Dear Democrats Abroad member,
Your FBAR/FATCA Task Force has been working steadily to seek relief for overseas Americans facing onerous tax reporting burdens. This is an update on developments related to taxation of overseas Americans and on our advocacy work.
A New IRS Program for those who have not filed
The Internal Revenue Service has made a significant concession to overseas voters who present little or no risk to tax avoidance. On Tuesday June 26, 2012, the IRS announced it will provide a new option to help some U.S. citizens and others residing abroad who haven’t been filing tax returns and provide them a chance to catch up with their tax filing obligations if they owe little or no back taxes. The new procedure will go into effect on Sept. 1, 2012. See these postings on the IRS website for the details of the new program:
[Auther’s Note: the above urls are correct, but if you cannot open them directly when you lick the hyperlink, simply copy and paste the addresses in your browser window.]
We believe our submission to the IRS, Joe Green’s testimony at the IRS hearing and our joint advocacy with other organizations of overseas Americans were at least in part responsible for the new IRS program. It seems that some of our concerns are being addressed.
FATCA has come into effect
FATCA reporting has come into effect for the current filing year; i.e., to be submitted with the 2011 US tax return. The good news is that the threshold for reporting under the FATCA regime (Form 8938) has been raised from $50,000 to $200,000 for individual-filing Americans living abroad (to $400,000 for Americans living abroad filing jointly). That will bring relief from this filing obligation to a significant number of overseas Americans.
Many of us living outside of the U.S. will likely need to continue to seek professional help for filing the various tax forms required of us. We have heard some pretty horrendous stories about Americans being fleeced by unscrupulous tax preparers, so we urge that you use caution in finding professional financial help.
Overseas Americans Surveyed for FBAR/FATCA impacts
As you know, in April of this year, Democrats Abroad issued a survey for overseas Americans to establish data around the impacts of existing and new tax reporting requirements. The survey results through to May have been analyzed and they paint a rather bleak picture of the struggles we face dealing with tax and foreign account filing requirements. As a result, they have been very useful in our discussions with government!
They suggest that too many of us:
- understand too little about our tax filing obligations;
- harbor considerable fears about fines and penalties that the U.S. government agencies responsible for tax reporting and collection have imposed and are proposing;
- are negatively impacted by the fact that that, in a growing number of countries banks, brokers and other financial institutions are refusing to open new accounts for American citizens and, in some cases, closing existing ones; and
- may choose to remain or go underground in relation to tax filing, or even consider giving up cherished American citizenship.
None of the respondents, most of who insist on anonymity because of their fears, believe that our government’s serious attempts to root out fraud, money laundering and tax evasion are unwarranted. Indeed, expat Americans cheer such efforts.
The survey results are compelling and we thank Gary Suwannarat and Amanda Klekowski von Koppenfels for their excellent work preparing the survey report. The survey is still open and we welcome you a) to participate if you have not already done so and b) to send the survey to other overseas Americans. This is the link to the survey:
Overseas Tax Filers invited to submit their Expat Tax Stories
The stories told on our Expat Tax Stories website (www.expattaxstory.us) give personal expression to data in the FBAR/FATCA survey. Thanks to Alex Sirota for building the website which is creating a flesh and blood record of the experience of overseas tax filers. The website is still live and we encourage you to use it to tell your individual story about US tax compliance or read the stories submitted by others.
Our advocacy work
In our discussions with political and bureaucratic officials we go to great lengths to express our support for the Government’s crack down on money launderers and tax cheats before explaining the adverse impacts and outlining our recommendations for making FATCA less harmful to overseas Americans.
