Honest US citizens are being turned into prey by the IRS, the victims a hunt for tax evaders. It is the natural, if lamentable, product of the urge to power our Founders warned us against.
More than two centuries ago, George Washington stated:
Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master.
Over the years, General Washington’s prescience has been demonstrated as government usurped and abused power. The myth that government serves the people should be shattered by now. Increasingly, government behaves as the master, not as the intended servant.
Oppression abounds, but nowhere is the raw abuse of power and coercion more possible and evident than in the Internal Revenue Service. They are the most dangerous member of the government gang. Now they have another tool to bully and expropriate wealth from innocents — US citizens living abroad.
Early in his presidency, Barack Obama pledged to add 800 new IRS agents to punish tax evaders with overseas accounts. In an effort, presumably designed to curtail and punish tax evasion on the part of wealthy Americans, legislation aimed at criminals now threatens the income and savings of the law-abiding.
Background
The Bank Secrecy Act became law in 1970 and implemented the Foreign Bank Accounts Report (FBAR) to monitor money laundering. The FBAR law required that US persons owning or having signing authority over foreign bank accounts report this information to the US Treasury Department. It was not much enforced for the obvious reason that a criminal does not willingly divulge incriminating information. During the first three decades of FBAR, there was widespread ignorance and disregard for the law.
In 2003, the Treasury Department handed over enforcement to the IRS. In 2004 non-willful non-compliance increased to a $10,000 fine per account per annum. Willful non-compliance allows criminal charges, a prison sentence, and fines of $100,000 or 50% of bank account’s contents, whichever is more (see Shepherd, p. 10).
The IRS has implemented two Voluntary Disclosure Programs I (2009) and II (2011), in which they waive criminal charges provided that all back taxes and penalties have been paid, along with an FBAR penalty of 20% (in 2009) or 25% (in 2011) of the account’s highest balance over the last six years. The penalty is lower (12.5%) for balances under $75,000. Persons who were unknowingly US citizens face a 5% penalty (see FAQ 52).
In 2010, Congress passed FATCA (Foreign Account Tax Compliance Act) which forces foreign banks to report on American clients, even if doing so would violate the banking and privacy laws of their country. Implementation of FACTA will be coerced by withholding 30% of US income from banks not in compliance.
The arrogance and brutality of the legislation is apparent. The penalties are severe and disproportionate. Economic blackmail of foreign banks is disgraceful. All of these actions will have repercussions, probably not intended.
US Citizens Abroad
US citizens living abroad must open a foreign bank account because commerce is done in the local currency. All who do are potentially in violation of the FBAR law. Most were unaware of the FBAR requirements; but now that the IRS has rattled its FBAR saber, taxpayers abroad are in a quandary.
Wealthier citizens spend thousands of dollars on accountants and tax lawyers to try to put themselves into compliance with the least financial damage. The average citizen not in compliance has limited options. His choices include:
- Do Nothing The IRS doesn’t know about you, so continuing to keep a low profile and ignore the law might be the best route. This option may become impossible once FACTA comes into force.
- File FBAR Forms IRS FAQ 17 of the 2011 Voluntary Disclosure Program states that filers who have complied with all taxes and filing requirements except FBAR should not enter the program but simply file the delinquent forms by August 31, 2011 with a letter of explanation. They promise that no penalties will apply to such persons. But given the severe threats of punishment issued to anyone failing to comply, many wonder whether the IRS will accept the excuse of ignorance of the FBAR requirement.
- Enter 2011 Voluntary Disclosure Program: Some US citizens who entered the 2009 Voluntary Disclosure Program and were otherwise in compliance with US tax laws, found that the IRS intended to apply to them the full 20% penalty (see, e.g., hereand here).
- Renounce Citizenship Many US citizens living overseas have lives fully integrated into their new country. They comply with the local tax laws and often possess dual citizenship. Compliance with US tax laws and FBAR are a nuisance and liability that they may be able to live without.
Renunciation of citizenship is not riskless. Such a decision will set citizens free from future liability, but may subject them to IRS penalties for prior non-compliance. In addition, for covered expatriates, those having two million in assets or $145,000 in average annual tax liability over the last five years, an exit tax is also required.
To appreciate the uncertainty and duress faced by US citizens living abroad, a couple of hypothetical situations are useful. International tax lawyer Phil Hodgen partly inspired the following hypothetical cases:
Hypothetical Case 1: Jim lives in a foreign country and has dutifully filed a US income tax return each year, but was unaware of FBAR filing retirements. Jim operates eight accounts: four retirement accounts (which he reported on his annual tax returns), two trading accounts, a checking account and a high interest savings account. The highest balance in these accounts is $1,000,000 over the last six years. His current balance is $800,000 after the market dip.
Jim doesn’t know what to do. After great worry, he enters the Voluntary Disclosure Program. The IRS assesses Jim a $250,000 FBAR penalty. In order to pay the penalty, Jim must withdraw funds from his retirement accounts forcing an additional tax liability of $100,000 on the income. Jim is no longer able to retire because his $800,000 has been reduced to $450,000, solely as a result of IRS capriciousness.
Hypothetical case 2: Nancy is a teacher and mother of three, married to a citizen of the foreign country where she has lived for fifteen years. She dutifully filed her taxes in the US, but never knew about FBAR. A friend entered the Voluntary Disclosure Program and was assessed $14,000. She contemplates the renunciation of American citizen, because her foreign husband owns a successful business and Nancy is a signer on business accounts. She fears exposing her husband’s business to the IRS and also fears that upon her death, the IRS will seek its pound of flesh from her estate. She renounces citizenship, though it breaks her heart.
