Moodys Tax Advisors Blog, July 4, 2013: Blog Renouncing your US citizenship: New law may keep you out forever! by Alexander Marino JD, LLM (US Tax)
Under the proposed amendment, a renouncing individual who would be classified as a Covered Expatriate under §877A, must prove to the Department of Homeland Security by “clear and convincing” evidence that he or she did not renounce for tax avoidance purposes. The burden of proving this negative falls on the renouncing Covered Expatriate if he or she desires to ever re-enter the US.
In a nutshell, all Covered Expatriates will now have the burden of proving that tax avoidance was not a primary purpose of their renunciation. Under the original Reed Amendment, the burden was with the US government to show that the renouncing US citizen did so to avoid US tax. This shifting of the burden of proof is enormously important and greatly increases what is at stake for a Covered Expatriate. Under the original Reed Amendment the advantage was clearly with any renouncing US citizen (whether a Covered Expatriate or not). It can be very difficult for the US government to meet its burden of proof regarding tax avoidance motives. Under the proposed Reed-Schumer Amendment, the advantage would be squarely with the US government when dealing with a Covered Expatriate.
Under the newly proposed regime of the proposed Reed-Schumer Amendment, the importance of avoiding the US exit tax under §877A could be even more important than before. Not only will the repercussions of being classified as a Covered Expatriate under §877A result in a deemed disposition of the renouncing individual’s worldwide assets under the exit tax rules, but the burden to prove that a primary purpose of the renunciation was not to avoid US tax, falls on the Covered Expatriate and not the US government.
The Reed-Schumer Amendment is not law yet, but the danger of inadvertently being barred from the US while also being hit with the US exit tax are real concerns for those considering renouncing if it becomes law. Any US citizen, who renounces their US citizenship with either the original Reed Amendment or the proposal Reed-Schumer Amendment regimes in place, needs to understand the repercussions and timing of this decision.
Click HERE for a summary of filing and reporting obligations required by US citizens residing in Canada.
Exile is punishment. While some former USC’s might never have had any ties to the US at all, there are those of us who have always had a significant amount of family there. But if I am to be exiled, so be it. Painful as that will be, I then become a walking advertisement that gives lie to the idea that America is some shangri-la of democracy but is instead just another police state run by tyrants.
If they exile enough of us, the world will notice, which is why I don’t think they actually will.
When questioned regarding this newly proposed amendment, Senator Reed stated:
“American citizenship is a privilege. But it seems that a privileged few are trying to game the system by accumulating wealth and benefiting from the greatness of the United States and then renouncing their citizenship to avoid paying their fair share of taxes. They are welcome to leave our country, but they should not be welcomed to return without playing by the rules and paying what they owe.”
This boy who apparently is a Harvard educated lawyer has got it wrong. The 14th amendment makes it clear that citizenship is a “right”. You can do with it what you want. You can expatriate if you want. He is absolutely delusional. People like Reed, Schumer and Levin are the reasons why people need constitutional rights.
Here is a link to Reed’s trip to Pakistan and Afghanistan (your tax dollars at work). Look at the picture on the top left. Note who he is arriving with.
At first the USG is forcing many Americans abroad to choose between their national ties with the US and their families abroad. Reed and Schumer would tighten the screws further by forcing many to choose between their families abroad and their families in the US. Already under siege with a continued escalation of attacks against us will undoubtably drive more than a few over the deep end. If one person feels they have no other recourse than to take their own life then the US government is going to have more of their citizens blood on their hands than just that of those they’ve droned.
The US has already proven that the pursuit of a few bucks is more important than a thriving diaspora. Without an immediate move to RBT, expect the total annihilation of USP’s abroad. I know this sounds depressing, but without much in the way of acknowledgement by the USG, there isn’t much hope things will get better.
@USCitizenAbroad, reading that again I see a sinister new twist for the future.
“… They are welcome to leave our country, but they should not be welcomed to return without playing by the rules and paying what they owe.”
Does this hint at an “entrance tax” before you might be allowed to come back into the country?