Democrats Abroad has recommended the following reforms to FATCA to offer relief to law-abiding citizens living abroad and to enhance FATCA’s intended function as a tax evasion deterrent:
- 1. Define a foreign or offshore account as an account in a country other than one’s country of residence or the US, thereby recognizing the legitimate need for local banking services;
- 2. Raise the FATCA reporting threshold to $1 million to put the focus on taxpayers with wealth sizeable enough to justify the costly and complex investment structures normally used to conceal assessable earnings;
- 3. Index the reporting threshold to inflation so that it goes up every year just as the Section 911 income exclusion does;
- 4. Add a provision that excuses anyone who does not owe taxes (because of the Section 911 exclusion or any other exemption or a tax treaty) from the obligation to file form 8938, regardless of the threshold reporting;
- 5. Merge the FBAR reporting requirement with the developing FATCA legislation to eliminate duplication in filings; and
- 6. Offer amnesty to overseas Americans who are delinquent taxpayers, inviting them to pay what they may owe and restore their status as tax-compliant citizens. (See our opening remarks for our success in this area.)
So, ladies and gents, while we have made some progress in in ameliorating the toxic (or is that tax-ic) issues that the Task Force was created to address, we continue to discuss our concerns with the governmental bodies that are charged with implementation. When the time is right (not in the midst of the federal election campaign), we are optimistic that we will achieve more – or perhaps all – of our goals. And, when appropriate, we will get back to you with specific actions that you may be able to take.
But, as we move forward toward November 6, please bear in mind that, as troubling as our tax issues are now, conditions would be much worse (taxes and way beyond) with a Romney presidency, a tea party House and a Senate without a filibuster-proof majority. Imagine a right wing activist Supreme Court for thirty years (despite the welcome news about the President’s historic health care initiative)!
Let’s Get Out The Vote!
Your DPCA FBAR/FATCA Task Force,
Joe Green (Canada) Chair, Stanley Grossman (UK), Maureen Harwood (Canada), Carmelan Polce (Australia), Maya Samara (Switzerland) and Joe Smallhoover (France)
I’m still waiting for some kind of response from Joe Green.
Are our voices being heard?
@Foo: I also would like to see Joe Green’s response to the many comments here. He was quick to say Wow. That was fast. Unfortunately, he has not been quick to respond to our many comments. Perhaps he hasn’t been back to Brock since then, but it would be nice to have a response from him or Democrats Abroad.
*@Just Me – Thanks for posting that ad. I’m avoiding US media like the plague these days so haven’t been following things or seeing ads. Yes, I think the Democrats are showing their true colors and it’s clear they are not interested in Americans abroad. It drives me crazy when I see and hear stuff like this. Americans (homelanders) are ignorant enough the way it is without adding any more fuel to the fire. I can’t believe the uninformed, silly, and ignorant comments people post to those news stories about “tax cheats renouncing their citizenship.”
I’ve been a lifelong Democrat, but that is OVER. When I told a friend I would never vote for Obama or another Democrat again their jaw dropped. Then I said, “Well, I wouldn’t vote for a Republican, either.” Actually, if I was voting this fall (which I’m not) I’d write in Ron Paul.
I’m not impressed with this latest letter from Democrats Abroad. However, to their credit, at least they are working on it. To my knowledge, Republicans Abroad haven’t addressed it. I looked at their website out of curiosity once and didn’t see anything.
@SadCdn: My 89 year old mother has been a life long Democrat (as were her parents). She, like you, will never vote Democrat again. She, like you, will also never vote Republican. That’s how fed up she is. Her grandmother was a suffragist, so voting as a responsibility and a right was always instilled in my mother.
Because I relinquished in 1973, I haven’t voted in any US elections since then (Despite advice I received from Joe Green in 2004 to “get with the program. Pennsylvania is a swing state.”)
I must say, however, I am quickly losing hope about my voting options in Canada, too.
@just me, this is part of the conversation Democrats Abroad is having on Facebook regarding their own party’s attack ad on Romney:
Democrats Abroad suggest…
‘start by voting and making everyone of your friends outside the US do the same. We need to make our voice heard. From there, we can work on dispelling myths – changing attitudes — but we won’t be able to do much if someone who doesn’t feel he needs to be transparent is in the White House!”
Myths that your party is perpetuating, Dems Abroad!