Abuse Of the Law
FBAR was initially a harmless and little known embarrassment for the United States. It began as an ineffective attempt to stop money laundering. Like so many other laws (RICO, Homeland Security, etc.), it began with what some believed noble purposes, only to morph into a tyranny imposed upon law-abiding citizens. It is now a tool capable of arbitrary and oppressive expropriation of the wealth of millions of US citizens living abroad.
An insolvent government is a dangerous government. It is akin to a wounded and cornered animal. When conditions become really difficult, it is likely to do anything to survive. Arbitrariness in the interpretation of any law is dangerous to freedom, but especially so when government’s primary concern is survival rather than justice.
There are many reasons to be critical of FBAR. The following two will illustrate:
- Excessive fines: Ayn Rand said “The severity of the punishment must match the gravity of the crime.” This basic principle of human rights, enshrined in the Eighth Amendment, forbids excessive fines. It is immoral for the IRS to intimidate innocent citizens. Any law so uncertain that it could result in a loss of 50% of your wealth, depending upon the whims of the IRS, is not a law. It is government-sanctioned extortion.
- Guilt Presumed: The Fourth Amendment protects (or was supposed to) citizens against arbitrary fishing expeditions by government. Probable cause is required. The FBAR requirements circumvent this Fourth Amendment right, in effect saying: “You will volunteer to open the door to your house and let us look inside. If you don’t, we will fine and/or imprison you.” The IRS demands bank information based on a presumption of guilt even though holding funds in a foreign bank account is no crime.
Unintended Consequences
The term unintended consequences, a convenient euphemism for stupid policy or law, is appropriate. Some of the foreseeable outcomes are the following:
- An avalanche of US persons will renounce their citizenship. In July 2010, the State Department implemented a $450 fee for making a renunciation before a consular officer, presumably to exact additional income and possibly (highly unlikely) deter some from making the decision.
- Foreign banks and investors may decide doing business with the US is not worth the trouble of compliance with FACTA, particularly as the US economy collapses and the global economy shifts to the East.
- US Citizens abroad already find it challenging to open bank accounts both in US and in their countries of residence. This annoyance makes it more difficult for American companies and their employees to engage in foreign missions, business and trade.
- US citizens are already shunned from positions in foreign companies which do not want their banking details revealed to the United States Treasury Department.
Conclusion
The Bank Secrecy Act, passed in 1970, is an example of law designed for one purpose being expanded to be used against innocent citizens. Regardless of its good intentions, it is now a tyranny used to extort wealth from otherwise legal, law-abiding US citizens living abroad.
It represents a classic case of how government usurps freedom. What level of morality must government have to think they are entitled to shake-down hard-working citizens?
Monty Pelerin has never lived abroad or had a foreign bank account. He has friends who do and hopes that exposing this State plunder will cause it to cease in this and other parts of our lives.
NB: The preceding article appeared first at the American Thinker on April 5, 2011, then at Monty Pelerin’s World. Monty Pelerin is a retired economist who writes under a pen name. In March, I approached Monty asking if he would publish under his pen name an article on FBAR. He agreed and then we co-wrote the article and he kindly gave me no credit because I feared the long arm of the IRS. Then, Monty submitted it to the American Thinker. Now that I am out in the open with my IRS concerns, I’ve decided I can reproduce it here. So I want to thank Monty for his extraordinary help when nearly no one in the mainstream media or even conservative blogs were talking about this injustice which the IRS has afflicted upon millions of Americans. Petros
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Here is a great article that appeared in the Swiss “Wall Street Journal” not long ago. The author is a locally well-known international tax lawyer, and I will contact him to get the original, which was certainly in English. But for now, the French version of “The IRS is closely watching you.”
LE FISC AMÉRICAIN
VOUS SURVEILLE DE TRÈS PRÈS
Le cas de Kashya Hildebrand donne un exemple concret
de l’étendue et de la complexité des lois US.
Jonathan Lachowitz, AGEFI, Friday-Sunday 27-29 January 2012.
Jonathan Lachowitz is a Financial Planner at White Lighthouse Investment Management.
Le travail à la tête de la BNS n’a certes pas été très facile ces dernières années pour Philipp Hildebrand. En comparaison avec beaucoup de dirigeants des pays environnants et également avec ceux des banques d’affaires suisses, son travail mérite le respect. Il semble même imprudent de faire de cette politique un débat public et d’attirer encore plus de susceptibilités vers la Suisse en ces temps troublés.
A vrai dire, les transactions privées en cause ressemblent plutôt à un mauvais timing qu’à un délit d’initié. Si l’épouse de Philipp Hildebrand avait vraiment cherché à faire du bénéfice grâce à une action sur le marché des devises basée sur des informations d’initiée, elle aurait presque certainement eu recours à des options sur l’EUR/CHF. Acheter directement des dollars ou des euros ne serait pas efficient et vraiment risqué, puisque les marchés réagissent parfois de manière inattendue aux actions de banques centrales. Nous estimons donc que Mme Hildebrand, disposant de très bonnes connaissances financières, n’a pas fait de transactions basées sur des informations d’initiée. Mais aujourd’hui, elle se voit confrontée à des problèmes beaucoup plus importants, qui arrivent cette fois d’outre-Atlantique. Les lois fiscales des Etats-Unis sont déjà bien assez compliquées pour les citoyens qui y vivent.
Mais ce n’est rien par rapport à la situation d’un citoyen américain propriétaire d’une entreprise vivant en-dehors des Etats-Unis et marié à un non-Américain (qui est en plus le président d’une Banque nationale d’un pays alpin qui se trouve actuellement en guerre fiscale avec les Etats-Unis sur des questions bancaires). Cela devrait avoir propulsé les Hildebrand à la tête de la liste de cartes de vacances 2011 de Doug Shulman (actuellement à la tête de l’IRS).
