These numbers are sourced at Quick Facts at USxCanada InfoShop. If you have a favorite number, toss in some more speculation!
Extraterritorial U.S. citizens number up into the millions. Say 6 to 7 million. Maybe more, and likely not less.
On the compliance side, Taxpayer Advocate Service says all FBAR filing added up to 218,840 for 2008.
For 1990 a total of 180,087 IRS Form 2555 were filed from outside the United States.
The 2009 and 2011 voluntary disclosure programs reported around 33,000 disclosures by January 2012.
At a generous guess, current full compliance likely totals no more than 300,000 persons worldwide. Stay generous, go low with a pool of 6 million, and that yields a ratio of 1 in 20 compliant, or 5%.
Assume that the reported figure of 30,067 U.S. citizens reporting Canadian-earned income to the IRS in 2006 is based on something real. Multiply by 20 and that provides a common lower estimate for U.S. citizens in Canada, which is 600,000.
Then take another look at the crude Globe and Mail poll of U.S. citizen status/intention, that over half of 3233 responders intend to do nothing, and only 1 out of 5 are doing something.
A vague picture emerges. Maybe 5% of U.S. extraterritorials are OK with the IRS. Maybe 15% are worrying and/or taking specific steps. Maybe 80% just truck along in the same old limbo.
Now from the other side. The IRS says it has extracted $4.4 billion from 33,000 persons, for an average of $133,000 per person. Stay conservative, chop the potential harvest in half to 3 million, and cut the take per person to $50,000.
If this series of conjectures holds together, the IRS smells at least $150 billion more lying around out there beyond the borders — over 30 times what they have already raked in.
Even minnows can be tasty for a hungry bear?
What are the odds that this will go away?
Meanwhile, a lot of the serious money is being offshored by persons still resident in the United States.
To close with a good anecdote. A brokerage employee recently told me of a Fortune 500 CEO hoping to diversify to holdings outside the United States … a service that the Canadian financial industry is constrained to not provide.
I am very confused. If my UK spouse inherited my US assets and was only exempt from US estate taxes up to $60,000, I would have thought that I too would suffer the same tiny exemption if I inherited a US-sourced inheritance if I were no longer a US citizen.
I also understand that I need to travel into the US on an American passport as a US citizen. As getting a CLN could take a few years even after my renunciation, I would have thought that I would be in limbo until I received this vital document, especially as my US passport would have already been revoked.
I see that when applying for a tourist permit to visit the USA from a visa-waiver country like the UK that I would need to list my birthplace. They could decide to be awkward and not issue the permit.
I also worry about being audited or harrassed about FBAR fines, in spite of the renunciation guide suggesting otherwise.
As for declaring travel cards and pre-paid phone cards, I think it’s safer to over-report since these could arguably be defined as pre-paid debit card accounts…it’s their vague definitions of what makes a financial account that makes me inclined to play it safe by over-reporting, just in case 😛
I’m trying to wire my US assets over to the UK but they seem to be ignoring my request…may have to see if they can’t mail me a check instead though my local bank warned me there would be extra charges and that it could take up to six weeks to clear :P….but trying to bring it across before 2013, especially as the US brokerage account could by then have to withhold 30% as it would be going to a local credit union or what we term ‘building society’.
Mona, you are confused. Read what we wrote. If you were to die, your estate would not be liable for US estate taxes so long as your world wide assets are less than 5 million.
it is still worthwhile to get your US assets under 60,000 to avoid the REPORTING requirement. Not a tax due requirement merely a right royal pain of a REPORTING requirement.
They are not enforcing the requirement for a USC to travel on a US passport if you have another valid passport. I presume you are a dual citizen. Travel on your other passport.
To report travel cards and phone cards on FBAR is preposterous.
Any withholding will not be in effect by 2013. Withholding, when it comes in to play, if ever, would only be on income not principal-it’s your money.
@Mona
I was about to ask you why you couldn’t travel with your UK passport because every UK passport that I’ve seen only lists the city of birth and does not mention the country or state (if from the US). I even have a born in Reading (California), but he could claim that he is from the Reading between London and Oxford at the border, no? But…then I saw the “Electronic System for Travel Authorization” website. My, that is really scary looking. Great way to scare tourists off if you ask me because it screams legalese and you have to click through two in your face disclaimers before you can even fill in the form. Sure enough, the form asks for place of birth, etc. But also some out there questions like asking if you have a veneral disease or if you committed war crimes for Nazi Germany. I think that this is a “Visa Free Waiver” in name only, accepting that it is significantly cheaper than a visa.
Canadians, is it true that you don’t need the waiver and can just go back and forth as you please? I guess that this is the only nationality for whom the “city of birth” trick could work then!
@KalC & Watcher
Please make a blog post about the estate tax, because as you can see it is a really confusing topic for most of us!
How do i make a blog post? I am neither an accountant nor a lawyer. I struggle with this as well.
