Having stumbled upon this article, I had to check the date to see when it was printed because it seemed quite similar to the current situation today. Where have we heard this before? This suggests that there is no hope that the US government will ever learn from its mistakes:
Americans Abroad Angry About Tax Snare
Dec. 20, 1979. By R. C. Longworth. Chicago Tribune.
After living for nearly 20 years in Switzerland, Cartoonist Hank Ketcham faced the crucial choice – either return to the United States or become a Swiss citizen. Many of his American friends in Geneva were taking Swiss citizenship, but eventually the creator of Dennis the Menance returned to California.
“I had to think about Dennis,” Ketcham said at the time. “How would it look if the all-American boy had a Swiss father?”
There are two points to this story – that Dennis’ “daddy” would even consider giving up his American citizenship, and that some Americans he knew had already done so.
This is a sharp change in the history of Americans overseas. Normally, no American, no matter how expatriated he became, ever considered giving up his citizenship.
The change is traceable to one factor – a new American tax law that can raise the taxes of Americans abroad well above what they would pay at home. At the very least, the law produces extra work and confusion. At the worst, it penalizes the American or, often, the company that sent him abroad.
The evidence that Americans are increasingly becoming ex-Americans comes mostly from informal reports from abroad. The State Department says it keeps no statistics on the matter.
But Bill William, editor of the Brazil Herald and a 20-year resident of Rio de Janeiro, wrote recently that “taxes were one of many elements” that led him to take Brazilian citizenship. He is not alone, he added.
“But almost without exception, the growing number of ex-Americans deny that taxes influenced their decisions – in fear, probably, that the Internal Revenue Service would hound them for 10 years, which it reportedly can do if suspicion exists they changed nationalities to evade taxes,” he said.
No matter what they say, he said, these ex-Americans “got a big push from their own government, thanks to their country’s unique and absurd laws taxing its citizens living abroad on their incomes earned overseas.”
What bothers Americans abroad most is the fact that the United States is the only industralized nation that taxes its citizens overseas. Other nations hold to the belief that taxes are a fee for services and should be charged only to residents who actually use the local services.
The U.S. government claims that most American taxes go for U.S. defense, which also protects Americans abroad. Since this argument implies that all persons outside the Soviet block should pay American taxes, it is not taken very seriously by nonresident Americans.
Instead, they see it as the result of a home-grown misconception of life abroad – an attitude expressed by Sen. William Proxmire, D-Wis., who sneered at overseas Americans as “mink-swathed, high-living jet-setters living at the taxpayer’s expense.”
Most Americans abroad, in fact, are hard-working businessmen, teachers, or other wage slaves. They are bitter, and some are taking out their bitterness by trading in their passports.
Many American companies are bitter, too. Most companies pay tax-equalization that can add $5,000 or more to the annual upkeep of a middle-management employee. The trouble is that these allowances are taxable, too, producing an allowance-tax-allowance-tax cycle. for a top management man earning $150,000, the tax-equalization allowance could rise to $434,000, according to Business International, a research firm based in Geneva.
The result is that many are returning home – the number of Americans overseas is believed to have shrunk from 1.7 million to 1.5 million in recent years. Others, like Williamson, have stopped being Americans. And companies are replacing Americans in their overseas operations with other nationalities.
What this means, of course, is that export business that depends upon national ties is going to other nations.
“One of the indices of a great international power is the number of quality of its expatriate citizens in their international marketplace,” American lawyer William Havemore wrote from Rome. “To discourage multinational enterprises from staffing their offices with Americans is just plain stupid.”
So, there you have it, folks. Political activism is hopeless. Americans abroad have 3 choices:
- Be a good slave and loyally serve your master.
- Move to the US and sign up to collect food stamps.
- Renounce and become liberated from American insanity.
I can’t say I have, but then if I had, I couldn’t say with all honesty that I was previously unaware of my US tax filing obligations prior to last year, could I?