Les Américains vivant à l’étranger doivent déclarer au fisc la totalité de leurs revenus générés à travers le monde, et faire figurer tous leurs comptes bancaires à l’étranger (même ceux détenus en commun avec un époux non-citoyen) sur les rapports à destination du Trésor. Les conseillers fiscaux du couple Hildebrand auraient donc dû s’assurer que tous les comptes détenus en commun soient déclarés chaque année au gouvernement des Etats-Unis, accompagné d’au moins la moitié du revenu issu de ces comptes. A la lumière des directives actuelles, il apparaît que tous les comptes de Mme Hildebrand en Suisse, même ceux qu’elle détient en commun avec son mari, devraient être considérés comme information «publique».
Le réseau du Trésor cherchant à réprimander les crimes financiers (FINCEN) suit de près, en coopération avec l’IRS, toutes les dernières informations financières et bancaires sortant de la Suisse. Avons-nous vraiment besoin de laisser encore plus d’investigations se dérouler dans notre beau pays?
Tous les citoyens US, en Suisse ou ailleurs, même ceux n’ayant pas la même notoriété que le couple Hildebrand, devraient consulter la liste des formulaires IRS dont ils pourraient avoir besoin dans le cadre de cette saison de déclaration d’impôt US 2011 :
– Avez-vous transmis chaque année la déclaration d’impôt US, rapporté tous vos revenus mondiaux, et avez-vous payé tous les impôts dus ? Ces revenus comprennent le salaire, les intérêts, les gains en capital, les bénéfices de transactions de devises, les revenus de sociétés d’investissements étrangères passives (PFIC), les revenus de locations, de partenariat à responsabilité limitée, etc.
Pour ces revenus, vous aurez besoin des formulaires IRS de base: 1040, 1116 et 2555, accompagnés des tableaux A, B et D.
– Si vous êtes indépendant, avez-vous transmis le tableau C du formulaire 1040: Bénéfice ou perte d’une activité commerciale ?
– Si vous possédez plus de 10% d’une entreprise étrangère (une SA, une Sàrl,…), avez-vous transmis le formulaire 5471 ? Je l’espère pour vous, car sinon, vous êtes amendable à hauteur de 10.000 dollars par an. Si vous avez attribué la moindre part de vos revenus aux réserves à la fin de l’année, cela sera considéré comme une distribution présumée… Le 5471 est un véritable cauchemar, et vous aurez besoin d’aide pour remplir correctement celui-ci.
– Possédez-vous des fonds de placement non-US (soit des PFIC), un 3e pilier etc. ? Laissez-vous conseiller par un comptable, car la déclaration fiscale de cela est chaque année un cauchemar. Même si vous ne les avez pas vendus, vous devez tout de même les déclarer et vous serez peut-être même imposé si vous les évaluez à la valeur du marché.
– Avez-vous déclaré les intérêts et autres revenus de comptes du 3e pilier ? Ils n’ont pas été approuvés par le fisc américain. Les Suisses vous accordent certes cette faveur, mais pas les Etats-Unis.
– Avez-vous déclaré vos propres contributions au 2e pilier ainsi que ceux de votre entreprise en tant que revenu ? Sûr ? Car ce n’est pas un plan approuvé par le fisc US, et l’IRS vous demande donc de déclarer ce revenu chaque année.
– Avez-vous transmis vos extraits de comptes auprès de banques étrangères (FBAR) au Trésor chaque année le 30 juin ? Ceci inclut les comptes en commun et doit être déclaré si le montant dépasse 10.000 dollars.
– Avez-vous vraiment déclaré sur les FBAR tous vos comptes non-US, les comptes personnels, d’entreprise, détenus en commun avec des non-citoyens, même ceux où vous êtes plutôt signataire pro forma [par exemple le 2e/3e pilier et des contrats d’assurance-vie avec des montants assurés en cas de décès] ? Si ce n’est pas le cas, les amendes peuvent être assez méchantes, comme tout le processus de déclaration volontaire l’a déjà montré.
– Si vous êtes mis en compte commun avec un contribuable non-US, vous pouvez peut-être déduire la moitié des revenus de ces comptes.
– Avez-vous jamais fait des cadeaux à un contribuable non-US ? Si ceux-ci ont été destinés à votre épouse, leur valeur a-t-elle dépassée 136.000 dollars sur une quelconque année de calendrier ? Si c’est le cas, jetez un coup d’œil au formulaire de déclaration 709 pour l’impôt US sur les cadeaux. En effet, il y a certes toujours une exonération à vie à hauteur de 5 millions pour les contribuables US, mais vous devriez consulter votre conseiller fiscal si vous faites des cadeaux sortant de la fortune du système fiscal US.
– Avez-vous reçu des cadeaux d’un contribuable non-US d’une valeur supérieure à 100.000 dollars sur n’importe quelle année ? Il y a aussi un formulaire pour cela: IRS 3520. Heureusement que vos cadeaux ne sont que déclarables, mais pas imposables aux Etats-Unis.
– Avez-vous reçu des distributions de bénéfice d’un trust étranger ? Si oui, demandez à votre conseiller fiscal comment il faut les déclarer.
– Avez-vous vendu une propriété immobilière dont vous remboursez l’hypothèque en francs suisses ? Dans ce cas, avez-vous calculé le gain ou la perte sur devises provenant de ces remboursements et même des amortissements ? Eh oui, même ces gains-là sont également imposables aux Etats-Unis.
– Le FATCA apporte encore une nouveauté pour 2011, le formulaire IRS 8938 : Etat des actifs financiers à l’étranger spécifiques. Vous devez également transférer celui-là. La seule bonne nouvelle, c’est que vous ne pouvez pas le remettre trop tard, comme il s’agit d’un nouveau formulaire pour 2011.
