Liberty and justice for all United States persons abroad

The Isaac Brock Society

Posted on by Posted in Issues regarding US persons abroad 16 Comments

Thought I would share the following comment from a post on my blog called “An open letter to Mitt Romney“.

This plea should be retweeted, retweeted and (you guessed it) retweeted – hard to get the word out!

 

 

or this one:

 

 

 

 

 

Dear Mr Romney, please act and help us.
FATCA, FBAR reporting and the rest of the IRS penalty system aimed at rich tax frauds is wreaking havoc among honest americans abroad.
Hardworking middle class families abroad are terrified and offered no means of coming into compliance… threatened with confiscation of a large chunk of their net worth, for the crime of simply not filling in some papers required by laws back home. Families are being separated, and people are tragically and heartbroken, flooding into the embassies to renounce the US citizenship they once cherished. Being a US citizen abroad means they are subjected to threats, insults, compliance fees and complications far beyond what any US citizen at home must deal with. They are also being refused banking and insurance services. They have two choices, either return to the states, or if they have built their life elsewhere, renounce their US citizenship (if they are in compliance that is).

Others, who just learned of their reporting responsibilities, must either fork over 30% of their net wealth to a country where they don’t even live or work; or else take to hiding as a fugitive.
Their children are learning that the US is a country to fear and hide from, rather than “the land of the free”.
Please Mr Romney have an in-depth look at this situation and please help to fix it.

16 thoughts on “Pain and desperation of U.S. citizen living outside the United States”

  1. *Excellent letter Petros.  Can one live in hope that sensible people will roll Washington back from the brink of becoming the new Kremlin? and the IRS from becoming the new KGB?

  3. @ Nervous.  I can’t take credit for other people’s posts.  But thanks anyway.  Cheers.

  4. @ Nervous 

    I think you are seeing these new post as coming from Petros, because you are still subscribed to the .com domain instead of the new .ca. If you unsubscribe on .com, and then re-subscribe here at .ca, that will clear up the confusion on who is writing the posts…

    And “Nervous”, I hope by reading here we can help calm those nerves.  Welcome aboard.

  5. The reality is that this ridiculous law applies to non-US citizens ie greencard holders.  People who were transferred to the US and never had intentions of retiring in the US since all their family live outside the US. A few years on a greencard at executive salary packages leaves you forced to stay in the US since if you attempt to go home the US will tax you not just on the US assets but all your worldwide assets even though they were not earned in the US or bought with US earned money. No one has a problem with paying witholding taxes when money is drawn out of US sources but really, 30% or higher, or having to liquidate your assets to pay the tax bill. This does not happen in other democratic or some not so democratic countries. America is a joke, freedom, liberty, pursuit happiness, democratic institutions, what a load of BS. Americans need to wake up to the real world and get the message they are not the chosen people nor elected to enforce their rules/law on others.

    It is the moral responsibility of all companies transferring individuals to US positions to warn these people that they may be trapped forever in the US whether they want to be there or not. I would definitely not taken up my position if I had known about this exit tax.

  6. I am arriving at the conclusion that the largest problem with the taxation of US citizens abroad is the FBAR penalties. Sure, citizenship-based taxation is wrong, sometimes there is double taxation or taxation on tax-free items in the other country, the tax forms are extremely complex, OVDI is deceiving, and FATCA is a monster. But I think that everyone in this blog would sleep better if the FBAR penalties were similar to those for the 8938 form: applied to the unpaid tax resulting from the unreported income generated by the undisclosed accounts, not to the value of the accounts. Because of the foreign tax credit, I suppose that any unpaid tax would be minimal, if not zero, in almost all cases.

    I think it would be very hard for the US to abandon citizenship-based taxation, but perhaps Congress would be willing to change the FBAR penalties, because there are also many US immigrants subject to them, and I suppose that Congress is more sympathetic to immigrants than emigrants. Moreover, the FBAR penalty of 50% of the value of the accounts is so absurd that most congressmen would probably agree that it is unconstitutional (excessive fines clause). If they actually read about this subject, they would realize that the FBAR has become useless because of the new 8938 form, and they may even abolish the FBAR completely.

    I think that we have a good chance of convincing Congress to change the FBAR penalties. It is a more simple request, it is backed by the constitution, it has more emotional appeal, and it affects more people. It would not solve all problems, but it would improve the whole situation dramatically. What do you all think?

