55 thoughts on “U.S. citizenship and a possible marriage penalty”

1. Many US persons are house husbands or house wives, meaning that their non-US spouse is the primary earner.  The FBAR-FATCA regime thus is an out and out assault on the privacy and the human rights of the non-US spouse who makes the money.

   Turns out, the guy who turned these guns on Expats, Mr. Timothy the tax Cheat Geithner, has also been caught red-handed giving the big banks information about interest rates BEFORE the announcement to the general public.  This enabled the banks to illegally front-run investment markets ahead of the crowd.  Geithner belongs in prison along with his buddies Jon Corzine, Barack Obama, and Charlie Rangel.  But these high level democrats will never go to jail.  They just want to fine expats and grandmas big multi-million dollar fines.

   When criminals run the government they turn innocent people into criminals.

2. I read that about Geithner the other day. That man will never even be prosecuted for what is clearly a crime.

   I agree that the reporting modes where never about the USP but about their non-citizen spouses. It is a fishing expedition. First they got the fish to jump into the net and now they are trolling with intent to net.

   It’s not possible to marry outside your American nationality and remain a US citizen anymore. And while this makes me angry, I am not going to bother to fight the inevitable.

3. How do I feel about having brought this plague into my home? My husband, born in Canada, is a US citizens through his father. He said he would have laid low if it weren’t for the mark of a US birthplace on my Canadian passport. I am not convinced that having a SSN and draft card would have not eventually revealed him to the IRS, as I don’t know how far the US might eventually go in mining information in their witch hunt for non-resident USP’s. I did a little investigating on that SS card that some may have hidden in that file box somewhere to try to determine how easy that might be, and found out about some of the politics, rule bending and mishaps that went into the implementation of the SSN card, and how the SSA is dealing with the prospect of one day running out of SS numbers:

   “The original purpose of the
   SSN was to enable the Social Security Board to maintain accurate records of the
   earnings of individuals who worked in jobs covered under the Social Security
   program. The card was never intended to serve as a personal identification
   document—that is, it does not establish that the person presenting the card is
   actually the person whose name and SSN appear on the card. Although SSA has
   made the card counterfeit-resistant, the card does not contain information that
   would allow it to be used as proof of identity.” 
   

   p>“In 1938,
   a wallet manufacturer in Lockport, New York, the E.H. Ferree Company, decided
   to promote its product by showing how a Social Security card would fit into the
   wallet. The company vice president thought it would be clever to use a sample
   card with his secretary’s actual SSN. The wallet was sold at Woolworth’s13 and many other large
   department stores, and the SSN was widely distributed. Many purchasers adopted
   the SSN as their own—5,755 people were using it in the peak year 1943, and 12
   were still using it as late as 1977. In all, SSA received 40,000 incorrect
   earnings reports under this SSN, which had to be reassigned laboriously to
   proper SSNs. SSA voided the much-used number and issued a new SSN to the
   secretary.”

   “In 1972,
   SSA created an electronic file, the Numerical Index File or Numident, to house
   the numerically-ordered master file of all assigned SSNs. In 1973, SSA began
   converting its legacy SS-5 records to the Numident electronic database,
   completing the conversion in 1979. There is one Numident record for each SSN
   ever assigned.

   In order
   to share data among government agencies or between commercial firms, a unique
   identifier to match records is critically important, and the SSN is the one
   unique tag that follows an individual throughout life. People may change their
   names and addresses throughout their lives, but their SSNs generally will
   remain the same.”

   “In August 1987,
   SSA began a three-state pilot of the “Enumeration at Birth” (EAB)
   process in which the parent of a newborn can request an SSN as part of the
   state’s birth registration process. Additional states began to participate in
   EAB in July 1988. By the end of 1991, 45 states, the District of
   Columbia, Puerto Rico, and New York City had signed agreements (Long 1993,
   83). Today, over 90 percent of parents use the EAB process offered in all
   50 states plus Puerto Rico and the District of Columbia. SSA receives nearly
   three-quarters of original SSN applications through the EAB process and issues
   over 4 million SSNs via EAB each year (SSA 2006). No microfilm SS-5
   exists for a record created through the EAB process.”

