Our own Noble Dreamer in the news. Wall Street Journal reports:
Expatriate Americans Break Up With Uncle Sam to Escape Tax Rules
By LIAM PLEVEN and LAURA SAUNDERS
“Ms. Moon is among record numbers of Americans cutting ties. U.S. offices abroad reported that 1,001 U.S. citizens and green-card holders had renounced their allegiance in the first three months of the year, according to Andrew Mitchel, a lawyer in Centerbrook, Conn., who analyzes Treasury Department data. That figure puts 2014 on track to top last year’s total of 2,999 renunciations, he said, which was the most since the government began disclosing the data.”
Outstanding article! A big hat tip to Tricia and Just Me. Many favorable comments as of about two hours ago.
Nice job, thank you!
Hi Trisha/nobledreamer…repeated appreciation of your courage.NOTED!
@Neill
Yes, there are big problems there. Every chance I get, I point out that the IRS STILL doesn’t mention foreign account reporting on its webpage for immigrants.
@Justkidding
Hopefully they will see that she never earned very much and realize that the money comes from her non-U.S. husband.
One thing, of course, with house values is that the US dollar has been weak against the Canadian dollar.
There was a really nice story from a website in the U.K.:
http://www.emigrate.co.uk/news/20140617-9446_us-expats-giving-up-citizenship-to-avoid-taxation
One thing that may cause a lot of kerfuffle in the U.K. is that apparently all family trusts are affected whether or not they have anything to do with the U.S. or not because they count as FFIs.
I posted a comment about the value of the house and got the usual stupid non-sequitur response from a stupid homelander:
NO Fatca 2 hours ago
Oh and anyone who thinks that this lady is a “rich expat” because she lives in a house that is worth $800,000 should keep in mind that the AVERAGE price in Toronto is now above $888,000 for a single family dwelling.
Jeff Marshall
@NO Fatca Move somewhere else cheaper then and commute to work like everyone does then.
@Jeff Marshall why should she? This is where her husband lives and works and she raised her kids. If you read the actual article you would see that she and her husband bought it for $125,000 and it has just inflated in price since. They wouldn’t even be able to afford a house like that now. And if you think commuting is cheaper it ISN’T. Anyway, what does that have to do with this at all? and who is “everyone”? There are 3.5 million people living and working in Toronto
I tried to shut him down on another point but it won’t let me post my comment:
Jeff Marshall 2 hours ago
At least it looks like the IRS is finally going to go after as many of these offshore banks as they can.
“77,000 foreign banks to share tax info with IRS”
http://www.cnbc.com/id/101726971
The super rich have been getting away with not paying their share of the taxes for DECADES while middle class wage earners have their taxes withheld and have very few options for hiding their loot overseas. Looks like the super rich top 1% might actually have to pay their taxes now! Horrible isn’t it?
NO Fatca 1 hour ago
@Jeff Marshall Where did you get that this person and the thousands of other US expats are “rich”? did you even read this article?
Jeff Marshall 1 hour ago
@NO Fatca @Jeff Marshall Okay so it is SOME middle class people who are becoming US expats. Mostly it is probably the FATCAT rich guys who thoroughly enjoy gaming the U.S. tax system with all of their loopholes, sneaky accounting, offshore accounts, tax havens, etc.
Don’t you think that everyone in America should be able to “game the U.S. tax system” like the rich and large corporations do? Shouldn’t regular middle class families making $80,000/yr be able to end up with an effective tax rate of 5% and hide money in secret overseas accounts if the super rich and corporations are doing it? Fair is fair, right?
NO Fatca 1 hour ago
@Jeff Marshall There are 7.6 million US citizens living outside the US. So you are actually arguing that the MAJORITY of those people are “Rich Fatcats”? Get real!
Jeff Marshall 1 hour ago
@NO Fatca @Jeff Marshall I was referring to SOME middle class people who are probably getting into trouble with the IRS because they are likely trying to hide money in order to avoid paying taxes.
Here is my comment that wouldn’t go thru (GRR):
@Jeff Marshall The middle class US expats who live outside the US use their local banks for local banking and these are what is known as “overseas accounts” to the US Treasury and the IRS. The FUBAR and FATCA laws were originally supposed to force rich homelanders to report the money they had squirrelled away in actual overseas accounts. I don’t know about you, but the middle class people that I know (and I am one of those so-called “overseas” middle class US citizens who has lived outside the US for my WHOLE life) are working, paying taxes in their home countries, paying their giant mortgages, buying groceries and keeping their cars roadworthy while trying to use whatever meagre pennies left over to save for retirement and their kids educations. There is not ONE penny left over to “hide”. I WISH!
