Same Country Exception. A letter writing campaign “exempting” one from FATCA reporting has now been kicked off. If one can show that one is tax compliant, one won’t be reported. In this case, one needs only to send a different piece of paper to the IRS that declares that one is same-country exempted. Sounds Good. Is it?
We’ll look at the details. But first, let’s look at something that came along, albeit at a much slower pace–the Social Security number. Since it’s not the prime point, I won’t claim to have researched its history fully, let’s just talk about it from my own memory. And, remember that the course of history need not be planned in advance. However, it can be expected to morph itself to a known end.
Social Security came about as a forced savings system for one’s retirement. The payments after retirement were well publicized, and the incoming payments were accepted by legislation in the houses. In order to keep track of the payments, identification was required for the first time in America. Lots of people complained, that identification was not part of the American ideal. It was a huge transition, for which we dismiss today as “conspiracy theories”. Many of us have a Social Security card which is overlayed with “not to be used for identification purposes”. This didn’t last very long. In fact, long before my first card was printed, the Social Security number was indeed used on tax forms and not just on Social Security.
During the early 80’s, judicial and legislation determined that no one could require you to supply your social security number to them (loans, credit cards, universities, whatever)–however, those institutions need not issue you their services if you don’t cough up your number. The Social Security number has morphed into most everything. In Europe, the government number is used everywhere. Anyone can require that you hand it over. In many countries, the birthdate is ingrained in the number. You have to cough it up for almost anything, including discount cards at the store.
Trying to keep it short, the Social Security number morphed from something with a real need into something used everywhere. Now, with FATCA, globally. Remember that something starts and with or without fore-planning, it morphs into mainstream.
Now, we are being offered Same Country Exemption. Safe Harbor (another Orwellian name which has a background in other areas). You have a safe harbor, if you prove to your bank (by attaching your 1040 IRS document) that you are US-tax compliant. (An individual residing in a foreign country could elect, but would not have to elect, to have an account treated as a “Same Country” Account by providing an election to the relevant FFI (such as, the individual’s bank) and attaching a copy to his or her regular Form 1040 or Form 1040NR. The FFI would then be relieved from the requirement to treat the account in question as a US account and to process and report information with respect to it.)When you do this, your bank will not FATCA report you. You will also then be allowed to not file your form 8938. It does not mention that you would still be required to file your FBAR.
Let’s begin with why this might be a benefit. If you’ve already crossed all your T’s and dotted your i’s, why would you care if you were being reported? If you are filing a paper with the statement that you are only same country, what is the difference between that and just sending in the firetrucking 8938?
Q: Does Same Country Exemption eliminate the FBAR? A: No. Q: Does it eliminate the penalties? A: No. So, now we’ve reached the point of “who cares” and Safe Harbor. But it gets worse.
If you want to take advantage of Same Country Exemption, you need to SEND YOUR PRIVATE AND PERSONAL TAX FORMS TO YOUR LOCAL BANK. Your bank will then make a determination of whether your IRS 1040 is good, bad, or needs to be whistleblown. This would be the first instance where a 1040 tax return might be reviewed by an external source. (Go back to the Social Security example).
Do you want this? But, Safe Harbor is voluntary. When you write to your Congressperson, you support that you can voluntarily submit your private and personal 1040 form to an institution. When your Congressperson reads your letter, he sees that you support voluntary submittal of your personal 1040 form to an institution. He reads thousands of letters of persons who support voluntary submittals of 1040 forms to their institutions.
What does your legislator learn from this? He learns that thousands of persons support the idea of submitting their private and personal 1040 forms to their institution. People will gladly show their private information to an institution. WELL, IF SO MANY THOUSANDS OF PERSONS WOULD VOLUNTARILY SUBMIT THEIR PRIVATE TAX FORMS TO A 3RD PARTY, THEN THOSE SAME PERSONS WOULD NEVER COMPLAIN THAT THEY WOULD BE FORCED TO SHOW THEIR PRIVATE TAX INFORMATION TO A THIRD PARTY. And if they don’t they wouldn’t mind being banned from using that institution.
Do you really want your bank to judge your 1040? Why not your grocer? Why not your gardener? Why not bring your 1040 to the singles bar and paste it to your forehead? Why not send a copy of your 1040 along with your passport application (oops, it looks like that already might be required according to the transportation bill).
