consulate, but the circumstances only added to the stress my family and I were under that day. 

Better way?

I am grateful that this process is complete. Recently, through a standard check per FACTA, my Canadian financial institution’s compliance team happened to notice the birthplace on my passport for the first time. Thankfully, I was able to provide proof that I was no longer a U.S. citizen. But my own financial institution would have restricted my access to my own investments. 

There must be a better way to fund the U.S. government without forcing Americans abroad to renounce their citizenship just to lead a normal life.

Sincerely,

Jordan Leith