    http://www.ssa.gov/policy/docs/ssb/v69n2/v69n2p55.html

4. States force you to apply for SSN for newborns now. They hand you the form with everything else in the hospital.

   Only trouble with SSN is that the IRS (and to some extent the credit reporting entities) have multiple people attached to one number due to identity theft – illegal immigrants being chief among them. So while the SSA has the correct number with the actual person, the IRS can have more than one, and sometimes several, people attached to one number. Given the fact that right now, there is precious little sharing of data between agencies like SSA and the IRS, the IRS can’t really sort out who is who. It doesn’t matter to the IRS. They take in quite a bit of cash from illegals, so they are in no hurry to sort it out. (They also receive a good deal of money from people with fake SSN’s and they like that too.)

   If this sharing of info thing lights a fire in other govts, it’s only a matter of time before everyone is sporting a virtual barcode, but that could take a while.

   My husband doesn’t blame me for anything. He is annoyed about the crimp this puts on plans. He wanted to start a spousal RRSP for me and that will have to wait. We can’t sell his house and it is his but don’t want to take a chance. Things like that.

   This just confirms for me that my native land’s govt is the evil piece of shite that I have always suspected. I’d like to be more surprised, but I am not. Nothing that can be done but just keep on the path to relinquishment.

5. I suspect that when push comes to shove that in some senior mixed marriages where one spouse is a dual US Canadian , the Canadian partner may seriously have to consider divorce in order to separate their assets instead of facing the loss of their family home because of the settlement of estate taxes to the US.
   How about all the unsuspecting Canadians married to US duals who no nothing aboiut FATCA or FUBARS?
   How many seniors will lose the benefit of inheriting their deceased dual’s RIF LIF or RRSP’s which would have rolled over tax free to the surviving spouse in Canada but suddenly the survivors have to pay out US estate taxes because they are being unfairlly treated as a non US person and so have no right to the US inheritance tax exemption??
   What about those married to a disabled spouse who can’t renouce citizenship and so when that person dies the survivng spouse is forced to pay estate taxes so their income is suddenly cut off or reduced below the poverty line ? Suddenly you are faced with the prospect that the home you both contributed to has to be sold and you OWE money to the IRS because of estate taxes which will further reduce the standard of living you have worked so long to attain?

6. DTRHole –

   So much excitement. For 2013, the first $5.25 million is excludable. Over the fiscal cliff we go, yoho yoho.

   http://www.forbes.com/sites/deborahljacobs/2013/01/02/after-the-fiscal-cliff-deal-estate-and-gift-tax-explained/

7. The Canadian government goes to great pains to try to prevent Canadians and its permanent residents from being victims of marriage fraud:

   “If you are a Canadian citizen or permanent resident and you meet someone from another country on the Internet or while travelling, you should take care if you are considering marrying them and sponsoring them to Canada.”
   

   The Canadian government’s level of concern should also extend to spouses who can do economic harm to an unsuspecting Canadian/PR, such as by marrying a USPerson.

   “There are some people who think marriage to a Canadian citizen will be their ticket to Canada.”
   

   In the case of a Canadian marrying a USP, it could be their ticket to hell!

   “Effective October 25, 2012, sponsored spouses or partners must now live together in a legitimate relationship with their sponsor for two years from the day they receive permanent residence status in Canada.”
   

   In the case of Canadians marrying Americans, at least into the first tax filing season 🙁

   http://www.cic.gc.ca/english/information/protection/fraud/marriage.asp

8. @a

   That’s an interesting perspective on why the IRS may not be in a hurry to sort out the illegals with the SSA, as they are revenue generators. 

   On the marriage note @a, I wonder how happy some Canadian spouses would be if their USP spouse had qualms about renouncing after they both learn about the one’s tax filing obligations. If some marriages are already rocky, expect citizenship based taxation to cause more than a few divorces and a lot of USP’s fleeing back to the US.

9. @dtrh:  For me my religion will allow me to tell my former country to f-off before it will allow me to divorce my wife.  Sorry USA.  She comes first.

   I should also mention that I like my wife much better than the United States. It is my choice to take my wife over my country. I have explained to reporters and on the FACTA Fact Finding video that I chose my wife over my country. I have to protect her first. If I can’t protect my wife there is no point in even having a country, because “country” or “nation” as an entity is there first and foremost for the mutual protection of the families who make up the country. When the country begins to attack the family, that country no longer serves the purpose for which the People created it, and it deserves to end–or our relationship with this evil principality must end. That is why I renounce the United States.
   

