Liberty and justice for all United States persons abroad

The Isaac Brock Society

US expat tax and FBAR: Discussion thread (Ask your questions) Part Two

Please ask your questions here about US Expat tax and FBAR.

Participants will need to provide their e-mail address (real or fake) and an alias. The only written rule is that participants must use a same alias each time they post (and not “anonymous” or derivatives thereof).

Bear in mind that any responses that you get from participants is peer-to-peer help, and it is not intended as a replacement for professional advice. Also, the Isaac Brock Society provides this disclaimer: neither the Society nor any of its members are professionals. We offer our advice here only in friendship and we recommend that our readers seek professional advice if they need it.

If you wish to receive an e-mail notification of comments, check the box to that effect when making your first comment.

NB: This discussion is a continuation of an older discussion that became to large for our software to handle well.  See US expat tax and FBAR: Discussion thread (Ask your questions) Part One.

3,618 thoughts on “US expat tax and FBAR: Discussion thread (Ask your questions) Part Two”

  1. Pay taxes in full where you actually live and earn outside the US (ex. Canada, Mexico or the EU)? Have a local legal already-taxed-and-registered bank account where you live and may be a dual-by-birth outside the US? Have a registered savings account for your children, your retirement, or disability? Toxic ‘foreign trust’. Canadian mutual fund? Threats by the US, plus confiscatory penalties, labyrinthine US forms and laws, and slanderous charges that we are criminals.

    But,
    You can live in the US, receive all available US benefits and services, earn money as a contractor to the US government or work for the US government (including the IRS) and don’t pay your US taxes? Not a priority for the IRS and Treasury apparently; http://www.allgov.com/news/where-is-the-money-going/irs-and-contractor-employees-owe-millions-in-back-taxes-as-do-thousands-with-security-clearances-131105?news=851571
    …..” Thousands of federal employees and contractors working in the intelligence community, as well as those serving the Internal Revenue Service (IRS) owe millions of dollars in back taxes.

    The Government Accountability Office (GAO) found 8,400 individuals with security clearances between 2006 and 2012 who owed $85 million to the IRS.

    About half of the 8,400 had not arranged a repayment plan with the IRS, according to the GAO report http://www.treasury.gov/tigta/auditreports/2013reports/201310082fr.pdf . The average amount owed was $3,800.

    Some owed as much as $2 million.”…….

    See GAO report:
    ‘Contractor Employees Have Millions of Dollars of Federal Tax Debts’
    August 30, 2013
    Reference Number: 2013-10-082 ‘
    http://www.treasury.gov/tigta/auditreports/2013reports/201310082fr.pdf

    So, who is really responsible for the US domestic debt and the US ‘tax gap’?

  2. further to my post above, see excerpts from the GAO report ‘Contractor Employees Have Millions of Dollars of Federal Tax Debts’
    August 30, 2013
    Reference Number: 2013-10-082 ‘http://www.treasury.gov/tigta/auditreports/2013reports/201310082fr.pdf :

    IRS data is compromised by letting tax delinquent contractors with staledated background checks have access to sensitive IRS data:

    …”Approved contractor employees may be granted access to information systems, data, or sensitive but unclassified information, no matter where the work will be located.

    Once staff-like access is granted to an IRS contractor, the background investigation, including the tax compliance component, is
    reinvestigated only every five years….”

    and,
    “…….The IRS reported that retired and active Federal employees owed more than $3.5 billion in unpaid Tax Year (footnote 3) 2011 Federal income taxes. The delinquency rate for Federal workers and retirees was 3.2 percent in 2011, while the delinquency rate for the Department of the Treasury,
    which includes the IRS, was 1.1 percent. The U.S. population as a whole has a delinquency rate of 8.2 percent.”…….

    So, we abroad are fully in compliance with our home country taxes and laws – where our income originates, and where many of us were born or naturalized, and have non-US citizenship and live permanently outside the US.

    And yet 8.2 % of the US RESIDENT population is delinquent in their US taxes. And, the IRS knows that “retired and active Federal employees owed more than $3.5 billion in unpaid Tax” for the tax year 2011 alone.