Mind you, I still wonder why he thinks that anyone who’s left for “tax purposes” would want to return in the first place. I’m not talking about people visiting, but people who have left and then presumably want to come back to live and work in the US.
U.S. citizens abroad have only two choices: Renounce or move to the U.S. That’s it. I suspect that after the events of the last couple of years that few will move back. Most can’t. Their families are outside the U.S.
There are no other options. Leaving aside the financial problems of U.S. citizenship abroad, as you suggest:
“Already under siege with a continued escalation of attacks against us will undoubtably drive more than a few over the deep end. If one person feels they have no other recourse than to take their own life then the US government is going to have more of their citizens blood on their hands than just that of those they’ve droned.”
Look the U.S. government does not care. They don’t care whether you live or whether you die. It would be a great mistake to presume that those in the Homeland see the world the same way you do. They don’t and they never will. Leaving aside the treatment of U.S. citizens abroad, the U.S. has the highest rate of incarceration in the world (apparently now on a par with the worst of the Stalin era).
In 2008, to celebrate the 60th anniversary of the Declaration of Human Rights they enacted the Exit Tax. This Exit Tax is far more punitive than those imposed by either the Nazis or the Soviets.
The U.S. has become an Orwellian nation of forms and penalties. The “Stars and Stripes”, because of the Obama drone attacks, has become the THE SYMBOL of terror throughout the world.
Believe me the U.S. does not care about you. If you are alive they want to confiscate your assets. (Things like FBAR, PFICs, artificially low interest rates are about confiscation pure and simple.) If you are dead they want your estate. That’s it. No more complicated than that.
Although the Homelanders don’t know what is going on, I wouldn’t let them off the hook. In a healthy, functioning democracy, the people have an obligation to keep an eye on their “elected representatives”. Most Homelanders are not fulfilling their obligations of citizenship.
No matter what you do you will left with anger that is going to be very hard to get rid of. It’s not what you take from somebody, it’s what you leave them with.
What is important at this point, (and I believe that we have a moral obligation to do this) is to educate as many people as possible. Those who are NOT covered expats absolutely must renounce. Those who don’t renounce will have to live in a permanent state of OVDI (with the difficulties of compliance and reporting requirements). You are incredibly lucky in that you are exempt from the Exit Tax.
Consider the situation of TAX COMPLIANT (you know the ones who “played by the rules”) middle class U.S citizens abroad in Toronto, Vancouver, London, Paris, Melbourne, Bangcock, etc. They have scrimped and saved. They probably own their own homes (which in many cases is enough to make them covered Expats). Their situation is very dismal. The can’t continue (the compliance burden is impossible.) They can’t renounce because they if they follow U.S. law they will have to turn huge chunks of their wealth over to the U.S. Their lives as they knew them and planned them are over.
Interestingly, those who have been tax compliant are in a much worse situation than those who have ignored their tax obligations to the U.S. I suspect that the events of the last couple of years have made people much more reluctant to come into compliance than before. But, we will see. The important thing is that all of their energy must go into escaping the U.S.
The ones in the best situation are those who are young and have not yet accumulated any assets. They need to get out and get out now! It is the only way that they can have a fulfilling life.
Spread the word! Renounce the “privilege” of U.S. citizenship. Offer it to somebody who wants to live in the Homeland.
You may be right. But, as I argued in the above comment:
Just get out! U.S. citizenship is like living in an abusive marriage. Virtually all people who leave abusive marriages always say: “I wish I had left earlier”.
The ONLY thing that can remedy the situation is a move to RBT. But even then, unless you want to live there, keeping the option of returning to “the greatest country on earth” just isn’t (IMHO) worth it.
USCitizenAbroad, why do you think that I have been stating that the US populace at large is complicit in the “attacks” on the finances of US expatriates for all these months that I’ve been reading about this? That I have been accusing them of being thieves. It’s taken a long time for you to come around to that realization.
When the United States was known as the 13 Colonies; they violently rebelled against unfair taxation by Great Britain. Now the United States is in the same position as Great Britain with unfair taxation rules and the descendents of those same rebels state that expatriates are traitors and should be taxed.