Si vous avez plutôt tardé avec vos derniers transferts d’information ou même transmis des informations inadéquates, vous devriez, en tant qu’Américain d’outre-Atlantique, absolument prendre en considération le programme de déclaration volontaire (OVDI). Vous voudriez certainement vous faire conseiller par un avocat qui a déjà fait des expériences avec ce programme – malheureusement, il y en a déjà beaucoup qui ont ainsi dû aider des citoyens innocents à régulariser leur situation vis-à-vis de l’IRS à grands frais. Ces jours-ci, les impôts ne sont toutefois pas la seule source de préoccupation venant de Washington D.C.
Le 31 décembre 2011, quand le monde entier était en train de se préparer à fêter la Nouvelle Année, le Président Obama, aidé par le sénateur du Michigan Carl Levin, a tranquillement fait avancer la cause d’un Etat digne d’Orwell. Il a signé le texte de plus de 500 pages sur les autorisations liées à la défense nationale, le NDAA devenant ainsi loi. Celui-ci autorise les organes exécutifs du gouvernement à détenir à durée indéterminée tout individu accusé d’être un terroriste, citoyens US y compris. Pas besoin pour cela de l’accuser, ni de l’interroger.
D’autres pièces de législation telles que le FATCA donnent de bons exemples avec quel excès de zèle certains membres du gouvernement US ont attaqué le système financier. Même pas pour des gains financiers, mais tout juste pour obtenir plus d’informations. Dans combien de temps le gouvernement US ou d’autres s’accuseront-ils mutuellement de «terrorisme financier», parce qu’ils enfreignent ou ne comprennent tout simplement pas les régulations financières et fiscales de chacun d’entre eux? Avoir une opinion divergente devient dangereux.
Beaucoup de pays autour du globe ont dernièrement changé de gouvernement ou s’apprêtent à le faire. Je souhaite à tous les votants – en Suisse, aux Etats-Unis et ailleurs – de choisir vos élus avec soin et d’exprimer vos préoccupations auprès des représentants des autorités élus. Le début du XXIe siècle a été marqué par une érosion sans précédent des libertés individuelles dans un monde dit «libre». La constitution des Etats-Unis est en lambeaux, il ne faut pas faire les mêmes erreurs en Suisse.
Et n’oubliez pas, s’il vous plaît, d’envoyer vos formulaires d’impôt et d’information à destination tant du gouvernement US que suisse dans les délais et de payer vos factures d’impôt. Un peu plus de bonne volonté de la part de tous les citoyens pourrait en effet permettre à nos politiciens de tourner leur attention vers la simplification des impôts, plutôt que vers leur application. Finalement, les gouvernements de la Suisse et des Etats-Unis ne pourraient-ils pas se réconcilier, à l’instar de leurs citoyens et entreprises, et diriger des êtres humains à nouveau normaux et productifs, qui ne doivent pas craindre leurs gouvernements ! (JL)
The IRS and the ‘Pointed-Stick’:
( http://en.wikipedia.org/wiki/Self_Defence_Against_Fresh_Fruit)
A customer service centered approach to ‘taxpayer’ education and ‘international’ assistance:
See – “IRS “International Services”;
“If you are a taxpayer who lives outside the United States, the IRS has full-time permanent staff in 4 U.S. embassies and consulates”
http://www.irs.gov/localcontacts/article/0,,id=101292,00.html
To those living just over the border in CANADA looking for help, those easily accessible locations are: Frankfurt, London, Paris, and Beijing (possibly also Puerto Rico – it’s not clear). Make sure that if you are flying to a location with ‘fulltime permanent’ IRS staff, and your plane connects through a US airport, make certain that you follow US government directive to use your US passport to travel, not your Canadian one! AND, by the way; if as a result, you need to apply for, or renew a US passport, make sure that you report your IRS tax identification number (and coming soon? – “by the way, have you been filing your US tax and FBAR reports?”…).
The deliciously ironic contrast between the IRS repetitive and baseless ‘commitment’ to a ‘balance’ of ‘education’ and enforcement’ for those of us ‘abroad’, is beautifully illustrated on the (Ottawa, Canada) US consulate website.
As we struggle with FBARs, OVD/I/Ps, and FATCA; the IRS helpfully offers the largest population of those deemed US taxpayer ‘citizen/duals/’persons’ these resources:
E-mail access to an office LOCATED in Canada:
“IRS: Tax Fraud
If you suspect a individual or business of tax fraud in the United States, email the (‘AttacheOttawa’..) the IRS office in Ottawa. You may be eligible for a reward! Further information on how to report tax fraud is available on the IRS website” from; http://canada.usembassy.gov/about-us/embassy-offices/irs-tax-fraud.html
Contrast that with;
“Taxpayer Assistance:
The information on this page is intended especially for taxpayers residing in Canada. Note: Owing to budget cutbacks, the Internal Revenue Service will NOT be providing any in-person assistance or tax seminars at the U.S. Embassy and certain of the Consulates General in Canada.” http://canada.usembassy.gov/service/taxpayer-assistance2.html
and,
“IRS Ottawa
The Internal Revenue Service (IRS) does NOT maintain an office in Canada. For information tailored to both U.S. citizens in Canada and Canadian citizens, please refer to this page at the IRS web site.”
The link to the FBAR page on the IRS website offers this:
“FBAR Assistance
Help in completing Form TD F 90-22.1 (PDF) is available Monday – Friday, 8 a.m. to 4:30 p.m. Eastern time, at 866-270-0733 (toll-free INSIDE the U.S.) or 313-234-6146 (NOT toll-free, for callers OUTSIDE the U.S.