So, hurry up and write a letter to your Congresscritter and tell them that you support Same Country Exemption. At the same time, ask them to inform all of the bank employees to close their eyes while they strip search you in the bank lobby.
Addition:
BE CAREFUL WHAT YOU ASK FOR. And be careful about what others are asking for– remember that a few hundred people will be supporting DA/ACA/AARO/FAWCO SCE as-is. That proposal could affect you.
By all means, write the letters. Be specific about what is needed. Be specific if something is not objectionable and what is definitely objectable. Make sure that you discuss your opinion about the specific issue of giving your bank your personal tax records, in both cases of mandatory or non mandatory.
Noted: (The “Same Country” Exemption, sometimes referred to as “Safe Harbor” Rule, is the product of collaborative work among several groups representing Americans abroad. A detailed description was prepared by ACA and draws upon ideas and work of the other groups – which ACA greatly acknowledges. ACA is solely responsible for its content. This paper (attached) was drafted by Charles M. Bruce, Legal Counsel, ACA….)
@Mark Twain……
It looks like a POS.
It smells like a POS.
It is a POS.
Like yeah, who is going to give their full 1040 to the Teller at Krakow Savings Bank instead of just filing the damn single extra form with the IRS.
They do not get it, many and maybe a majority of so called deemed ex-pats do not want their “priceless citizenship” because it is actually worse than chewing gum on the bottom of your shoe.
Its a human rights violation to saddle anyone with unwanted citizenship and create a chutes and ladder game to get rid of it.
SCE won’t change anything for me, but a modified letter might not be discarded immediately
Jeez, are you sure?
I did get that Democrats Abroad email for letter-writing, and had drafted a response telling them to get ready to loose my votes and contributions. I knew SCE, uh pardon me, Safe Harbor, was balderdash, but what you write is … oh well, it’s consistent with what I expected.
You must be “compliant” to get any benefit from this “safe harbour” exemption??!! Well this does little good for the (8.7 million minus the less than a million who actually ARE “compliant”) 7.8-ish million people who just want to be left alone…….NOT!
Back to the drawing board for you, Dems. This is a “POS” indeed.
@Pierre, “7.8-ish million people who just want to be left alone…….NOT!”
Left alone..like those who do not have nor want a US Passport.
Like those who do not vote in other peoples elections…as in US Elections….
Like those who would renounce if they could do what Ted Cruz did in renouncing his Canadian Citizenship.
There are millions who do not want this clinging foreign citizenship that is stuck to the bottom on the shoe.
Stop coming up with ways to keep people on the plantation, let them free.
People need to go on the Democrats Abroad Facebook page and tell them exactly how you feel. They need to be called on every single stupid thing they do. Hold them accountable. DA is the most useless group I have ever come across. Click on the Facebook profiles of some of the people who comment on articles there. Literally, 90% of people on Democrats Abroad LIVE INSIDE THE USA. Democrats Abroad has no interest in helping any Americans abroad as the majority of them aren’t Americans abroad themselves.
I agree that “Same S#’! Different Day” is a lame proposal that is likely to only help a handful of people. Still, I’m philosophically opposed to fighting against any measure that might help bring attention to the larger problem of CBT.
DA will soon discover that even if they achieve this “victory,” it will not silence the voices of discontent. I’m still determined not to vote for anyone who does not support RBT.
By the way, DA, when is this RBT Task Force forming, which you promised soon?
That is where your real mission lies.
Nice post. Thank you.
I used to support SCE. I thought it meant just the US gov saying that it wasn’t interested in local accounts and then me simply proving local residency to my French bank by showing them my residency card (which they have on file anyway :-). Even with that idea of SCE in mind I turned against it. As some have said it doesn’t help people with accounts in other countries and I realized that telling the foreign banks NOW that oopsie! the US gov now wants to change the deal just isn;t going to happen. So the banks are supposed to go back to their records, send yet another letter saying we might exempt you if you are a resident here and then modfy their reporting to reflect that? I don’t think so. I fact I don’t think they are going to respect the thresholds either. KISS. I believe they will just send everything they find to the IRS and let the Americans sort it out on the other side.
But what Mark writes is a whole nother kettle of fish. So the banks are now going to be asked to take over yet another US government function – that of vetting US Persons’ tax records? And that in addition to playing State department in their spare time and having to determine if people are US citizens (or connected to the US in some way)?
Really.
