CRA collects U.S. disclosure penalties on behalf of the IRS.

CRA COLLECTS U.S. DISCLOSURES PENALTIES

An August 10, 2017 Society of Trust and Estate Practitioners article (IRS pursues Canadian resident who refused to pay offshore penalty) discussed a U.S. citizen resident in Canadawho failed to file IRS Form 5471 with disclosures for his consulting business for twelve years.

In 2009, he applied for the Offshore Voluntary Disclosures Program (OVDP). He was assessed substantial taxes and penalties, in part due to IRS double-counting of some accounts, which were finally reduced to $186,000 U.S. He refused to pay, withdrawing from the OVDP in June of 2011. The IRS withdrew the OVDP penalties and assessed penalties of $120,000 U.S. In May 2015, the taxpayer was owed a substantial refund on his Canadiantax return, and the IRS enlisted CRA to withhold the refund to collect the penalties in accordance with the Income Tax Treaty.

The taxpayer then appealed in the U.S. courts but was unsuccessful in having the penalty reversed or reduced (Dewees vs. United States, Case No. 16-cv-01579 CVC).

For further information see Video Tax News Monthly Tax Update Newsletter, Issue No. 433