GOD, these ignoramus homelanders IRK ME NO END!!!!
Accompanying video:
http://live.wsj.com/video/expatriate-americans-giving-up-citizenship-to-escape-taxes/76F23177-68A8-494E-9141-C6B52C0F4990.html?KEYWORDS=LIAM+PLEVEN#!76F23177-68A8-494E-9141-C6B52C0F4990
@GwEvil
Thanks for posting. I couldn’t get in. If I could have, I would have mentioned that the average U.S. born resident of Canada had an income of around US $26,000 in 2006.
@Pulius I think they shut down the comments right after my last comment.
I knew the price of the house would generate some comments…
The reason homelanders think Tricia might be ‘rich’ and could afford US taxes is that they’re also totally ignorant that the property taxes are likely totally different in the US and Canada.
For those who don’t know, in the US, it is not uncommon that people cannot afford to stay in a house that has grown in price lice Tricia’s has. Depending on where they live in the US, most people in that case with a modest income could not afford the property taxes, that are based on the price of the house (and revalued each year!). In Texas for example, it is not uncommon to pay 3% of the price of the house in property taxes yearly. Do the math. On a $800,000 home, that’s $24,000 per year. If you’re still paying a mortgage on the house, even if you bought it cheap, that’s quite a sum.
That’s another reason CBT is totally unfair. It does not account for the many differences in each countries.
A very nice article. But one thing all these journalists seem to keep missing is the double taxation due to the mismatch in tax systems and non recognition of tax deferred investments where expats reside.
For example, homeland journalists routinely draw attention to the FEIE but always miss the mark on the double taxation of investment income (interest, dividends, cap gains, rent etc). Moreover, they completely neglect the punishing costs and complexity of investing in non-US mutual funds due to the PFIC rules.
In addition to this, none of the non-US retirement funds are recognised as having tax deferred status during the build up stage. To make matters worse, they also get double taxed when the person retires.
To top it off, the CFC rules completely sabotage expats from owning small businesses, unless of course they are incorporated in the US.
The FEIE creates the appearance that expats are getting a break and perhaps FEIE is okay for short term temporary expats. But for long term expats who build lives outside the homeland the situation is pure hell due to all the double taxation issues (not to mention 20% VAT) along with the complicated form filing, penalties up the wazoo, and now bank account closings and mortgage cancellations.
These are the reasons many expats are cutting ties with the homeland. They were able to tolerate the existence of bad US laws as long as the US didn’t enforce them, but that is now changing and expats have no way to remedy the situation (no representation in congress) other than getting rid of US citizenship or going underground.
It is truly a fucked up situation and to this day, no journalist has really been able to put together the whole story. Bits and pieces here and there, but never the whole thing.
End of rant.
About the price of the house. The figure is NOT the assessed value but a guess based upon similar properties in the neighborhood. We do not pay anywhere near $24k in property taxes. We would have had to move too as we could never have afforded that (obviously). I think the assessed value is about $200k less. I honestly don’t see all that many comments about that and notice several who point out, quite correctly, that obviously I did not make enough to buy it etc.
One of the things that did not make it in the article but was/is relevant is that the house was paid for, in cash, by my in-laws. Both of whom had nothing when they married, they slaved, never spent a dime, never had anything new, never borrowed money. Never had a phone in the house nor a car until the kids were old enough to drive. The idea that the IRS/US gov would think they are entitled to capital gains on the sale of that house is simply revolting. I may have had my issues with them sometimes but I would have taken my name off the deed before letting something like that happen.
The Wall Street Journal is really big time isn’t it. Thanks Tricia and Just Me for getting FATCA on their radar and swinging them over to the right side of the issue.
I noticed this phrase: “green-card holders had renounced their allegiance”. Excuse me? What allegiance? There’s no oath involved with getting a kryptonite card and no obligation to take up the unholy grail of American citizenship eventually either. Of course someone getting that card understands that it means they must obey the laws of the USA while living there. It would be natural to assume though, as I did, that when back “habitually residing” in your homeland it is that country’s laws you must obey. Oh well, whatever … guess Canada has decided to set asides its own laws to accommodate US laws now — Part 5 of Bill C-31 says so.
@Publius
“Every chance I get, I point out that the IRS STILL doesn’t mention foreign account reporting on its webpage for immigrants.”
Of course not. If they did mention it, there would be a) less immigrants to the USA and b) less penalties assessed as a result of more compliance. Why should they kill their cash cow?