And isn’t it interesting how this proposal assumes that the foreign banks are going to be willing to do this? Has Dems abroad spoken to the foreign financial community to see how they like this idea? Or is this going to be the last last straw and the banks that still take us are going to rethink that decision?
Ted Cruz is an idiot renouncing. A Canadian passport with a Canadian place of birth is a good thing in this FATCA world.
“This would be the first instance where a 1040 tax return might be reviewed by an external source.”
No it wouldn’t. For decades there have been other reasons why some people need to present transcripts of their US tax returns. I never needed them so I didn’t know what was involved.
Too late, I learned about Form 4506-T. If I’d known years earlier, I could have discovered that IRS employees Monica Hernandez and likely collaborators were stealing my withholding to frame me for fraud.
A transcript somewhat resembles assessments that we get from Canada’s income tax department, but we don’t get them automatically. We have to file form 4506-T to get them. You’d better file two forms 4506-T every year, one for a transcript of your return, and one for a transcript of any US withholding that you had that was reported on forms 1099, 1042-S, or other. You can’t get transcripts for returns older than three years, so you’d better do them every year, whether you need them or not, before you learn too late that you needed them.
I’ll just transfer this from the other thread …
This campaign worries me. I believe that “Safe Harbor” has pirates lurking in it and a gate which will close after you enter. Sail in there and you will still be tagged and bagged for IRS consumption. Sail in there and you will have no hope of CBT ever being abolished. The Congress will simply say they fixed things, so stop your bitchin’ and submit your annual tax and info forms from now until eternity. I think Americans would still be toxic at the banks after “Safe Harbor” because they still come with an annual paperwork burden attached.
https://americansabroad.org/files/4314/2900/7077/same-country-exemption-2015-04-06.pdf
See any devils in those details? Mark Twain does and so do I.
SCE would be beneficial to me. I am compliant (at least I think I am as you never know because the rules are obtuse and changing) so this would help. Around the time the 8938 form came in there was a big increase in my compliance costs. It takes me a lot of my time too. That form wants you to list all accounts and then say which line of the tax return any interest, gain, etc is on – all not required if you only live in the US. Then without requirement of 8938 goes all the potential penalties associated with it – so the theory goes.
It would appear that SCE could alleviate some of the nasty FBAR life control. As if you are SCE then one might say that FinCen could never know if you are treasurer of the local girl scouts even if you don’t tell them, for instance – and it could be some fight back in regards to employers if you are going for a job with signature authority that the local banks would not be required to report to Fincen (until the rules change again).
A key weakness of SCE is that there would be more requirements on banks, more questions to ask, more forms to deal with, more fields to add to IT systems – so SCE would certainly not be about reducing extra red tape for banks. And it might encourage more discrimination of US persons overseas. Keith Redmond on Twitter has been after DA if they have asked FFI what they think about SCE. Of course there has been no research or investigation to see if SCE would end or reduce discrimination against US persons. I thought that through FATCA they could change the laws and maybe add: 30% witholding against FFI along the lines of: if you discriminate against US Persons ‘if you mess with US persons, you get the horns.’ That would be some benefit of being a US person.
SCE really does not go far enough. If you are qualifying for SCE then:
*FBAR penalties/life control should be reduced as you are really certifying that you are not a US person living in the US with overseas accounts to trying to evade tax.
*Should not have to pay NIIT Obamacare tax
*Should not get your legal retirement accounts on earned income in your SCE double taxed by the US.
*Very much more relief from compliance and double taxation from the US.
The way SCE is proposed to work is that for FATCA the US will recognize that you do not live in the US so there is relief from the FATCA requirements, but then the rest of the US tax and compliance still works to pretend that you live in the US and for all the penalties and compliance for US persons with overseas accounts to apply.
“Of the Stepford Wives, by the Stepford Wives for the Stepford Wives”
As Victoria notes:
If by Safe Harbor is meant the document written for Americans Abroad found here:
https://americansabroad.org/files/4314/2900/7077/same-country-exemption-2015-04-06.pdf
it notes that:
Under the Model 1 IGA this is NOT necessarily true. The Model 1 (at least Canada U.S.) IGA makes it clear that for accounts under $50,000 the FFI is:
A. Not required to treat the account as a U.S. reportable account; but
B. May elect to treat the account as a U.S. reportable account.
See page 20 of the Canada U.S. FATCA IGA.
https://www.fin.gc.ca/treaties-conventions/pdf/FATCA-eng.pdf
What this means is that an FFI, which has just had more U.S.A./Democrats/Obama bullshit dumped on them is very likely to say/think:
Sorry not interested. Too bad, so sad. Get lost. We are allowed to report you and we will report you because you are a toxic American and we don’t like you.
