In a previous post I started talking about services. I fail to understand why some folks back in the home country are so insistent that we “pay our fair share” but they don’t have an answer when I reply, “For what?”
Let me be very clear, folks, I get NOTHING from the U.S. government living abroad. Zero. I will receive no Social Security, no Medicare, no English-language or Civics education for my children, no useful help if I am arrested (What good is an English-speaking lawyer to me? I speak fluent French. Or the fact that they could visit me in jail? They admit they can’t get me released.) The Embassy people are very nice – it’s a pleasure to go down there once every 10 years or so and renew my passport but that’s about all the contact I have with them because they don’t have much in the way of services that would help me. And, to be honest, that was OK with me for a long time. I integrated very well into my host country and I hardly need them to hold my hand. But if they are going to insist on taxing me, then I want something for my money. Something relevant to my situation. Here is another suggestion that I came up with after I saw this:
“The IRS is also committed to educating all taxpayers so that they understand their U.S. tax responsibilities.” Nice idea. Now I’d like to see you put your money where your mouth is.
Outreach: Education is a start and I sincerely hope they are serious about it because this is going to be a tall order. There are about 100,000 American citizens living in France, a significant minority live in small villages and towns. There are even larger American communities in places like the U.K. and Germany. All this nonsense about how “we can’t possibly find and count these people,” is utter rubbish. Of course you can, you just haven’t tried very hard because you know it will cost the American taxpayer at home a pretty penny to do this. At the very least, you need to hand out or mail to everyone who requests a passport renewal a synopsis of this document, “The Tax Guide for American Citizens and Resident Aliens Abroad.” Will some of these people react in outrage and renounce their U.S. citizenship once they know the facts? Of course they will but at least they are no longer living in ignorance and whatever they do from that point forward is their personal decision. However, even this is not adequate.
Tax Assistance: If Congress is going to keep making convoluted rules and imposing onerous reporting requirements than the IRS is going to have to start providing more personalized assistance to U.S. taxpayers abroad. This means more staff and I’m not talking about tax experts just off the boat from the U.S., I’m talking about people who understand the U.S. tax/financial systems AND the local ones. In Europe that would mean people who understand the tax and financial systems of over 27 different countries because the way U.S. tax law and local law interact is complex even for people abroad who don’t lead very complicated lives. (I once tried to explain a P.E.L. to an American tax lawyer and his eyes glazed over before I was halfway through.) Now the IRS offices in Paris and London already have very knowledgeable people. I’m just saying that we would need many MANY more of them to meet the needs of the 1 million+ American citizens and U.S. persons living in Europe. (The folks at the IRS should be 100% behind me on this one – what IRS agent could possibly complain about an exciting post in Paris or London or Beijing? Think of the recruiting possibilities? Join the IRS and See the World!)
To give you an idea of how limited their service is right now, just have a look at the Paris IRS office hours:
“Walk-In Assistance Monday-Friday : from 9:00 a.m. to 12:00 noon. Phone Calls Monday-Friday : from 9:00 a.m.- 12:00 noon and from 1:30 to 3.30 p.m. Offices are closed on French AND US holidays.”
Not good enough. We need more staff, longer opening hours and information that is easily accessible (“pushed” to us rather than forcing us to “pull”). No U.S. citizen or resident alien should be obliged, just because he or she lives abroad, to have an accounting degree or to hire an expensive expatriate tax accountant/lawyer in order to be compliant. These things should only be necessary if the citizen/legal resident has a very complex tax situation – none of them should be necessary for an IT Manager, an English teacher, a Computer Programmer or the American spouse of a foreign national working part-time.
Is that clear enough for everyone?
Oh, and to add insult to injury, there is a FBAR helpline available (highlighted on the Paris IRS website) which is toll-free for people inside the US but those of us abroad have to pay the long-distance call.
Amazing, isn’t it?
Victoria, where I’m at Americans are given *very low* priority at the consulates. When I went there for my 1st interview, I went by way of public transport. I had to wait for 3 hours in a park because they don’t take appointments. I think it’s only 13h00-15h00 for citizens, a very small window like that.
When it was finally our turn to go in, I was talking to an older guy next to me how WE are the 2nd class citizens. I pointed to the thousands of people in line to get tourist visas and I said “they are paying, and we’re not”. They really don’t care how much we have paid in the past. When I complained about the renunciation fee, he said “The taxes you have paid went to other things…” They cut me off when I started comparing renunciation fees of other countries.