10. Bubble – I suspect that people will/have divorced as the magnitude of the problem grows. However, I wonder if for younger couples how much of a problem it will be given that so many anymore don’t marry and keep much (or all) of their assets separate and if this will be incentive to couple but not legally marry.

    I agree though with Petros. There is no contest between one’s spouse and one’s citizenship but it was nasty of the USG to make this an issue in the first place.

11. @a, are the US person? You wrote that the house is in your husband’s name, but if you file separately with the IRS, you would still have to pay taxes on the proceed of the sale?

    Can you explain? I am just curious on how this works. It seemed to me that one way of protecting the non-US person and his/her assets in a dual household (although non convenient and non desirable) was to separate the finances and have only the US person filing taxes separately with the IRS. If he is Canadian and the house is in his name, why can’t you sell the house?

12. *@Christophe, I agree.  I would have thought it would have only been a problem for @a if they were filing jointly and/or owned the house jointly.  

13. I am the USP and I do file separately. About the house, I am not sure. In a lot of instances where money is concerned – inheritance for example – the USG doesn’t recognize our marriage. But if they stand to gain money, they do recognize it. Make sense?

    Some of the problems is the lack of transparency on the USG’s part. It’s impossible to get straight, clear answers when you ask questions. So far, I haven’t had to resort to paying someone though when we drew up wills and such, the Canadian lawyer pointed out that the documents were legal only from a Canadian law pov. The US might view things quite differently and we’d need to seek out a US lawyer to know for sure.

    Basically, if you keep the USP’s finances separate and he/she files separate and you own nothing commonly like property, it’s possible – in theory – to keep the damage to your non-US spouse at a minimum. But it gets tricky when spousal rights come into play. There is a presumption of “shared”. For instance, if my husband wanted to use the house to open a line of credit – I have to sign off b/c it effects what Canada terms my “dower rights”, so I am assuming that if he sold the house, I would have to sign something and does this leave us open to the IRS? I am guessing they would say “yes”, but that’s only a guess. I am not willing to chance it.

    Aside from preserving my marriage, the confusion over the rules and what is or isn’t kosher is just mind-numbing and it’s reached the point where I can’t be both a USP and be married to a “foreigner”. I will always choose my husband over the made up notion of nationality, but the USG has gone out of its way to make itself an enemy of my marriage, which is doing me a favor b/c it makes severing my ties a little bit easier.

14. @a

    In the case of selling a home, I hope you have considered that even if your were factored into the situation, there is an exemption for singles of $250K on the net proceeds of the sale. (Bear in mind that the IRS no longer factors in the purchase of another home).

15. Bubble, I am aware of the exemption and I think, again not sure, that only my half of the sale proceeds is counted not the whole. But, as I said, we prefer not to put anything to test. It’s not a huge thing to wait until it is no longer an issue. It’s the principle. USG interfering outside its own jurisdiction ( and I am well aware that the USG considers the entire world its jurisdiction if there is profit or power to be had).

16. @a 

    I completely understand. Both my husband and I are afraid of making any significant money moves until we put OVDI and renunciation behinds us. We’ve been hung up over 13 months now and we aint getting any younger!

    @Petros

    Bravo. There should be no competition between love of family and love of country, but that is the future of America, the land of the free.

17. @all, I think that it is eventually not a viable plan to keep everything separate – because inevitably, disability, death or divorce, or having children can spread the US IRS blight onto the other family members. It is not possible to keep it contained and quarantined forever, due to unforeseen life circumstances, and because if @a is correct, the IRS and Treasury will continue to work at methods for extorting assets from the non-US spouse or other family members. And the inability to benefit from registered savings (other than RRSPs with scrupulous annual reporting) means that our households are forever encumbered by the US person who can never save or invest in most of the options open to those who do not carry the US taxable and reporting burden. A household with one US person is always more burdened than one with none – no matter whether the assets are kept separate or joint. One person is never able to achieve the same savings results.

