Liberty and justice for all United States persons abroad

41 thoughts on “Even in “retirement” Jackie Bugnion writes the best arguments against citizenship taxation ever

  1. @badger, that’s terrible. I’m very glad you did get the refund – and especially glad about the interest. By rights you should have been able to slap a $10,000 penalty on them as well, plus send them your accountants’ bills!

    “And the ‘success’ they trumpet ala the OVD programs really was mostly penalties, and not mostly delinquent US taxes.” Somewhere (can’t remember where, maybe Allison Christians) I read that the outrageous penalties are really a form of hidden tax, to cover up the fact that what with the FEIE and the FTCs and the near-impossibility of enforcement, CBT is really mostly a waste of everybody’s time and spirit. They just “deem” that it’s successful. I have never seen a country so fond of deeming! I call it not being able to tell the difference between dreams and reality.

  2. @iota, I agree with @Embee;

    “Good for you for taking US SS payments. It’s some consolation for the misery that nation has inflicted.”

    I am happy that somebody is making the US pay something. And @Embee, I hope your husband gets his without problem. Will make me feel glad that a small something is flowing out of the US to some of those it has mistreated – though it will never be nearly enough.

    ‘Deeming’ is another way of saying “because I said so and because it benefits me to say so”, in the case of the US ‘deeming’ us tax ‘residents’ for life based on where my mother’s birthing bed was located decades ago, or in other cases because a parent was a citizen and lived there for the minimal period to pass it on to babies born anywhere around the globe outside the US.

    Birthplace or parentage is not a taxable event or economic connection anywhere else.

  3. @Embee –

    “As for our savings … nobody can guarantee that the US gov’t, CND gov’t and/or our banks won’t find a way to steal them outright or just slowly bleed them away in the near or distant future.”

    This is unfortunately very true. I’ve put my money in NS&I – the UK bank that’s owned by the Chancellor – in the hope that at least it should be safe from the IRS. But sadly, that doesn’t protect them from the Chancellor. 🙁

    “One day at a time. Now is okay. The future, who knows?”

    Exactly. As Jon Kabat-Zinn says, We have only moments to live.

  4. @Embee. That’s why I’m taking the money now, figuring sooner or later somebody in the US government will wake up one day and realize how stupid this all is. Hey, none of us invented the system, we all just have to live with it. I consider each monthly installment to be just compensation for all the pain and suffering they have inflicted on me.

  5. @iota

    Many thanks for imparting some very useful knowledge regarding the history of citizenship-based taxation. Due to my personal and professional commitments, I could never find the time to delve deeper into the matter. This is why I laud the folks on this website for taking the time to enrich our knowledge.

    I suppose that back in the nineteenth century they did not really consider the consequences of CBT in cases like “accidental Americans” who left the States when they were infants. Fast forward to the twenty-first century, an anachronism called Fatca is wreaking unnecessary havoc onto individuals, families, businesses and financial institutions worldwide only to catch a few (US resident) tax cheats.

  6. @maz57

    “Its really tough being a citizen of a stupid country.”

    A simple statement that sums it all up about America.

  7. “In my case I received ‘refunds’ from the IRS plus interest because of the Make Work Pay credit despite never having actually being assessed with any US tax owing.”

    You could get the Make Work Pay refundable credit even if the Foreign Earned Income Exclusion wiped out all of your earned income?

    It’s probably too late for me to claim it.

    “They made several entry errors that resulted in other erroneous notices.”

    Either that or intentional entry inaccuracies that resulted in other intentionally false notices (courtesy of Monica Hernandez and cohorts).

    “They passed me from person to person trying to rationalize what was impossible to explain because you cannot assess tax on a zero or negative number.”

    I’m not sure if that’s true. Canada only assesses interest on a nil number, but I think the US can assess tax on it. The US can also assess penalties on a nil or negative number, and some penalties get labelled as taxes.

  8. @Norman Diamond,
    Unfortunately, it is probably too late to claim the Make Work Pay refundable credit after the fact now. I can’t remember whether those were years I used the FEIE, or whether they were ones in which I was so far under the threshold for taxable income anyway that I didn’t need it – after the personal deduction for individuals – because my income was very very low for those relevant years.

    In terms of the assessment of US tax on a zero – in my case, the return was very clear that there was no US tax assessable. The agents I contacted kept trying to come up with potential reasons why the notice – which was I think computer generated – could assess tax (clearly not penalties) of over 500. on a taxable income of zero – on a very simple return, without any fancy deductions or situation. Basically straight wage income. In the end, after about the 4th agent, they acknowledged that it was erroneous computer error – because the accountant entered a zero instead of leaving it blank. But that took months, plus hours on the phone, registered mail copies of my return, and faxing.