I really think like Petros on this. They say it is “voluntary” because *they like donations of money*. If you had really committed a crime, they would have already prosecuted you and then put it in a press release.
I think that keeping US citizenship would be worth it if they actually provided some services, but they don’t, and I doubt they ever will. We are just flat-out discriminated against / threatened / called tax cheat, when we are not. I don’t think that US resident-citizens will ever get that. I gave up trying to talk to them a long time ago. Most of them have no CLUE as to what is like living in a foreign country, especially countries that speak a different language and the culture is different.
Just my 2 pennies.
Thanks for the update, geeez, on what It’s like in Brazil. I’ve passed through the Embassies in both France and Japan. Nice folks – one even went into the consulate for me and brought me out my new passport. But, let’s face it, most of the US citizens who seek out services from them are tourists or foreign nationals asking for visas. I’ve also seen, through some of the expat organizations here, that the embassy sends people for seminars on things like coping with inheritance if you are Pacsed (civil union as opposed to marriage here in France). All that is very kind of them but not terribly useful if you don’t live in a large metropolitan area. I don’t want to get on their case and I don’t want anything I’ve said here to be taken as a criticism of them. But I think they need more resources and a much better outreach program.
Just so I can help people understand better I’ll give you a story that exemplifies for me what our needs are versus those of a tourist. I know a woman who is a long-time American resident in France. She was married to a French citizen and things went very badly for her – a truly horrendous case of spousal abuse. She did not have money to go home and she was having to deal with the French authorities by herself. The people at the consulate were very sympathetic but they were also very clear that they could not help her in any way except to loan her enough money to get home. She had no job, no money, no health insurance, nothing in the U.S. Not even a bank account. Even if she accepted the offer, where would she go in the U.S. and how would she pay back the loan? She gave up and stayed. I hear stories like this and I ask myself, If one day it’s me knocking on the door because I am in real trouble, is this what will happen?
Sorry to bend your ear for so long but this is the sort of thing has been bothering me for a very long time.
Dead on geeeez, most folks don’t have a clue and you’d be amazed how many people with fantasies about moving abroad just don’t want to hear it.
I’m kind of on vacation until after Carnaval (without pay– and I’m not sitting on the beach!). This is why I like writing on here and I like reading other peoples’ stories and experiences.
Pretty scary story. I think that’s why on every expat forum I have ever posted, if I see a young girl or woman who is moving overseas to be with a guy, I always recommend caution. It applies also with men because some years back an American was killed here by his “girlfriend” and her REAL boyfriend after he coughed up $50.000.
I guess the point is that the consulates can’t help. The only people I have seen them help are people who actually work at consulates, like marines and civilian staff, who sometimes cause problems in foreign countries– like the Marine that was drunk driving and killed a famous singer in Hungary, I believe.
Years ago, I participated in an embassy evacuation exercise with Joint special forces teams, but even that drill was just to rescue the embassy “staff”. I honestly don’t remember seeing any “civilians”. Even though we pay taxes (or at least file $0) there, we’re not exactly “assets” to them as long as we live overseas. I’m not saying that a rescue is impossible. I just know I’m a lower priority. I think this is why as adults we have to make good decisions about where to live, like not living in a warzone, for example.
This is why, given the positives (nearly 0) to the negatives (many) to having American “citizenship” while living abroad, I think the question to (or not to) renounce is a no brainer. How could/should renouncing change your relationship with Americans? You are still the same person who was born there. They don’t erase your birth certificate from public record. I think even the most die-hard American could understand this once they have been shown the REAL truth, which I think the MSM is withholding purposely to maintain the “official” IRS story.
By the way, I think the IRS is fabricating these numbers to make it look like it’s worth the money for the program. There’s not even any way to verify those numbers because they can put whatever they want to and we just have to take their word for it.
Now this was a major ear bend, but now I have to get to work.
Another great post with some very practical suggestions. Thank you indeed.
One of the things that I find incredible is how unhelpful the U.S. is letting know about their tax and reporting obligations – let alone assisting in compliance. It has reached the point where it is:
– too expensive
– too complicated
– too risky (given the possibility of penalties)
to remain a U.S. citizen without some of the things that you suggest.