    But, despite this, the IRS is dedicating scarce resources and federal tax monies to persecute ‘US persons’ abroad, and the US Treasury is concentrating on spending who knows how much to send their FATCA-natics abroad to create FATCAmyths and propaganda, work out IGAs all over the globe, and slander expats abroad as criminal-moneylaundering-druglord-terror-funding-tax-cheats?

    F the US.

  5. Another one to Anders the Borg:

    USA to tax Europeans with Green Cards, to be enforced by FATCA

    There are tens of thousands of Swedish Citizens living in Sweden that USA believes owe taxes to USA, simply because they did not go through a formal process in order to get rid of their USA visa “green card”.

    FATCA and the IGA will find them, and Sweden and EU will report them, and Sweden and the EU will help to collect taxes for USA.

    http://www.irs.gov/pub/irs-pdf/p4588.pdf

    Here is the information sheet (attached and link above) to the European Citizens who have not known how to cancel their USA greencards during the last 100 years, for which FATCA’s objective is to find their US indicia and tax them.

    Likely, Europeans must bring a copy of their USA form I-407 in order to prove to their European bank that they are not US citizens.

    Afterall, FATCA assumes that a European is a US person until that European proves that they are not.

    And we know that a US person living in Europe is going to be found and taxed by FATCA and the Intergovernmental Agreement with USA.

    Since Sweden and EU support FATCA and the application of USA laws inside Sweden, has Sweden and the EU analyzed all of the US laws that are to be applied in Europe?

    Swedish Citizen

  7. See ACA notice of event in the UK:
    http://americansabroad.org/news-and-events/events/

    “Town Hall Evening in London England”

    “Changes in the US Tax Laws:
    How they impact US Citizens Abroad”

    Wednesday, 27 November 2013 18:30 to 21:30

    To be held at:
    Royal Overseas League
    Park Place, St James’s Street,
    London SW1A 1LR, United Kingdom

    “What’s happening with new US and UK tax rules? How do these fit together?
    What does FATCA mean for Americans living in the UK?
    What are my options for “catching up” if I am out of compliance for income tax and FBAR reporting?
    What is the short course in US and UK pension and estate planning for Americans living in the UK?”

    Moderator: Colleen Graffy, Chairman of SEAL,
    the Society of English & American Lawyers

    Invited speakers:

    Charles Bruce, international tax specialist
    Daniel Hyde, Chartered Tax Advisor
    Daniel Freedman, Managing Director, London & Capital
    Alex Jones, Director at Deloitte, US/UK High Net Worth, London, UK

    We kindly ask for a donation of £25 per person
    at the door to help support ACA.

    Detailed flyer (pdf)

    Limited Seating: Please RSVP by email to
    info@americansabroad.org by 20 November 2013″
    ……………………………………………………………………………………………………
    Note that Colleen Graffy was the author of this great article:
    http://on.wsj.com/13N3FGM
    Jul 17, 2013Opinion
    ‘How to Lose Friends, Citizens and Influence’
    “The U.S. Foreign Account Tax Compliance Act seeks to co-opt foreign banks as long-arm enforcement agencies of the IRS.”

  8. How about not having filed because CBT is a scourge that should be wiped from the face of the earth?

  10. The enablers at Democrats Abroad still haven’t made the connection between the current administration and the passing of FATCA!

    “The majority of us living and working around the world understands and supports our government’s efforts to close the loopholes that enable tax avoidance schemes. FATCA and the regulations established to comply with it do not, however, sufficiently distinguish between those Americans with foreign accounts that live within the US and those with foreign accounts who legitimately reside offshore. Overseas Americans have the same needs as stateside Americans for access to basic financial instruments of personal banking, business banking, investments, and savings, based in our country of residence. Living and banking offshore does not equate to tax avoidance.”

    https://www.democratsabroad.org/group/da-international/fbarfatca-task-force-page

  11. According to the New York Post, the IRS dealt with 1.6 MILLION cases of identity theft this tax year.

    Before verifying identities, they issued $4 BILLION in tax refunds to bogus claimants.

