Renouncing Your U.S. Citizenship: Is Divorcing Uncle Sam Right For You?
By Alexander Marino JD, LLM (US Tax)
The billionaire co-founder of Facebook, the only American member of Monty Python, a Civil Rights Leader with a PhD from Harvard, the founder of Carnival Cruise Lines and owner of the Miami Heat NBA franchise, and arguably the best chess mind to ever live have more in common than you might think. So what do Eduardo Saverin, Terry Gilliam, W.E.B. Du Bois, Ted Arison, Bobby Fischer and thousands of U.S. citizens living in Canada have in common? The answer is all five have renounced their U.S. citizenship.
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@Watcher, I’ve copied what I emailed to your MP, Andrew Sealous:
”…Dear Mr Selous,
I was referred onto you by one of your constituents regarding FATCA.
As an American, I can appreciate why the U.S. wants to go after tax
evaders hiding money offshore but their actions causing much collateral
damage. Though born in the U.S.A., I have lived in the UK for almost
25 years and have also had British citizenship since 2006. I tried to
be responsible and save into ISAs and a personal pension as a means of
saving towards my retirement. However, only learned recently that
their tax systems are incompatible and make normal financial planning
impossible for those of us holding both passports.
What I hadn’t realized was that the IRS doesn’t recognize tax-efficient
investments or pension plans here the U.K. if you’re what’s deemed a
‘U.S. Person’. This included long-term expats like myself, former
green card holders, and even Britons who inherited U.S. citizenship
from an American parent even if they’ve never actually ever lived in
the States. I learned to my horror two years ago that not only did the
U.S. not recognize UK tax-efficient accounts such as ISAs or private
pension plans; they also do NOT recognize what are to the British
straightforward pooled investments funds such as unit trusts. They
also consider private pension plans foreign grantor trusts which
require complicated and expensive reporting to the IRS.
They have a very harsh type of taxation on Non-U.S registered unit
trusts called PFIC taxation (passive foreign investment companies). I
wound up having to pay six months’ take home pay in double taxation on
what were PHANTOM capital gains. I hadn’t even sold the stocks but
because of the way the U.S. taxes these funds which were also in UK
tax-free ISA accounts, I got hit with a double whammy in both the nasty
way I was taxed plus the fact that I lost any advantage of having held
this investment in an ISA.
What we can’t understand is why I can’t enjoy the same financial rights
as every other resident resident in the UK, especially when I have full
British citizenship and am permanently settled here. I am an honest
person but am being effectively punished for trying to be prudent and
save instead of running up huge debts!
I also want to point out that the recent U.S. crackdown on its citizens
abroad seems like entrapment because there was barely any indication
that a major enforcement was going to be taking place; I had done all
my financial planning like other Brits and hadn’t even realized that I
had to continue filing and even doing my planning as though I still
lived in the United States (which is ridiculous). I am getting the
short end of the stick because the U.S. won’t allow me to make use of
their tax-efficient savings/investment vehicles.
Two things that annoy me even more are that there is a whole compliance
industry being set up around FATCA whereby accountants and attorneys
are making a fortune out of our misfortune and ignorance. I will have
wound up owing over $12,000 to the U.S. on what were sold to me as tax
free investments here in the U.K.; and I will have had to shell out
over Β£10,000 in accountant fees. My UK tax returns are 10-20 pages
long, whereas my U.S. tax returns are over 150 pages long; in fact, my
2011 tax return was 270 pages long!!
I am NOT wealthy; I only earn approximately Β£16,000 per year.
These investments were funded by my British spouse so HIS UK-sourced
assets have been indirectly attacked by U.S. interests. The U.S. tax
system is so complicated that if I choose to retain both citizenships,
I will continue having to pay my accountant close to Β£2000 each year
just to stay compliant. I simply cannot afford this and am thus
looking into renouncing my US citizenship in order to simplify my life.
If this FATCA is going to go through, Americans need to be kept much
better informed about what their filing responsibilities are and what
sorts of investments they can safely partake in. Otherwise, I fear
that many other expats may wind up like me and suffer a substantial hit.
The U.S. system is too over-reaching. Please don’t let them throw us
under the bus!!!
I would be grateful if you could take our concerns into consideration.
We are NOT exaggerating.
Yours sincerely,
monalisa1776
Happy Easter to everyone and hope the Easter Bunny’s good to you!! π π
@ monalisa
Happy Easter to you too. Your letter to Watcher’s MP is very good. I hope he reads it with an open mind and an open heart. It’s what we are all trying to say. Please listen to us. The US tax grab net is too large and has been flung way too far. Whales swim away while minnows flounder. π
@monalisa;
Glad you let the UK MP know in such useful detail how ridiculous it is that the US should dictate what a long time UK resident and now dual citizen is allowed to do to provide for their own security – while the US provides no help in that regard, and only serious hindrance.
And amply demonstrated the useless expense spent for accounting and preparer assistance with the insanely complex US forms – 270 pages is just ridiculous.
Hope that MP can convey how insane it is to be taxed on phantom gains and ordinary lawful savings – while already being entirely tax compliant in the UK.
The UK and other countries cannot afford to have citizens and residents like you ruined by the grasping greedy hands of the US – creating and claiming taxpayers everywhere, whilst providing absolutely nothing in return. The US will not feed, clothe or succor you, provide healthcare or seniors benefits,yet it will take your money, now and after death.
Hope your Easter/spring solstice comes with some chocolate!
: )
@monalisa1776, @edelweiss, thanks both for taking the time to email. Hopefully these real stories will have more effect than hypotheticals. If nothing else, at least we’ll be able to say ‘I told you so!’ to the UK govt when the IGA implodes or when news of its damage and one-sidedness surface in the press.