Here they come… IRS Builds New International Tax Group

The IRS has started putting together a new group to focus on international tax issues, including offshore bank accounts used to evade taxes.

An IRS unit that deals with large corporations and large partnerships has posted job openings for several positions in a new group that will “focus on examinations involving the complicated business arrangements and entities controlled by the high-wealth taxpayer segment,” according to IRS spokesman Frank Keith.

It shows the agency is “taking this very seriously,” says Roy Black, an attorney at Black, Srebnick, Kornspan & Stumpf.  The IRS looks to be assembling a “more sophisticated” group of examiners for the group, judging from the job postings, Black adds.

The group was formed to follow on a pledge by IRS Commissioner Doug Shulman to beef up international tax compliance, partly through a crackdown on people who use offshore accounts to evade taxes. President Obama’s 2010 budget earmarked extra IRS funds for this purpose.

IRS spokesman Keith said it would “be premature at this time to discuss further specifics” of the group that’s being formed.


I think the IRS should open up more than one phone line for international entities and actually have their officers be patient and understanding that those who are calling from say, Canada, may not understand the IRS way of operating and may need some tender love and care.  As it is, they come across on this line, from Pennsylvania, as being pompous, arrogant know-it-alls, unwilling to take a few minutes to explain anything to the callers.

At least that is my impression in the dozens of times I have called this line and spoke to a Mr. Jones, Mr. Smith or Agent 345678.

Is it too much to ask for some customer service too… Not everyone calling is a criminal!

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Understanding your Boss

It’s no secret that tough times bring out troubling traits even in bosses who seemed supportive and easy to deal with, and employees should learn to develop strategies to cope with this behaviour.  When times are bad, employees are usually much more reluctant to push back.

Bosses, too, are under more stress from their bosses and from the economy.

All this stress makes for a dangerous work environment that senior management should be monitoring, because left to fester, it can demoralize workers, reduce job performance and damage relationships which cannot be repaired.

In order to learn to cope and succeed in these troubling times, it’s time for employees to develop strategies to manage their bosses and develop ways to avoid being a victim of their leaders’ rogue behaviour.  An employee will want to make sure that they stay in frequent contact with their boss and make it clear that they understand his or her agenda and do whatever you can to help make it happen.  Act as if you are in survival mode and that your boss is not going to want to sink their only possible life raft.

Another way to look at your bosses odd behaviour in times of recession or when the company is struggling is by trying to see your uncooperative boss like an unruly kid, and use the variety of parenting tactics that work on kids to get them to play nice.  By setting limits and boundaries, anticipating their needs, creating distractions to get their attention off a tantrum, you may be able to prevent conflict, and be prepared to use good timing and humour and reward their good behaviours to encourage it to continue.

 So what are the kinds of bosses to watch out for?   Do any of these resemble your boss, or you?  Here are some stereotypical bosses found on the Internet via Google;

 1) The chronic critic

The behaviour:  Frustration over having things not go his or her way makes this boss find fault with everything you do.

How to deal with it:  Stay resilient. Don’t try to defend yourself against the corrections or you will receive more of them. Instead, smile, take notes and then walk away without taking the comments personally.

2) The pass along boss

The behaviour:  This person responds to a growing workload by passing it on to you.

How to deal with it:  Keep a careful record of the fallout you’re carrying because of your boss’s absentee behaviour. Then when you have a review with your boss, show him or her the facts and ask for a reward for handling it, or a less arduous workload in the future.

3) The spineless boss

The behaviour:  This boss tends to hide out, either due to indecision or to uncertainty about what to say about a challenging situation.

How to deal with it:  Take the lead. Decide what needs to be done and approach the boss with documented evidence of why your recommendation should go forward.

4) The rule changer

The behaviour:  This boss reacts to uncertainty by regularly changing decisions and rearranging priorities.

How to deal with it:  Remain flexible and accept the fact that plans are tentative.  Check in daily to keep abreast of priorities to avoid wasting efforts.

5) The demanding boss

The behaviour:  When over-burdened and out of control, this boss turns to you, assuming you will take on ever more of his or her load.