    Through June, the IRS identified 1.6 million victims who had their identities stolen during this year’s tax filing season, the report said. That compares with 1.2 million victims in 2012.

    http://nypost.com/2013/11/07/irs-sent-655-tax-refunds-to-a-single-address-in-lithuania/

    And you think they will be able to bother little old minnow you living in Canada or Sweden or wherever?

  13. KalC
    My guess is that you own US equities, Will you cross the border? By the way The Canadian government offers us a hell of a lot more protection than a bunch of Socialist countries,

  16. Do I understand the FEIE well enough to say that for those of us in Canada, with higher taxes than in the US, losing the FEIE would not cost us any money?

  18. Foreign bank interest with high inflation unfairness

    Imagine you have substantial savings in a foreign bank account in the country where you live. It’s a country with a very high inflation rate. Because inflation is high, bank interest rates are high, although not as high as the inflation rate.

    When you fill out your 1040, you realize that the annual inflation adjustment of tax brackets, standard deduction and exemptions is based on very low US inflation, not the hyperinflation that you are experiencing in the country where you live.

    Therefore you are pushed into a higher tax bracket when you declare this interest and are in effect paying a higher tax rate than US citizens with the same income who reside in the US. Even though you receive none of the benefits that the US resident receives, such as federal insurance on his bank deposit. Your deposit in the foreign bank is 100% at risk, and you get the privilege of paying a higher tax rate for accepting this risk, because you’re a US citizen living abroad.

    I’ve read a lot of information from people who complain that they have to pay huge accounting fees just to file a return with zero tax owed. But this shows that there are also cases where people are indeed forced to pay a higher tax than US residents do. It illustrates the basic unfairness of Citizen Based Taxation, no?

  19. The FBAR makes it very difficult to manage one’s money. If your bank has a new policy that you don’t like, you can’t just move your funds to a different bank because then the FBAR would show another account with the same “maximum value.” The IRS could think that you have much more money than you really have, simply because there’s no way to indicate that it’s the same money that was moved to a different bank in the same year. Move the money more than once in a year and the problem gets worse.

    This is a major problem when you’re trying to manage your money.

  20. @WhatAmI
    If we lost the FEIE that income earned outside the US would be reported and there wouldn’t be anything to offset it. In comes double-taxation, from my understanding

  21. @Tricia

    With no FEIE, people would have to resort to Foreign Tax Credits. Since Canada is a relatively high tax rate country, the vast majority of Canadian filers would likely still owe no taxes when using FTCs. However, I believe tax filing paperwork would increase.

    People in low or no income tax countries would be SOL (*not* Statute of Limitations).

  22. Form 2555 is the exclusion–excludes up to 95,200 of the types of income specified. It excludes it from the bottom upwards–the lowest-taxed income is excluded first (there is a built in calculation to make the highest marginal tax apply). Form 1116 credits most of the (high) taxes one has paid. In both cases the risk of retirement funds, unemployment benefits, and parental leave payments of not being credited not being excluded is high. The loss of the exclusion would hit people in Dubai, Singapore, Hong Kong, Russia–basically the most strategic business areas of the World.

  23. Can anyone confirm if this is correct?

    According to an article I read, NRAs are subject to estate tax on US assets. What’s even more “interesting”, the exemption is only $60K and applies to US stocks even if held in a foreign (e.g. Canadian) brokerage. The article said that the (not inexpensive) work-around is to form a tiny corporation and hold the stocks in that.

    Applying an estate tax to US stocks seems too ridiculous to be true. It’s like putting up a big “Don’t buy our stocks” sign. Anyone?

  25. The problem with the foreign tax credit is that you can only apply it to the equivalent US tax. We pay higher taxes in Canada on salaries/capital gains etc., so we would generally not owe US tax on that same income. However, the US taxes many things that does not. For example, RESP, RDSP and TFSA are either tax deferred or tax exempt here in Canada, but fully taxable by the US. Since we don’t pay tax against our registered accounts in Canada, there is no foreign tax credit to offset it. We would owe the full pop in taxes to the US. The same goes for any gains made from the sale of your primary residence in Canada or winning a Canadian lottery. Canada does not tax these things, so there is no tax credit to offset. You would owe the IRS the full amount of tax levied.

Comments are closed.

%d bloggers like this: