reposted from MapleSandbox
by Lynne Swanson
#FATCA Americans overseas: Do NOT allow US tax pros scare u into entering US tax system. Many have no business entering!
— Keith REDMOND (@kredmond_global) January 19, 2017
Backing up the above tweet, Keith Redmond posted the following on Facebook:
Dear Members: I just had a lengthy, robust call with an individual who spent 25 years in upper management with the Department of Treasury IRS Criminal Investigation. He confirmed what I thought about the IRS. There is more bark than bite. He stated that there are many, many Americans overseas ho have no business in entering the US tax system and that Accidental Americans UNDER NO CIRCUMSTANCES should enter the US tax system. He confirmed that there are MANY US tax pros who prey on Americans overseas and Accidental Americans through fear and falsehoods. (e.g. you will get arrested, etc.). Any US tax professional who pushes and scaremongers these individuals to comply are not professionals and should not be used! He confirmed that the IRS is NOT going to go after you in your country of residence (most especially if you are a citizen of that country) and the IRS is NOT going to arrest you at the US border. The IRS does not have the resources to do this plus they go after those who have committed a crime not the average American overseas. He stated that Americans overseas need to not succumb to the fear. Excellent conversation and I am glad my views have been validated.
This reflects what I have long believed. Unfortunately, there is still the nightmare of FATCA to deal with. In some countries, anyone born in the US cannot even get bank accounts. We are treated as criminals just for banking where we live.
I asked Keith how his contact explains and justifies this.
Keith replied:
He can’t. He finds the whole situation abhorent…
This is very welcome news! Yet, despite what this particular individual has told Keith, we are left with the letter of the law which says clearly, in black and white, that every American citizen regardless of where domiciled, must file US taxes annually. And we are left with the letter of the law that says clearly that every account over $10,000 held in a financial institution outside the United States must be reported annually to the Treasury Department.
Until these laws are off the books (we’re counting on you, Republicans!) I’m not trusting anyone’s say-so that the law will not be applied to us. Until recently, many of us lived in ignorance of US tax law and, indeed, we were able to do so because the law was never applied. Then along came FATCA. We all know better now. Once burned, twice shy.
I completely agree with Keith’s findings.
Do nothing if you can, of course. But if you are Fatca’d you have to do something. In my opinion only the US born are forced to act. In My case the bank is threatening to turn over my info to the local govt to be forwarded to the IRS. And to refuse to open any new accounts as long as I ignore them. What would happen if the US gets info like this. Will they ignore it because I reside abroad (tacit RBT!)?
I hasten to add that I agree with the headline: DO NOTHING!
@Fred(B) – renunciation works, and keeps the banks happy too.
I think I recommended something similar in my Petros Principles.
@Iota. Renunciation works fine……as long as you don’t mind handing over US$2350 to the extortionists. (Not to mention all the associated wasted time and angst.)
Lying to your bank also works and costs nothing. Personally, I prefer the lying option because lies are exactly what our banks, our own governments, and the USG deserve for collaborating to inflict this harm upon all of us. I realize, however, that due to individual circumstances this option is not open to all.
@maz57 – yes, what suits one may not suit another. The main thing is to let people know that there’s no need to be terrified, or spend months/years worrying about the wretched IRS.
@Haydon….as you know I have high personal regard for you as you are one of the very few who do not have a heart of stone.
I literally almost choked to death on reading your words………
Some day I shall buy you a pint.
Cheers,
George S.
@maz57, well you and I agree that our own personal differences are simply the width of tobacco rolling paper.
A relinquishment does the job and costs nil nada zip.
Where does it say that this is a policy with the IRS?
There has to be something written somewhere that IRS agents and automated procedures are to ignore non-resident taxpayers before I’m going to believe that non-residents are off the hook. Otherwise, if someone is FATCA’d and the procedure is automated, the system will send the suspected USP a notice. If it instead comes across the desk of an IRS agent, it will be at his or her discretion whether to pursue it or not. My IRS agent said “its the law that all US citizens pay taxes.” He don’t give a rat’s a$$ that I lived in Canada since I was 12. That only qualified me for Streamlined.
If the IRS isn’t going to enforce the law, then it should be off the books – not to be dusted off when it suits someone, like a sword of Damocles.
Thank you. In practical terms, what does this mean for a US-born, naturalized Canadian citizen crossing into the US with a Canadian passport?
Many thanks!
What a way to run a railroad!
Depending on
…the luck of which IRS agent one gets / his or her discretion whether to pursue going after you or not
OR
…having to decide on the risk of being caught up in having to fabricate one’s history for the rest of his or her life, always looking over one’s shoulder.
The deck is stacked for anyone who shows a US place of birth (or, like my Canadian-born son whose information appears in the FBARS I submitted), no matter that person has zero connection with that place of birth (or birth abroad to US parent(s). It’s a game of chance and some are better gamblers than others.