  7. @Sally Mac

    Just curious.  Are you the Sally of Jack Townsend blog fame?  Whether or not you are, thanks for commenting here at Isaac Brock.  Welcome aboard. 

    Regarding your…

     Americans need to wake up to the real world and get the message they are not the chosen people nor elected to enforce their rules/law on others. 

    They certainly do need to wake up, but so far, no MSM reporting is being done!  Help us with this.  Also, encourage you to go and vote / comment on the “Should Obama be re-elected thread”  Your comment would be a good one for the Economist to see.

  8. @Shadow Raider

    I know you are looking for “reasoned” alternatives, incremental changes, you might say. However, I think there is a snowball’s chance in hell that they will let go of their FBAR enforcement hammer. The history has been just the opposite. As recently as 2004 they increased the penalties like  adding the “nonwillful” penalties and making the “willful” penalties more severe.  Besides, this bludgeoning tool has been responsible for Shulman’s most successful tax / penalty collection effort in the history of the IRS, (from their perspective) so realistically there is no chance that they are going to back down on that.

    Also…given the title of the FBAR Statute from 1970  (The Bank Secrecy Act) and given everything that has happened since 9/11 to crack down on secret terrorist funding, plus the efforts now being expended with FATCA to create a global GATCA and end all bank secrecy, do you think any Republican or Democrat wants to be on the record for repealing or rescinding any of these provisions. I think not.  

  9. @Just Me, Thanks for the information, I didn’t realize that the FBAR penalties had increased. You’re right, according to the IRS manual (http://www.irs.gov/irm/part4/irm_04-026-016.html), until 2004, there was only a willful penalty, basically 10% of the value of the account, and with a maximum penalty of $100,000. After 2004, the willful penalty is basically 50%, with a minimum of $100,000, and there is also a non-willful penalty of basically 10%, with a maximum of $10,000.

    The law that increased the FBAR penalties is the American Jobs Creation Act (AJCA) of 2004, the same law that also created the first version of the exit tax. However, AJCA also removed the limitation of the foreign tax credit for the alternative minimum tax. These provisions don’t seem to be related to the rest of the act, like the way the second version of the exit tax was added to the HEART Act of 2008, and FATCA was added to the HIRE Act of 2010.

    Maybe I’m dreaming, but the fact that FATCA creates a complete repetition of the FBAR information in form 8938, with penalties only on the unpaid tax, makes me think that most congressmen don’t even know about the FBAR and its severe penalties. I still think that it would be easier to convince Congress to at least revert the FBAR penalty structure, or apply it to the unpaid tax only, or eliminate the FBAR, than to abolish citizenship-based taxation. I still believe that the government’s intention is to collect taxes, not penalties. It is very hard to convince Congress of anything, but do you have a better suggestion?

  10. @ shadow raider,

    I understand what you’re saying about the FBAR, but how could anyone rely on their definition of ‘unpaid tax’, and FATCA seems to also extend or alter all sorts of statute of limitations and conditions – leaving very few restrictions that might rein in the overzealous and punitive excesses. They can also change the penalty calculation basis, the reporting threshold, or what is to be reported at anytime, similar to what they chose to do with the FBAR, leaving an even bigger monster to grapple with – the damage for inadvertent errors by the honest average person will be huge. The GAO already noted in a report released in March 2012 that the opportunities for confusion with the FATCA forms has been flagged by tax practitioners whose opinions it solicited, but the US is going ahead anyway.

    See: http://www.gao.gov/assets/590/589717.txt 

    GAO-12-403
    entitled ‘Reporting Foreign Accounts To IRS: Extent of Duplication Not
    Currently Known, but Requirements Can Be Clarified’ which was released
    on March 29, 2012.

    …..”A variety of tax commentators, taxpayer representatives, and
    individuals stated that these duplicative reporting requirements have
    created confusion. They report being unclear about what and how
    information should be reported on both forms.”……

    ……This increases the compliance burden and adds complexity that
    can create confusion, potentially resulting in inaccurate or
    unnecessary reporting. Currently, the instructions and guidance for
    both forms lack any explanation of why and where duplication exists.
    Actions to reduce duplicate reporting requirements while maintaining
    the usefulness of the data for tax administration and law enforcement
    purposes would benefit filers. However, since the Form 8938 is a new
    requirement beginning after 2011, data are not yet available to
    determine the number of filers subject to these duplicative reporting
    requirements. Without these data, it is not known whether the benefits
    of reduced duplication would exceed the costs.”…….