I’ll concede that someone proposing that an administration favours certain races over another does not necessarily make them a racist, for to ignore that possibility would be perilous. But from what I’m learning about how the US government runs its administrations, I’m growing more inclined to believe that it’s more ineptness than much else that results in things like loopholes that allow tax credit abuses. Do you have part 2 of this news story, the reaction from congress to the child tax credit abuses, which to me would be very telling? That being said, I must say that I care more about Canada and the US’s abuses towards its citizens abroad. Their’s is an equal opportunity attack against their own where the only distinction made concerning colour is that of our money.
*@Blaze – I feel so betrayed – by Democrats as well as my own country. I feel like I’ve been used.
It’s got to be really, really hard on your mom to see what has happened and what is happening.
The only way that Democrats abroad can have a voice is if they all register to vote in Florida as a new political party for Americans abroad. If we are all registered in the same city, then we’ll be sending our party representatives to the house and senate.
I don’t think that the democrats or republicans don’t care about American abroad. They might care, but they don’t think about them. It shows their ignorance. They didn’t think about them when they created FACTA, because they only thought about homelanders tax evaders. They certainly didn’t think about them when they created this ad, which was targeted at Romney – not expats.
It shows the lack of analysis (of either party) in their actions.
And the reactions of the people in the ad are normal, I would say. They’re asked to comment in the context of a multimillionaire homelander opening foreign accounts. Do you think they might think one second that it might not be normal for people living abroad to have one?
Actually, it shows more the ignorance of people about finance and the disconnect about their own finances and those of Romney’s. How many middle class americans can actually picture how much money the guy has, and that it actually makes sense for him to diversify abroad, when all they’re dealing with is multiple orders of magnitude less.
The part that is less understandable is that most homelanders call expats tax cheat if they don’t “follow the rule” and file their tax return with the US. That, I don’t understand… It seems common sense that if you don’t live in the country, you should not have to pay taxes for services you don’t receive. I think they’re more against the fact that some expats don’t follow the law, even when they might know about it, even if the law itself is not fair.
As for voting, well, I can’t vote. But it would have been a difficult choice this time. Yes, Ron Paul might have been better for America than either candidates.
*Just me. You miss the point about the Obama campaign’s anti Mitt ad.
They say nothing about the accounts of people living outside the US. Nor do they complain about legitimate accounts.
Mitt pretends to be a man of the people. He goes around in jeans and a plaid shirt and was reluctant to release his tax returns showing that his average tax rate is 15%.
Vanity Fair has an article suggesting that his off shore accounts are highly likely designed to bury his assets from view by the voters.
This ad raises legitimate concerns about Mitts suitability to be POTUS
@swisspinoy, what a great idea!
Part of the conversation at Dems Abroad’s Fb page:
Part of the problem we have in congress regarding laws that negatively impact US persons abroad are a result of misperceptions many resident Americans have of us. This ad perpetuates these myths. If the Obama campaign really cared about us, they would distinguish us from the real offshore tax evaders. Without this distinction, we are being lumped together and will make it worse for us in the eyes of the general public. If the Democrats REALLY cared about our votes and want us to trust that they will give concern to them if they are elected, they are doing little to make us trust them with this kind of rubbish. This ad give the false impression that all offshore bank accounts are bad. In fact, I wouldn’t be surprised if Romney’s offshore bank accounts are legit, which the ad makes no distinction between.I have more than just a few times been accused of being a traitor and tax evader by Americans in the US because I object to extraterratorial taxation. Sen Levin is responsible for FATCA, Cong Tierney just made efforts to eliminated the FEIE, both very negative for US persons abroad, both Democrats. Dems Abroad should be urging their own party to run ads that put non resident US citizens in a favourable light if you want my vote. I would rather be pandered to than ignored!
I too have wondered about the lack of anything from the Republicans Abroad. I don’t know if they are afraid of the offshore issue, as it is a toxic word these days, and would they rather work silently on it rather than make it a public issue that they would be attacked on politically? There must be some calculus there that I am not privy too.