Something new just in from Dundee Wealth, that is clearly a fishing expedition:
NON-REGISTERED INVESTMENT ACCOUNTS-INTERNAL REVENUE SERVICE (IRS)
DWM Securities Inc. is required to file the following forms for all investors who are deemed a US citizen or US person under US law. These forms are issued to you and provided to the US Internal Revenue Service, are are based on income type:
1099-DIV All investors who are allocated dividends will receive an IRS 1099-DIV Form.
1099-INT All investors who are allocated interest income will receive an IRS 1099-INT Form.
1099-B All investors who received proceeds of dispositions from the sale of redemption of securities will receive an IRS 1099-B Form.
*It looks like Dundee just became an SEC Registered Advisor which is actually pretty rare for Canadian firms. It does enable them to legally solicit to clients in the US.
It came in “Your Guide to 2012 Tax Reporting” for Canada.
*Those are NOT FATCA related forms. They are basically what US banks send out to there domestic US customers. Completely normal from the standpoint of someone living in the US. The only reasons I could see a foreign bank doing that type of reporting is if/when they become SEC registered. The big Canadian banks have no desire to be SEC registered because they have big US based units that are. However, as a niche player despite being partially owned by Scotia Bank I could why Dundee might want to be SEC registered to get clients living in the US.
Well we certainly have given you a lot to think about … more than you wanted I’m sure. For my part I hope my late night replies did not muddy the waters for you too much. I did preface my first contribution with “I’m the last person qualified to give advice but I will throw this out anyway.” It’s obvious everyone here wishes you the best of luck in whatever direction your brain-bustin, gut-wrenchin musings on this topic take you from here.
I’m now collecting almost every comment you make because they are that good. Thank you.
We don’t meet your criteria but the only personalized “demand” communication we ever received did not come from the IRS but from the Treasury Dept. We had neglected to fill in my husband’s DOB on his FBAR one year and they demanded with a 4 page letter that we correct that omission. Of course they had only to look at his previous FBARs to determine his DOB but never mind that, my reply to them began as follows (and then it got even cheekier for 5 more paragraphs). BTW I filled out that FBAR but my husband reviewed it and signed it so we share the blame for that big honkin error.
“My MOST sincere and humble apologies for neglecting to inform the MOST exalted and almighty Department of the Treasury of the MOST omnipotent and esteemed nation in the universe (namely, the United States of America) of this MOST important piece of information regarding my husband (namely, his date of birth).”
Thanks. I didn’t think they were FATCA forms, but it is the first time Dundee has sent anything having to do with US taxes, other than a letter warning of FATCA about a year ago that contained errors.
*What information does DOS actually supply to the IRS? As I recall it is a “list of names”. Is any other information provided other than a name?
It looks to me like DOS supplies the CLN and the 4081 (Statement of Understanding of Consequences) to the IRS. In item 10 of the 4081, the person acknowledges that “with regard to US taxation consequences, I understand that I must contact the US IRS.” The CLN has your current residential address on it, or to be more accurate I should say your residential address as at the day you signed your CLN application forms at the consulate.
You can check it out further in the DOS manual, 7 FAM 1240 Interagency Coordination and Reporting Requirements. Pages 2 and 3 deal with IRS.
@bubblebustin, re your comments about Flaherty http://isaacbrocksociety.ca/2013/01/22/1979-flashback-americans-abroad-angry-about/comment-page-2/#comment-156050
I think that the Finance Minister, Prime Minister, and Government of Canada has a ‘duty of care’ (and perhaps a a fiduciary duty) that it owes all citizens and residents of Canada the responsibility to uphold. See definition of ‘duty of care’ http://en.wikipedia.org/wiki/Duty_of_care “… a duty of care is a legal obligation imposed on an individual requiring that they adhere to a standard of reasonable care while performing any acts that could foreseeably harm others….” Duty of care may be considered a formalization of the social contract, the implicit responsibilities held by individuals towards others within society. It is not a requirement that a duty of care be defined by law, though it will often develop through the jurisprudence of common law.…..” The harm that would result to over 1,000,000 Canadian citizens and resident, from the Government of Canada entering into any FATCA IGA is entirely foreseeable.