Canadians need a passport but not a visa.
@Mona: “They could…”
Well, they could. But is it likely they would? And if they did, once you’ve renounced already and moved your assets out of the US you’re basically unreachable. They have much easier targets than you at that point. On travel, if not having a CLN is a problem then until you do get it, can’t you have people come to you? Or better, meet in a third country; a great excuse for all to visit a new place.
@Kalc: “Withholding, when it comes in to play, if ever, would only be on income not principal…”
Meh. Not quite, in fact. FATCA withholding applies to dividends and “gross sale proceeds”. The latter, then, could well be principal. Buy at $100, sell at $100, lose $30 in withholding.
@Don: “Reading”
Oooh, so close. It’s Redding in California, though. Spelling’s different, pronunciation’s the same. And you could so easily have had Oxford, Mississippi, instead :-). For one you can’t have, google “Badiddlyboing, Odawidaho”!
I think you’re overestimating my abilities. I’m flattered you’d ask for an estate tax post, but frankly the only situation I really know is my own. It’s relatively close to Mona’s in some respects, which is why I can reasonably comment here. A wider post to a predominantly Canadian audience though? That’s way beyond me. Not remotely qualified, I’m afraid.
@KalC
Just comment on this post here that you want to join the blog:
http://isaacbrocksociety.com/2011/12/12/how-to-join/
You’ll be invited to become a contributor. You’ll just have to create a WordPress account if you don’t have one yet.
@Watcher
I could have sworn that it was “Reading” in my friend’s passport. I just got off the phone with him and, sure enough, it indeed is! It looks like they messed up the spelling at the UK passport office. He looked at his old passport as well – They’ve been using the same misspelling for almost 20 years 🙂
@Watcher, so I’m currently a US citizen with Brazilian dependents. My assets are sitting in American banks because nobody in Europe will let me open a bank account!
I can’t send the money here because everyone I have asked here, including the equivalent to the IRS, says whatever I transfer will be treated like income, even though it is accumulated savings. I’m between a rock and a hard place with this FATCA issue.
@watcher
I added this to my list of reasons to renounce
I want copies of all documents that we sign today. It is customary to receive signed copies for all contractual obligations such as applying for a credit card, loan or lease.
Considering the gravity of what is being done today, this is a reasonable request.
It can not hurt to ask for a copy of your oath
also you can use your receipt, mine clearly
indicates renunciation
Mona from your 2:08 post ” I would have thought that I too would suffer the same tiny exemption if I inherited a US-sourced inheritance if I were no longer a US citizen.”
Again, you are confused or getting bad advice. Let’s say one of your parent’s dies this year and leaves you 4.9 million. There is NO tax owing as long as the total world wide value of the estate is 5 million or less. Above that, the estate pays taxes with amax of 35%. Doesn’t matter if you are a US citizen or not.
In 2013, the exemption goes down to 1 million due to the expiration of the “Bush tax cuts”
However, because it is so politically contraversial, it is the hated ‘death tax’, the exemption is likely to stay well above 1 million.
You don’t pay the taxes if any are due. The estate does.
I’m sorry that you are so torn by this. It’s difficult for all of us.
[*****] Almighty – Petros – add some comment functionality such as editing comments!!
I have 2 Brazilian DEPENDENTS, not independents.
Yep, see what living in a non-English speaking country does.
Mona –
This is a follow-up on some gentle encouragement of a couple of weeks back. I join Watcher and KalC in suggesting now, less gently, that you are being blinded severely by unnecessary fears. Given what you appear to have spent on “professional” support so far, it is hard to believe you have received value for money.
Suggestions: (1) Get good professional advice. You probably are not as hamstrung as you think. (2) Find out how “unified credit” applies in UK. In Canada, at present in 2012: “Under the Canada-U.S. Tax Treaty, Canadian residents will have a U.S. estate tax liability only if their worldwide assets are valued at more than US$5 million.” So says PriceWaterhouseCoopers. (3) Consult http://www.renunciationguide.com and allay fears about being turned back at the border. If they want to shaft you, a CLN will make no difference. A CLN buys you nothing in terms of assuring entry to the United States. Unofficial or not, a noncitizen is a noncitizen. (4) As regards your spouse, there are functional ways to specify and interrelate what happens to your estates. (5) Get good professional advice.
Sorry about (5). It is sort of like the Warren Buffet two rules of investing. One, do not lose money. Two, do not forget rule number one. [From memory. Maybe that was Mark Twain or Nietzsche. Who cares?]
Is there anyone on the «blog» in the region of Montreal ?
Geeez eeeasy-not everyone appreciates your language.
Geeeez:
Editor’s note: I fixed your typo (to “dependent”) in the earlier comment above. We do quietly correct obvious typos as we read comments, but we cannot change the functionality of WordPress comments. That’s up to WordPress. I asterisked your language because of a complaint. We aim to serve.
Cheers