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Can't make "Live Toronto Event" to discuss end of @citizenshiptax https://t.co/pk6PVMNAKc? @Expatriationlaw interviews @SolomonYue LIVE: Friday Aug. 17 – 11:00 a.m. EST (Toronto) – VIEW it @thatchannel anywhere in the world! Tweet questions to @expatriationlaw in advance and RT! pic.twitter.com/bWFBBPv2Zz
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) August 14, 2018
Thank you for this.
Despite the spin/redirection being put on it in various quarters, TTFI does not in any way portend the end of Citizen Based Taxation. It perpetuates it. Not only will you have to come into compliance in order to take advantage of TTFI, you are likely to have to file something on an annual basis to maintain it. The real kicker is that when you die, your estate is still subject to US taxation. At the moment, the $10M threshold protects most, but the Democrats have already indicated that they intend to reduce the estate tax threshold back to $3.5M and gift tax threshold to $1M. Other proposed D legislation is to roll these back to $1M and $500K respectively. At which point, a huge number of people’s estates would be affected.
TTFI also does not solve the problem for almost all Accidentals, dual nationals living overseas or long term green card holders. And FATCA continues to loom large, and Repatriation Tax even larger.
I won’t actively lobby against TTFI since it will help some, and passage would represent the first positive movement in decades. But it is a minor skirmish in the ongoing war against Citizenship Based Taxation.
The potential damage TTFI may inflict is Congress declaring “job done!” and moving on, our numbers and influence having being reduced by those who do opt for TTFI.
Yeah, that’s my take. I support it because it will help some people in specific situations, and it’s a step in the right direction.
However, as a non compliant dual US-Canadian citizen living in Canada with no US exposure (your basic accidental with US birthplace) there is ZERO incentive for me to become compliant just to take advantage of TTFI. I am far better off remaining non-compliant. The less the IRS knows about me the better.
In fact my US citizenship causes me no difficulties whatsoever, living in Canada, now that I’ve learned how to sidestep FATCA via the use of a simple two-letter word.
So I don’t want to discourage him so I won’t say it out loud, but my question to Solomon Yue would be “Strictly in regards to my personal situation, how does this help me, and why should I care?”
I endorse the very same concerns as Gary Clueit and would be very happy to have those issues brought up on Friday.
While I support the efforts of Mr. Yue the following is what, in my heart, I feel: For many years I have been hoping for a solution that would bring an end to everybody’s FATCA/CBT problems once and for all but we seem at best to be destined for a future of carve-outs, one thing for already compliant Americans, one thing for Accidentals in France, one thing for people without corporations, one thing for people with corporations, one thing . . . etc. etc., all of which will (if at all) dribble down to us over a period of years that many of us don’t have. As I’ve said before on this forum: CBT is a cancer in the lives of ALL of us. It needs to be cut out at the root and abolished as an acceptable form of taxation.
Im sad to read what other said above, I do not know what the actual bill states. Does anyone know if theres a way for us to read the bill? I know Representative George Holding (R-SC) will introduce the stand-alone TTFI bill but is there anyway for us to read it so I know what it contains?
‘So I don’t want to discourage him so I won’t say it out loud, but my question to Solomon Yue would be “Strictly in regards to my personal situation, how does this help me, and why should I care?”’
Why should you care? Here’s why.
‘Then they came for me—and there was no one left to speak for me.’
From my limited understanding of what will be in the TTFI bill (considering that no details have been released), my husband and I are among the few who will directly benefit from it. We are single-citizenship, long-term compliant, and feeling very upset about the latter. So, selfishly I want this to pass. Nevertheless, I wholeheartedly agree with the above sentiments that this appears to be a string-and-masking-tape solution, which will continue to oppress us year after year, as we file forms to “prove” our situation. How much do you want to bet that such forms are as obtuse and incomprehensible, and riddled with vague acronyms and hidden traps, as can be expected from the US Government? Check out the W8-BEN if you want an example of how excruciatingly difficult it is for a non-US entity to “prove” it isn’t subject to US tax. I tried helping a Chinese friend fill one out, since his bank was demanding it, and I finally gave up.