    Even with completely separate accounts, at what point will the IRS try to claim that the US person may be benefiting in some way indirectly or vicariously via a spouse’s assets? And, even if accounts are kept separate on an everyday basis, what about advance planning? Inevitably someone has to be a beneficiary, executor, or the person who created the estate. Inevitably someone will become incapacitated. It is unrealistic to think that operating without any kind of advance planning documents, in order to maintain things cleanly and separately will work forever. Life is full of messy and unforeseen complexities.

    Or in situations where the individual or couple want to operate a business? The US has made the rules for those ‘abroad’ more and more complex – which basically amounts to deliberate entrapment to ensnare people just trying to live any kind of normal lives ‘abroad’ – as our fellow citizens and residents here do, and as those living inside the US are allowed to do.

    The twin US aims of extorting funds from those living and earning (or born) outside the US, and tracking all assets, via inventing new and ever more extensive financial reporting liabilities – may result in penalties as proxies for income tax – in order to entrench penalty revenues in lieu of the US taxes that they cannot currently assess from those for whom the FEIE and Foreign Tax credits mostly work. I am firmly convinced that this is the motivation for them to continue to keep the FBAR threshold at the very low $10,000. aggregate.  They are at work to invent other liabilities. They are looking for all possible ways to get at assets produced and held in other countries, via US-birth or inherited citizenship. Our home countries have no say over what US domestic laws are created, and any ‘protection’ our so-called ‘reciprocal’ tax treaties contain, have serious leaks in them already (ex. US taxable  ‘foreign trust’ designation of registered savings like TFSAs, and deemed taxable sale of our principal residence via capital gains, and now the Obamacare tax).

    We see that it is entirely possible for the US to continue to creatively invent additional liabilities for those outside the US – like the Obamacare double-tax, http://www.theglobeandmail.com/report-on-business/us-expats-in-canada-face-new-obamacare-health-care-tax/article7372249/ without effective recourse or consent. I expect more of the same. If they see that we can legitimately and lawfully plan to keep all assets separate in a mixed US citizens and non-citizen household, I expect that they will try to make that even more impossible – which it appears that they have the power and incentive to do. The US will not admit to any limits on taxation and invention of liabilities for those abroad – we see already that basis entrenched with the ‘savings clause’ and ‘just in time rule’, as well as the sly attempts to cast the FATCA IGAs as just an ‘interpretation’ of existing tax treaties ( see recent blog comments by Prof. Allison Christians ” Sunday, January 20, 2013 “Why FATCA is a Tax Treaty Override” at http://taxpol.blogspot.ca/2013/01/why-fatca-is-tax-treaty-override.html ).

    The official US discourse willfully and strategically evades acknowledgement that we already pay taxes where we live and earn, and hold another citizenship – through birth or naturalization. They never admit that. Even if that may sometimes be due to ignorance, we have seen how the IRS and Treasury never ever acknowledge it in public statements about the ‘tax gap’, and in speaking of their hunt for ‘offshore’ ‘foreign’ accounts. They speak only of those who ‘are not paying taxes’ and refuse to discuss any ‘same country’ exceptions for FATCA, FBARs re our local banking. They refuse to admit that they are effectively depriving us of the ordinary benefits to banking and saving that they offer to US residents, as well as depriving us of the equivalent benefits that our home countries offer as well.  This is deliberate and willful. They refrain from drawing any unwanted public attention to the significant and unjust collateral damage done to mostly ‘benign actors’ and minnows – as the Taxpayer Advocate has repeatedly documented in her reports to Congress. Why let the truth get in the way of extorting revenue by any means possible?

    The work around for the FATCA IGAs had to be discussed and deliberately crafted by lawyers and others working for Treasury and the IRS. That is so disingenuous and so unethical that it brings the US into disrepute. Prime Minister Harper and Finance Minister Flaherty, and any other Canadian politicians who are aware of this should be ashamed if they are colluding with the US to enable this to bind and burden their own citizen and resident households.

18. Badger hits another home run!

19. I agree with bubblebustin, badger. Your analyses and postings hit the nail on the head and put into words what I cannot. Thank you so much.

20. @all, re the “US citizenship marriage penalty”

    When we said ‘I do’ here in Canada, unbeknownst to us, the IRS insinuated itself into our marriage bed via our family and household accounts. Since when does the mere marriage to a US person constitute a waiver enabling the IRS to assert that non-US spouses have signed away their own personal Canadian Charter and
    Constitutional rights inside Canada over their jointly held accounts?

