I love to share my concerns with you all. I am a dual citizen Brazil/USA and I always saw the USA as a fair country, like they say, Americans always do the right thing after trying everything else. But lately I have been questioning this belief because of the enormous difficulties I am having trying to comply with the IRS demands on Americans Living Abroad.
They seem so unfair to me. My reactions so far can be summed up under FEAR. And perhaps CONFUSION. Love to exchange ideas with you all.
@markpinetree, I agree it defies all logic. FBAR was designed to nail US residents hiding assets abroad to avoid US taxes. What happens to US citizens overseas is just collateral damage, perhaps not intended, but Congress has a low opinion of US citizens who live abroad so it doesn’t really loose any sleep when these things happen. There are several in Congress who honestly believe that any US citizen who lives abroad is an ungrateful wretch and should be duly punished for such an un-patriotic attitude through higher US taxes. Americans overseas don’t have any delegates of their own in Congress so what they think is of little concern to those on Capitol Hill. Very sad indeed, but not an exaggeration.
I am compiling a list of the Congressmen who are in the Americans Abroad Caucus, with their faxes. Faxes are important because it is impossible to e-mail them unless you are intheir district. It has to be by fax. I will publish this list here as soon as I finish doing it. We should start sending faxes to these “representatives”. You know, even if there is a income exclusion and tax credit… people are falling through the cracks especially when there is no treaty between the USA and the country they are residing. And I don´t even mention the paper work that I need to do every year. Incredible. The USA is not smart inthe sense of public relations. Every American abroad represents the Country and cuts through prejudices. Many times I found myself defending the USA in Brazil because of my experience living in the USA. Now… they come after me?… Don´t they have smarter people looking into this at a time where it is important for the USA to have a good image abroad?… From a purelly pragmatic sense they they are indeed working agains the US interests in the world community..
@markpinetree,
Here is a link from the American Citizens Abroad website listing the members of the American’s abroad caucus. It does not include their fax numbers, but it does give email addresses for specific members of the staffs of each so that you can send emails to their offices. You are absolutely correct that you can’t send emails directly to these Congressmen via their websites because they exclude emails from persons who do not have an address within the state they represent. From experience, some exlude emails for persons who do not have an address within their specific districts within the state. Their principal responsibilities are to the voters who elected them and who they represent in Congress.
The ACA folks in Geneva tell me they have been able to communicate with these Coalition members by sending emails to their staff members, who deliver them to their congressman, in this website listing:
http://www.aca.ch/joomla/index.php?option=com_content&task=view&id=73&Itemid=74
The ACA website, where you can find a lot of good information of interest to US citizens living abroad is http://www.aca.ch
Bear in mind that a tax treaty between the US and another country has as its primary purpose the recognition of the foreign country to the right of the US to levy and collect taxes from US citizens resident in that country. There may be some prvisions for mitigating double taxation, but they pale in sigficance in comparison with the right granted by the foreign country to the US to tax and collect from US citizens who live in that country.
Tax treaties are not primarily for the benefit of US citizens living abroad but are for the benefit of the IRS in collecting taxes. So you may be better off in Brazil because Brazil has never agreed to executing a tax treay with the US.
Incidentally I did have lunch with my retired friend who worked for several years as a tax professional. He told me that he is no longer working as a volunteer preparing tax returns for low-income retired folks. He is only helping a few of his closest old friends who have very limited resources. He therefore did not participate in any of the training sessions on FATCA and does not plan on assisting any persons who have assets outside of the US which they are required to report, under FATCA, for the fist time this year.
“When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.”
– Frederic Bastiat
The USA collect taxes from US Citizens living and working in Brazil even though there is not Tax Treaty between the two countries. Self Employed people, in the absence of a treaty have to pay Social Security Self Employment Taxes in boith countries. And Americans living in France who have a Tax Treaty, don´t have to pay US taxes if they have a French Pension. In Brazil we do… You know we have to pay taxes to the USA in pensions we receive in Brazil for working here, even though these pensions don´t pay taxes in Brazil. I know about ACA. Thanks for the information. Will check the e-mail of the Congressmen staff ( I already correspond with one) but will make my list anyway. with the faxes. Will send to ACA and AARO.
marketpinetree,
The wesite with general information on US tax treaties includes this this statement “Tax treaties reduce the U.S. taxes of residents of foreign countries. With certain exceptions, they do not reduce the U.S. taxes of U.S. citizens or residents. U.S. citizens and residents are subject to U.S. income tax on their worldwide income.
The US-France treaty might be one of these “certain exceptions.” The text of the treaty is available on line.