So, let me get this straight;
Those fictive ‘tax evader’ Canadian grandmas hiding funds en masse, in ‘foreign’ ‘offshore’ locations (Canada) that Emily MacMahon ( http://www.treasury.gov/press-center/press-releases/Pages/tg1412.aspx ) and Timothy Geithner ( http://blogs.telegraph.co.uk/news/alexspillius/8174427/Tim_Geithners_tax_evasion_/ ) and Douglas Shulman (http://www.rothcpa.com/archives/007690.php) are always happy to purport the existence of – owning all those ‘foreign’ assets and non-US bank accounts, aren’t they supposed to be mostly those living ‘ABROAD’?
But the FBAR assistance line is NOT tollfree from OUTSIDE the US – only INSIDE?
The biggest group of those deemed by the US as ‘taxpayer’ citizen/duals/’persons’ are located in Canada – and many/most are probably handily clustered just over/near the border – along most of their other fellow Canadians. But, there is no tollfree FBAR helpline from within Canada, and no in-person assistance or IRS help sessions in Canada – due to IRS CUTBACKS?
A sample of experiences during attempts to obtain IRS help with FBAR filings from within Canada:
– A call to the FBAR helpline, (not tollfree, long distance!) finally connects to a representative who cannot answer questions with any detail or precision, offers information with a tone of great uncertainty, contradicts information on the IRS FBAR pages – for a really common banking scenario (ex. the appropriate treatment of jointly held, ordinary bank accounts – co-owned with a non-US citizen, non-US resident Canadian spouse).
The FBAR representative finally advises to submit questions by e-mail to a ‘specialist’ – and deems them too complex for the FBAR helpline. Advised the rep that the e-mail avenue has already yielded no useful answer regarding US foreign tax returns – (3 separate brief answers all refer back in a circular way to the same IRS forms and webpages in question).
Pressed to resolve the apparent contradiction between the representative’s advice (not to include spousal joint account on FBAR) and the information online that we’re both reading, and faced with personal skepticism that the joint account would be exempted, the FBAR rep says testily “you don’t want to file it (FBAR), don’t file it then”. She then hangs up abruptly when asked if that advice can be quoted.
– Subsequent calls to a long distance (not tollfree) IRS help number for ‘international taxpayers’ – located on an island somewhere far from Canada – results in 3 disconnections after lengthy waits and a long and unhelpful automated message……..
So far, all evidence out there overwhelmingly demonstrates an IRS preference for funding the big stick of ‘enforcement’, but offering us only the ‘self-serve’ ‘you’re-on-your-own’ version of the ‘education’ component they espouse in numerous official materials.
Dear Emily (MacMahon); where are all those services that ‘compliant’ ‘taxpayers’ abroad receive from the US government that make us such a tax ‘burden’ on our compatriots?
And friend-of-the-common-taxpayer Shulman says:
“I want to again make the distinction between corporations and individuals (‘GRANDMAS’?) in the international tax compliance context.
International business transactions can be complex for many reasons, but it’s no secret that multinational corporations engage in sophisticated tax planning. Let me be clear. There are plenty of international tax strategies that are perfectly legal. And many corporations and their legal and tax advisors are genuinely trying to comply with the myriad of international tax laws.
While we won’t always agree about what the law is, or how it applies in particular cases, we recognize that many businesses are trying to get it right. However, we also know that some businesses use the complexity of the tax code and the international capital markets to push the envelope too far.
That is where we have issues, and where we will continue to focus. I have highlighted in the past some of the areas where we have particular interest and these include: transfer pricing, financial instruments, hybrid structures, and withholding taxes.
(BUT) For INDIVIDUALS (ex. GRANDMAS) with overseas income and assets (in CANADA?), it’s much more straightforward. If you are a U.S. taxpayer holding overseas assets (in CANADA), you must pay your taxes or we will be very focused on finding you. It’s as simple as that. ” http://www.irs.gov/newsroom/article/0,,id=209342,00.html
The IRS bright side? The (absence of) investment in ‘education’ efforts by the IRS are really paying off in raising revenues (see; http://www.irs.gov/newsroom/article/0,,id=245768,00.html ).
@Brock
Excellent — the ONLY advice I’ve ever gotten from any source of the IRS “Help” sources was that my question was too complex for their resources and they suggested that I consult with a US tax lawyer or cross-border accountant. They are, in a word, USELESS to me in Canada, let alone somewhere further afield. Relinquish if you can or renounce and end the nightmare. Just think of what you can do with all the extra precious stress-free moments in your life.
Patriotism in owing to the homeland, you say — I say US fly-flying patriotism is as blind as those who govern there.
So, what ‘face of the US government’ are we seeing?
IRS Commissioner Shulman is quoted as saying:
” ‘I often tell our employees that the IRS represents the face of the government to more American people than any other federal institution,” Shulman said. “How we do our job can affect the way that the American people actually think about their government.’ ”
from: http://www.washingtonpost.com/politics/douglas-shulman/gIQAjjnrAP_topic.html
As those ‘abroad’, we see the Janus faces (http://en.wikipedia.org/wiki/Janus) “of beginnings and transitions,[1] thence also of gates, doors, doorways, endings and time. He (Janus) is usually a two-faced god since he looks to the future and the past. ”
This is certainly, an ending, going through the doorway reluctantly – looking to a less fearful future, and away from past feelings of kinship for the US.
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avowda here is the english translation
AMERICAN TAX LAWS
YOU watchful eye of
The case of Kashya Hildebrand gives a concrete example
the extent and complexity of U.S. laws.
Jonathan Lachowitz, AGEFI, Friday-Sunday 27-29 January 2012.
Jonathan Lachowitz is a Financial Planner at White Lighthouse Investment Management.
The work at the head of the SNB has certainly not been easy in recent years to Hildebrand. Compared with many leaders of surrounding countries and also with those of Swiss banks, his work deserves respect. It even seems unwise to make this policy public debate and bring in more susceptibility to Switzerland in these troubled times.