    That ordeal re a very simple return without fancy deductions and with a very low income to report makes the insanity of US extraterritorial CBT very clear in my case. The agents didn’t know how to identify the problem, the computer generated threatening letters just kept coming (threatening liens – on my non-existent US assets) and it took so much work just to understand what the notices were about – (because they made no sense at all and contained no information other than a demand for money).

    Even if I hadn’t planned to expatriate, and even with a very simple low income situation, they managed to threaten me and stress me out and cost me money for preparation, for faxes, for phone calls, for registered mail/couriered mail. And the error was made by a US accountant.

    There is no way I could live with that US extraterritorial BS for the rest of my life, and that is not even counting the offensive FBAR fundraiser and the potential FATCAnizing of my legal local (already after tax) bank accts and other potential pitfalls for complexity in the future (ex. 3520s for TFSAs or calling Canadian mutual funds PFICs). And that experience was on a filing that was compliant and timely.

    So when people say that their US reporting from ‘abroad’ is no problem whatsoever, or locals who’re about to move to the US on green cards or who’re USPs ‘abroad’ dismiss my warnings as paranoia, I know they’re either doing it wrong, or the IRS hasn’t screwed theirs up YET, or their US tax preparer/accountant hasn’t made a mistake YET – or they haven’t fallen into the quicksand – YET.

    The IRS couldn’t even process a ‘simple’ return properly.

  9. This citizenship taxation arose from the liberal view that anyone who is rich must be a criminal and anyone who lives abroad must be doing it to avoid taxation. They want to punish the rich and if someone is affected by the law it is of no consequence to them. You are just collateral damage in their war on the rich.
    Those of us on the political right know this is Marxist nonsense, just as out system of taxation was designed by Karl marx in his manifesto. The second chapter asks for a progressive income tax so as to destroy the economic Middle Class whom Marx hated. Territorial Taxation, with everyone’s participation is the answer for the expat and those of us who stayed home. A bill has been introduced every new congress since 1999 that would do both nicely, but congress is so vested in the income tax which they use to extract campaign contributions, that they have successfully ignored the bil and never even held hearings on it. Citizens at home and abroad should insist on the FairTax HR25. It would solve the problem of extra territorial taxation and the unfair way we are all taxed.

  10. @ badger
    It’s an odd thing about the IRS/FinCEN. They can let a huge foot fault of an error slide through without a challenge and then fixate themselves on a hangnail. In your case a “zero” — good grief! What an infuriating experience. My husband got a four page comeuppance for neglecting (only once) to fill in his DOB on a FBAR form. Guess they couldn’t grasp the fact that his DOB is a constant — it was the same that year as it was every other year that he submitted a FBAR. Heavens, even today his DOB is the same. Anyway he sent the missing bit of information to them and I included a one page long, extremely sarcastic letter which was a faux apology for my husband’s oversight. That letter either gave them a laugh or made them slap a permanent red flag on my husband’s FBAR file. Bureaucrats and their computers — can’t live with them and well you just can’t live with them period.

  11. “Guess they couldn’t grasp the fact that his DOB is a constant”

    It isn’t.
    “George Washington was born in Virginia on February 11, 1731, according to the then-used Julian calendar. In 1752, however, Britain and all its colonies adopted the Gregorian calendar which moved Washington’s birthday a year and 11 days to February 22, 1732.”

    A refugee from somewhere in Africa was actually allowed into the US but her government issued a document stating a wrong birthdate. The US government said that if she wanted to stay in the US she would have to declare under penalty of perjury that the birthdate in that document was her birthdate, despite everyone knowing that it wasn’t. She obeyed and perjured (just like I did on US tax returns after the IRS told me that honest declarations are automatically considered frivolous).

    One of my grandfathers was an orphan. For decades he used an estimated birthdate. Then somehow a life insurance company found his actual birthdate.

  12. @ Normand Diamond
    Interesting examples but MY husband’s DOB IS a constant. No way would I let him age backwards or forwards on paper. We are the age we are and that’s that. 😉

  13. @Embee, re;
    “It’s an odd thing about the IRS/FinCEN. They can let a huge foot fault of an error slide through without a challenge and then fixate themselves on a hangnail.”

    They’re demanding our local legal account information, but can’t safeguard the data of over 720,000. ‘compliant’ taxpayers actually residing in the US:

    And this is the foreign agency our own Canadian government is defending the turnover of Canadian data and accountholders to?

  14. “No way would I let him age backwards or forwards on paper.”

    There’s only one way to stop aging forwards.

  15. And last night on 60 Minutes we were reminded that the Social Security Administration annually declares about 9,000 living Americans dead! The government down south should spend their energies repairing their own broken systems instead of going out into the rest of the world trying to mess up everyone else’s.

  16. “the Social Security Administration annually declares about 9,000 living Americans dead!”

    And if anyone disputes it, they can get a judge to put the recalcitrant cadaver in its place.

    Now I wonder, if the guy kept breathing after that, can a judge jail a corpse for contempt of court?

    Mark Twain, where are you when we need you?

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