But in general tax treaties only reduce the US taxes of foreign citizens who are “residents of foreign countries” but not those of US citeizens resident in those foreign countries. The IRS has a website listing all of the countries with which the US has tax treaties. On this list there is a link to each of these treaties where you view them together with all changes that have been made since the treaties were originally signed.
http://www.irs.gov.businesses/international/article/0.id=96739.00.html
is the US treaty website. If nthis link does not work, just do a google search for US tax treaties.
I would not hold out any hope that any treaty that bmight eventually be signed between the US and Brazil would reduce the US tax on US citizens resident in Brazil.
Good to know… but it would not reduce the doubole taxation for Social Security Self Employment Taxes?
@Markpinetree, under US tax law US citizens abroad can claiim a foreign tax credit for foreign income taxes paid in foreign source (but not US source) income, which is also subject to US tax. This is true whether there is a tax treaty or not. Foreign taxes paid on excluded foreign income cannot be used for tax credit purposes, and the foreign tax credit can never exceed the US tax on that specific type of income You can’t, for example, use excess foreign tax credits on earned income to offset the US tax on foreign capital gains.
None of these tax treaties address the question of double Social Security taxes and indeed self-employed US citizens abroad, as well as US citizens employed by US companies abroad, are generally subject to double social security taxation by both countries. I have done some additional checking on the subject of Social Securiy double taxation, and this is what I have found.
The US does have Social Security tax equalization agreements with a few countries. These are separate treaties from income tax treaties which specifically cover Social Security taxes and benefits. France is one of them. The provisions of these treaties are not uniform, but some of them do indeed allow US citizens in those treaty countries to pay Social Security tax to the host country and exempt them from double Socual Security tax payments to the US. It is important to read and understand the specific treaty for the foreign country to understand its provisions since they vary widely, Here’s a website with information on these treaties. http://www.ssa.gov/international/agreements_overview.html.
I know about Foreign Tax Credit. I have gone through this many times. A lot of paper work. Yes, there are Tax Treaties and Social Security Treaties. Employed people don’t pay the same SS Tax as Self Employed people. I don’t have the time and disposition to go over all possible treaties. I am not a lawyer or CPA. All I know is that it becoming impossible for me to pay taxes- including SS Self Employment Tax- to the two countries.
@markpinetree, it is indeed a nightmare. That is what is driving so many US citizens resident abroad to renounce or rescind their US citizenship. With these tax laws it has become pure torture. And for what purpose? According to the Tax Advocates 2011 report, only 9% of the US tax filers living abroad owe any US income tax because the higher tax rates in other countries result in sufficient foreign tax credits to totally zero out their US tax obligation. But they have to spend thousands of dollars and maintain mountains of complicated records in order to properly file all of the US tax forms that confirm this, and if they make even one inadvertant and inconsequential mistake, that could cost them tens of thousands of dollars in fines and penalties. The 9% small because they live in countries with tax systems very different from those of the US and therefore very few Americans can even survive in those countries.
That is what drove me to reurn to the US in 1977 after living and working abroad for 11 years. Since then it has become exponentially worse for US citizens living outside of the US. I suspect it costs the IRS thousands of times more to colect each dollar from US citizensabroad than it does to collect tax revenue back home. No cost-benefit study has ever been performed. I suspect that such a study would reveal that citizenship-based taxation destroys more tax revenue than it collects ad produces a miserably poor return on what it costs the IRS to attempt to enforce these laws. On top of all this is the human misery it creates.
I was just thinking about what you said. I can say that until October 15 I will be losing sleep and spending a lot of time and money with my IRS return. I have a CPA in Brazil and one in the USA. They can’t communicate. Even though I know that I pay 15% taxes on my investments here, the same that would have to pay in the US, I will have to fill forms to prove that I don’t have to pay in the US. If a have capital gains the same thing. All of this discussed with a CPA in NY at $100.00 an hour. Then in Brazil I declare separate from my wife but this is not better for the US. Its impossible. So as you said I know I will not have to pay taxes in the US, but then comes the paper work for me to prove. I really am distressed. Then come the FBARs. Since they don’t change that much I thought I could use the 2010 form and make the small modifications for 2011. Not so …I can’t do that…have to start all over again with a new form …-
@markpinetree, my heart really goes out to you and all of the misery you, as well as thousands of others in the same situation, are having to go through. My only surprise, I guess, is that there are not many more times the number of dual citizen renouncing their US citizenshp. Renunciations are up, but they are still only a trickle. The US is, in my opinion, commiting a form of economic suicide by isolating itself from Americans and ex-Americans who just cannot survive if they don’t get rid of theirUS citizenship. That is why, in my feeble way, I am trying to make my voice heard, even though I feel I am crying in the widerness. I can’t help but belive that it is going to take strong action on the part of foreign governments in confronting the US about this, which certaily is a violation of human rights for so many dual citizens. American citizen expats, who are not dual citizens, face exactly the same problems but have no foreign citizenship with another country that would allow them to protest to the goverment of the countries where they live like those with dual citizenship hopefully may be able to do.
