My expat question has been accepted by WSJ.
That’s great news. When it’s published, do you mind posting it on this other tread also for easy reference?
They’re really hot to trot to tell our stories at WSJ Expat, aren’t they? Maybe some of the journalists we’ve been talking to there were listening when we said we needed a voice in the media. They need our support in return. I don’t believe that the WSJ Expat has been advertised on Brock. Would one of our moderators mind making a new post of it?
You can follow them on Twitter and friend them on Facebook too.
From some of the prior related commentary:
Vote (Do you think the U.S. needs to rethink its taxation rules for nonresident U.S. citizens?) and comment on this new “Ask An Expert” “EXPAT” article:
Wall Street Journal, December 16, 2014: U.S. Expats Find Hope in Senate Finance Tax Reform Proposal
Expat is The Wall Street Journal’s hub for expatriates and global nomads – spanning the globe in expat hotspots like London, Paris, Hong Kong, Beijing, Sydney and many more.
Here you’ll find stories about expat living – housing, education, healthcare and more – expat jobs and managing your finances abroad. Whether you’re an expat in Dubai or Delhi, Sao Paulo or Singapore, Tokyo or Tel Aviv we’ll bring you stories the world over.
Share your expat stories with us at email@example.com.
Trish reported on a comment…
John Richardson wrote:
Thanks to Mr. Lachowitz for his initiative and insight which is reflected in this quality article.
His article includes:
“Comprehensive tax reform is high on the priority list of many members of Congress and with a Republican majority in both houses the chance for a tax reform bill being sent to the Oval Office for a signature in 2015 has been significantly increased. All this said, legislators must also be careful that, in their efforts to improve the lot of overseas Americans, they don’t inadvertently make things worse for some American expats by exposing them to higher taxes under a different part of what is a very complex federal tax code.”
Yes, Congress must take care to NOT make things worse (which is easy to do) but more importantly the time has come for America to decide whether it values all Americans (including Americans abroad) or whether it wants to perpetuate a system of laws (not even found in one section of the Internal Revenue Code) that not only penalizes Americans for living outside the United States but is now forcing them to renounce U.S. citizenship to survive. Yes FORCING them to renounce.
With the exception of the “Foreign Earned Income Exclusion” the U.S. Internal Revenue Code “in it’s majestic equality” treats Americans abroad and Homeland Americans in exactly the same way. It’s just that the Internal Revenue Code punishes anything that is “foreign” and anything that is NOT a U.S. sanctioned form of tax deferral. The effect of this in plain English is:
1. All the financial accounts of U.S. citizens abroad are deemed foreign and are therefore subject to complex, punitive and and expensive reporting requirements. The penalties for mistakes can be life altering and can destroy assets. (That includes your neighborhood bank.)
2. Retirement planning throughout the world is generally based on principles of “tax deferral”. This means that it is very difficult (and I would argue impossible for people of modest means) to engage in retirement planning abroad. The tax compliance community is even treating Canadian mutual funds as vehicles that are subject to special punishment (PFIC taxes and reporting requirements).
3. Business planning – Americans abroad who run their business through corporations (in Canada think Canadian Controlled Private Corporations) are subject to unbelievably punitive requirements.
4. This regime is enforced by expensive accountants and lawyers who (truth be known) don’t completely understand how this complex system of laws interact and don’t fully understand them (not that anybody could). The result is that they interpret the laws in the most conservative ways (generally to protect themselves). Consider the new 3.8% Obamacare surtax. Everybody knows that this is for the purpose of financing Obamacare for Homeland Americans. There is no specific clarity on whether it applies to Americans abroad. What’s interesting is that if the Obamacare surtax applies to Americans abroad, it is likely that a higher percentage of Americans abroad will pay this tax than Homeland Americans will pay it. The main reason is that Americans abroad are married to “foreign spouses” (AKA “aliens”) will almost certainly use the “married filing separately category”. The result of this filing category is that the threshold for this tax is lower making more people subject to it. Think of the unfairness and absurdity. The Obamacare surtax – which is designed to fiance medical care for homeland Americans – is likely to be applied to a higher percentage of Americans abroad than to Homeland Americans.
5. Before stopping (I could go on all day) I am aware of elderly Americans abroad who are (I am going to put this in CAPS) FORCED TO RENOUNCE THEIR U.S. CITIZENSHIP TO SAVE THEIR RETIREMENT. Here is an increasingly common scenario which I am seeing in Canada. In Canada the sale of a principal residence is tax free and the U.S. it is subject to capital gains tax (and possibly the Obamacare surtax). Imagine a person reaches the age of retirement and has lived for years in a house that has increased in value (along with the rate of inflation). In other words, the house is the persons source of capital and retirement plan. Once the person stops working they really can’t afford to pay the expenses of running the house. So the idea (and possible long term objective) was to sell the house, downsize and live off the capital. As a U.S. citizen, the person is NOT able to do this and preserve the capital. Why? Because the sale of the house will be taxed. The solution AND OBVIOUS NECESSITY is to renounce U.S. citizenship so that the person can sell the house and preserve the capital. Does the person want to? No. Does the person have to? Yes.
6. But hold on just a minute. Since 2008 U.S. citizens who renounce U.S. citizenship (I don’t move physically MOVE from the United States) may be subject to (get this) a tax on the renunciation of their U.S. citizenship. This is nothing more and nothing less than the confiscation of the assets of people (which were not accumulated in the United States) because they chose to live outside the United States.
I could go on but I am going to stop. Thanks again to Mr. Lachowitz for this fine article. I certainly share his view that Congress must be careful to NOT make things worse, But, actually it’s time for the U.S. to stop this nonsense and move (just like the rest of the world) to residence based taxation. The situation is urgent!!!!
And I almost forget, I didn’t even mention FATCA – the new U.S. “Foreign Account Tax Compliance Act”. The purpose of FATCA is to enforce these tax rules on Americans abroad. But to enforce the rules, one must locate Americans abroad. Hence, FATCA. Since July 1, 2014 banks around the world are now searching for U.S. citizens who are account holders. Obviously this primarily affects U.S. citizens abroad. If you were a non-U.S. bank would you want to put up with this garbage? Of course not. The obvious solution if possible – close the accounts of U.S. citizens.
To repeat – the U.S. must reform (tax and otherwise) the way that it treats its citizens abroad!! (That is if it cares about them)