How to deal with it:  Set boundaries, and stand your ground. When the boss gives you more work and your plate is full, make it clear you are busy and may need more time.  A reality check lets you show you’re helping with the load but setting limits on further burdens.

6) The insecure boss

The behaviour:  Constantly checking in and asking you to revisit finished work for fear of being second-guessed or reprimanded for not being good enough.

How to deal with it:  Stroke their ego.  Express confidence that work is on track.  Avoid talking about any doubts that could provoke further insecurity.  Regularly remind bosses of their, and your, past successes.

7) The distracted boss

The behaviour:  Too many things are on the boss’s mind, creating a short attention span, so ideas get forgotten and discussions need to be repeated.

How to deal with it:  Use props, visual aids and supportive materials to hold his or her attention. Make communications compelling and to the point. Follow up with a written summary of decisions.

8) The tantrum thrower

The behaviour: Angry because something is not going his or her way, this boss panics and lashes out at whoever is being blamed for the problem – or even the nearest unsuspecting target.

How to deal with it:  Call a time out. Never fight a tantrum with a tantrum, which will only make it grow. Find shelter until the storm passes. For instance, look at your watch and say, “I’ve got an important call scheduled. Would you agree to defer this discussion until later?” When you come back to the discussion, the emotion will invariably have lessened.

9) The fickle boss

The behaviour:  Even though you got approval and your project is well under way, the boss suddenly has another prime directive and asks you to start over.

How to deal with it:  Shore up the boss’s confidence in having picked the right course to begin with to make for less flip-flopping. Offer up supporting materials and endorsements of the wisdom of the plan from others.

10) The control freak

The behaviour: Fearful of being caught off guard when so many things are changing so quickly, this boss wants constant status reports and final say on everything that is going on, which means time-wasting meetings and long waits for a go-ahead.

How to deal with it:  Provide constant updates. No matter how time-consuming it may seem to soothe the boss’s anxiety, over time it will win trust and mean less constant interference.


In other words, its better to react like an adult, even though your boss may be acting like a child.  Also it helps to know the least stressful way to discuss things with your boss.  Some bosses prefer e-mail, whereas others favour phone conversations or face-to-face encounters.

Also learn to pick up on queues for the best and worst timing.  Avoid bringing up bad news or asking for favours at the wrong times – close to lunch, late afternoon, nearing time to go home.

Communicate regularly!  Sounds like a marriage…  Make dialogue with the boss part of your routine so it becomes more natural and less stressful.

Anticipate.  See problems coming and prepare a calming, positive spin.

Avoid unnecessary conflict.  If your boss is under a lot of stress, stay out of the line of fire.  

Don’t snap back.  If caught when the boss is having a tantrum, listen calmly and react with a comment such as, “I hear you,” then walk away.

Use humour.  Laughter is a great diffuser of tension, if appropriate.  Breaking out in spontaneous laughter might not be the best remedy, unless the situation warrants it.  

Manage up.  Be the voice of reason and calm under pressure. Your boss will appreciate that and want to stay on your good side.  Also shows your boss what you are capable of in times of crisis.

Work, don’t worry.  Dreading the storm clouds or wishing for a different boss just wastes time and will distract you from doing your best work.

 With all this insight into what your boss may or may not be like, the key concepts to remember are the same in work as in play;  communicate, be respectful and work hard.

Good luck!

IRS Qualified Intermediary (QI) – Know Your Client Rules

Logo of the Internal Revenue Service
Logo of the Internal Revenue Service (Photo credit: Wikipedia)

List of Approved Know-Your-Client Rules

Revenue Procedure 2000-12 states that the IRS will not enter into a qualified intermediary (QI) withholding agreement that provides for the use of documentary evidence obtained under a country’s know-your-customer rules if it has not received the know-your-customer practices and procedures for opening accounts and responses to 18 specific questions listed in the revenue procedure.This document lists those countries that have submitted know-your-customer rules and those rules have been approved.The QI agreement contains an attachment that lists the specific types of know-your-customer documentary evidence for each country that is sufficient for purposes of the QI.  The IRS is working together with the organizations that have submitted acceptable know-your-customer rules to develop standardized attachments.  The attachments can be seen here as soon as they are available.

