This article by Bloomberg is their reporting on the submissions to House Ways and Means Tax reform. It has been mentioned in multiple threads here at Isaac Brock, and was highlighted at ACA, so thought I would pull it out for better visibility. It merits comments and email to the journalist. I did send them one to thank them for drawing attention to the U.S. Expat plight, and provided the link back to the anecdotal snippets from other submissions like those @AbusedExpat has been posting.
Thought I would also highlight whitecats response to this story which caught my attention.
It must be a full moon or something because FATCA and the USA war on ‘tax cheats’ is getting to me more than usual. I posted this as a comment to this article:
OMG, Israel Jackson, you are so misinformed, and very rude. How many times have you told someone to shutup or called them stupid in your comments to this article? This alone shows your lack of intelligence and inability to think ethically, empathetically and critically.
The foreign income exclusion amount of 92K (or so) applies to ‘EARNED’ income only – meaning money you receive from an employer. It does not apply to any other sources of income such as pension income, investment income, unemployment benefits, disability benefits, etc. Try being a pensioner who is a dual citizen living outside of USA and you will be double taxed. Imagine being unfortunate enough to have lost your job and be collecting unemployment benefits – you will be double taxed. Try buying non-USA mutual funds in the country you live in – you can’t because USA considers these to be ‘passive foreign investment income corporations’ and taxes the hell out of them.
I was born in the USA to Canadian parents and left as an infant thus am dual from birth – not by choice. I have never been schooled or worked or invested in the USA, yet USA expects annual tax returns at the cost of a couple thousand per year, and annual FBARS for all my bank accounts which USA says are ‘foreign’.I live where my accounts are, so HOW ARE MY ACCOUNTS FOREIGN?
Unlike other Canadian citizens, because I am tainted with a US birthplace, I cannot take advantage of any of Canada’s registered savings plans – cannot save for retirement, cannot save for my kids university, and am required to jump through hoops every year to prove I owe little or no taxes. In addition I am required to report on every detail of every bank account with my name on it which are held in the country where I live and am a citizen of. I must spend thousands every year preparing US tax returns and ‘foreign’ bank account reports which are much more complicated than the reporting required by US citizens living in US.
Do US citizens in US have to prepare detailed reports of each and every bank account they have in US? No, but I have to report all my locally held accounts to the USA and hope to GOD there are no breaches of privacy of my personal information that might subject me to identity theft. Even the government of Canada does not require me to annually report the details of each and every account I hold.
I pay high taxes where I live already – higher than Americans in USA do. I want to be able to save for retirement so the Canadian government won’t have to pay to take care of me in my old age – I know USA won’t. Who will take care of me if I am not allowed to take advantage of my own countries registered retirement plans?
Why not renounce you say? Because, I never had a clue until now (at age 50) that USA even considered me a taxpayer. Why would I? It makes no sense to tax people who DO NOT LIVE in USA, never worked there, never earned income there, and never plan to live there. No other country does this. Since all the publicity surrounding FATCA, I discover I am in big trouble for not filing all these years, even though I have always paid taxes to the Canadian government. USA will not let me renounce unless I can prove 5 years of US tax compliance which requires paying 10′s of thousands in lawyers and accounting fees and risking PENALTIES for previous non-filing of ‘foreign bank account reports’ (aka accounts in MY country of residence).
Soon, thanks to FATCA, my own local banks will be required to send all the personal details of every account my name is on (including those held jointly with my Canadian only spouse) to the IRS because USA thinks it owns a piece of me and apparently anyone who is remotely connected to me.
Isreal Jackson and others with similar mindsets, before you whine about people not ‘paying their fair share’, maybe you should RESEARCH and try to understand what is really happening instead of blindly taking up the pitchforks and assuming everyone who does not pay taxes to the US is a witch that should be burned at the stake.
Very well detailed account of what it’s like to be an American outside of the US and certainly highlights the added unfairness of foisting citizenship on the children of non-citizens.
But, you can renounce without having filed 5yrs of income tax. Or am I mistaken? I didn’t think they asked you to prove compliance at the consulates, but just informed you of the tax issues and assumed you had or will take care of it. Of course, you can never set foot in the US again. How hard is that really for those without family or job ties there?
@YogaGirl, it may depend upon the location. A Canadian will have a much more difficult time not flying over America than an African.
@Just Me, thanks for the update on the comments. Until now, I didn’t know that there were some individuals posting there seeking the light in the narrow tunnel.