Continuing to market TFSAs, RESPs and other Canadian government registered savings without any public warning to the > 1 million or 1/32 who would then find themselves holding a US taxable ‘foreign trust’ grenade be consistent with upholding those duties? The harm that will result is entirely foreseeable. Especially if you are the Minister responsible for entering in to the treaty agreements that you know full well do not allow those savings to be exempt from punitive US taxation? And when you know full well of the existence of the ‘savings clause’ and the ‘last in time rule’, which can overrule any agreement you already think you have? And when you know of the essential conflicts between Canada’s tax system and that of the US? And know that the sale of our Canadian principle residences are taxable – by the US, from abroad?
Does entering into a FATCA IGA – designed to entrap and penalize Canadian citizens and residents who the US claims the right to tax, meet any reasonable standards of a ‘duty of care’ or fiduciary duty that the Finance Department and the Government of Canada holds towards us?
If you see a train wreck coming, and you are silent, and don’t try to warn those on the scene, aren’t you committing at least a sin of omission?
And if you see a hungry predator coming, and you open the barn door to let them in, don’t you share in the slaughter that results?
Have you ever considered e-mailing your Brock comments directly to Flaherty’s office? A day after day barrage of your well written, common sense, comments regarding FATCA and citizenship based taxation would be good for the souls of his office staff and you never know what they might pass along to their boss. You could begin each e-mail with, “Dear Mr. Flaherty — I recently made the following comment at issacbrocksociety.ca regarding [fill in the blank] and would like to submit it to you for your consideration too.”
I agree Em.
And, badger, your latest re DUTY OF CARE of the Finance Minister, the Premier and the Canadian Government is right on. At the least, every Registered Canadian account offered should come with the warning “Not Intended for Canadians who are US Citizens or US Persons”.
If my requested meeting with my MP, Michelle Rempel, ever materializes, I will indeed be highlighting much of your very common sense material. (Next sitting of Parliament starts January 28th so not likely my meeting will be confirmed in the next couple of days.)
I am also a dual from birth. Born to Canadian parents in the early 1960’s living in the US, registered as Canadian born abroad (necessary at that time) & then moved back to Canada when I was a child. I never intended to be American & did nothing at all to stake my claim as one. But of course had no idea there was any reason to go & actually renounce. Parents thought it would just “drop off”. I am paying a high price for the ignorance & misinformation of 30 years ago. We (my Canadian husband & me) first learned of US world wide tax about a year ago. We went into damage control & learned as much as we could. Because of FATCA threat, my occupation, and also my husbands business of which I am a partner, laying low & hiding was simply not a feasible option. By hiding, I would not be able to operate my financial or personal life the way I would want to anyway because I would never knowingly put my husbands assets or information at risk with even the remotest chance of some possible future exposure where we would not be able to control the outcome. I do not trust the US to come to it’s senses & do not trust that the Canadian government will be protecting me for the next 40 years. I don’t want to live with this hanging over me. We prefer to deal with things head on & after agonizing for months deciding exactly what that was going to entail, I did file 3 years of income tax & FBARs. I sent along my story of innocence with each one & expected that they would leave me alone as I am so not American. I “owed” almost nothing at all to the US. My lawyer & accountant had also assured me that I am not who the IRS are looking for. The whole process for me was extremely expensive & benefited the US probably not even enough to cover the cost of some poor sucker going over the files. I did hear back from them with a very small penalty for interest on the taxes which was tiny enough I simply sent it in. I have felt completely violated even though it was my choice to come forward. The goal for us is simple. I plan to renounce in a year & truly be free. Everyone’s circumstances will be a little different & you must chose to do what is right for you. However, I would suggest that you
explore what it would actually cost to
file the income tax to become compliant and also the ramifications of inheriting from your father. It may not be as bad as you think. I will say that my life has improved since filing simply because the decision about course of action was made & there was no more debating about it. My case was a bit more complicated which is what made it so costly for me. It is the price of my freedom. But I’m very angry over this senseless intrusion into the lives of Americans abroad & the arrogance of coming after my country to get all those “tax cheats”. All the best to you in whatever you decide.
