Those tax compliant #Americansabroad who pay U.S. tax are actually "tax invaders!" bc they invade the US to pay taxes http://t.co/E1gTvU7OXW
— U.S. Citizen Abroad (@USCitizenAbroad) October 7, 2014
Some of you may be aware that Kelly Phillips Erb (@TaxGirl) is running a series of “Guest Posts” on topics of interest. The above tweet references a particularly creative and interesting article on the taxation of Americans abroad. I recommend you read the article. I also recommend that you get over to Forbes and comment on this article. You may want to consider this article in light of some of the recent Robert Wood posts, including:
Marilyn’s Letter to President Obama; and
Dear Son, Why You Should Leave American Now.
An excerpt from this particularly brilliant article begins with:
The Accidental Tax Invasion
By Dominic Ferszt
America’s hatred of tax evaders is at an all-time high. In recent years the media has reported that the IRS identified over 43,000 hidden offshore accounts from which they raised over $6 billion in revenue. Their hard work has elevated the tax evader to public enemy #3, after terrorists and pedophiles. Yet for every villain, there must be a hero. Perhaps now is the time to introduce America to the ‘Tax Invader’.
A tax evader is someone who uses the privileges of citizenship to generate income and then conceals that income to avoid paying tax. A Tax Invader is a foreigner who generates income offshore which they reveal, and on which they pay tax; specifically to the United States.
Owing to a unique combination of laws, the US is the only country that benefits from Tax Invasion. Principal among these is citizenship based taxation (CBT) which requires US citizens to pay tax on their worldwide income no matter where they live. Tax Invaders are distinct from Americans who have moved abroad in that they long ago severed (or never even had) meaningful ties with the US. They generally come from within three categories: foreigners who hold on to their green card; individuals born abroad to US parents who had previously emigrated (nominal citizens) and; individuals born to foreign parents who were temporarily in the US (accidental citizens).
All three groups are considered resident for tax purposes under US law, so they’re not paying tax voluntarily. However, their notion of patriotism was developed in a foreign country, so most could readily go down to their nearest US Consulate and renounce their taxing obligation along with their citizenship; an option not available to US residents.
Unfortunately all is not well with the Tax Invaders, and darker storm clouds are gathering.
This is primarily a well-written account/description of what is going on. I am puzzled though, by the omission of long-term duals or even those who are only permanent residents in their second country. I am pressed for time so will just put my comment left on the site.
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Thanks for your thoughtful account of this situation. And thanks to Kelly for sharing her blog-this is a great idea!
Tax invader. Interesting term. I like your solution regarding Accidentals and tweaking the Treaty. Such a simple and effective way to deal with this complicated mess. However, I don’t understand why you would choose to leave out those who were connected to America longer than say, Accidentals/nominals and who have lived in other countries for decades; especially those who relinquished their citizenship years ago by becoming citizens of another country. These former Americans were told in no uncertain terms, that they had lost their US citizenship. Now the banks are demanding CLN’s as proof they are NOT Americans and many are scared to death. A few are defiant. There is no doubt this is another unplanned situation that needs to be dealt with fairly. I also happen to think that dual citizens who have lived in their second country for perhaps, a prescribed number of years, should have the same opportunities that you have suggested. By the sheer numbers, I believe it is obvious that people simply didn’t know of any filing requirements. No indications from the State Dept. No letters from the IRS. Paying taxes and following the laws in their country of residence. Obviously not using American services/homelanders’ tax dollars. Surely they should also be included in this solution. Otherwise, I believe the rise in renunciations will continue.
I have been involved in this situation for nearly three years now. I can say with certainty that I have yet to meet an Accidental, nominal, former green card holder or former dual who wanted to have an American passport or “return” to America. Unfortunately, an awful lot of damage has already been done (as you indicate in your description of OVDI, retirees etc). Were it not for the thoroughly entrenched mistaken notion that all Americans living outside the country are rich tax cheats, I am sure homelanders would be horrified by what is happening and would not support what is going on. There are an awful lot of people for whom the damage irrevocably done,
I am delighted that Mr. Ferszt, the author of this “guest post” at Forbes, mentioned our Human Rights Complaint as well as the ADCS lawsuit. Even though we’ve heard nothing at all so far from the UN regarding our Complaint the several mentions of it in articles such as this is well worth having done it. The US government can consider itself on notice.
The article is factually correct. However it’s the continuing suggestions for a ‘watered down’ CBT that I can’t get my head around. So you spend too long in the US? You’re sentenced to a lifetime of CBT?
Scrap CBT – that’s it full stop. That should be the goal.
If you spend more than 6 months in the US then the US is entitled to consider you a taxpayer in a calendar year. It’s easy for everyone to understand without having to employ accountants and lawyers and oddly the IRS itself.