@Samuel Adams, you hit the nail on the head. I hate how I am effectively muted until my statutes of limitations have closed regarding my messy PFIC situation. I was already hit with US tax in five figures (!!!) and am still scared that the IRS, if they audit me, might disagree with my accountant.
I find it too complex to fully understand but am under the impression that if the IRS determined that she should have used the default method rather than mark-to-market, I would be wiped out. Perhaps it was bad advice but was advised to transfer them to my NRA spouse and/or sell the remaining ones. So far so good; it’s been three years since the disclosure but my statutes of limitations for the sales/transfers still have at least two, if not four years to run.
When all this is finanally behind me, I will be more than willing to share my story and concerns in interviews. But what I can’t get my head around is that this hasn’t been more widely acknowledged to, in fact, be perhaps the biggest threat to Expats (along with pensions issues ).
I could see that that there could actually be quite a high percentage who will find to their horror that they will actually wind up owing substantial double taxation on their mutual funds. It’s also an attack on the middle vs rich classes in that mutual funds enable those of more modest means to more effectively spread their investment risks.
@SamuelAdams
What you say is so true. And add to that the fact that when the dollar goes down, everybody`s foreign currency goes up and that is taxed as capital gains. And the most perfidious of all is that they conclude that giving up your citizenship “for tax reasons” is forbidden. It is an example of perversion at its best, and sadly condoned by the legal system- and it should not be.
@Em, I’m also surprised that even the caliber of the WSJ would describe all this in terms of ‘giving up allegiances’. It still frightens me how the US mindset views us essentially as apostates. I wouldn’t even put it past Congress to encourage the IRS to pursue those who’ve renounced, especially to deter others.
@Polly, again, excellent point made. People will be affected by phantom gains if the dollar crashes. Like I say, I could imagine that a high percentage will wind up learning that they will face substantial double taxes due to the incompatible tax treatment of passive income and capital gains, such as on real estate.
………. People will be affected by phantom gains if the dollar crashes……
The Dollar already crashed against the CHF and GBP !
…..when the dollar goes down, everybody`s foreign currency goes up and that is taxed as capital gains……
not necessarily – consider a 1031 tax-deferred exchange, that is a common, fairly straightforward strategy .
http://www.irs.gov/uac/Like-Kind-Exchanges-Under-IRC-Code-Section-1031
http://www.wave.net/immigration/lawyer/tax_avoid.html
…..none of the non-US retirement funds are recognised as having tax deferred status during the build up stage………..
over the last 10 years the IRS left my employer pension fund (contribution from employee and employer with interest component) alone …. claimed treaty based position on Form 8833
Pingback: @SaundersWSj and Liam Pleven article on life as #Americansabroad | Citizenship Counselling For U.S. Citizens in Canada and Abroad
………homeland journalists routinely draw attention to the FEIE but always miss the mark on the double taxation of investment income (interest, dividends)…………..
If you paid foreign taxes on your interest or dividend income, you may be able to claim a FTC (foreign tax credit) .
http://www.irs.gov/Individuals/International-Taxpayers/What-Foreign-Taxes-Qualify-For-The-Foreign-Tax-Credit%3F
http://thismatter.com/money/tax/tax-credits/foreign-tax-credit.htm
………..the double taxation of investment income (interest, dividends)………
All foreign income whether from foreign interest, dividends, capital gains or other … requires taxes to be paid, then you can claim Foreign Tax Credit (FTC).
http://www.irs.gov/Individuals/International-Taxpayers/What-Foreign-Taxes-Qualify-For-The-Foreign-Tax-Credit%3F
http://thismatter.com/money/tax/tax-credits/foreign-tax-credit.htm
@Laughing:
You wrote: “over the last 10 years the IRS left my employer pension fund (contribution from employee and employer with interest component) alone …. claimed treaty based position on Form 8833”
Only valid if you live in a country with a treaty. And the treaties only address a few of the issues affecting long term expats.
@Polly:
You are correct, the threat of being forever banished from visiting family members (REED Amendment) is like an open “gag order” applied to anyone who just wants to be out of this mess.
Liam reads the comments. That’s how he initially contacted me. Congratulations and thanks to Trish and Marvin for getting your stories told, and through your husband, Trish, how this situation has the potential to destroy our families.
If Liam didn’t get everything exactly right it’s not through carelessness or lack of effort, as I know that he spoke with several others in his research. My concern was whether he and Laura would cast us in a favourable light, in other words, tell the truth, because if the truth be told, we stand a chance of being vindicated.