@Em, and @calgary, thanks for your suggestions. I am thinking of trying to get to see the Conservative MP who has an office nearby. I have e-mailed him, and the Conservative MPP counterpart before, but get not even form responses. There is nothing to lose by trying to speak with someone in person though – even if it is only an assistant.
Thanks for sharing your analysis, what you figured out you had to do for your own situation. Each of us has to somehow do what you did so well to arrive at our decision.
Me too. I don’t think I’ll ever rid myself of the anger I have for what has been foisted upon so many non-“tax cheats”. But dealing with my situation, expensive as it has been, has given me some sense of power. That’s what, for me, had to be done. Even when I have my CLN in hand, I’ll still be in this game, especially for those like my son for whom I and other Parents, Guardians, Trustees do not have the right to renounce on their behalf.
We all wish you the best in arriving at your decision, WhiteKat.
Thanks for responding to my comment. The situation with US persons is exceptional and I also feel that the Canadian government should take exceptional measures to protect its citizens, but when would a warning aimed at a certain group of Canadians have the effect of discriminating against that group of people? The Department of Finance wrote that TSFA’s are for all Canadians, that’s true. I think by now we can all predict that the caveats will come from those who provide the RRSP’s, TFSA’s, etc, saving the Canadian Government from having to soil its hands.
Nigel Green just wrote an article that says FATCA will cost the world $500B to implement and $10B annually to operate, all for the US to recover $1B a year in lost revenue.
Just Google “Canada immigration information blog” and “US immigration information blog” and you’ll find all kinds of places to enlighten many unsuspecting folks to the dangers of acquiring/maintaining US citizenship.
Here’s one for example: The Pro’s and Con’s of moving to Canada from the US. I posted something there last night which hasn’t appeared yet:
Here’s an example of one of those Americans abroad who isn’t swathed in mink and drinking champagne for breakfast. Jamie K-L., a “German-American”, is head of social services at a refugee camp in Ingelheim, Germany. Her appearance is at 3:35 to 4:20 in this news program “Refugees: Welcome or Undesired”. She has a tough job:
This tax expert would have us believe that accidentals don’t need to “claim” US citizenship in order to have it:
Highlights the difficulty in trying to prove a negative that doesn’t exist for those who are “entitled” to US citizenship through birth.
“Literally, sometimes as a tax lawyer I feel more like a psychologist, when these individuals come to me saying they can’t sleep, they can’t eat, they are seeing a cardiologist for high blood pressure, etc. and even in a most extreme case they thought suicide was a solution.”
@Bubbles…..you come up with some of the greatest links 🙂
IMO, the opinion stated in that blog is correct.
The governing language in the US Statute is “shall.”
But……in the scenario listed, what if the mother refused to state for the record how many years she resided in the USA? What if she signs an affadavit in front of a Saudi lawyer/notary/judge and swears she lived in the USA less than the requisite number of days?
What is she refuses to state how many days she lived in the USA at all? Something tells me that without the co-operation of the mother the USA Consulate in Saudi Arabia would never issue a passport to her son.
So what does the son do moving forward?
Mother needs to sign a sworn statement stating how many days she lived in the USA. If that is less than the magic number……nothing else to do. But when she signs that statement it may turn out her naturalisation was fraudulent so she can not return to the USA for holiday.
If she does nothing…….when the son is older he may want to engage in a relinquishing act and document it just in case he needs it some day.