A U.S. federal court has upheld a $165,000 penalty against a Toronto man for not filing forms reporting his Canadian business on his U.S. tax returns.
Donald Dewees, a 76-year-old U.S. citizen, has been living in Canada since 1971. He had been paying taxes in Canada, but not filing U.S. tax returns, which U.S. law required him to do.His lawyer, Mark Feigenbaum, calls it “a rule that a lot of people don’t know about.” “He came to me when he learned of the obligation,” Feigenbaum says. “I do about 100 people a year who haven’t filed before in the U.S. and didn’t know they had to.”
Dewees turned out not to owe any tax to the U.S. when he filed American tax returns going back several years in 2009, but the IRS charged him a penalty for not filing a form related to reporting his consulting business. From the IRS’s point of view it was a “foreign corporation,” and complex reporting rules applied.
The penalty came to US$10,000 for each year the form should have been filed, for a total of US$120,000. With interest, that came to US$134,116, or $165,923.