The tax complications are bad enough but the reporting requirements make it all but impossible. A couple of days I was looking at U.S. passport and noticed something of great interest:
The passport itself tells people that they are required to pay taxes on worldwide income. But, there is no mention whatsoever of any reporting requirements.
Now you would agree that London is a major city with tens of thousands (if not more) U.S. citizens. Here is a link to the London Embassy with no mention of FBAR.
http://london.usembassy.gov/irs/irsfaq.html
Given that this can be updated – here is what it said in December 2011:
Frequently Asked Questions
Which tax form should I use — Form 1040 or 1040NR?
Resident aliens and U.S. citizens must use Form 1040. Nonresident aliens must use Form 1040NR or 1040NR-EZ. The determining factor is whether your tax status is resident or nonresident alien. You may use this flowchart to help determine your nonresident or resident alien status [PDF, 1 page].
What exchange rate should I use when I convert my income to US dollars?
The 2009 average rate was $1.57 to £1 (see Unofficial Exchange Rates 2003/2009 for GBP and other foreign currencies to USD).
What is the due date for filing tax returns?
For taxpayers living and working abroad, the filing deadline is extended automatically to June 15th for 2010. Note that the deadline for payment is not extended; to avoid penalties and interest, any anticipated balance due should have been paid to IRS on or before April 15th.
Overseas Taxpayers who cannot file by June 15 should file Form 4868 (“Application for Automatic Extension of Time to File U.S. Individual Income Tax Return”) on or before that date. File the Form 4868 and check the box on line 8 if you need an additional 4 months to file your return, to October 15th. Copies of Form 4868 are available from the IRS website or the IRS office in the Embassy. A further extension is available.
Taxpayers filing their first overseas return may elect to file Form 2350 anytime before the due date of their return (including extensions) in order to meet residency requirements to exclude foreign income.
How should I file my return? Are foreign postmarks acceptable?
You may send your return either to our Austin Service Center or to our London office. If you bring your return in person to our London office, you may wish to bring a copy so that we can date stamp it as your record of timely filing. (We cannot provide copies for you.) Postmarks from any official postal system, foreign or domestic, are valid as a record of timely filing.
What is the foreign earned income (FEI) exclusion?
Central to the tax rules for certain filers of US tax returns who live and work abroad is the ability to exclude up to $91,400 of earned income annually. Earned income that may be excluded means wages, salaries, professional fees, and other compensation received for personal services performed in a foreign country. It does not include pensions, annuities, social security, interest, dividends, capital gains, or alimony. The exclusion is available to both spouses on a joint return assuming both persons meet the qualifications. More details are available on the FEI information page.
If I am able to exclude all my income, why do I have to file?
A U.S. citizen or lawful resident alien is required to report worldwide income if you exceed the minimum filing requirements.
If your tax liability is zero there is no penalty for not filing, but you may risk eligibility for future exclusions or deductions by not filing a timely and accurate return.
Income filing requirements for dependent childrenare found at on page 9 of the Form 1040 Instructions (PDF).
Am I eligible to exclude the income from my Fulbright (or other teaching) grant under the FEI exclusion?
No. Because Fulbright grantees have no intention of remaining “indefinitely” outside the U.S., they do not meet the tax home test. Since the vast majority of grantees spend one school year or less abroad, they would be allowed to deduct certain expenses of being away from home as business expenses. It is essential to note that the allowed expenses are for the grantee only, and not the spouse and children who may accompany him or her. You may use the foreign per diem rates on the Department of State web site to calculate the away from home expenses.
Who taxes my U.S. Social Security, the U.S. or the UK?
The U.S./UK tax treaty (Article 17, Paragraph 3) provides that United States Social Security payments, as long as they are reported for taxation to the United Kingdom Government, are not taxable in the United States. This rule applies to all United Kingdom residents, regardless of places of citizenship.
I paid tax when I was working in the United States last year on a visa. How can I get it back?
A nonresident alien must file Form 1040NR or 1040NR-EZ to claim a refund of any overpaid taxes. You may use this flowchart to help determine your nonresident or resident alien status.
I am a U.S. citizen who moved to the U.K. several (or many) years ago and thought I did not have to file U.S. tax returns any longer. Now I have learned that information was incorrect. What do I do?
