Problems with Canadian taxes - Expert Income Tax help on crossBorder tax and immigration and divorce and RRSP and IRA

Hi David,

I’m a US citizen who had a Canadian work visa and lived/worked in Montreal for 15 months in 2005/2006. I filed both Canadian and US taxes as required. I moved back to the US in 2006 thinking all was well and good. I got rid of all my Canadian accounts and records thinking they weren’t going to be ever necessary. I now received this letter. I would like to just ignore it, but I’m not sure of the consequences of that. I do have to travel to Canada almost every month and I’m now worried I’m going to be thrown in jail when I next return.

My questions are:

1.     1.   What are the consequences of ignoring this?

2.      2.  What can they do to me when I travel to Canada?

3.      3.  I paid into the Canadian retirement service, is that money totally lost to me? Can I argue that they are going to get that money and I’ll never see it?

I fear that trying to straighten this out with the Canadian tax service is going to be really hard and stressful.


david ingram replies.

This is only part of your problem.

As well as this bill for $19,000, sometime in the next three months, you should be receiving a Quebec re-assessment for another $17,000 because Canada will have informed Quebec of their reassessment -  You can see that this has already been taken into account because the Notice of Assessment shows that the Quebec Abatement on line 440 has been changed from an original $3,716.13 to a current $6,894.62. 

The CRA says in its reassessment that you ignored a letter they sent you on January 27th.  That was a bad move and this is the consequence.

The answers to your questions:

1.    After you have ignored it for a year and a half (incurring another $3,000 of interest), You will have the CRA ask the IRS to collect it for them,.  It is a simple procedure. The IRS regularly asks the CRA to collect tax bills from Canadians who are ignoring the US bills and the IRS will be happy to   return the favour and start a collection action against you in the USA.

2.    Although I have several horror stories of the IRS taking vehicles away from people traveling to the US, at this moment, I have never heard of the CRA taking an individual's vehicle when they travel to Canada. I do know of the CRA seizing commercial property located in Canada which has included booths and rides being used at the Canadian National Exhibition in Toronto and the Pacific National Exhibition in Vancouver.

3.    Under the terms of the US Canada Social Security Totalization Agreement, you will be entitled to a small Canada Pension Plan when you retire.

What do you do?

Well, the reassessment indicates that they had added $133,646 of Capital Gains to your assessment as reported to them by ETrade and as they will have suggested is / was the capital gain they proposed to add in their letter of Jan 27, 2010.  It is unlikely that any deduction was given to you for the cost of the shares.  It was up to you to provide that information as a reply to their Jan 27, 2010 letter.

And the reverse is also true, I had the IRS give an American client a $218,000 tax bill for sales that were 6, 7, and 8 years old at the time.  In reality, the client had lost money over the three years while living in Canada and China and not one but TWO CPA's told him to forget about it when he asked them when he went back to the USA.

He had also lost or destroyed all his Merrill Lynch records and I will condemn M-L for ever because I wrote to them and phoned and couriered requests for copies of his statements showing that the sales had actually been losses and they completely and my client who no longer had any money.

In your case, it will be easy to get ETrade to reproduce your statements for the 2006 year and you might actually have them because if you threw them away,m that was a silly thing to do because you needed to report the sales on your US return as well and you should have a 2006 schedule D as filed with your 1040 and that will be a good start.  If you lost that return, you can go to the IRS and get an exact photocopy of your 2006 US 1040 return  and lets hope that you did file them with your 1040 that year. In the future remember to keep everything like that for ten years at least.

In the meantime, it is a good idea to file an official NOTICE OF OBJECTION as described to you on the back of the 2006 Notice of Reassessment you received.

If you do not have that filed within 90 days of April 29, 2010, the bill is yours and you have no official method of changing it.
(to be sure, if you get some very good documentation, we can ask to have it reviewed again but we can NOT "force" the CRA to review it again.

So get hold of the Jan 27th letter and get the costs for the stocks the CRA added to your income.

If you need help, you know where we are and this is "what we do".

If you want us to do anything for you, I need copies of your 2005 and 2006 Canadian and US Income Tax returns as filed.

If you really do not have them, get a letter in to both governments now asking for actual photocopies, not just transcripts.  If you efiled, this is a perfect example of why I do not let anyone with any complication (like entering or leaving the country or dual country returns to efile.  I want to see genuine paper copies of everything so that an ordinary human can understand. 

On the other hand, if you did efile, you "can" get your efiler to at least give you an actual tax return reproduction in the pages which look like a tax return as opposed to the CRA or IRS who can only give you their transcript.

 david ingram

If your question was not answered fully or you wish to go further, I am available for individual consultations by phone or email or in person for $450 per professional hour. 

Please also note that we prepare Canadian, US, Australian, UK and New Zealand returns on a mail in, email, fax, snail mail or couriered basis. At any time, our clients are in 40 countries or more.  They have every occupation from nuclear Submarine captains to FedEx pilots to Major Bank officers to Politicians, Diplomats and border patrol officers.  My favourite, however, is a penguin catcher in Antarctica among others there..

If you 'really' only have a single question requiring a 'couple' of minutes, you can try phoning me for free as part of the following.

- For a quick free question

You might try calling Fred Snyder's radio program for an answer on a Sunday Morning.. 

Fred Snyder's  "IT'S YOUR MONEY" radio show. on CISL,  650 AM on the dial in Vancouver from 9 to 11:00 AM every Sunday  (604) 280-0650 or (877) 280-0650 - You can listen live from anywhere in the world at from anywhere in the world. click on the button in the top left hand corner.
You might try calling Fred Snyder's weekly radio programs for an answer. 
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Disclaimer:  This question has been answered without detailed information or consultation and is to be regarded only as general comment.   Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation  in connection with personal or business affairs such as at or  If you forward this message, this disclaimer must be included."

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