Like the 13 Colonies, we are being taxed unfairly. By their standards we should be violently rebelling against such taxes. We get no benefits from the United States. And we are being demanded of our rightful earned wages in exchange for nothing. The United States are thieves and the biggest thief is in the White House.
“USCitizenAbroad, why do you think that I have been stating that the US populace at large is complicit in the “attacks” on the finances of US expatriates for all these months that I’ve been reading about this? That I have been accusing them of being thieves. It’s taken a long time for you to come around to that realization.”
As I understand your situation – you are not a U.S. citizen. I think that for U.S. citizens the realization of “some of these things” is perhaps more gradual. Those of us born in the U.S. have part of our identities to into this. Not sure the same is true of you.
As the SPOUSE of an American citizen (who seeks to shed herself of that chain) and a former US apologist (to tell you exactly what I was…I wanted to serve in the United States military over serving in the Canadian military (as far what I was concerned – the United States had the better equipment) – what a rude awakening that was to realize that my rose-colored assessment of the United States was so absolutely wrong? So yes, with Americans as my friends and some Americans were my schoolmates at my Canadian highschool and college. And some of those Americans are seeing just exactly what an injustice this is as well. Unfortunately my one conservative friend in the United States whom I went to high school with in Canada (he is now one of the guys dealing with VA matters in Washington DC – a former veteran with the United States Navy) is fearing that he and his Filipino (US Naturalized wife) is trapped in the United States, because despite his good income and salary, he’s not sure that he will be able to find work outside of the United States. I warned him to “get out while the getting’s good.”
There are plenty of Canadians who are US apologists and some who would at a chance jump to be a United States citizen. I, in fact, used to be one. I see them every day indicating “The US is our friend, why would they do that to us? You’re making a mountain out of a molehill.” The US is not our friend, the US is our enemy if they are going to resort to extra-territorial attacks on our sovereignty.
You say that because you were born in the United States that you “have part of our identities too into this.”? Then you solidify your position with the same arguments that cults use to brainwash their followers. I have deep anger against the United States, not because I am separated from this travesty of justice, but because I have personal experience through my family being financially attacked by this. Don’t try to make this a “my situation is more of a concern than yours…” argument because of my nationality. We are unfortunately all in this together. You as a US citizen abroad and I as a Canadian citizen fighting for the rights of my American wife…whom I am trying to protect. Maybe it’s because I have a low tolerance for injustice that I am quick to jump towards a position of anti-American taxation and anti-American injustice and not because I am a “non-American”. Perhaps that should be a point for you to ponder.
We are all angry. We all see the injustice. I was responding to the specific part of your comment where you noted that you had seen the complicity of non-governmental Homelanders earlier than I had. Nothing to do with the injustice overall. What I meant to say – and I will try again is this:
That as non-governmental U.S. citizen it is a hard leap for me to presume that your basic middle class homelander – trying to pay his bills – is complicit in the attack on U.S. citizens abroad. Hard for me to come to that decision. I have been one. You BECAUSE you have not been one are perhaps able to see complicity on the part of middle class homelanders more easily than I do.
This has nothing to do with the injustice from the U.S. gov which we all agree is there.
Stars are what’ll you’ll see and stripes are what you’ll wear if you don’t want to play it their way.
When someone makes an attack on my finances or my wife’s and I hear arguments of US citizens like “Ericka from America” and others… where do you think my mind instantly goes to. US citizens, the ones who voted for Obama, and the conservative idiots who keep pumping the tires of the “benefits of US citizenship” (There is none, by the way…of those who are wondering).
And I say again, USCitizenAbroad? Why don’t you answer the question of if I was as blind as my fellow US apologists prior to this prior to 2012 “How was it that I was able to come to that realization so quickly that your fellow citizens were a bunch of thieving leeches?” If it was my finances…under attack from fellow Canadians, I’d be just as quick. So what does that say about Americans and brainwashing from an early age? I think the argument that “I am not an American therefore I see with clearer eyes” is a cop-out. If you make an attack on my family…whether it be physical or financial, it doesn’t matter what nationality you are; whether it is a fellow Canadian or a foreign country; I will be quick to respond.