I don’t think I missed the point of the ad. I am talking about perceptions, and the subtlety of what you say is correct, but it is lost on the uninformed watcher. This ad is also working on the subconscious of that person. The clear message is “Offshore is Bad” I bet that poll tests very well. This implies that somehow an offshore account, by it’s nature is bad or un-Americana or suspicious. It is very effective in that regard. “Offshore” is almost a toxic word, which makes our job harder when trying to explain why efforts directed at offshore accounts like FATCA are poorly conceived with the many unintended consequences. If you tried to explain that to a person who just watched that ad, you would have a Big bias mountain to climb to overcome what that ad reinforces and plays to…
Now, as far as Romney goes, you are correct, that he has some serious perception problems to deal with related to how he has structured his financial affairs. Everything he has done off shore could be, probably is, technically very legal, but it is still suspect in the minds of the audience that ad targeted.
Frankly, it is getting to be more suspect in the minds of others that are not just the Left engaging in a hack job (which some would want to dismiss the Vanity Fair piece as being). This article was just published on Inside Business today..
It’s Starting To Look Like Romney Has A Dirty Tax Secret
Bottom line, his financial life is complex, and a lot of it is offshore, and that is not something the average man participates in or understands. While it may be just legal tax planning, it is conflated with Wall Street financial engineering in the minds of the listener, and as such is effective at demonized all that have offshore activity. It does not help in our cause, as it does not positively reinforce the difference between illegal and legal offshore accounts.
If the ad was to differentiate between legitimate and illegitimate offshore accounts, the Obama campaign wouldn’t be able to use these, by all probability, unwarranted claims. I agree that ‘offshore’ is a dirty word by now.
I thought that I ought to just simply write a letter to the ambassador asking for the renunciation forms to be sent to me. Obviously, I would not provide a reason.
I am not at all committed to fill them out, but it is one person’s effort to send a message to the embassy.
Would anyone care to do the same? I wonder what effect it might have if the printing and mailing budgets for those forms were to go up significantly.
@Just Me, I check the republicansabroad website, and there is really not much content…
Mainly about how to vote and where to find your local chapter.
They don’t seem very active.
I love the Capital Steps… I don’t suppose you caught the 4th of July program, did you…?
I have tweeted Republicans Abroad a few times asking about their position, but heard nothing back…
@mark twain, love your idea, we’d probably at least blow their postage budget.
The Facebook page for Republicans Abroad doesn’t reveal much in the way of issues facing US persons abroad. Not even slamming Obama for our treatment, a missed opportunity I think.
For what it’s worth, here’s a strong second to your multiple defenses of open discussion, freedom of the individual, tolerance of very diverse opinion, and reliance on community response to steer the course.
To shut up the voices that someone doesn’t want to hear only reproduces nasty tendencies that Brock is locked in struggle with – pragmatic politicians focused on nothing but the lowest common vote, dead or useless phone lines at the IRS, exaction of tribute with little avenue of recourse and no regard for justice, opaque embassies and consulates that seem to operate on whim, morass of cynical legislation, etc
By the way, I don’t cotton to your militaristic streak. But I just cut you that slack and don’t waste time trying to remake what I don’t like. Instead I treasure your backbone and your persistence and your entrepreneurship and your sardonic streak.
Rhetoric and fantasies aside, the main power that any of us individuals has is that ten-toed vote. Imagine the impact of only a million renunciations. That could be thinking too small?
If all the overseas Americans would ban together regardless of the past voting pattern or political belief and ask for the Ways and Means Committee to stop all the tax changing nonsense and Void the entire Federal Tax Code, Pass the FairTax and that one act would fix all the expat tax worries. The fairTax is a National sales tax that voids all other taxes and collects the sales tax, on a territorial basis, on new goods only, with nobody paying taxes on used goods or on any goods up to the national poverty level. *
@USX, thanks for the words of affirmation. It means a lot.