Citizenship of the individual shouldn’t matter. It would be far cheaper and raise more revenue for the US to identify these people rather than force 200+ countries with different legal systems, varying levels of commitment, fight data integrity, and fighting your own ex-pats as well.
Identify the tax ‘prospects’ and pursue them. This makes sense for everyone all around rather than continue this ‘you will comply’ mentality orchestrated by a few narrow minded Senators.
But again blowing $2T on two Gulf wars that haven’t made any difference in the long term management of the world’s terrorist problem is the US Government’s mentality we’re dealing with.
And here we’re here again dropping bombs hoping the continued beatings will somehow produce the result we hoped for twice before. It’s been said once bitten, twice shy, what is thrice from the POV of the terrorists? Shy didn’t work and now we’re on to thrice. I guess thrice is they board planes from all around the world to Istanbul, cross into Syria and fight for IS.
Interesting approach, but I strongly disagree with this generalization:
“However, their [the tax invader’s] notion of patriotism was developed in a foreign country so most could readily go down to their nearest US Consulate and renounce their taxing obligation along with their citizenship…”
For me, it’s the fact that stupid laws have resulted in driving an artificial wedge between US citizens and any patriotism or allegiance they have for the US. No other country, especially one that prides itself on being supportive of personal liberties forces their citizens to make this “Sophie’s Choice” like decision. Thousands of people are proving that it’s not so easy to make that walk down to the consulate, and those that do often do it with huge resentment and regret. It is not something they would “readily” do if FATCA or CBT didn’t exist, no matter how entrenched they are where they live – unless only of course the country where they live requires it of them. Unfortunately, false and misleading comments like this only act to relieve the US government of their responsibility for CBT and FATCA forcing US citizens to give up their US citizenships, IMO.
I realize that the writer’s comment was intended to convey how those “accidentals” who may not have any attachment for the US might feel about giving up US citizenship, but the same principle applies. My husband, who’s never been a resident of the US is angry that what should have been a “gift” from his father is being forced to do something no other country would force him to do in order to lead a normal life where he was born and lived his entire life. No one “readily” does something at the point of a bayonet (figuratively speaking).
@Don, “But again blowing $2T on two Gulf wars that haven’t made any difference in the long term management of the world’s terrorist problem is the US Government’s mentality we’re dealing with.
And here we’re here again dropping bombs hoping the continued beatings will somehow produce the result we hoped for twice before.”
Its now Gulf War III
Pricetag is approaching $4trillion with future health care costs etc…
Bombs have been dropping 23 years.
Yep, lets do more of the same….
@Bubbles..”No other country, especially one that prides itself on being supportive of personal liberties forces their citizens to make this “Sophie’s Choice” like decision.”
It pains me to say this and a couple Brockers know why, but “personal liberties” died in that place a long time ago. That place i knew and grew up in is gone…..
People need to get over that psychological hurdle and realize their ideal does not exist.
@Bubbles “Thousands of people are proving that it’s not so easy to make that walk down to the consulate, and those that do often do it with huge resentment and regret.”
It was very tough for me to say goodbye but the City on the Hill with the bright light, well the light went out. The resentment and regret is based on what you “think” you are giving up not what you are “actually” giving up.
@Bubbles “It is not something they would “readily” do if FATCA or CBT didn’t exist, no matter how entrenched they are where they live – unless only of course the country where they live requires it of them.”
A nation that practices CBT alone in the world and imposes FATCA unilaterally is simply the “proof” that the ideal which founded the US is dead.
Bubbles, I am a product of the plantation yet I walked away from the plantation at a high personal sacrifice. When you look back at it through a telescope you realize that the left little behind.
I guess by definition I am a “nominal citizen” and I resent the idea that I would even have to renounce something that I don’t even consider myself. I don’t recognize the US’s claim of ownership on me, therefore I would do not feel the need to renounce (and pay for it too!!??!!), nor would I do anything else with regard to the USG and their insane tax laws. If they believe, for that, I should be arrested and thrown in jail like a runaway slave, then I have no need to cross their dirty border.
@George……thank you from another refugee from the plantation…………. for your wonderful post October 7, 2014 at 3:10 pm on this thread -reading it was like listening to the “Trumpet Voluntary” played by Tina Ting Helsen…… chills up my spine and hair on back of my neck standing up, a call to arms……… my renunciation was an expensive but entirely necessary blowing up of my fantasy picture of USA as a citadel of freedom…………….. in spite of all UK flaws, there is more real freedom here in one little borough of London than in entire behemoth of 330 million people in “the land of the brave”……….I wish I had no need to go back but I have ageing P’s, family and friends that it would tear my heart out not to be able to visit. I try not to think about the Reed Amendment and the 3x attempts to bring the Expatriot Act Provisions to the statute book., it just makes me sad, mad and sends my already high BP through the stratosphere., we “silent Brockers” (who make contributions to ADCS and logon several times a day for their fix) rely on all of you more than we know.—-Blei brav….nicht!
