Laura Snyder, Karen Alpert and John Richardson point out the disparities between domestic and overseas persons in US tax policies and procedures in a detailed new paper in TaxNotes Federal, Mission Impossible: Extraterritorial Taxation and the IRS. It covers a lot of ground very clearly and also includes a terrific chart, “Comparison of IRS Services for Domestic and International Taxpayers,” illustrating these disparities at a glance. This paper is also featured in an article in AmericanExpatFinance.
This is must read for anyone thinking of emigrating from the US!
Many thanks to those who toil tirelessly in service of this just cause. Indeed the toll on US citizens abroad is high. Personally I have resorted to filing sanitized FBARS and returns yearly, but it does cost time, money and above all stress that at some point something will go wrong and that the full bureaucratic wrath of the US Federal Government will descend upon the lowly dual citizen that I am. Yet I remain reluctant to relinquish my US citizenship because it is part of who I am. At least the stimulus payments that I absurdly received serve to pay for my tax preparation costs and perhaps even for renunciation should it come to that. So again, my respect and appreciation to the leaders in this cause.
Fred (B): I felt as you do, giving up my citizenship would be giving up part of who I am. I’m not urging you to renounce or not, but to say that the day after my appointment, I realized my cultural DNA was still intact, everyone I know views me as an American who moved to Canada. I felt a pang not being able to vote, but that’s it. (Actually got a form to apply for my absentee ballot.)
I share your respect and gratitude for the work of those who put so much into the cause, and this site.
It seems strange they are paying us all this stimulus money. They need to just stop telling people to stop filing and foreign banks and others to stop harassing US citizens as FATCA is just a terrible and expensive nightmare on themselves. They have to accept this fact and move on. Its very stupid as their FATCA revenues don’t earn them money as money paid on stimulus to citizens living in other countries.
That would seem logical but it’s not so much about the meagre pickings to be collected from minnows but more about control of their citizens wherever in the world they are.
I think it’s more than being about control of citizens. I think it boils down to the Congress, White House, etc., to be able to point out to their domestic audience: “See? We’re doing something about all those wealthy tax absconders!” Doesn’t faze them one iota that FATCA on its own has brought in zero revenue (compared to the billions it was supposed to), because nobody in the US public knows that, or would pay attention to any message otherwise. So, I think that yes, control is part of their plan, but it’s mainly just cynical political imagery.
I’m still counting down the few years left until I can claim a second citizenship, and will have few qualms about shedding my US citizenship. Heck, my family goes back only 2 generations before me as US citizens; it isn’t as if I’m shedding some lengthy heritage.
I don’t think it’s any of the above. It’s indifference and inertia and historical accident. This is probably on the radar of about twelve people in the entire US government and civil service.
Yup, no one who is actually aware of and cares about this issue wields any influence, and no one who wields influence cares about it. This issue is very small potatoes compared to what is going on domestically in the US, and there is absolutely zero political upside to trying to fix the problem.
If its about control, CBT is a total failure because 90% of overseas Americans don’t file. CBT is a legacy relic dating back to the Civil War and most aren’t even aware of it, regardless of whether they live inside or outside of the US.
When no tax is due, filing is still required. FATCA, FBAR, FinCen forms and regular old 1040. Forget to file any of them for any financial account, the fine is $10k per account per year. $5k+ in accountants’ fees per year. If you admit to a foreign address to your bank in the USA, they kick you out. If you admit to US citizenship to your foreign (home country) bank, they kick you out. Ambiguous rules on treatment of retirement plans, insurance policies, multi-currency accounts, and what counts as a reportable event. It is brutally expensive and near impossible to comply.
Some of us simply refuse to file. I have no financial life in the USA, never filed in my life, and the only reason I renounced was banking issues due to FATCA.
Estimated global compliance rate for non-resident US persons: approximately 10 percent.
Rate US citizens not filing their exit tax paperwork after renouncing, according to the IRS: 41 percent.
Number of people not in the US tax system being penalized for failure to file US tax forms: 0 (by definition).
Fairly compelling argument in favour of just ignoring the whole business, I’d say. If you need to renounce because you have a US birthplace on your ID and live in a country where banks notice and care (some do, some don’t, it varies) then you simply renounce – no need for US tax compliance. (Unless you’re especially sly and want to collect $3200 in stimulus benefits this year to offset the $2350 renunciation fee.)
Ron, what stimulus payments? My husband and I received the very first ones, but not a single US citizen I know in several countries has received the subsequent two payments. I assume that after the debacle of many non-citizens abroad receiving the first cheque, they’d more or less disqualified overseas citizens, including those like us who continue to file 1040s. It doesn’t bother me, because I think it’s right that we don’t get them; they’re meant to stimulate the domestic economy. But it seems like only you and one or two others treat them as if they’re given.
Bridging from there to the topic of compliance, I saw IRS notes that anyone who didn’t receive the cheque(s) can claim the stimulus payment amounts as tax credits or refunds. I wouldn’t touch that with a ten-metre pole! In my paranoid vision, claiming a stimulus refund on my 1040 is just asking for an auditor to pay actual attention to my forms (which I don’t believe they have done in 25 years), and start picking on me.
I’ve seen numerous reports of non-residents who received the first cheque by direct deposit also receiving the subsequent cheques quite quickly if they had direct deposit set up. No idea if it’s been slower with regular mail.
I have no real idea how it works with the returns and refunds, but since I expect that many millions are claiming the money this year I can’t see it leading to audits.
What I don’t know is how it’s going to work or how long it’s going to take for people to receive the money if they come into compliance now, filing for 2020 plus previous years. But the way the law is written, there is no prohibition on non-residents receiving the stimulus benefit. (I don’t remember fully but I think they changed the rule that prevented you receiving the money if you had an NRA spouse and used one or the other married filing status.)
A friend of mine who lives in Europe, and renounced some years ago, has just received one of the stimulus cheques. He didn’t receive the earlier ones, and is at a loss why this one was sent to him. He does receive Social Security, so maybe that was the trigger.
I am a US citizen residing overseas, and have received all three stimulus checks.