Animal and USCitizenAbroad,
If there is complicity by the homelanders, it comes from mass complacency and the shield they have around the logic parts of their brains, borne of osmosis from what I now understand as “brainwashing” I remember from my school days. For the ones that do hear about the expat issue (how many know or understand what citizenship taxation is?), they may be complicit for not taking the time to fully understand (refer to former statement). Many in the “homeland” certainly don’t realize their eroding rights and that something like this could happen to them.
For the basic middle-class homelander, my relatives in the US, this isn’t on their radar, their nightly news or their attention span. Only one of my sisters is in tune with what I am going through. Another sister when I tried to describe what US Persons abroad face, said ‘Oh crap’ and then on to the next subject. She’s never uttered another word on the subject. My youngest brother has health problems and dealing with those in an earlier retirement than he thought would be the case, and he really doesn’t take in what I explain and I don’t want to force it down his throat. My other brother would be the one most to understand (after his years of military during the Vietnam war era and gone related to those years). My mom and dad have passed on and I’m not sure what their take on this would be — I think it would be hard for them to understand as well. One out of the three remaining truly does understand — and it took a lot from me for that to happen. I get my support from those here, not my family, because y’all are the ones that do understand — you’re going through it.
We realize we fight an up-hill battle even in convincing our government representatives so hard to convince those once removed (in the US). As in Canada, the media slants not in our favour and people are too much in their own bubbles to grasp if our issue should float into their reach. There has to be a real outrage created by the media for there to be understanding. That is done in their successful painting of us, even if subconsciously, as tax cheats and traitors. We all know journalism is not what it used to be; someone pulls the strings. Today’s journalism can be method of mind control — if the information that people read and see can be controlled, their perceptions of reality is as well. Limit the scope of what homelanders (and fellow countrymen here alike) take in (awareness / understanding), and you limit the possibilities of solutions. (like fighting this).
I really think Erika from America is an evil anomaly. God forbid that they all be like her, Animal.
We who have been paying attention realize we are being attacked, whatever our relationship with the US, so we’re all in this together. USCitizenAbroad describes the feelings of many of us, but not all in My wound is geography.
Another real LOL! A great slogan for the IRS. (You and Em are always able to make me laugh through the tears.)
Wrote this a while back in November 2012 where I equated the United States with a cult.
“I have been rabidly anti-American as of late. With the United States trying to go after what money my wife earns (as she is a US citizen who is seriously thinking about getting rid of her US citizenship and becoming a naturalized Canadian citizen), I have been enraged and furthermore become more and more anti-American.
I have come to the conclusion that the United States is a massive nation-cult. Some people will object to this, but hear me out. A cult is defined as “new religious movement or other group whose beliefs or practices are considered abnormal or bizarre” It is one of the hallmarks of a cult to have certain practices and symbols that render their participants into a state of catatonic “bliss”. Take for example, the American flag. To anyone not of US birth, the American Flag (note that it is always capitalized for most Americans who use it in writing). Even when it is taken alone and used “The Flag”, what is the first impression that comes to mind? The American flag. Cults have buzzwords. The American Cult has the buzzwords “Freedom, Liberty, the pursuit of happiness.” As if those things don’t exist in certain other nations.