Indeed, private transactions in question are more like bad timing to insider trading. If the wife of Philipp Hildebrand had really tried to make a profit through an action on the currency market based on information initiated, it would almost certainly have used options on the EUR / CHF. Buy now for dollars or euros would be inefficient and really risky because markets may react unexpectedly to the actions of central banks. We therefore believe that Ms. Hildebrand, with very good financial knowledge, has not made transaction based on information initiated. But today, she is confronted with problems far more important, this time arriving from overseas. The tax laws of the United States are already complicated enough for citizens who live there.
But that’s nothing compared to the situation of an American citizen business owner living outside the U.S. and married to a non-American (which is more the president of National Bank of an Alpine country that is currently at war with tax on the U.S. banking issues). That should have propelled Hildebrand at the head of the list of holiday cards for 2011 Doug Shulman (currently head of the IRS).
Americans living abroad must declare all of their tax revenues worldwide, and to include all bank accounts abroad (even those owned jointly with a non-citizen spouses) on reports to Treasury destination. The couple’s tax advisors Hildebrand should therefore have to ensure that all accounts are held in common reported annually to the Government of the United States, accompanied by at least half the income from these accounts. In light of current guidelines, it appears that all the accounts of Ms. Hildebrand in Switzerland, even those she holds jointly with her husband, should be considered “public” information.
The network seeks to berate Treasury Financial Crimes (FINCEN) follows closely in cooperation with the IRS, the latest financial and banking information out of Switzerland. Do we really need to let some more investigations take place in our beautiful country?
All U.S. citizens, in Switzerland or elsewhere, even those not as popular as the couple Hildebrand, should consult the list of IRS forms they might need in this season of 2011 U.S. tax return:
– Have you passed the annual U.S. tax return, reported all your worldwide income, and did you pay all taxes due? This income includes wages, interest, capital gains, profits from exchange transactions, income from passive foreign investment companies (PFIC), income from rentals, limited liability partnership, etc..
For this income, you will need the basic IRS forms: 1040, 1116 and 2555, together with Tables A, B and D.
– If you are independent, have you submitted the Form 1040 Schedule C: Profit or loss of a business?
– If you own more than 10% of a foreign company (an SA, Sàrl, …), have you sent the form 5471? I hope for you, because otherwise you are risking a fine of up to $ 10,000 per annum. If you assign any portion of your income to reserves at the end of the year, this will be considered an assumed distribution … The 5471 is a nightmare, and you need help completing it correctly.
– Do you own mutual funds non-US (either PFIC), a third pillar etc.. ? Take advice from an accountant, because the tax return for each year it is a nightmare. Even if you have not sold, you must still declare them and you may be imposed even if you value them at market value.
– Did you declare the interest and other income accounts of the third pillar? They have not been approved by the IRS. The Swiss certainly grant you this favor, but not the United States.
– Have you declared your own contributions to the second pillar as well as those of your business as income? Sure? For it is not a plan approved by the U.S. treasury, and the IRS asking you to declare this income each year.
– Have you sent your bank accounts with foreign banks (FBAR) to the Treasury each year on June 30? This includes accounts in common and must be reported if the amount exceeds $ 10,000.
– Have you actually said on the FBAR all your non-US accounts, personal accounts, business, owned jointly with non-citizens, even those where you are instead signing pro forma [eg 2nd/3rd pillar and life insurance contracts with sums insured in case of death]? If this is not the case, fines can be pretty nasty, as the whole process of self has already been shown.
– If you are put on joint account with a non-US taxpayer, you may be able to deduct half the income of these accounts.
– Have you ever made gifts to a non-US taxpayer? If they were for your wife, their value has it exceeded $ 136,000 in any calendar year? If this is the case, take a look at the declaration form 709 to U.S. tax on gifts. Indeed, there is certainly still a lifetime exemption to the tune of 5 million to U.S. taxpayers, but you should consult your tax advisor if you make gifts out of the fortune of the U.S. tax system.
– Have you received gifts from a non-US taxpayer of a value greater than $ 100,000 in any year? There is also a form for this: IRS 3520. Fortunately, your gifts are only reportable but not taxable in the United States.
– Did you receive distributions of earnings from a foreign trust? If so, ask your tax advisor how to report them.
– Did you sell a property which you repay the mortgage in Swiss francs? In this case, did you calculate the gain or loss on foreign exchange from these repayments and even depreciation? Yes, even then the gains are taxable in the United States.
– The FATCA brings even new for 2011, IRS Form 8938: Statement of financial assets abroad specific. You must also transfer this. The only good news is that you can not give it too late, as this is a new form for 2011.
If you tend to slow with your latest information transfers or even inaccurate information provided, you should, as an American from overseas, absolutely consider the voluntary reporting program (OVDI). You would definitely want to get advice from a lawyer who has already experimented with this program – unfortunately, there are already many who have aided and innocent citizens to legalize their status vis-à-vis the IRS at large costs. These days, taxes are not the only concern from Washington DC
December 31, 2011, when the world was getting ready to celebrate the New Year, President Obama, aided by Senator Carl Levin of Michigan, has quietly advanced the cause of an Orwellian state. He signed the text of over 500 pages on authorizations related to national defense, the NDAA becoming law. It authorizes the executive government to detain indefinitely to anyone accused of being a terrorist, including U.S. citizens. No need for that to accuse him, or questioning.
Other pieces of legislation such as FATCA provide good examples with which some overzealous members of the U.S. government attacked the financial system. Not even for financial gain, but just to get more information. How long the U.S. government or others they accuse each other of “financial terrorism” because they violate or just do not regulations and tax of each of them? Have a dissent becomes dangerous.
Many countries around the globe have recently changed government or preparing to do so. I wish all voters – in Switzerland, the United States and elsewhere – your elected officials to choose carefully and express your concerns to the elected representatives of the authorities. The turn of the century was marked by an unprecedented erosion of individual freedoms in a world called “free”. The U.S. Constitution is in tatters, we should not make the same mistakes in Switzerland.