I am the author of the Forbes guest post. I hope it helps our cause.
I’d like to thank Tricia Moon, who prompted me to write and submit the article when she made us aware of Kelly Phillips Erb’s call for guest submissions in her post of 20 August.
@Don: I agree that CBT should be scrapped, but that’s not a battle we’re likely to win at this stage. I am choosing to fight those battles where the opposing lines are weakest.
@Bubblebustin: I wrote this article with homelanders in mind. Many of them are appalled by the notion that any American would consider renouncing. I just wanted to highlight the fact that accidentals don’t share that sense of patriotism because they grew up somewhere else. The sense of renouncing your past, your roots, your family etc. just doesn’t apply to them. Of course we all know that there are renunciation fees, compliance costs, exits taxes etc. which make it hard to leave, but this was an article trying to highlight a point. I’d need to write a book to address it all.
I replied to Tricia Moon’s comment at Forbes:
“I am very aware of the problems faced, not just by accidentals, but by long term expats as well as those in ‘citizenship purgatory’ whose relinquishment is presently under scrutiny. I chose to focus this article on accidentals for three reasons; without wishing to suggest that they are the only ones caught up in this problem.
The first reason is that they are such a readily identifiable group, against all of whom these tax provisions are so patently unfair that it will be difficult for the ‘tax patriots’ who comment here occasionally to present a legitimate dissenting opinion; accidentals clearly didn’t emigrate to avoid tax. The second reason is that FATCA will be exposing them. The intersection of these two factors raises a valid issue which, thanks to Forbes, might come to the attention of a Washington policymaker. The third reason is that as an accidental myself, I’m more keenly aware of our circumstances and therefore more confident to write about them.
In a broader sense, I tend to use the term accidentals more liberally to mean all those accidentally caught up in the hunt for resident tax evaders. My suggestion to define them in terms of dominant nationality and minimal US presence should bear this out.”
The charter challenge at ADCS only stands to benefit Canadians if it succeeds; except that it doesn’t. It’ll benefit all of us. Similarly, any progress made by accidentals will benefit all of us. Like I said to Don, there are many battles to be fought here. Any progress on any front benefits everyone.
@Crystal, a out to you down the road……
“Liberty and justice for all”
“Sweet land of liberty”
“land of the free and the home of the brave”
America today is what it is, nothing more nothing less. But the above catch phrases are a reflection of what was not what is.
Being an American expat is like hanging on to a piece of clothing from High School or like still wearing a High School ring at 40!! The heady memory days of High School are gone for you, me, MonaLisa1776, for everyone…….
@Domino, I thought you were the author as the style of writing was very close. I did not want to say anything out of respect to privacy.
Excellent item you penned!!!
Yes, every battle helps no matter where it occurs.
@Domino – great job bringing this to the attention of “homelanders”. Not sure they will get it…I hope so, though.
@Domino Great initiative!
@Bubblebustin Why not post on the article? This is a really good point you make: “For me, it’s the fact that stupid laws have resulted in driving an artificial wedge between US citizens and any patriotism or allegiance they have for the US.”
Why so many more posts here than on the article? It is good to compare notes here and share viewpoints. Yet sometimes the idiom ‘preaching to the choir’ comes to mind.
@GwEvil – thanks. I feel bad for stereotyping you further into a new definition “Nominal Citizen”. It certainly wasn’t my intention. I picked up the term from one of Michael Kirsch’s legal papers, not that that’s going to make you feel any better
I believe you are one of the plaintiffs in the charter challenge. You have my considered respect.
As of today, I’m also now ‘out of the closet’, but I’ve been IRS compliant for a while and I still had serious misgivings before submitting my article to Forbes. I can only imagine the anxieties that you must endure from time to time.
For what it’s worth, I don’t believe for a second that any branch of the US government has you in their sights. FATCA is an important US foreign policy agenda, and they’re not going to compromise the integrity of its ongoing implementation by using it to target someone in your position; particularly now that you’re a public figure.
You are titanium.
@Domino – I hope you’re right about being titanium…especially in case there’s a drone attack against me! :O
Domino, a huge Thanks for writing and posting. This is definitely what we need here! I would love to see ALL the eyes here on IBS give their opinions on this . In conversation with many Native people in Canada here regarding this unjust law that the USA has forced on Canadians, I can tell you this. The feedback on how to deal with this is to live a normal life. When the bank asks for place of birth, say Canada. If they require proof, go get a fake birth certificate. If the CRA wants to be involved, let them try to prosecute a Native. They feel, if this happens, most will take the CRA to Native court and deal with this in that system. I do not think the Canadian government can convince a judge that this is a fair or just law.The Native people do not cower to the Canadian government. This is what seems to be the way they will deal with it.