There are key components to a cult: Mind control where – Studies have identified a number of key steps in coercive persuasion: 1)People are put in physically or emotionally distressing situations; 2)Their problems are reduced to one simple explanation, which is repeatedly emphasized; 3)They receive what seems to be unconditional love, acceptance, and attention from a charismatic leader or group; 4)They get a new identity based on the group; 5)They are subject to entrapment (isolation from friends, relatives and the mainstream culture) and their access to information is severely controlled. The first is the media control of the United States media – notice that their programming pretty much is all fear-based. This emotionally distressing or physically distressing situation is kept up repeatedly by the media in playing out violence that happens in their nation as well as in other parts of the world. The second where their problems are reduced to one simple explanation: such as the attacks of 9/11 – The terrorists did it, the terrorists are the bad guys, With the election of Barack Obama, the third came into play – he was elected as a charismatic leader who doles out affection, love and attention, especially to those undeserving of his attention such as those who would seek to stay on government assistance and welfare. 4) Americans are Americans – that is their identity and they use it every chance that they can get. From the Pledge of Allegiance, to the jingoistic marches of Sousa, to the constant ceremony and rituals; it is drummed into them from the time they were born. They have a world wide reputation of being the boorish, outspoken tourist that keeps asking why everyone else doesn’t conform to American values. 5) American culture is America-centrist. To most others this would be typified as brainwashing. Everything is put through the “America is better” filter before it is fed to the American public. This is why their country is typically so jingoistic and Americans appear to have the mentality that “the world revolves around us”.
According to psychologists, the cult joiners have a need for subconscious – psychological fulfillment – unfortunately those of us who are awake tend to call it a need to be controlled by someone else, a need to be told what to do. Ultimately, it is manipulation no matter which way you look at it.
Considering how many wars the United States has started or been in, there is a distinct potential for harm not only to other nations, but to their own cult-members as well. The Viet Nam War Memorial has a list of 58,282 names of those Killed in Action.
Leaving a cult is not easy and as such leaving the United States is not easy. Punitive Legislation, such as the Reed Amendment where US renunciants lose their citizenship for tax reasons are forbidden to visit the United States and a punitive fine of $450 for the act itself of renouncing one’s citizenship and tax forms to seize assets if one has more assets than they deem that you should depart the country of your birth or naturalization with. All this makes it difficult to leave this cult-nation.
If you are not an American, don’t get involved. If you are an American, don’t you think it’s about time to leave?”
Thanks, Animal. Your analogy is right on as far as I’m concerned. Mind control is all done without many realizing they’ve been controlled. (Perhaps Erika from America is the extreme result; most homelanders won’t even engage with us to argue what their minds believe. They’ll go on ignoring what is happening and, if anything, feel sorry for us, ‘knowing they are better off because they live in the land of the free and they must fight all who threaten that ‘freedom’).
To give you an idea, USCitizenAbroad, of the situation that I find myself in, and why I’m fighting so desperately to keep our funds out of the hands of the United States Government: Here you go. And I lost my naivete when my mother decided to be a narcissistic, controlling b**** who initiated financial abuse upon me to keep me “under control”? Sound familiar to what the United States is doing? That is why I saw this kind of thing early on. You say “U.S. citizenship is like living in an abusive marriage. Virtually all people who leave abusive marriages always say: “I wish I had left earlier”. Yes, I have been abused, mentally, emotionally…and scarred and yet I stayed with my “mother” until I could take no longer. That’s where I learned my self worth and got out. Yes, I’m angry; enraged even.
“it is hard for me to articulate this into words; whether written or spoken. For me success has never been a part of my life. Sure I have had little successes here and there, passing tests, getting something small that I would have liked; but nothing that I could really call a career or any sort of life-advancement. Every career I’ve had including photography has been worked at from a limitation, whether in real estate; a car which was absolutely necessary (mine kept breaking down so often it soaked up all the funds that my career made and more (into whatever earnings my dad made)); the wildlife photography career that I’m trying to build: I’m stuck with a short lens that doesn’t even break the 400mm mark which would be the absolute bare minimum for this genre of photography.
I know my mother is going to screw me over in the will; she already has when my father died. All I know is that I’m going to contest the will when she passes. Then maybe I can get the 300mm f/2.8 VRII (to go along with the 600mm f/4 lens that my wife is getting me in 2014) as well as fix up this place to sell at a profit so that we can move into a place of our own.