@ Yoga Girl,
You are correct. They don’t ask and they don’t care. The only duty a consular officer has regarding tax is to ensure that you have read and understand the “Statement of Understanding of Consequences” (form 4081), which makes reference to tax in line 10.
The 4079 questionnaire, “Request for Determination of Loss of Citizenship,” does ask if one files tax returns. This form is required for CLN applications based on s. (1) relinquishments. According to the DOS procedure manual (7 FAM 1260), the 4079 questionnaire is not required for s (5) renunciation. However, some consulates do ask renunciants to complete this questionnaire. But, again, they don’t seem to be asking questions about tax, at least from the reports we’re getting at Brock or hearing about conversationally.
I am aware that questions about tax compliance were being asked at one consulate in 2011-12 (they no longer do), so it’s possible there’s the odd one that does. They are not supposed to. (And most have enough on their plate fulfiling their own mandate, it seems they have no interest in becoming an arm of a separate government department anyway.) From all reports we get at Brock (as well as the ones we only hear about), it appears that the consulates do not ask about it or even want to get into it, except to fulfil their duty that you read and understand line 10 (along with the others) on the Statement of Understanding of Consequences.
Legally one does not have to be up-to-date on taxes in order to renounce. The only legal requirement is that the expatriate is up-to-date with IRS (IRS exit form,8854, and the 5 previous years tax forms filed) by June 15th of the year following their renunciation.
How does one write an article for this site (as opposed to commenting on something someone else has written)? Thanks, Les
Thanks for the zinger WhiteKat.
@bubblebustin,
My pleasure.
He deserves the nickname ‘jingo jackson’.
All, there is a link to this in one of the comments:
http://www.texasenterprise.utexas.edu/article/costly-folly-us-tax-americans-living-abroad
too bad this Michael Froehls didn’t make a submission to the tax reform working groups.
@YogaGirl, you said: ‘But, you can renounce without having filed 5yrs of income tax. Or am I mistaken? I didn’t think they asked you to prove compliance at the consulates, but just informed you of the tax issues and assumed you had or will take care of it. Of course, you can never set foot in the US again. How hard is that really for those without family or job ties there?’
My understanding (perhaps I am mistaken) is that yes, you can renounce without being tax compliant, but you still are on the hook for filing 5 years of tax returns after renouncing which requires you to ‘be in the system’, reveal yourself to the IRS, obtain a SSN, etc. For someone like myself who has so far remain ‘unseen’, this is a fairly major undertaking: dollars to accountants, and lawyers to figure out which approach to become compliant (for example streamlined program), and risking penalties for non-filing of FBARS.
I still have a parent in the USA and a future inheritance, so to suggest never to go back to the USA after renouncing, but not filing is not a viable option either.
For those with zero US ties, renouncing without filing may be an option, but even then you never know when the rules will change and maybe some day USA will have the means to come after those who have renounced but not fulfilled all their tax and FBAR reporting obligations. There is no sure thing about any of this mess.
@Les Fant:
Some of us have seen your posts at Forbes, AccountingToday and possibly elsewhere. We subsequently reviewed your website “ExpatriationCopesthesiaConsultants.com” and, to some of us, it looked like a website set up for identity theft purposes. Your Contact page requests that unnecessary personal information be entered, e.g., DOB, citizenship information, etc. Your website also gives little information about who is behind it, i.e., no Impressum (Legal Notice as to ownership). I also recall that your company to a warehouse area in Ireland (see below).
Summa summarum, your website doesn’t instill a lot of trust in you and your “company”, or whatever it is.
owner-addr: Unit 12A, Barrowside Business Park
owner-addr: Sleaty Road
owner-city: Graiguecullen
owner-province: Co. Carlow
https://maps.google.ca/maps?q=Unit+12A,+Barrowside+Business+Park+Graiguecullen+Co.+Carlow&hl=en&ll=52.841567,-6.939132&spn=0.002832,0.008256&sll=52.838084,-6.94057&sspn=0.022657,0.066047&t=h&hnear=Unit+10A,+Sleaty+Rd,+Graiguecullen,+County+Carlow,+Ireland&z=18&layer=c&cbll=52.841484,-6.939061&panoid=SfES6vEtn4A58tK64B_xFw&cbp=12,75.13
Perhaps you would like to respond to the above.
Figured I might as well be just as abusive as Israel Jackson, right back at him: “Oh, nice. It’s an Obama-please tax the hell out of everyone so I can have my “fair share” piece of Democrap. What we Canadians should do is put a 50 foot high wall along the 49th parallel and turn your water and oil taps off. If I tell you to STFU and quit wasting our air you gonna go cry to Obama?”