Thank you. I considered giving up my US citizenship. But I have two married daughters and a son in the US. I also have a Tax Sheltered Retirement savings, SS income and small investments in the US. You see I trusted the US. Never thought I would be in this situation.
I think eventually I must do something to alleviate me. Perhaps I worry too much. But this situation is beginning to affect my work and my health. I never know what I can or should do in terms to comply and protect my interests. And to think that this will stay with me the whole year is scary.
@Mark, the US was a great place to invest money for many years. Now with the sister-act of the FATCA, the DATCA, I think is the name, would send information about your accounts in America to the Brazilian government. There seems to be some congresspeople fighting this part though because they are scared people will take all of their money out of banks, mostly in the southern states like Florida and Louisiana.
I also have read on the internet that you EARN social security, so you don’t lose that by giving up citizenship. I get the annual letter, saying how much they would give me if I retired today– something which is definitely NOT enough to live on, even in a small town in Brazil! It would be nice though, to see a legal professional confirm what I have read though.
@Geees,
One important fact needs to be clarified. US Social Security benefits are paid to persons who retire, regardless of citizenship and if you live abroad the Social Security Administration will deposit your benefits directly in your foreign bank account whether you are a US or foreign citizen. One restriction, however, is that you are not covered by Medicare when you retire and live outside of the US. If you do, you must return to the US for medical procedures in order to receive Medicare coverage. (A retired American friend of mine, who lives in Manaus, Brazil has traveled back to Miami about 4 times in the last 3 or 4 years for cancer surgery and radiation treatments, totally covered by Medicare.)
I have not seen any information that renouncing your US citizenship resulting in your losing US Social Security benefits. Has anyone else? I know there are lots of Brazilian citizen ex-US residents who receive US SS benefits.
The SS Administration recently published statistics on the number of recipients and total amount of such benefits sent to retireees outside of the US. But it does not compile statistics on how many are US and how many are foreign citizens.
Been away for a while. I am kind of pessimist. I tried to explian to a Brazilian reporter about FATCA and how the world banks are catering to the USA. I think they will. The US is a powerful Country. Not sure about Brazil but I will not be surprised. The moment I say that the IRS wants Brazilian banks to report to the IRS their American, Dual Citizens and Greencarder clients, they think that this is because these people are cheating in their income tax. Of course this is the main reazon. I came to believe that I am just a casualty in this scenario and it will be very difficult to make my case. So, I was thinking that from now on I will spend a lot of time and money every year to file my IRS Return (plus my Brazilian Return). I will have a Brazilian and an US CPA who don´t speak each other´s language. I will be in the middle (at $100.00 an hour) translating one to the other. They will have to work out the system in Brazil and US which not always coincide. I believe that it will cost me more than 1000 dollars a year just to file my US IRS. In Brazil it is not much less.
Besides I will have to file the FBARS every year – always looking for the newest edition so I just can´t copy the previous year and update the numbers. First by April 30, I will finish the Brazilian IRS, then I will have until June 15 (but I will pay interest if I owe) and I could extend to October 15 (also paying interest if I owe). In summary I am glad that I am not that young and this will not last many years. I never believed that one day I would be in such a position for becoming an American and going to the USA. I will try; I don´t know what other Brazilian dual citizens and greencarders will do. Most of them don´t know that this is going on and don´t believe that their accounts in Brazil one day will be accessed by the IRS. Not because of bad faith or because their are cheaters. But because they never knew when they immigrated to the USA that they had to declare their bank accounts and investments in Brazil. Perhaps now when a Brazilian applies to become a citizen or to have a green card, they should be told in no uncertan terms that they will have to declare every year all their assets in Brazil in the FBARs and would have to include any income from investments in Brazil to the US IRS. Then, at least they would have a choice.
This of course would be fair and not a trap. Thanks to you all..
@Markpinetree. Faz tempo. Thanks for your comments and your very brave stiff upper lip. I believe you will indeed be very fortunate if you will be able to limit the amount to $1000 for competent professional advice from the US in preparing your US tax return and all of the necessary accompanying forms.
With respect to Brazilians who have emigrated to the US and now have permeanent resident green cards, their US tax liability and reporting requirements on bank accounts and other assets they may have back in Brazil is already subjet to exactly the same US tax reporting and payment requirements, even though they are not yet and never become US citizens. So Brazilians who are contemplating relocating to the US need to be aware of these tax obligations that commence from the moment they set foot in the United States with permanent residency staus. This is of super importance to Brazilians who are obtaining US visas and transfering some of their funds to the US to finance the establishment of a business in the US.