Do these morons at Democrats Abroad actually think that this is going to make the banks want to deal with Americans? Nope, Obama and the Democrats have made U.S. persons so toxic that any rational self-respecting country (including the banks) will want to rid itself of “toxic U.S. waste contamination” as soon as possible. The more trouble Americans abroad have getting bank accounts, the easier it will be to get rid of them.
Clearly, SCE or Safe Harbor or whatever name you put on it is a proposal, as President Lincoln might have said:
“of the Stepford Wives, by the Stepford Wives for the Stepford Wives”.
http://www.abrahamlincolnonline.org/lincoln/speeches/gettysburg.htm
But then again, what would you expect of those Stepford Wives …
http://isaacbrocksociety.ca/2012/12/19/democrats-abroad-are-like-the-stepford-wives/
DA is worse than useless because the ding dongs in Congress and Obama and Treasury just might listen to them and pass it quickly to be able to say they heard and helped us…..
Two questions about SCE:
1) If someone like me hands our 1040 to the local non-English-speaking (non-Roman-alphabet-reading) bank teller or receptionist to pass to God-knows-whom (and copies to his foreigner-hating brother-in-law or his criminal triad gang neighborhood boss?), who is supposed go over every line of my 1040 and make a determination that we are “US tax compliant”…and it turns out that we made an error and therefore the bank was, by IRS criteria, wrong in declaring us compliant, is the bank then sanctioned by the US treasury?
2) What if I choose not to participate in SCE, and not submit my 1040s? The IRS then sees from FATCA filings that I am indeed resident in the same country as my account, but didn’t hand over 1040s to the bank. Won’t that raise an immediate red flag, that I have something to hide? And I get hammered the same way US cops treat non-white women who forgot to signal a lane change?
Damned if you do, damned if you don’t.
Damn the Democrats. Damn the USA.
For what it’s worth, my husband and I just mailed in our voter registration revision forms to change our party affiliations to Republican.
No FATCA reporting etc. for clarity
Does this safe harbor deal let me only get my foreign earned pension taxed in country of origin ?
My house sale exempt by US tax ?
No US death tax ?
There are at least two additional points that are important here.
First, Democrats Abroad and any supporter of Safe Harbor or SCE support the FATCA legislation and immorality behind it.
Think about the practical implications of this.
Many Democrats Abroad are residents and possible citizens of other nations. Yet they actually support the imposition of FATCA and all its costs, the overriding of local laws, the downgrading of human rights and other attendant evil, on those nations where they reside. This means that Democrats Abroad are the clear enemies of any country they reside in. They are the modern version of the Trojan Horse.
To put it simply: By supporting FATCA, Democrats Abroad support the imposition of U.S. compliance costs on their countries of residence.
Second, Democrats Abroad are the enemies of ALL Americans abroad who are NOT U.S. tax compliant. This makes them the clear enemies of most Americans abroad.
The “Safe Harbor Exemption” (or whatever it is called) applies ONLY to U.S. tax compliant Americans. This is a small minority of Americans. In other words, it applies only to a small percentage of Americans abroad.
That this proposal applies only to U.S. tax compliant Americans abroad means that, Democrats Abroad are either:
A. In clear support of U.S. citizenship-based taxation; or
B. Will NOT oppose it (which is clearly demonstrated by the fact that their submissions to the Senate Finance Committee did NOT include a request to repeal citizenship-based taxation). Again. Think of it. Democrats Abroad made submissions to the Senate Finance Committee that did NOT ask for the repeal of citizenship-based taxation but DID support FATCA Safe Harbor/SCE.
So, when it comes to Democrats Abroad, we are left with a situation where …
They are perfectly happy to support and inflict these immoral U.S. extraterritorial laws on the world in general, and at the same time say:
Disgusting. Simply disgusting.
But, on the other hand, this kind of hypocrisy reminds of the song:
https://www.youtube.com/watch?v=_3IICY5NKC0
@USC, re: “The “Safe Harbor Exemption” (or whatever it is called) applies ONLY to U.S. tax compliant Americans. This is a small minority of Americans. In other words, it applies only to a small percentage of Americans abroad.”