    They obviously don’t care what happens to those reporting – even if just confused innocents, or ‘benign actors’ as the TAS says.  They are forcing it – with the pre-identified flaws on those affected, this year – without having corrected the problems – knowing that inadvertant errors and confusion will entangle those honestly trying to comply, and subjecting them to the usual draconian penalties and pitfalls. What can you say about a government who officially flags to the IRS, Congress, and the Treasury Department, problems with FBARs and FATCA, knowing fully and willfully, that it will entangle numbers of the innocent, and then force them to cope with the fallout on their own – or with high priced professional help – and goes ahead regardless. http://www.nytimes.com/2012/04/16/business/global/for-americans-abroad-taxes-just-got-more-complicated.html?pagewanted=all .

    And they wonder why people are lining up to renounce? There is unlimited potential for danger and jeopardy to the innocent, but the US has decided that it is expedient to push through these ill conceived initiatives – and either cover up, or ignore the ‘acceptable fallout’ that they were warned in writing of. Similar to how the US refuses to acknowledge the fallout on those abroad denied basic banking, and says that there is no evidence of a *’systemic’ problem. “

    “U.S. officials declined to respond directly, but have suggested that some of the concerns are misplaced.

    In another comment, American Citizens Abroad, a group representing
    expatriates, provided testimonials, many unsigned, from people saying
    some European banks have refused to open accounts for them, citing FATCA
    compliance burdens.

    Treasury officials are aware of anecdotal complaints about FATCA
    affecting U.S. citizens abroad, but they don’t see a *systemic problem,
    the Treasury official said.” from http://online.wsj.com/article/SB10001424052702304543904577398482312938046.html

  11. Well said Badger.  I understand where Shadow Raider is coming from. He is thinking logically and rationally, and unfortunately when it comes to the inter-tangled mess that is our tax compliance complexity regime, you can not get Congressman to change a thing, unless it comes attached with a SuperPac funding check!   And to your point, Shadow Raider, I don’t really have a better solution.  Other than to say, if  you are going to be a US Expat, living overseas, your choices are pretty limited.

    Comply or Renounce, Complain and Warn!   (still working on the best combination)

    Then there is the other choice.

    Come Home and divest of your offshore holdings.  Roger Conklin had to make that decision years ago, but he has kept the Complaining going, and so am I!

  13. @ Just Me, and @Shadow Raider;

    The US and IRS and Treasury still don’t get it. Here we are telling them the pitfalls for those who want to be compliant and for those who will be imminently trying to comply, and we get no traction. The Taxpayer Advocate has already told them. Compliance shouldn’t be made so fraught with potentials for inadvertant errors that it punishes those who are honest and are trying to cooperate. And, if the price (professional, time, stress, complexity, etc.) wasn’t so high, there would be more who would just shrug and go ahead. So, compliance isn’t what they want.

    They want the FBAR-‘n-FATCA Fundraiser as a permanent revenue generator. And they’d like the FEIE and foreign tax credits repealed too. As Phil Hodgen says ” the floggings will continue until morale improves” http://hodgen.com/why-people-expatriate/ and http://en.wikipedia.org/wiki/The_beatings_will_continue_until_morale_improves

  14. Wow @Just Me, I think France has been admiring (and now emulating) the US from afar. The global reach, and the multi-layering of claims to assets (no matter how small, where produced, where held, and undistributed or post-tax) by imposed by multiple governments on the same individuals is ramping up nicely. Where will it end?

    “French property, shares, jewellery, and a variety of other assets are included in the wealth estimate.

    Read more: http://www.dailymail.co.uk/money/mortgageshome/article-2158326/British-expats-France-face-shock-8-000-fine-declare-inheritance-trusts.html#ixzz1xhYiQ2K2”

    @Victoria, I know you’ve got too much going on in your life, but would be interested to hear what you think of this article, if you’re considering a Flophouse blog topic http://thefranco-americanflophouse.blogspot.ca/2012/06/two-tales-of-us-citizenship.html ?

  15. @badger…

    That was a Hat Tip from Victoria who sent it to me for my amusement! I bet she is working on something on her blog…

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