And remember, please send your tax forms and information aimed at both the U.S. government that Swiss on time and pay your tax bills. A little more good will on the part of all citizens could indeed allow our politicians to turn their attention to the simplification of taxes, rather than their application. Finally, the governments of Switzerland and the United States should they not be reconciled, as their citizens and businesses, and direct human normal and productive again, that should not fear their governments! (JL)
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Discussion of changes to FATCA and FBARs in order to stop treating US taxable persons ‘abroad’ and their ‘foreign’ bank accounts like criminals in waiting.
http://taxpol.blogspot.ca/2012/07/taming-fatca.html
from blog by Allison Christians ‘
Wednesday, July 11, 2012
‘Taming FATCA’
“For US persons living abroad, living their lives means having foreign bank accounts. Regimes like FATCA and FBAR are particularly harsh for these persons, many or perhaps most of whom are either dual citizens themselves or are in families with dual and multiple citizenships. While it seems clear to me that the US can impose its sovereign jurisdiction with regimes like FATCA and FBAR, it’s less clear to me that it shoulddo so, especially with a one-size-fits-all approach that appears to treat everyone with a foreign bank account as a potential tax criminal………. bypassing bilateral and multilateral cooperation among governments in order to impose draconian US rules on individuals and financial institutions across the globe. “………..
see also PDF link for Tax Notes International column, “Could a Same-Country Exception Help Focus FATCA and FBAR?
………”Yet holders of U.S. citizenship or permanent residence
documents who have bank accounts in the foreign country of their residence are equally liable for the harsh requirements and even harsher penalties of FATCA and FBAR just as if they were money launderers or tax evaders.”…….
Very good discussion of issues of national sovereignty, the impact of inheriting and passing on a US tax burden to multiple generations, dual citizenship, etc. Highly recommended reading – and touches on many of the themes discussed at IBS.
@Badger…
Tim also posted on this here tonight… Great minds thinking alike.. 🙂
http://dl.dropbox.com/u/44761778/Christians-FATCA%20Same%20Country%20Exception.pdf
I am glad to see Allison Christian’s piece. It calls the shots as they are, but it is incomplete. It reminds me of the IRS’ 26 June efforts in IR-2012-65 to “help” Americans not resident in America to become compliant. IR-2012-65 did not address the situation of those who are participating in OVDI. It is as if OVDI participants did not exist even though their facts are similar.
This is the problem with Ms. Christian’s piece as well as the position of Democrats Abroad on “Same Country Exception”. By concentrating on “Same Country Exception”, they focus on the most obvious part of the problem, while the reality is a lot more complex than that. In an increasingly open Europe, bank accounts are often located outside of the country of residence. This should not be ignored.
I tried posting on the taxpol blogspot, but it did not go through. I will repeat the comments that I made to another post on Isaac Brock here as it is important that there is awareness of perfectly legitimate and common reasons why many dual citizens may have accounts outside of the US and the country they reside in.
While basing FBAR and FATCA reporting on country of residence will
help a lot of people who are being unfairly burdened by these
requirements, it is, unfortunately, not enough in the global world we
are living in. In particular, it is not enough for the increasingly
borderless Europe that many dual citizens live in. I will provide 5
examples that show while reporting bank accounts based on country of
residence would be a good step to take, large and increasing amounts of
dual citizens will still be subject to these destructive positions.
Example 1: My European large multinational employer makes money by
contracting a significant part of its workforce to work in other
countries. These contracts are usually for only one year, but as part
of the salary and expenses are paid in the country of employment, it is
necessary to have a bank account there. However, the employee fully
intends to return to his or her “home” country after 1 year. These
employees are not resident in their home country, but it would be
foolish to close out all their home country bank accounts since they
intend to return. Thus, while performing a legitimate activity in the
country they reside in, they have accounts in a country they are not
resident in, which is really their “home” country.
Example 2: Many of these employees who work in foreign countries for
a year are required to participate in local retirement schemes. When
they leave that country, their contributions are by law sometimes
required to be transferred to a private bank account. Two notable
examples are Swiss Vested Pension Benefits and Mexican AFORE accounts.
While Switzerland will let you liquidate the account if you move abroad,
if you move within the EU, you cannot liquidate a portion of the
account until you are 65. Switzerland offers some flexibility in that
you can keep the money in cash, but Mexico automatically invests the
money in funds and there is no possibility to liquidate it before age
65. Thus, a young dual national who thought it would be a great
opportunity to live and work in Mexico for a year becomes saddled with a
PFIC for most of his or her life in a country he or she does not reside
in. This PFIC will likely cost more in accounting fees and US taxes
than the account is worth.
Example 3: What about the cross border worker whose employer pays the
salary into a local bank account in the country of employment? That
same bank also offers accounts in the currency of the country the
employee lives in so the employee keeps a large part of their money in
an account in the country of employment, not the country of residence,
as the exchange rates are better.
Example 4: What about the dual citizen retiree from Sweden who
retires to Thailand or Spain, but yet spends the summers in Sweden
visiting family and friends? As they have a legacy account in Sweden
and do spend some time in the country each year, it would be foolish to
close the account as they will have several months of local expenses to
pay. These people will be unnecessarily punished and examined for
legitimate activity.
Example 5: What about the dual citizen employee who participates in
the stock plan of the company he or she works for? One day, the company
decides that they can save money by transferring the plan to a bank in a
third country. Suddenly, the employee has an account in a country they
do not reside in even though they have never stopped residing in their
country of employment. .
These are realities, especially for many of us who live in Europe.