I agree that it seems especially egregious for people like Gwen to be afflicted with US citizenship and all it’s responsibilities, but I still don’t see how varying degrees of attachment to US citizenship make any difference concerning the thing that makes all US citizenships so toxic – citizenship based taxation. An injustice is an injustice is an injustice, whether it’s against a baby or a full card-carrying flag-toting individual, isn’t it? The last thing we want is for the US to make exemptions among certain groups of people, rather than ditching the whole thing.
We hold these truths to be self evident, that all men are born with certain inalienable rights. Among these are life liberty and the pursuit of happiness——-
Well not exactly, If you want the liberty to live where ever in the world you want to, you must conform to the arcane rules that our knot headed political leaders, decided upon. They have decided that if you leave America to work at a job where you could make a living, they will reach into your pocket and take whatever share they decide is ”fair”, even though you must pay taxes to the country that allows you to have a job that has fled the U.S. because the corp taxes makes their product so expensive they were essentially driven out.
Pursuing happiness, well the current crop of D.C. Pukes thinks that your pursuit is an offence against their ”good” judgemant, and you should just come home and go onto the dole with the 50 million ”useful idiots” who voted this group of knot heads into office.
Maybe these truths are self evident to some but the D.C. Pukes probably never even read them in the founding documents. —-and the government of the people, for the people, and by the people, has perished from this earth——
bubblebustin,
An injustice is an injustice is an injustice just like the law is the law is the law — and we need law that will make this equitable for all of us. It makes no sense that some can slide under the radar (although if so, good for them / all’s fair in love and war and this is war; it sure ain’t love) and others cannot. That should not be the point. The only justice is that we have law that works for everyone — no one has to hide, looking over their shoulder for the rest of their lives wondering if and when they will be “caught”. It’s bloody absurd.
Sure, my son could more easily not be detected with his birthplace in Canada (but born to two US citizens) — if his mom wasn’t a loud mouth. I could ask for special compensation from the Pope or the President, but I don’t want that. I want no family like mine to have to deal with this nonsense. They should have the same treatment as my son, and my son or other sons and daughters or their families should not have to count on failing to be detected because of their non-USA birthplace. The “Accidentals” born in the US should also have like treatment. The common factor in these cases is these children had NO CHOICE in the matter of where they were born or to whom they were born. If we want fairness with the unfairness of CBT, there should be a CHOICE when these children of ours are of age to CLAIM a US citizenship if the facts present themselves or NOT. To NOT CLAIM, there should be no further obligations. To CLAIM US Citizenship, the persons CLAIM knowing all of the responsibilities and consequences of doing so.
So, at least give us that, USA, if you cannot give us what the reset of the world has – the more fair and equitable Residence-Based Taxation. Really, your exceptionality is wearing very thin — pretty soon the Emperor will have no clothes!
@ Domino
We’re all pleased your piece got picked as a guest post. Well done!
@ GwEvil
You are titanium and dynamite too.
@ Calgary411 You are so right “an injustice is an injustice is an injustice”. I admire your courage to stand up for what is right, you are a real crusader. I wish I could be more vocal, that is the problem, too many of us cannot risk being identified, otherwise there would be all kinds of public protests and our governments would have to notice us. We should have a law that works for everyone. I thought we did, when we were told we needed to “claim” the US citizenship after we left the US as children to live in Canada, it seemed fair. The law was changed because there was a 3 year time limit on it and US citizens living overseas fought the law and won. However no consideration was given to those that did not want the citizenship, it was forced on everyone. It’s time to reconsider how the US bestows citizenship on its citizens if it persists in uding CBT.
This article’s focus on deemed citizens who did not leave by choice (as in left as young children) might silence some of the homelanders with their “traitor” attitude. Anything that will encourage the homelanders to read the article and actually understand what all citizens abroad face is a good thing.
Thank you Domino!
@Domino,
So glad to see you take up the challenge, and have your piece published! Delighted to have been a tiny part of that.
I see your point now and it is a good one. I am so hopelessly immersed in this that i didn’t even consider there might be a positive motive in not including the long term duals or old relinquishers. The homelanders could hardly accuse those groups of being willful tax evaders, disloyal and the hype they love to pin on us. This may well be the most effective approach to undoing that nasty cliché.
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I agree with you wholeheartedly that we all gain from the efforts of other expats whether it is direct or indirect. Anything that any of us can do to defeat this is well worth the time and effort. Things have a way of balancing themselves and no initiative addresses only one group, one concept, etc. The world is an interactive place!
@heartsick
I wrote that “an injustice is an I justice is an injustice” in my above comment 🙂
My mother brought me to Canada as a child but does voting in a US election, obtaining a US passport, and referring to myself as a US citizen some how make those injustices more acceptable? Am I some how more guilty of being American and more deserving of punishment, or less deserving of non-punishment than an accidental?