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)