They illustrate that a same country exception binds the wound, but it
does not heal it. Reporting exemptions based on bona fide residence
abroad (not related to the country of the bank account), or residence
based taxation, or renunciation appear to be the only true answers.
@Lisa, thank you for providing your perspective and commentary on the Christians blog and article. The examples you gave are very illuminating for those of us who don’t know what it is like to live in the EU – with much more movement across multiple borders. You make it very clear that exempting accounts where we live won’t solve the root problem – although it may be a stepping stone to allow some of us to get a breather, and ease the situation somewhat.
@Lisa… Let me add my thnx..
I tweeted your comment…
https://twitter.com/FATCA_Fallout/status/223465851658055680
@Just Me, thanks for the link to Tim’s post – I had missed it. On the other thread, he says; “I have been in contact with the author for quite some time over the
issues discussed here so getting this published I feel was a little bit
of personal success on my part getting this published” That’s great!
@badger…
Great success on Tim’s part, I agree.
It is easy to miss things as this site and posting has really become active with information sharing. I have been busy trying to get comments up on every story I see in the media, and hard to accomplish and stay current here…
Just posted at Reuters and CBS… I can’t get them all, but I try to get as many as I can.
Allison Christian’s suggestion of “same country” accounts being exempt from FBAR and FATCA is so logical, rational and simple IRS will likely never accept it.
Then again, Ms. Christans did write a long, convoluted and detailed article to make her very basic and practical suggestions, so maybe IRS will actually understand what she is saying. As for Levin, Schumer and Casey, I’m not sure they will ever understand anything about anyone who chooses to live outside US.
Thanks again for Tim for working with Ms. Christians and for posting the link here.
@Lisa
There is a strong case to be made that the EU/EEA+Swiss could be treated as “one country” and in fact some elements of proposed FATCA regulations do just that. I agree it is not a total and final solution but she is trying to make the case to the management of the US Treasury department that if they continue on the present course damn the torpedos they very real risks to the US in terms reputation, litigation etc.
Great. Here’s just what we need: US-UK Joint Venture for FATCA Accreditation.
As if government predators weren’t bad enough, now the private sector is swooping in for the kill. Why not–there’s money to be made.
@Blaze… I actually chuckled when I saw that one.
I am calling this the newest version of the FCC accreditation. FATCA Compliance Complex wants to be sure I am following best practices for turning over the bodies to the IRS.
I am relieved to know that I can get a accreditation certificate to hang on my wall, I guess. 🙂 I want to belong, and that framed accreditation will be important to me.
*To realistically make the move to residency based taxation you are going to need a really high powered entry exit tracking system in the US similar to what you might find in countries like Israel, Hong Kong, Singapore, and Japan. Such a system especially to the extent it applies to US citizens and not just “aliens” still very much runs against the grain of American society. Having said that with the cooperation of Canada under the border security perimeter deal signed last year such a system very much has a realistic chance of happening. The two big obstacles are the Mexican land border and dealing with private vessel traffic heading to the Bahamas and Caribbean from Florida.
Here’s another country (Taiwan) which may be coming on board with FATCA: Gov’t Hopes To Sign Agreement With United States For FATCA Compliance.
This article makes no mention of “reciprocity.” Will Canada be the last holdout? Will Canada continue to hold out?
@Tim…
I take your point on the tracking of ins and outs. NZ and Australia have huge bureaucracies for checking you out of the country. Your departure details go into their little computer, and it is easy to obtain all your in and out details. I had to get it once for my wife, and they quickly provided it.
Then again, America has all that info, it is just that the US airlines are responsible for collecting it and remitting it to homeland security, so they can scan for terrorist before the flight departs or arrives in America. Either way, they have the information about your travels, so they really don’t need an outward bound exit process, they just need to data mine what they already have to track your immigration status.
So hopefully that outbound immigration process is one that Americans will not have to suffer through, although NZ and Australia they make up for it with a simpler and less egregiousness and less bureaucratic security clearance system, except of course for going to America! And at least in NZ, I can still board my local flight to Auckland without security, and still no body scanners, or shoe removal necessities even when going to America.
@Blaze.
I saw that story on Tawian. Will be interested to see if this becomes a 3rd model of an IGA FATCA pact, or just either the EU or Swiss/Japan model, which of course we haven’t really seen as none are finalized. Let’s hope the IRS is on such FATCA overload that they won’t have them actually ready for implementation. I can guarantee that there will be confusion.
@Blaze: To me it provides further evidence that FATCA is a lot bigger than just collecting a few billion more from expats. It is about control of capital.
Here is a Boston Consulting Group study saying that the only way out of this 4 year long financial crisis is a one-time wealth tax of 25-35%:
http://www.zerohedge.com/news/muddle-through-has-failed-bcg-says-there-may-be-only-painful-ways-out-crisis
Here Steven Keen talk on RT about a possible debt jubilee where the
government deposits a wad of cash into your account in order to pay off
debts. This massive counterfeit opperation would steal 30% of the wealth of anyone holding fiat currency or fiat denominated wealth.
http://www.zerohedge.com/news/steve-keen-why-debt-matters-all-time-and-need-quantitative-easing-public
All the western welfare states realize that there is too much debt and that the only way out is to seize a gigantic chunk of cash from the middle classes. These welfare states are working together to prepare for this massive fleecing, and capital controls are a definite requirement beforehand or the money will escape. FATCA is the US’s best effort to set up a system the rest of the worlds elite ruling classes can get behind. Loads of parasites are jumping on the bandwagon as can be seen by this FATCA accredation program.
Confederate – I have also been screaming CAPITAL CONTROLS for a long time. There was someone at Deloitte or one of those large accounting firms that also made reference to this too, and said that the “US is implementing capital controls”.
Americans are boiling frogs. They have NO IDEA that this is going on. I’m just glad that I don’t live there anymore.