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So, with Canada out of the picture, the IRS would have to act on its own to collect taxes. It can get a judgment from a U.S. court stating that George owes the U.S. government US$100,000, which can be easily enforced against any assets he has in the United States. But the IRS may have a hard time enforcing this tax debt against George’s Canadian assets. This is because of the other half of the firewall that protects George.

Overly simplified, a foreign creditor such as the IRS has to get the permission of a Canadian court before it can enforce a foreign judgment against assets in Canada. In a 1967 case called United States v. Harden, the Supreme Court of Canada ruled that Canadian courts will not enforce judgements for U.S. taxes owed. This precedent still applies.

A couple of caveats are in order. Laws can and do change. Simply relying on the firewall might be risky and stressful for our U.S. citizen north of the 49th. Further, intentionally refusing to pay a U.S. tax debt is a criminal offense in the United States. So it is possible, although perhaps unlikely, that the U.S. government would eventually pursue criminal charges. A more prudent approach for George might be to catch up on his U.S. taxes using the Streamlined Procedure (the IRS’ amnesty program) before the IRS finds him through FATCA, if only to ultimately renounce his U.S. citizenship.

Max Reed is a cross-border tax lawyer at SKL Tax (www.skltax.com) in Vancouver and the co-author (with Dick Pound) of A Tax Guide for American Citizens in Canada. max@skltax.com

Note: The March 7 instalment of this column, about FATCA, stated that “most U.S. citizens in Canada won’t owe U.S. tax.” To be clearer, those U.S. citizens in Canada who have no American source income will probably not owe any U.S. tax.