Furthermore in reply to Israel Jackson. For all he knows, I’m a Canadian…which I am. “Just so you know, you Democrap…”Hand me out some money so I can feed my 532 kids” piece of S***. You’re in a CULT. That’s why you keep screaming about “fair share” and “Be patriotic or get the F*** out”. You’re a scumbag, Obama-hugging “I want my fair share so that I don’t have to work while other people work their asses off for me” piece of democrap so you keep whining about everyone else paying their fair share while you sit on your *** and take in unemployment like the rest of you scumbag 99%ers. And that’s why we pure-bred Canadians who like our Americans Abroad who work like hell to support their families who aren’t as brainwashed as you, Jackson, you’re an inbred idiot!”
Yep, my comments are now moderated. ~chuckle~…Watch him go crying “Hey…dat Canadian done insulted me. Massa. You go ban him now!” There’s no educating an idiot like that. The only thing that you can do with an idiot is heap him in abuse until the s***s up to his ears and he suffocates.
Is there some type of issue right now with logging in or password resets? Having problems?
I want to make a post on that Florida woman whose judge just ripped the IRS. Yes, the widow in Palm Beach.
@WhiteKat, I only asked b/c the person quoted in the article seems to think that renouncing isn’t allowed if he/she hasn’t filed. I didn’t think that is correct.
I have many ties in the US. Sometimes I think it would be nice to just slice through the Gordian Knot rather than bother with unraveling it, but for the moment I endure.
@Tim, she was no doubt wealthy enough to pay a posh attorney to represent her. On the other hand, that tragic Patricia in Canada probably felt impotent with the IRS and concluded she had no other option but to pay up.
It seems to me that the American system is set up around money. If you’re rich, you enjoy much more leverage and rights. We’re not all equal…
Talked to our lawyer today, says the IRS is continuing to move more and more from OVDI to streamlined, and says the IRS must be taking ‘happy pills’.
When the IRS had the luxury of time and budget on their side, they we able to torture unfortunate people like Patricia in Canada. So unjust, unfair and inhumane that she would be treated so differently than someone in her position today. Nothing can ever make up for what she’s had to endure.
Hopefully, the IRS will get it right at some point, but I’m not counting on it. Fool me once…
@monalisa1776, US citizenship = money. Many things demonstrate this, such as the renunciation list maintained by the treasury rather than the DoS, the US government claim that US citizens only renounce for tax reasons, the taxation of individuals who don’t live in America, etc. This is why I don’t need US citizenship, since my ancestry, culture, history and family is not the money which makes US citizenship what it is.
@Swiss, all I can think is that I cannot wait till my last tax return and the 8854 are finally filed next year so I can be free from all this.
@Bubblebustin, I’m pleased that your lawyer is more optimusic that your case will be moved into streamlined! 🙂
@Bubblebustin, I got an email from my lawyer in the U.S. who also said IRS is pushing the streamlined approach . What does this mean for those of us already enrolled in OVDI?
@monalisa1776, Titus
The IRS appears to be taking the initiative on their own to move the most obvious minnows into streamlined. Unfortunately because of some of the ‘sophisticated tax planning’ my husband’s business requires, we will likely be considered ‘high compliance risk’ and therefore will not likely be moved to streamlined. The sad thing is we had absolutely NO tax owing other than the sale of our home which happened in a year prior to the 3 years needed to enter the streamlined procedure 🙁
@YogaGirl,
I’m still confused over the 5 year filing requirement for renouncing as I hear so much conflicting advice. When I was considering my options, I spoke with an immigration lawyer(recommended by someone here on Brock) who told me if I renounce that I must also submit 5 years of tax returns. The lawyer told me to do all my filing first, then renounce.
Its time for me to do so more research on that one.
@whitekat
A few, including Petros, have stopped the bleeding by renouncing prior to establishing 5 years of tax compliance (Petros, please correct me if I’m wrong).
My husband and I are making the choice to be in compliance when we renounce because our lawyer said not doing so would be like ‘waving a red flag’ in front of the IRS. I don’t know how much more of a red flag we can wave considering we are in OVDI, but I’ll take his word on this. It’s also been a subject of debate as to whether you would lose some rights given to only US citizens should one run into problems in the process.
What we weren’t anticipating was the fact that OVDI would take so long. By the time we are through this we will have filed at least 10 years of tax returns to the IRS! (8 under OVDI, and 2 and counting since then).