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.”
….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. …….
Lol….yes of course…………but the “few” as you put it are fine for me so far as a LT expat.
Until RBT we all know nothing is perfect.
Outwitting The NIIT: 12 Ways To Avoid The New Net Investment Income Tax
Thanks for the Huffington Post article. No ambiguity as to who pays taxes there:
“The United States is one of the few developed countries that taxes income earned by its citizens, regardless of where they are residents. So U.S. citizens living and working abroad often must pay taxes to two countries!”
Expatriation is an option, but like the Charter in Canada, the European Convention on Human Rights as has similar protections for EU citizens.
For me FATCA violates Article 14 (Discrimination) particularly ‘national origin,’ and Article 8 – Privacy, Article 10 – Expression (FATCA) hinders Financial Freedom for dual US / EU citizens, also there’s a ‘right to peaceful enjoyment of possessions,’ how can the US (a foreign tax authority) be given the same rights as other EU member states to tax possessions?
By the way it seems the following EU member states have not fully signed up to Article 14 with Protocol 12 (Bulgaria, Denmark, France, Lithuania, Malta, Monaco, Poland, Sweden, Switzerland, and the United Kingdom) so I would envision initially a legal challenge would have to start in an EU member state such as Germany that has signed an IGA.
This whole FATCA issue in the EU needs to be looked at by a human rights solicitor.
It’s hard to imagine in the EU that resident EU citizens will eventually be carved out of the IGAs. Yes the US will potentially have an ‘exceptions’ list by comparing passport data vis-a-vis received FATCA data. Hopefully resident EU citizens will be exempt from FATCA automatic information exchange and turn the clock back for the IRS to have to rely upon a manual system making Tax Treaty requests.
The US won’t be totally stopped, but it will make the task much much harder, more expensive and risking IRS resources on little or zero tax revenue. I suppose they could try to hit people with penalties and fines, but would they be collectible abroad? I believe they may have a case for back taxes, but fines and penalties are different.
How about a new term Resident Citizen Carve Out (RCCO)? The legal status where a resident citizen’s accounts at FFIs will be deemed as not Reportable Account for IGA / FATCA purposes.
For example you show your EU Passport, proof of EU residency, then the bank would apply a RCCO to that particular account. Hopefully this world will come to pass.
I hope you were able to put your comment up on WSJ site, without the Fbomb, of course, so it is NOT taken down.
Looks like the IRS has released some additional details on OVDP changes.
Interesting stuff is at the end of the article. New 50% penalty for people who are discovered while entering OVDP. Lots more people can get the 5% including US residents and people with more tax due. Short on details and I cant find the IRS released information if there is any. No penalties for people overseas!
Please feel free to post or paraphrase my comment on the WSJ article (minus the F-bomb of course). I usually don’t comment on articles where registration is required. The last time I did that my e-mail account started giving me problems.
Michael Cohn, IRS Eases Offshore Voluntary Disclosure Program for Non-willful Tax Evasion (AccountingToday 6/18/14),
The two sets of actions announced by the IRS on Wednesday involve technical issues, but carry great importance for thousands of taxpayers and the agency’s continuing efforts in the offshore arena.
“First, we’re expanding the streamlined procedures to cover a much broader group of U.S. taxpayers we believe are out there who have failed to disclose their foreign accounts but who aren’t willfully evading their tax obligations,” said Koskinen. “To encourage these taxpayers to come forward, we’re expanding the eligibility criteria, eliminating a cap on the amount of tax owed to qualify for the program, and doing away with a questionnaire that applicants were required to complete.”
Secondly, the IRS is reshaping the terms for taxpayers to participate in the OVDP. “This is designed to cover those whose failure to comply with reporting requirements is considered willful in nature, and who therefore don’t qualify for the streamlined procedures,” Koskinen explained. “These changes will help focus this program on people seeking certainty and relief from criminal prosecution. From now on, people who want to participate in this program will have to provide more information than in the past, submit all account statements at the time they apply for the program, and in some cases pay more in penalties than they would have done had they entered this program earlier.”
* * * *
Koskinen noted that the changes reflect the helpful feedback of tax practitioners and the National Taxpayer Advocate, along with what we learned in our experience operating the OVDP.