I’m not sure what you mean by militaristic streak. We have used war metaphors, but the usage is for now in any case, metaphorical. For us, being in a war means that we find various non-violent means to rally the “troops” and “fight” against the tax “Jihad”. I am serious about the US extra-territorial taxation being a casus belli, but that doesn’t mean I endorse a war against the United States. I think it means that our government needs to circle the wagons around Americans in Canada and to protect its tax bases lest the USA continue to act like a spoiled brat, essentially stealing from all Canadians; we have to do politically what it takes to end this. I just spoke on the phone last night with a couple of Brockers who said that their daughter’s unemployment insurance was subject to taxation, being money received not from wages!!!! I couldn’t believe my ears–I actually am still incredulous. Folks, what the United States doesn’t know can’t hurt you–can’t hurt us.
On the question of ‘good news?’: The Canadian pooled registered retirement plan is closer to implementation. That could be considered good news for those in workplaces without a pension plan. Unless you’ve been deemed someone with US tax-chattel status.
“The PRPP tax rules have been designed to be simple and straightforward and to promote low-cost plans. The legislation amends the current Income Tax Act and the Income Tax Regulations to accommodate the establishment of the new vehicles. The tax rules for PRPPs will apply to both federally and provincially regulated PRPPs and will operate alongside the Pooled Registered Pension Plans Act.”
Not only is it likely that this would be taxed and reported to death by the IRS, and subject to the usual draconian and confiscatory penalties for inadvertant errors, but the reporting could be just as complex as some of the other registered plans deemed to be ‘trusts’ (TFSAs, RDSPs, RESPs). This is my own opinion – judging by the history of the IRS deciding that anyone outside the US cannot use US tax benefits, but steadfastly preventing them from benefits where they live, work, and pay taxes. And, those Canadian born duals are in the same situation as those with naturalized Canadian status.
Those with deemed US tax chattel status have been advised not to participate in those registered plans (other than RRSP and RRIFs) because the required reporting is so complex and expensive to do, they are not exempted from tax by the IRS, any benefits are wiped out by the reporting and US tax costs and because of the usual draconian penalty regime.
Problem with just trying to avoid the jeopardies of holding one is that the PRPP may be made mandatory by some employers:
“Automatic enrolment will take place where an employer offers a PRPP”
Minister Flaherty knows this, as several of us have flagged the problems with the punitive treatment of registered plans by the IRS, including the PRPP. If the PRPP is made mandatory by some employers, we’ll be subject to jeopardy without recourse.
It may be that the PRPP will fit into some kind of category similar to the RRSP, but since the IRS considered RRSPs to be trusts at first, then changed their minds but required annual reporting, and it took decades for them to come to a better arrangement (details due soon), it doesn’t look good for the PRPP.
I’d like to hear Minister Flaherty announce that he has obtained a pass from the IRS for the PRPP similar to the treatment of RRSPs, but that is probably a vain hope.
Doomed to be discriminated against and punished again by the IRS – and prevented from Canadian government blessed savings like a single citizenship Canadian?
Another link: http://business.financialpost.com/2012/06/07/contemplate-mandatory-participation-in-pooled-pensions-cppib-chief/
And a nod to the other costs that those with PRPPs would face:”Denison, who is retiring from the CPP Investment Board at the end of June, noted that two-thirds of workers in Canada do not participate in a workplace-assisted retirement program.
He urged policy-makers to ensure participants get the benefit of wholesale rather than retail fee levels, because every one per cent of fees charged for investment management and administration can reduce accumulated retirement savings over a working life by about 20 per cent.”
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Here’s an update on the child tax credit loophole debacle. Polarization in congress again sees that the US taxpayer gets the pointy end of the stick. What would be better proof that I was unaware of my responsibility to file US taxes as I never asked a dime from the US government while raising two children on modest means in Canada?
And what do you think these new Custom and Immigrations people will be doing at key European airports?
They will be on a fishing expedition to get US persons, including greencard holders etc. or am I wrong?