    I’d like to see a media report and academic papers explore that premise from the perspective of the Canadian-singlecitizenship-only spouse. I think it’s a pretty catchy angle. And it should also note the IRS barrier to effective advance planning agreements.

21. Badger did it again!

    Our marriage is not rocky but I must admit we have explored the possibility of a “divorce of convenience”. My husband feels badly for inadvertently pulling me down into the IRS morass. We have wondered if the only real solution would be for him to return to the USA and leave me behind in Canada after a paper divorce. Aside from the fact that this separation would be gut wrenching, we could absolutely not afford to maintain two residences and both of us would then plunge quickly into poverty as a result. So much for the “only real solution” — it just isn’t workable.

    There’s also the fact that my husband genuinely wants to become a Canadian and is well into the process now. He only kept his US citizenship because his mother was alive and it seemed the easiest way to go back and forth across the border to visit her. She passed away last year so the need to go there no longer exists. We honestly do not know what to do except plod along with a plan that doesn’t seem to be progressing quickly enough to outrun the fast developing advancements of FATCA and IGAs.

    For me, the looming question is IF the Canadian government betrays us with an IGA, will I be able to cope with the possibility of betraying my departed Canadian parents by one day having to hand over my inheritance to the IRS because of FBAR and who knows what other penalties? I would give it all away before I’d give it to the IRS. Let them try to squeeze even a penny out of this minnow-rock. It’s hard to see this as a bright spot but we are both getting older (me more rapidly than my more placid husband because the worry has sent my aging process into “doggy years”) so maybe death will solve the problem in the nick of time but I doubt it because the FATCA/IGA train is moving faster than anticipated.

22. Em, divorce of convenience is anything but as you point out and completely unfair for any of us to have to consider. The only path that makes any sense is dumping US citizenship but in the long run, I have no doubt that the USG will find ways to overcome that obstacle too. If you pay attention, you see that in all the FATCA talk, it is not about US citizens but US persons. A very flexible word that will only become more expansive with time and creativity.

    Badger, you are so correct.

    I continue on my path to citizenship and with the intent to relinquish and for good measure, I have planted and am nurturing the seeds that will ensure that my daughter will renounce as soon as she is of age – and thankfully it will end there b/c she doesn’t have enough boots on the ground time in the US to pass that curse on (although I don’t discount that the US might try to change the rules on that at some point.)

    I don’t understand at all the Canadian govts reluctance to draw a few lines in the sand. The US is frenemy more than anything else. Today’s headlines down there are making hay with the alleged fact that it was Canadians who helped stage the kidnappings in Algeria and that can only be to help the USG arm twist Ottawa into another military adventure that won’t benefit our country one bit. Maybe that’s a bit conspiracy theory but I am all out of love for the land of the free right now and it’s far easier to see the worst than not in them.

23. Do a paper divorce with the US, not your spouse! 

    The amount of damage to people’s lives the US is creating is beyond belief.  

     

24. Try explaining FATCA and FBAR to a Chinese wife, who wasn’t even aware that she became a USP simply because her husband decided to get her an ITIN so they could file jointly (she has no income of her own at the moment).  There’s a lot she wants to do with our money but I’m afraid to do anything except leave it in the simplest of bank accounts.  Perversely, the path with the least headaches is to just move my money back to the US where they’ll stop whining about it.

25. “Do a paper divorce with the US, not your spouse!”

    @ Abused Expat

    That is our plan but the wheels of Canadian citizenship, renunciation and CLN acquisition grind very slowly so time is not on our side. There is no evidence of benevolence coming from the US vampire squid because if it really was only after the onshore whales with offshore accounts, it could have included in those 544 pages of FATCA regulations some provisions to at least let offshore and onshore minnows swim free. For instance, the squid could have granted those who have had overwhelmingly more ties to the country where they have resided with dual-citizenship for 5 years or longer a total amnesty and exemption. It could have also raised reporting levels for 1040s, FBARS, FATCA banks, 8938s, etc. to a much higher level and made it the same level for everyone. That bar goes up and down like a limbo pole. Who can keep track of all the provisos? The squid chose to be malevolent and evil is as evil does.