“Over time, we discovered that there were people, including many here in the U.S., for whom the existing program penalties were too harsh or restrictive,” he said. “These people had small enough issues that they didn’t really need the protection from criminal prosecution offered by the OVDP. But they also didn’t fit into the narrow criteria of the streamlined procedures, either. It’s important to keep in mind that the IRS is seeking a balanced approach with this program, particularly in light of our other work on offshore issues. Our aim is to get people to disclose their accounts, pay the tax they owe and get right with the government. At the same time, for important categories of these non-willful people with offshore issues, a compliance regime that is too harsh won’t net the desired result.”
* * * *
The changes announced Wednesday make key expansions in the streamlined procedures to accommodate a wider group of U.S. taxpayers who have unreported foreign financial accounts.
The original streamlined procedures announced in 2012 were available only to non-resident, non-filers. Taxpayer submissions were subject to different degrees of review based on the amount of the tax due and the taxpayer’s response to a “risk” questionnaire.
The expanded streamlined procedures are available to a wider population of U.S. taxpayers living outside the country and, for the first time, to certain U.S. taxpayers residing in the United States.
The changes include:
• Eliminating a requirement that the taxpayer have $1,500 or less of unpaid tax per year;
• Eliminating the required risk questionnaire;
• Requiring the taxpayer to certify that previous failures to comply were due to non-willful conduct.
For eligible U.S. taxpayers residing outside the United States, all penalties will be waived. For eligible U.S. taxpayers residing in the United States, the only penalty will be a miscellaneous offshore penalty equal to 5 percent of the foreign financial assets that gave rise to the tax compliance issue.
The changes announced today also make important modifications to the OVDP. The changes include:
• Requiring additional information from taxpayers applying to the program;
• Eliminating the existing reduced penalty percentage for certain non-willful taxpayers in light of the expansion of the streamlined procedures;
• Requiring taxpayers to submit all account statements and pay the offshore penalty at the time of the OVDP application;
• Enabling taxpayers to submit voluminous records electronically rather than on paper;
• Increasing the offshore penalty percentage (from 27.5% to 50%) if, before the taxpayer’s OVDP pre-clearance request is submitted, it becomes public that a financial institution where the taxpayer holds an account or another party facilitating the taxpayer’s offshore arrangement is under investigation by the IRS or Department of Justice.
@Neill: Thanks for the post! I suspect I am like many people who post here and at the Maple Sandbox. I have no interest in ever coming into “compliance” with the IRS as long as the US insists on citizenship based taxation. The US needs to change– to residence based taxation– not me. I’ll pay taxes where I live. I’m not interested in paying for the United States’ past wars and next war.
I thought ACA’s Tax Team Director was pretty tentative in this interview: http://www.dukascopy.com/tv/en/#127190
However, she was a whole lot more forthright in her comment at the WSJ:
Jacqueline Bugnion wrote:
Americans abroad are the category of US taxpayers who suffer the most discrimination and unfairness under the US tax code. Citizenship-based taxation rests on a myth of the 19th century and is not adapted to the 21st century. Discrimination is linked to double taxation, double tax filing and expense, unique requirement to file financial assets, requirement to assume foreign exchange risk, taxation on fictive capital gains, exclusion from access to foreign financial institutions, partnerships and business ventures with foreigners, inability to invest in mutual funds in country of residence, prejudice against foreign savings vehicles for retirement, exaggerated penalties for errors in filing, treatment of individuals as criminals. It is time for the U.S. to stop punishing Americans who happen to reside overseas and to adopt residence-based taxation as proposed by American Citizens Abroad. Residence-based taxation would increase competitiveness of the US and would be tax neutral.
Come on! This looks like it could be a huge move forward toward a better place. Sure things are still unfair. Maybe I and others can get a bit of cash back. Maybe people who are scared enough to become compliant can do it with less hassles. Sure we still have CBT and PFIC and accounts not covered by the tax treaty and 3520 etc but it’s better.
I am real happy to see this. I can be bummed later when they release the real details and it doesn’t apply to me!
Me too — just like you.