I, too, want it all in writing as I was stung a long time ago when I was
toldWARNED that when I became a Canadian citizen in 1975 I would thereby lose my US citizenship.@Northern Shrike: And what will it mean for a US-born, naturalized Canadian citizen crossing the border on a Canadian passport when the last time she crossed was on a US passport (that she was told she was supposed to be using)? I wouldn’t give this person much of a chance of success.
@maz57
“Lying to your bank also works and costs nothing.”
Wouldn’t this open one up to prosecution for fraud? Obtaining goods or services under false pretexts is the very definition of fraud, is it not?
This just leaves those of us who pay taxes blowing in the wind. I wrote this to my Congressman in response today. BTW, he hates FATCA. Some of you aren’t going to like it – but like I said, I’m a bubble ready to burst, and all it takes is one prick:
I am a US citizen living in Canada and I pay US taxes. I have written to you on many occasions concerning the plight of Americans abroad and heard back from your office on a few of those letters. Thank you. I pay US taxes even though I don’t intend to ever live in the US since leaving there at the age of 12. I didn’t know about my obligation to pay US taxes until a few years ago, and I became US tax compliant for the purpose of renouncing US citizenship. Now that the Republican’s platform includes the repeal of the Foreign Account Tax Compliance Act and to return the US to Residency Based Taxation, I am having second thoughts. I do not want to give my US citizenship up. I never have. I even postponed getting my Canadian citizenship until such time I knew I would not lose my US by doing so. All I want in exchange is to be able to enjoy that which virtually every citizen of every other country enjoys, which is to pay taxes only to where I live, and like Americans at home do.
I heard from a very reliable source today that the IRS’s unofficial stance is to NOT enforce US tax laws against Americans living abroad. This is substantiated by the fact that I don’t know of one non-resident American who’s been contacted as a result of FATCA. Should this be the IRS’s stance, I feel that it is extremely discriminatory against those of us who pay taxes to the US and maybe even unconstitutional, as all US citizens are expected to pay US taxes. The IRS should be relied upon to assist in the collection of those taxes and to treat similarly situated taxpayers the same.
My questions to you are why taxation based on citizenship is still on the books, when clearly the IRS is not willing or able to fully enforce it? Am I stupid for paying US taxes, when I know of many Americans living abroad who don’t pay US taxes but continue live as as Americans without having to renounce their US citizenship, enjoy a life without US taxation because the IRS doesn’t enforce US law? Do you not see the irony that it’s primarily those who pay US taxes who are being forced to renounce their citizenships due to the excessive compliance burdens and double taxation abroad? Could I have avoided paying a large chunk of my retirement savings, save thousands of dollars every year in compliance fees and still not suffer any repercussions because the IRS itself has created their own tax avoidance scheme for some Americans, which is a lack of enforcement?
I have written the following letter to the lawmakers proposing tax reform:
“Dear Senate Committee on Finance and House Committee and Ways and Means Members,
I am a US citizen who has lived in Canada since childhood. Much to my surprise, I recently learned I am also considered a US taxpayer by the US government. After spending six figures of my retirement income earned solely in Canada to come into US tax compliance, I am now faced with having to renounce my US citizenship due to the ongoing complexities of filing US taxes from abroad. This is something I do not take lightly.
No other country undergoing tax reform has maintained a tax system based on taxing its non-resident citizens. The US should join the rest of the modern world and allow its non-resident citizens the ability to thrive as Americans in the US do by returning to a system based on residency, as every other citizen of every other country (save Eritrea) enjoys.
Americans are renouncing their US citizenships in record numbers, not because we do not cherish our US citizenships, but because we must in order to live normal lives. I fail to see how the US benefits from such policies that either prevent its citizens from leaving the US, or once gone cause their US citizenship to be such an extreme problem for them that they are forced to renounce US citizenship.
The US government is the single biggest threat to Americans living abroad. You have the power to change this. I implore you to do so.”
Mr Posey, I would appreciate it if you would lend your support to the Republican platform which calls for a return to a tax system that is based on residency for individuals. I am including this letter to them.
Bubblebustin. It makes perfect sense that they aren’t going to enforce the law with respect to ordinary folk living in other countries. Some of us have said all along they haven’t the resources. Like any other business they will go where they can get a return on their investment. That ain’t offshore.
Japan T. You must be kidding. Prosecutions take a lot of time and money.
Northern Shrike. In practical terms, the vast majority of duals crossing on a Canadian passport have had no problems.
@Bubblebustin
Dude, don’t spoil it for the rest of us! But honestly, this just confirms what everybody knew – there’s zero evidence of “ordinary” non-resident US citizens being pursued in any meaningful way. Given that in Canada at least there is no provision to collect any sort of penalty against dual citizens, those of us with no US financial ties can totally and completely ignore the IRS. In my view, FATCA creates an access-to-banking problem (in some countries) but not a US tax problem. If by chance you are identified through FATCA, what’s going to happen? The IRS might send you a letter by post – ouch.