In other words, Canadians living in Canada with US curse (a group which seems to have died recently since talk about a CBT lawsuit), and similarly, Australians living in Australia with US curse, etc, need to get off their asses and start screaming bloody murder as they are all pulled under the much larger undercurrent of AMERICANS ABROAD – who although many empathize with, have an entirely different fight on their hands.
Re;
“.. have an entirely different fight on their hands..”. ???????
“Entirely different”?
Think complementary. Think in aggregate. Think outside strict boxes of Canadians “with US curse” vs. everyone else. There is significant overlap. We are NOT “Americans Abroad” vs. everyone else. We are living in our chosen HOME country. It is NOT the US. WE are NOT “AMERICANS ABROAD”. We are residents and we are citizens of a non-us country, and we have CHOSEN our non-US country over the US.
What’s dangerous is that SCE at face value sounds like it might be ok, or at least not damaging. If one just hears the concept it sounds like a great idea for everybody. But the dirty details were put in by the DA lawyer what’s-his-name.
Q: Why not have just said that the banks need not report someone who is resident? Why put some onus upon the person living in his own ? A: Because the real objective of FATCA is to ferret out new filers. (Not new taxpayers, new filers. 82% would owe zero tax and another significant percentage would owe minimus). This makes it bright as day that DNC is NOT after evaders, it is after 8,7 million US citizens, spouses, and persons. Remember that DA is integral with DNC and it is DNC who decides.
Q: If eliminating the 8938, why not eliminate the FBAR? As a commenter pointed out, Nina Olsen has herself said (without conditions) that 2 forms ought not be necessary to a filer. A: Don’t know. I heard that the Senate Finance committee loves their Bank Secrecy Act, its unconstitutional FBARs and SARs and structuring laws. A sacred baby. Again, DNC has spoken. Particularly the boss Chuck Schumer. Another likely reason is that DNC & DA know that there are 2 applicable and separate laws involved and the Mythster only claims power over one of them..
Q: As many live in The United States of Europe (the European Union), where people have the right to live and work and do business anywhere within the borders and additionally within the EES, why doesn’t SCE cover them? A: Well, they aren’t really thinking about what is good for human beings. Its about their inate suspicious nature of anyone not back “home” inside USA.
On a separate note, the way to address CBT & FATCA is to show that its costs are greater than the revenue it sucks in from only 18% of the filers.
@Mark Twain Cost Benefit but in a different way: IRS costs, plus individual plus small business/partnership costs, plus FFI costs. If all these costs were added then the scales would likely come out different.
I had previously thought of SCE as meaningless and distracting. Commenters pointed out the issues which could be found in the specifics of the proposal. I found these details to be very much against interests.
Writing to Congresspersons at any time is of course critical, so writing a letter with the right content is beneficial, but SCE as proposed is wrong content.
Write something else other than what DA proposes. Send a thousand letters using your recommendations. Either don’t mention DA’s SCE or mention it and say that you do not want this component or that component.
Thank you for the post and for the comments, especially Pierre (8.7 million minus the less than a million who actually ARE “compliant”) and Victoria (banks are now going to be asked to take over yet another US government function – that of vetting US Persons’ tax records).
So now I’ve used the Democracy IO website, link provided by DA, to contact my representatives and ask them NOT to support “Safe Harbor”.
I too have used the link to express my true opinion of being taxed by the USA where I DO not live anymore. I have reminded them of the Revolutionary War and how our forefathers fought to NOT be taxed in their new homeland. Have they forgot ? Ironic
Expats Seek Tax Overhaul
Jul 27, 2015 by WealthManagement.com Staff in The Daily Brief
No taxation without representation. | Copyright Daniel Berehulak, Getty Images
More than three out of every four Americans living abroad say that taxes will play an important role in the next presidential election. In a recent poll of over 400 expatriate clients, the deVere Group found 78 percent say they would vote for a presidential candidate who vowed to consider an overhaul of the U.S. citizenship-based tax system. Generally expats living abroad have to pay both U.S. taxes, as well as taxes to the country in which they currently live—and many live in high tax jurisdictions such as the United Kingdom and Canada. “The citizenship-based taxation system financially discriminates against Americans who happen to choose to live and/or work outside U.S. borders, as is their right,” says Nigel Green, the founder and chief executive of deVere Group.
http://wealthmanagement.com/blog/expats-seek-tax-overhaul