Nope! Not going to comply no matter what they say or do. I refuse to agree that I’m a citizen of their country. They can try claiming me, but too bad…”NOT GON DOIT” (as George HW Bush said)
Oh yeah and “Read My Lips” comes before that.
expanding streamlined—let’s see what that shall be and when it shall be. In the meantime, he said everyone needs to run to a tax lawyer NOW, before it is too late.
@Neill, I think you’re suffering from Stockholm Syndrome 🙂 You’re stuck with those bastards since you live there and you see any little give back as a gift. It’s not a gift. They stole from you and might give a tiny bit back. I know what Stockholm Syndrome feels like, I lived through it as a child when I was left by my parents in the care of a slave driver for 5 years. Whenever she did anything that resembled her being a human being (rare as it was) I thought I might actually love her. Never again! The US can take their kinder, gentler program and shove it.
Those of us living long term outside the US don’t want to enter the belly of the beast no matter how much they try to make it seem like they are trying to be nicer to us. Nicer would be if they would just leave us the hell alone like every other civilized country does to it’s expats. Let us renounce with no questions asked, no ridiculous forms to fill out, no outrageous fees to pay. One form for a ticket out of the hell that is United States citizenship. Make it permanent this time, we don’t want back in no matter what!
There are people living in the US who want to be citizens but aren’t allowed to and there are people living outside the US who want to be rid of US citizenship but aren’t allowed to because it will cost too much. Let’s set up a barter system on Ebay. We’ll give our US citizenship for free to the illegal immigrant whose story we find most compelling.
@Neill: No penalties but we’ll still charge you back taxes plus interest. And BC_Doc, we don’t recognize your incorporated medical practice so get ready to pay through the nose. Welcome into my parlour…
Nope. I’ll pass. I am a Canadian. Just Canadian taxes for me, please and thank you.
Jacqueline Bugnion’s comments were right on target. So were the comments from Kathy Barkulios who wrote:
“This is nothing more than a “citizenship” tax. These people are not living here using the roads, schools, public buildings, fire or police services, and they are not collecting government benefits of any kind. They don’t get welfare or food stamps and they don’t get the benefit of the most powerful military in the world. Why should they pay taxes? For what?”
Another good comment from No FATCA:
“Will the U.S. government come and pick me up if I need assistance getting to the airport or other evacuation point?”
“Crises place an enormous strain on our resources as embassy personnel focus on assisting U.S. citizens affected by the crisis. Security conditions can also limit our ability to move freely around the country. It is almost impossible for the U.S. government to provide in-country transportation service to individuals or specific groups during a foreign crisis. This means that evacuation costs are ultimately your responsibility; you will be asked to sign a form promising to repay the U.S. government.”
Uncle Sam is out of excuses for CBT. Nothing justifies it other than admitting the obvious — the 13th Amendment of the US constitution does not apply to Americans abroad.
Yes, of course they aren’t playing fair with the taxation of greencard holders, a policy that thrives only because noone knows about it. I found one article on HEART where an accountant said outright that greencard holders are treated badly because they are in a weaker political position. What ever happened to ‘taxation without representation is tyranny’? I will be incorporating this into next year’s class as a warning. The 18th century Publius would be furious at what the country has become. First time I wished I taught more students!
Even for people in a pension treaty country, it has to be the right kind of pension. You are lucky to have an employer pension.
Good point about the centrality of pensions. Devere put out a blurb basically saying that people with compliant pensions were much less likely to want to renounce. The upshot was ‘buy a compliant pension,’ but, of course, for many people it is simply too late.
Phil Hodgen trolling over here:
The U.S.-Canadian tax treaty should be revised to exclude the family home, life insurance, pension funds etc. from U.S. taxation. What is holding this up?
@New Tax Treaty: Say Yes!
That’s what some of us are asking and advocating for. Unfortunately, the Conservative government feels it’s adequate that a few of those savings vehicles were carved out in the IGA, if only for the benefit of the banks.
It’s my understanding that it took quite a bit of wrangling with the US government just to get RRSP’s exempted from taxation. By virtually eliminating all means by which the US taxes us, there would have to be the recognition that what they are doing to their citizens is wrong. If they were capable of recognizing that, they would go to RBT.