@JapanT
Me, I’m not too worried about having lied to my bank. If they figure it out, I think it would be in their interests to quietly fire me as a customer, rather than publicize the fact that their sloppy compliance procedures are shit. My net worth is probably less than what their lawyers would charge to sue me. In any case, I answered the broker’s e-mail with “I am a Canadian citizen” rather than “I am not a US citizen” and if later I failed to notice that little “US” checkbox next to citizenship, well, an unfortunate oversight, I didn’t read the form very carefully.
@NorthernShrike
So here’s the thing with passports. If you are a US citizen, you are required by US law to enter the US using a valid US passport. That is the letter of the law. In practice, it was never enforced, so you could easily cross with a Canadian passport showing a US birthplace. In recent years they appear to have tightened things up. After my previous US passport expired (I had one 15 years ago, long before I knew about the tax mess, only because it made things slightly easier when living in Germany) I didn’t renew, just used my Canadian, but would tuck the old one into my bag just in case. Sure enough, one day flying down on a short business trip I got some grief about how meetings were “working” and I needed some sort of visa. I bitched and moaned and eventually the customs guy noticed the US birthplace and asked if I had citizenship. I said yes – one ought not to lie, even if it’s in the airport on Canadian soil – and he gave me the big lecture about the “hemispheric travel initiative” and h0ow the law is now being enforced, yada yada. I pulled out the expired one and he let me through. After that trip I continued to use the Canadian passport for a few more years, no trouble at all. I delayed renewal until we were back in Europe for a temporary stretch, figuring that on the off chance my name and address were given to the IRS, any letters they sent would disappear into the void. Subsequently I’ve not made too many trips south, but I’ve continued to use the Canadian passport without anyone asking to see the US version.
As we all know, US Customs has no access to any information about tax status. You’d pretty much need to have a warrant out for your arrest before you’d be stopped at the border, and presumably that wouldn’t happen without your hearing about it at some point. In which case you should not travel to the US…
Regarding passport renewal, there seems to be a lot of misinformation. In the past the US passport application required you to fill in your Social Security number (or zeroes if you had none) and sign a little declaration that you were up to date on your taxes (on penalty of a $500 fine for perjury, which is a bargain compared to renunciation or having your tax returns prepared). However, at some point within the last five years the application changed, and now you are only required to truthfully report your SSN, if you have one. No mention of taxes. What this suggests to me is that the State Department really doesn’t like the IRS and really wants nothing to do with this issue. There doesn’t seem to be any evidence of passport renewals being denied to individuals who are not tax compliant – the passport folks don’t talk to the tax folks.
In sum, a dual US-Canadian citizen is required to enter the US on a US passport, but that law is rarely enforced. Tax status is never checked at the border. If you are non-compliant, you are allowed to renew or acquire a US passport, and likely will never hear from the IRS after doing so.
The point implied by @Bubblebustin is worth repeating.
Those who enter the U.S. tax system will have to renounce. Interestingly the only Americans abroad who can retain U.S. citizenship are those who do NOT enter the U.S. tax system.
“…I feel that it is extremely discriminatory against those of us who pay taxes to the US and maybe even unconstitutional, as all US citizens are expected to pay US taxes. The IRS should be relied upon to assist in the collection of those taxes and to treat similarly situated taxpayers the same.”
@BB
So that is your argument for RBT. If you are going to apply an unfair and nonsensical law at least have the courtesy to apply it to everyone or don’t apply it at all . In other words,punish all those who don’t share in your desire to be all things american
To start a letter in support of RBT with that strategy would only bust not only your bubble but many others if read by someone of another mind.
Bubblebustin. Because you were put through the hell of streamlined voluntary disclosure you think the rest of us should suffer as well? (as in pay our fair share) You had a choice and you chose to remain on the res. fine; but please don’t wish it on the rest of us.
“I feel that it is extremely discriminatory against those of us who pay taxes to the US and maybe even unconstitutional, as all US citizens are expected to pay US taxes. The IRS should be relied upon to assist in the collection of those taxes and to treat similarly situated taxpayers the same.”
What’s discriminatory about it? Plenty of US-resident USCs don’t pay US taxes. One of them is about to be inaugurated as President.
Another is about to be approved by the Senate as Treasury Secretary, despite (a) having actually run an offshore facility in the Cayman Islands for the express purpose of helping US entities avoid US taxation; and (b) having tried to conceal his estate holdings from Congress on the questionnaire he was asked to complete prior to the hearing.
What do you expect the IRS to do about enforcing collection of US taxes abroad? What do you expect Sen. Posey to do about it?
Do you really want Canada and the UK and other countries to allow the IRS the power to enforce collection of US taxes extraterritorially?
Be careful what you wish for.
Although I understand that what this man said on the phone is a relief for many- what good is it really in the end if one man says this is abhorrent, Nina Olsen as well and perhaps even more, but nobody up there does anything about it? It is like it is a best kept SECRET, for Christs sake. Why should this be a secret? Because if they WANT to, if you are caught somehow, the IRS can still throw the book at you. Because it is the law. And that law needs to be changed by those people who made it and are even saying this is abhorrent. This whole thing is abhorrent. The man who used to work for the IRS and says this is abhorrent. He pretends to be a friend but does nothing to alleviate the situation.