I just don’t get it–if this TTFI bill is taking so long to draft because it’s so politically tricky to do so, how is that any more politically tricky than simply ending CBT. It can be done in a few sentences.
I’d tweet to Solomon Yue if I had Twitter. Why is he so addicted to that platform and its (or his, at least) incomprehensible gobble-de-gook and hashtags?
@Barbara – Also, probable penalties in addition to losing TTFI status if an annual form is not filed on time or filed incorrectly ($10K per “event” seems to be the going rate). What will happen if you lose status? Retroactive tax? If so, how far back? One can never underestimate the level of malevolent havoc the “noncompliant” must suffer.
https://www.reddit.com/r/taxpros/comments/97dvhk/territorial_tax_for_individuals_ttfi_americans/
Do not think the TTFI bill will resolve our problems.
Most of us DO not want to be in compliance to IRS. Again, the main point is that we want a real RBT, simply say- we pay tax to where I live, we deal with our own tax issue in where I live, period.
If I am required to deal with IRS continuously, we are still not allowed to open a regular account with FATCA because we are still a burden to the local banks.
Hence, bottom line is, real RBT is the only option. Not CBT 2.0.
Ant–Spot on. RBT–like the rest of the entire world (except-Eritrea), and REPEAL FATCA (manifest destiny plan written by a 30something IRS shyster lawyer.
Otherwise more of usa nothing–window dressing, word-smithing, and empty slogans/gestures.
@ND
1. The question was “strictly in regard to my personal situation”. I address the broader issue in the first paragraph.
2. Holocaust references are never a good idea.
3. TTFI is a carve-out that benefits a subset of US persons abroad, and which does not solve the underlying problem, and in fact might make the situation worse by luring people into compliance who would ultimately be safer off the radar.
“3. TTFI is a carve-out that benefits a subset of US persons abroad, and which does not solve the underlying problem,”
Of course.
“and in fact might make the situation worse by luring people into compliance who would ultimately be safer off the radar.”
You’re right. For example Dewees would still now owe any tax money to the US but would still get slaughtered for figuring out what forms he belatedly filed. Yes we still have to get the word out. Non-compliance breaks US law but compliance brings penalties.
I am concerned how TTFI will affect US pensions paid to persons living outside the US. At the moment my TIAA cref pension is taxed in my country of residence based on a longstanding tax treaty. The US has scores of these treaties with various countries. Will US pensions be included in TTFI? Will the US have to renegotiate all these treaties or will they just declare them obsolete? Will my resident country be willing to give up this revenue or will I be double taxed?!
“Dewees would still now owe any tax money to the US but would still get slaughtered for figuring out what forms he belatedly filed. ”
Dewees wasn’t actually assessed for any taxes owed – only for the non-filing of a US tax form. I surmise that he had no US-source income and therefore didn’t owe any real, honestly-due taxes, even though he hadn’t filed US tax forms for the past twelve years.
“Non-compliance breaks US law…”
Does it? Maybe it’s just deemed to break US law?
“…but compliance brings penalties.”
Indeed. And, in some cases, unnecessary tax bills and a desperate fear.
But not always. Some are better off filing than not filing. It’s a complicated situation with no one-size-fits-all solution.
I just took a look at the TTFI for individuals proposal.
http://republicansoverseas.com/wp-content/uploads/Territorial-Tax-Reform-Proposal-Jan-6-2017.pdf
WHAT WOULD BE TAXED
“Any wage, salary, pension, dividend, interest, commission, service or other income paid
by a bank, corporation or other entity organized within the U.S.
Capital gains on sales of any assets, tangible or otherwise, located in the U.S. and
securities of corporations or other entities organized within the U.S. or listed or traded on
a securities exchange with the U.S.”
Apart from the concern over pension tax treaties, won’t this proposed taxation severely curtail outside investment into the US?
I do not have a twitter account but is there someone who would bring this renegotiation of pension tax treaties to Solomon Yue’s attention?