If my mother is going to screw me over, I’m going to screw her over by contesting the will and getting the will changed so that I inherit 100% chunk of the property and cash assets. I will not allow my mother to put my dad’s hard earned money into the hands of the United States Government by allowing her to place inheritance in the hands of my children. They do not get their grandfather’s money until they renounce all citizenship ties to the United States. My father is Canadian and I will not allow HIS money to be appropriated by the US government due to “transmission”. And I am going to do my damndest to make some money with the money that is left over from the will by improving the status of the house that we are currently occupying and making a profit from selling the home. That may prove to be a hard thing to do considering the layout of the house, but it’s worth a try.
I’m tired of my mother bad-mouthing me to her circle of “friends” or shall I say sycophants. I see the looks that I get from them when I run into her and them on the sidewalk. The whole “Oh, my god…I’m so sorry to hear, Eiko, that you have to put up with the likes of that no-good son of yours”. I’m tired of her BS. Frankly she shouldn’t be put in the same grave as the grave where my father lies, because of the fact that she did so much to me. She saw a crypt where the last one to go would be on top, fitting just as it was in life, where my mother always got what she wanted out of my dad. As fortitudely strong as my dad was, he was a “whipped puppy” when it came to whatever my mother wanted. But I am no whipped puppy and I will do whatever it takes to keep the money out of the hands of the United States Government and that lying thief Obama.
My dad as well as my father-in-law would have turned livid if they was alive to hear what the government was doing to ordinary citizens just for the supposed “crime” of living in a country that is not the United States of America and he would have put the property back in my name as I am the full 100% Canadian born, Canadian only person in the family. My mother hates me too much to do anything but damage this family to appease her distrust and hatred of me. And I’m not going to allow her to destroy this family financially. My dad worked too damned hard throughout his 75 year life to allow her to do that so callously and unintelligently. It seems at this point that I’m the only one who will be able to “protect” the family fortune (what little that is) although Herr Obama seems to think that we have untold millions in the bank.”
My dad taught me one thing: That is “never give up”. It shows the measure of one’s character when you can be repeatedly beaten down but still spit defiantly and stand up after the abuse. And the day I stop fighting is the day I stop breathing.
You’re on Facebook, right? You should check out “Americans in Canada” group if you want to meet a bunch of ignorant Americans living right here in Canada. You can take the homelander out of the homeland, but you can’t take the homeland out of the homelander for many it seems. The gatekeepers there would hear nothing about how poorly the US of A is treating its expats and blocked me from their site. I just checked them out through my husbands Facebook and it seems they are at least beginning to allow discussion about US taxes, but I still suspect you would last a millisecond there as they have little tolerance for anything less than love for the homeland.
Oh, I’m sure there’s plenty of American Abroad still drinking the Kool-Aid that don’t mind having the US leech their financial life-blood out of them.
I wonder how many of them are on the forum that we all amscrayed from (y’know, the forum that we henceforth shall not name).
Bubble Bustin, I really had a good laugh over your stars and stripes comment! And like so many of you here, I’m working on getting rid of this ball and chain that comes with the stripes ASAP.
Animal, excellent cult analogy. Pushing the idea of patriotism and flag-waving to the extremes seen in America is brainwashing pure and simple (and something I’ve always abhorred). The fact of the matter is that I enjoy much greater freedom in every respect here in Belgium than I ever did in the US. You’re absolutely right: it’s time to leave.
Maybe we should stop referring the US as “the homeland,” and US residents as “homelanders.” I hate to say this, because I know some people will be offended, and I have no intention of making light of the inconceivable suffering of Jews (and other minorities) during WWII, but given how fascist the US seems to be becoming in so many ways, maybe we should refer to them as “the fatherland” and “fatherlanders.”
@Calgary 411 & Jane Doe belge
Thanks, happy I made you laugh. It’s said that sarcasm is the language of the devil. Can hardly wait to exorcise my rights as a US citizen 😉
I don’t refer to the US as the ‘homeland’, nor does my husband and many other US citizens like him who have never lived there. ‘Homelander’ adequately expresses a perception I have about a group of people who, like the term, are antiquated in their thinking.
For instance, I wouldn’t think of Chris Hedges as a homelander.