If a country is on the approved list, entities and branches located in that country may submit their QI applications. Once a specific attachment has been developed for a particular country, the IRS will associate the attachment with the QI agreement it sends for signature. A QI may suggest amendments to the attachment, but departures from the standardized attachment may delay processing of an application.

To determine whether the know-your-customer rules that have been submitted to the IRS cover a particular QI applicant, the applicant should look to the specific country attachment. For example, in some countries, different rules apply to banks and brokers. A QI applicant that is a bank or a broker should verify that the know-your-customer rules that have been submitted cover all the rules applicable to that applicant.

For a list of countries, follow this URL:,,id=96618,00.html

Qualified Intermediary – An IRS view

Qualified Intermediary – IRS view

A qualified intermediary (QI) is any foreign intermediary (or foreign branch of a U.S. intermediary) that has entered into a QI withholding agreement with the IRS.The QI assumes primary withholding responsibility or primary Form 1099 reporting and backup withholding responsibility for a payment – and can thus be treated as the payee.

In this situation, the QI is required to withhold the tax.

You can determine whether a QI has assumed responsibility from the Form W-8IMY provided by the QI.

QI Withholding Agreement Foreign financial institutions and foreign branches of U.S. financial institutions can enter into an agreement with the IRS to be a qualified intermediary. A QI is entitled to certain simplified withholding and reporting rules. In general, there are three major areas whereby intermediaries with QI status are afforded such simplified treatment.


A QI is not required to forward documentation obtained from foreign account holders to the U.S. withholding agent from whom the QI receives a payment of U.S. source income. The QI maintains such documentation at its location and provides the U.S. withholding agent with withholding rate pools. A withholding rate pool is a payment of a single type of income that is subject to a single rate of withholding.

A QI is required to provide the U.S. withholding agent with information regarding U.S. persons subject to Form 1099 information reporting unless the QI assumes the primary obligation to do Form 1099 reporting and backup withholding.

If a QI obtains documentary evidence under the know your customer rulesthat apply to the QI under local law, and the documentary evidence is of a type specified in an attachment to the QI agreement, the documentary evidence remains valid until there is a change in circumstances or the QI knows the information is incorrect. This indefinite validity period rule does not apply to Forms W-8 or to documentary evidence that is not of the type specified in the attachment to the agreement.

Form 1042-S Reporting A QI is permitted to report payments made to its direct foreign account holders on a pooled basis rather than reporting payments to each direct account holder specifically. Pooled basis reporting is not available for payments to certain account holders, such as a nonqualified intermediary (NQI) or a flow-through entity.

Collective Refund Procedures A QI may seek a refund on behalf of its direct account holders. The direct account holders, therefore, are not required to file returns with the IRS to obtain refunds, but rather may obtain them from the QI.

U.S. Branches of Foreign Banks and Foreign Insurance Companies Special rules apply to a U.S. branch of a foreign bank subject to Federal Reserve Board supervision or a foreign insurance company subject to state regulatory supervision. If you agree to treat the branch as a U.S. person, you may treat the branch as a U.S. payee for a payment subject to NRA withholding provided you receive a Form W-8IMY from the U.S. branch on which the agreement is evidenced. If you treat the branch as a U.S. payee, you are not required to withhold. Even though you agree to treat the branch as a U.S. person, you must report the payment on Form 1042-S.

So basically, through the “know your client” rules, the IRS provides the few perks listed above – pooled rate and reduced withholding rate, and the QI must receive valid W8’s or W9’s in order to confirm to the IRS that there are no Americans pretending to be foreign and avoid paying taxes.  For performing this duty for the IRS, you must also have performed 2 external audits and a yearly internal audit of the QI program.

If found in violation of this agreemnt, there is a fine of up to $100,000 per offense.

Make sure to keep all records in order – provide the IRS with one main contact for the QI program and have your yearly internal audits performed.  Charging extra to clients for being their QI makes sense in order to cover the costs of the external audits.