“Dewees would still now owe any tax money to the US but would still get slaughtered for figuring out what forms he belatedly filed.”
That was supposed to be:
Dewees would still NOT owe any tax money to the US but would still get slaughtered for figuring out what forms he belatedly filed.
‘I surmise that he had no US-source income and therefore didn’t owe any real, honestly-due taxes.’
It would be better to leave out the word ‘honestly’. I think it’s clear that he didn’t owe any US tax even with the way US law is, but was only penalized because of forms.
For comparison, the last time I owed US tax was due to CBT taxing severance pay as ordinary income, where earned income exemption (Form 2555) only ate up part of it and there was insufficient foreign tax credit (Form 2555) because of the tax break in the country where the severance pay was earned and received. I overpaid the tax due to the US due to US law, and in those days the IRS was honest enough to refund the overpayment. At the moment it only clouds the matter if we discuss whether US law was honest or not.
The time previous to that, I had a US sourced capital gain. US tax was really honestly due. That time too, I overpaid, and the IRS was honest enough to refund the overpayment though their other correspondence was standard IRS contortions of fact and fiction.
“Capital gains on sales of any assets, tangible or otherwise, located in the U.S. and
securities of corporations or other entities organized within the U.S. or listed or traded on
a securities exchange with the U.S.”
The place of listing should be irrelevant. TD Bank used to be listed on the Tokyo Stock Exchange; does that mean every Canadian resident who bought and sold shares of TD Bank should have paid capital gains tax to Japan?
North Korea needs to start its own stock exchange. Then they can list shares of every US company…
“That was supposed to be:
Dewees would still NOT owe any tax money to the US “
Ah. Then we’re in agreement on that point.
“At the moment it only clouds the matter if we discuss whether US law was honest or not.”
I do take the view that claiming a Canadian or European resident owes extra tax on their Canadian or European income simply because they were born in America, is dishonest.
Having attended the session with Solomon Yue I am much more optimistic. Certainly this is a huge step in the right direction and we should be supportive. Certainly we should not be shooting the horse before it even gets a chance to get to the gate. No bill will solve everything . Here him speak – ask your questions- but support the fundamental shift from taxation based on Citizenship to taxation based on residence. And no – you will not get everything first time through- but we should get enough to help and can keep pressuring to get everything we need. Thank you Solomon Yue, John Richardson and countless others for getting us to this point. Finally we do have some voice. Lets not use it to shout each other down but to shout each other support.
@Heidi: “Apart from the concern over pension tax treaties, won’t this proposed taxation severely curtail outside investment into the US?”
My personal view is that if the current iteration of TTFI proposes the same extensive raft of completely new taxes on foreigners as did the previous iteration, the likelihood of sizeable or even total disinvestment in US assets by these folk will be enough to completely sink the proposal in congress or in committee.
My (evidence-free) suspicion is that this may be part of what sunk TTFI last time around.
My understanding from those involved is that the proposal has changed since its first version and has become less punitive.
@BB
Thank you for the note, though we should probably observe that less punitive is not the same as not punitive.
Countries without existing treaties have little recourse at the national level, but their individuals do have a choice about where to put money, and they might decide that US assets no longer make sense. For countries with treaties in place — and mostly these would tend to be those with decent economic clout, albeit with a couple of notable exceptions — either the US lives with the status quo, or it unilaterally reneges on its treaties, or it gives up a heap of revenue until it can renegotiate them.
Reneging buys nobody anything. And renegotiation will be hard going, slow, and carries with it the possibility of failure to agree. Even where there is agreement, any renegotiation will likely mean that other countries exact a form of reciprocal retaliation such that the US does not gain out of any of these manoeuvres.
I just can’t see this much applecart-upsetting being something congress is likely to swallow. Although with Captain Twitter at the helm and a policy of America First at any cost, I suppose anything is possible these days.
https://www.nationalreview.com/2018/08/american-expatriates-deserve-territorial-income-tax-system/
It’s Time to Free American Expats from Our Ludicrous Extraterritorial Tax System
By Kurt Couchman
August 15, 2018 6:30 AM
Allowing Americans abroad to pay income taxes based on residence rather than citizenship would be better for the U.S. and the world.