This is a common misunderstanding among Americans abroad, and should not create anxiety for those who find themselves in this situation. Generally, you should file returns for the past three years, taking the foreign earned income exclusion, the foreign tax credit, or both. It would be extremely unlikely that there would be any late penalties assessed, since penalties are computed as a percentage of tax owed, and only the rare taxpayer would actually owe tax in this situation.
You may contact us for prior year tax forms, or download them from the IRS web site. To find older forms, enter the year required in the Search for… box on the top-left of the page. The search typically returns Forms and Publications for the year on which you will have seached.
My British employer did not give me a Form W-2. Is that a problem?
Not at all. W-2s are used primarily to verify Federal Income Tax Withheld from wages, which is not done by British employers. Therefore, it is not necessary to attach any wage statement other than Form W-2 to your U.S. tax return.
I am a U.S. citizen married to a nonresident alien. Can I claim an exemption for each of us?
Yes, provided the NRA spouse did not have any income from U.S. sources and he or she has been issued an ITIN (Individual Tax Identification Number).
Do I need an ITIN?
Generally, anyone who must file a U.S tax return but does not qualify for a Social Security number must apply for an ITIN. The same requirement applies to anyone who will be claimed as an exemption on a U.S. return. Please note persons, other than your spouse, must be either a U.S. citizen or resident to be claimed as a dependent. If legally adopted by a U.S. citizen then he or she is considered a U.S. citizen. Please check the ITIN page for more details.
Can I claim my stepchildren as depends on my tax return?
If you are married to a nonresident alien who has children from a previous relationship, generally you may not claim them as your dependents. There are five dependency requirements that must be met, one of which is that the person must be a U.S. citizen or resident, or reside in Canada or Mexico for at least some part of the tax year. Since citizenship is conferred by adoption and not by marriage, your stepchild will not qualify as your dependent unless legally adopted.
I received a tax package, but I am not required to file. What should I do?
If you are neither a U.S. citizen nor a resident alien and you have less than $3,650 income from the U.S. you do not need to file a tax return for 2009. You may, however, file a return if you had tax withheld and are due a refund.
The Internal Revenue Service sends tax packages to all taxpayers who filed returns the previous year (usually the same type of form filed in the past). However, if you are not required to file, do not send a form marked “nil” or with zeroes as entries; this will merely serve to keep you on the list to receive subsequent returns. You may discard the form; no IRS notification is necessary.
What is Alternative Minimum Tax (AMT)?
Over the years, legislative changes have created a number of avenues through which taxes can be avoided legally, most of which are available only to high-income taxpayers. In order to ensure that all taxpayers pay at least some income tax, Congress enacted the Alternative Minimum Tax.
Is There a Limit on AMT ?
From 2005 onwards, overseas taxpayers who offset their regular U.S. income tax with a substantial foreign tax credit may now also offset their AMT by 100% of their foreign taxes. Calculations can be extremely complex. AMT is computed using IRS Form 6251.
What is the maximum gift I can give without incurring a liability for gift tax?
Generally, a U.S. citizen or resident may give any one person up to $12,000 in any year, with no limit on the number of persons. There is no requirement for the recipients to be related to the donor. If you give anyone more than $12,000 in cash or property in any one year, you must file a gift tax return, IRS Form 709. See also IRS Publication 950 for more information (PDF).
A recipient of a gift does not incur a tax liability on the gift itself. However, if the recipient invests the gift, any subsequent earnings on that investment are subject to tax.
Can I file my state tax returns with the IRS in London?
IRS London does not have the resources to accept state tax returns or provide information regarding tax requirements of individual states. However, each state has its own website, URLs can be found listed at the Federation of Tax Administrators web site. You may request information and forms from the website or by mail or phone.
Thank you for posting that. You can see form the questions how much confusion there is. I really liked this part:
“This is a common misunderstanding among Americans abroad, and should not create anxiety for those who find themselves in this situation.”
Years ago when I actually visited the Paris embassy about this they were just as reassuring. Makes me wonder what the IRS people “on the ground” think of what the politicians are up to in the U.S. After all those politicians never have to deal with angry upset people on the phone or in their offices.
Pingback: Just another WordPress.com site Looking for Mr. FBAR – In Search of FBAR Fullfillment and Consciousness « Renounce U.S. Citizenship – Be Free!
Pingback: Looking for Mr. FBAR – In Search of FBAR Fullfillment and Consciousness « Renounce U.S. Citizenship – Be Free!