More to come…

What’s coming down the pipe…

It’ s been hard getting to post here because I want to add technical content, but in my tax group, we’ve been dealing with smaller, less technical issues, such as discrepancies from the CRA, a change in T5 reporting resulting in FN numbers being given to businesses which transfer agents will need in order to report on their behalf, more QI stuff and changes to the online W-8BEN form. 

All fun, just different.

CRA Tax Question: T5008. Divorce. Court Order.

In the process of managing the processing of 2 million tax slips for my employer, the world’s largest transfer agent, the following question came across my desk:

A husband and wife divorced during the year and the husband did not make his child support payments as required by court order.  As a result, family court here in Canada passed a judgement stating that any stock he held be removed from his name and either cashed in so those funds could be given to his wife, or the stock be transferred to his wife so that she may cash them in as she needs them.

So here is the question:

Who gets the T5008?  Him or her?

Note:  Traders or dealers in securities have to file a T5008 information return to report purchases of securities as principal for their own account, and sales of securities they make as an agent or nominee, for any vendor.

Issuers of securities and their agents or nominees use this (T5008) information return to report redemptions, acquisitions, or cancellations of securities.

Might this be considered a deemed disposition?

Deemed dispositions

You do not have to report deemed dispositions on a T5008 slip, in certain circumstances, the Income Tax Act considers that a property has been disposed of, even though no real compensation in the form of money or other consideration has been received.

Some examples of when a deemed disposition may occur are:

  • transfers of property to a trust;
  • gifts of property (that is, the name of the beneficial owner of the property is changed);
  • the owner dies; or
  • the owner ceases to be a resident of Canada.

In this guide, “sale” generally refers to a transaction where the ownership of property is transferred from one person or entity to another for a sum of money or other consideration. In the case of a deemed disposition, ownership of the property is not transferred for money or other consideration. In addition, a deemed disposition is not a purchase, redemption or cancellation of a security. Consequently, a deemed disposition is not considered for the purposes of Income Tax Regulation 230 and a T5008 slip is not required.

Answer to follow…




a: To excite or stupefy by taxation to the point where physical and mental control is markedly diminished

b: to excite or elate to the point of enthusiasm or frenzy… about taxation.

Passionate about Taxation.  Passionate about helping you!

Could a Canadian FATCA be in the works?

Since this case broke in February, governments around the world have been investigating the possibility that their citizens have offshore accounts set up mainly to avoid paying taxes.  Germany, which as of late 2008, is leading the international crackdown on tax evaders, has reportedly collected up to 250 million euros from more than 200 tax evaders who have turned themselves in, and  from 330 citizens who wrongly believed they were on the list of accounts stolen from LGT Group (the largest family-owned private wealth and asset manager in Europe, owned by the Prince of Liechtenstein and thought by many to be the factor behind the US crackdown on tax evasion through their FATCA legislation.

When prompted for a comment regarding Canadians, the CRA refuses to comment.

The CRA would not even throw the press a bone by offering how many Canadians are involved, if the CRA is investigating, and if the CRA would accept voluntary disclosure from those involved in order to help them come clean without the fear of penalties and / or prosecution.

One can wonder if the silence is a result of a crack team of CRA staff who have known about and are working on resolving the Canadians attached to this list, or whether this whole situation came out of left field and the CRA is scrambling to get more information before they can respond publicly.

For those of you who are unaware, this came to light when in February when a former LGT computer technician name Heinrich Kieber stole and sold account information of about 1,400 wealthy clients to the German foreign intelligence service, the Bundesnachrichtendienst.  Germany then shared the data with other countries which triggered an international crackdown on tax evasion.

Kieber, for his part, has been given a new identity and placed in witness protection in an undisclosed country.  During a hearing in the US, surrounding US citizens’ use of banks in Liechtenstein and Switzerland, Kieber answered questions and outlined the extensive efforts and schemes enlisted by the bank to ensure secrecy.

Swiss banks will now refuse to hold offshore money from US citizens and the US plans on suing the bank.  This is just the beginning!

Should Canada follow the lead of other countries investigating their citizens who have accounts in Liechtenstein?   Those countries have made public the number of people who have stepped forward and declared their offshore income.  Is there is reason why Canada remains quiet?

Only time will tell.