Americans who live and work around the world face crushing burdens from U.S. tax laws. Liberating them in the next round of tax reform can increase prosperity at home and expand American influence abroad.
The December 2017 Tax Cuts and Jobs Act replaced an anti-competitive global system with pro-growth territorial taxation for businesses. Companies now pay income taxes where they produce, not where they’re based. This smart move leveled the playing field between U.S.-headquartered firms and their foreign competitors.
Individual Americans should also pay taxes based on residence, rather than citizenship.
Under current law, the first $102,100 earned by an overseas American each year is taxed under the laws of the country in which he resides, and is exempt from U.S. income taxes under the foreign-earned-income exclusion, as are certain housing costs. Additional income faces taxation in both countries.
Income tax is hardly the worst aspect of America’s extraterritorial tax system, either.
The Foreign Account Tax Compliance Act (FATCA), an incredibly cumbersome offset to the 2010 stimulus bill, mandates that both Americans abroad and any foreign financial institutions they use must report detailed information to the Internal Revenue Service. Many foreign banks refuse to serve Americans to avoid the compliance costs, and thousands of Americans each year are driven to renounce U.S. citizenship so they can have a normal life abroad, not to mention the countless others who are discouraged from living abroad in the first place.
Who are these people? They are a broad cross-section of our fellow citizens. Some are teachers or medical researchers. Some are missionaries or humanitarian workers. Others conduct diverse business activities, from software development to manufacturing to resource production to sales to shipping and logistics.
In many ways, they are better ambassadors than our diplomatic corps. They are more likely to interact with regular people in the countries where they live. Sometimes they marry or adopt locals, putting down roots in their communities. Their objective is almost always peaceful, and they cost taxpayers nothing.
Americans bring new ideas. Our tradition of ordered liberty based on constitutionally limited government, equality under the law, free markets, inclusive institutions, and individual dignity remains a shining example for many around the world. As we share that heritage abroad, more opportunities for political and economic progress as well as cultural enrichment are created.
Economic development is also crucial. Beyond fostering institutional reform, direct commercial ties can help generate prosperity at home and abroad. Foreign inputs can strengthen production in America. Foreign goods and services can provide better and cheaper consumption options. Foreigners with greater incomes and friendlier attitudes toward America are potential customers for American workers’ products.
U.S. expatriates aren’t just good for spreading American values and building commercial relationships abroad, however. Many also have friends and family back here in the U.S. Their stories and experiences enrich us, too. They share new ideas, perspectives, and ways of living that improve our lives.
All in all, Americans abroad promote mutual understanding, economic development, and peaceful relations with their host countries. Many of our government programs actively promote such international exchanges. Yet our tax code discourages them.
This is easy to fix. About 9 million Americans live abroad. Many have annual earnings below the $102,100 threshold. FATCA does far more harm than good, and legislation has been offered to repeal it. Even if more Americans were to seek their livelihoods abroad, the increased economic activity would more than offset any lost revenue. In fact, American Citizens Abroad’s “residency-based tax” concept can be revenue neutral even without these additional considerations. Of course, the main idea is to remove foolish barriers to flourishing, not to fixate on filling government coffers.
Americans abroad help advance peace and prosperity. They also reduce armed conflict and humanitarian crises. Some seek these outcomes explicitly. Others, by making a living as they provide what other people want, will be (per Adam Smith) “led by an invisible hand to promote an end which was no part of his intention,” such as more robust, resilient, and self-sustaining societies.
Adopting territorial taxation for individual Americans is good policy. It would bring U.S. tax laws in line with global standards. It would simplify legal compliance for overseas Americans and reduce obstacles to their aspirations to serve others. And most importantly, it would enhance U.S. influence and prosperity while enriching Americans wherever they live.
Kurt Couchman is an economist and the vice president of public policy at Defense Priorities.