Just ocurred to me. In 1958 when I went to the USA as a alien resident with my green card, I would not have gone and worked hard there for 30 years if the Brazilian Income Tax required from me:
1. Filing Income Tax in Brazil every year from working earnings in the USA.
2. Asking me to fill forms in order to have excluded income or to fill forms if I decided to have tax credits for this income.
3. Declaring to Brazilian Income Tax all my income from investments in the USA and making me fill forms to have credit on the taxes I paid in the USA.
I don´t have to go on. You will understand.
Mark, Don Pomodoro posted a 2 part article in the forum. Take a look at that article. I liked it very much. It does a great job of explaining US foreign policy, and how the US wants to “own” the world.
The US passes their rules/law, no matter how misguided they may be, and the only way to not have to follow them is to renounce. We could argue about citizenship -vs- territorial-based taxation all day long, but the US will always think it “owns” its citizens no matter where they may live in the world. I doubt this is ever going to change in your lifetime or mine.
But Americans Living Abroad are millions. Can you imagine how powerful they could become with the absentee votes? It is a question of how we can organize ourselves. The first step is to have representation in the USA Congress. In the mean time to support ACA http://www.aca.ch. I lived and worked 30 years in the USA. I became an American by choice. I loved the USA and of course Brazil. Never had a conflict with this. Now, for the first time in my long life I do believe that the USA is being unfair to me with this taxation that comes with enormous paper work when I am living and working abroad. I can´t believe that a Country that has been always fair to me is making life so miserable ( and expensive ) for its citizens who are living abroad. I may be naive but I believe that eventually this will change because it makes sense.
I am in the midst of trying to comply with the demands on me. In 45 years of dual citizenship I never had to face what I am facing. I am collecting the data that I must have to fill my USA IRS Returns plans all the forms I must fill. I can´t imagineme doing this year after year. It is a lot of time, not to speak of the costs. I am not sure what I will do but I know that I can´t do this year after year without compromising my health and even my part time work. I feel like I am a casualty of a unfair and sick system. This is not the USA where I chose to become a citizen. Just one example. I must declare the dividends from my investments in Brazil (made with money earned with my work here). And then I must claim credit for the Income Tax I paid in Brazil. So it happens that in Brazil they deduct the taxes automatically and they don´t specify how much. I will have to go to the banks to find out how much they deducted in order for me to claim it. You all don´t know what it is to go to a bank in Brazil and how long it takes, Things like that. Incredible.
@markpinetree, I don’t know how it is with banks in Brazil today, but if you were asking a US bank to dig out something for you from their records you would pay a healthy fee for that additional service.
Last time I did this, to find out exactly how much I paid on taxes in the dividends in a money market I was in the bank close to two hours and the lady had to ask somewhere for the date and I was suppose to go back to get the results. The declaration for the Brazilian Income Tax only said that the IRS was outmatically deducted from the dividends, without revealing how much. I guess they send this data directly to the IRS. I am just giving a small example of how suddenly my life became a nighmare. I don´t want to keep harping on this.
@markpinetree, you wrote “I guess they send this data directly to the IRS” Have Brazlian banks, or at least has yours, made a decision to submit to the extraterritorial enforcement of US law? From the letter from Brazilian Banker’s Organization to the US Treasury Department it was my impression that FATCA imposes requirements on Brazilian banks that would require them to violate provisions of the Brazilian Constitution. If this is true, and I believe it is, I doubt if they are transmitting any data on your personal account to the IRS.
With regard to your earlier post remarking on the need for US citizen voters to rise up and unite on this subject, your are absolutely correct. There is a problem, however. Even though US citizens resident abroad have to the right to vote by absentee ballot in the precinct where they last voted before they left the US, they are voting for the candidates in that state and precinct whose primarly interest is in representing the voters in that precinct US citizens voting from abroad represent such a small percentage of the voters in that precinct that it is nigh unto impossible for them to get their elected officials to pay any attention to these issues. Unlike in some countries, there are no Congressmen or Senators who specifically are representated by persons directly elected by overseas voter. The Overseas votes are so diluted that they have an extremely limited effect on which candidate wins.
Nevertheless, if you are a US citizen resident abroad, you should indeed vote in US elections. You can find complete information on how to do this on the ACA website http://www.aca.ch. You have this right so please use it. And if you would personally like to contact your Senators and Congressman, do so through postal mail, because their websites are not set up to receive email messages from persons who do not have a home address in their state or district.
Be very honest and frank about what Citizenship based taxation has done to you.