US expat tax and FBAR: Discussion thread (Ask your questions) Part Two
Please ask your questions here about US Expat tax and FBAR.
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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.
@MedeaFleecestealer: Passed down from parent. I was born in a European country. That European country is my home, and “my country”, and the same is true for my other parent. Hell, we didn’t even speak English at home – ever .
@calgary411: Born in a European country to an American parent and a European parent. Never lived in the US, never earned a cent in the US, never owned anything in the US, never brought anything of value into or out of the US except for what a tourist normally would.
@all: I do want to do the right thing, but I’m a risk-averse person and in am afraid of making any moves. By going to the US with my (non-US) job, and living there for half a year to a year, I would be (in a sense, I feel) “accepting my Americanness”, even though it is something I in principle could have done just fine with the visa my job expected having to get for me. I’m afraid of going there and then raising my hand and saying “I just found out all of this”. Do you think I would be putting myself in jeopardy? I don’t want to make the situation worse by “claiming my rights as an American”, if you understand what I’m saying. To clarify: If the US were to (hypothetically of course) say “ok, so you just found out – give up your citizenship or fix all of this”, I would give it up without even thinking. But as we all know, I can’t (was it 5 years of tax returns, the rule said?). So I’m trapped.
Advice I’ve had from other people in my country includes: -“Oh yes, I’ve known about this stuff for a long time, but I just give them the finger.” -“What? That’s crazy! I had not idea… I’ll just never travel to the US again, ever.” -“Huh? What’s on the Isaac Brock Society web pages must be wrong – it sounds too crazy. Don’t dwell on it, just go with your job to the US.”
I somehow find myself unable to listen to any of these, as they all seem to include actively doing something wrong.
There’s two things that are keeping me up at night regarding raising my hand and “fixing things”: One is doing this while physically in the US – it feels dangerous, somehow. I have never done anything wrong, and have very little sense of dealing with “hostile authorities”, as it were. The other thing is my future in my home country. I have no intentions of ever going and living long term in the US, but I worry that “clearing up things” will jeopordize my future also here at home. From what I’m reading on here, US citizenship promises hell when it comes to the safety net provided by my real country. If I risk getting into trouble with the US over state sick pay, pensions, scholarships etc, I might not dare to do anything. Any thoughts? Am I being irrational?
Finally: Thanks for listening, guys. I know you must be so tired of people repeating the same things over and over, without contributing anything back to the community here. I’m sorry, I’ll be sure to share if I learn anything from all of this.
@Iwannacry
Did your American parent ever do anything to “register” you somehow as as US citizen? If not, I think the probability of you having a problem with the USA in your home country is next to nothing. No US birthplace, no SSN, no US passport, never lived there, correct?
Personally, I wouldn’t advise you to go to the USA to work, however. You already know the mess which awaits you if you claim US citizenship. If you don’t claim it, but apply for a visa, that would be asking for trouble IMHO. I don’t know what is asked on a visa application, but what if they ask about your parents or otherwise link your US parent to you? Also, even if that weren’t a problem, if you stay too long (> 183 days per year I think) you will be treated as a US person for tax purposes going forward, which means having to file taxes, FBARs and full financial disclosure (form 8938) on all assets in your home country as well as taxes on income in the USA. Why would anyone do that voluntarily?
@Iwannacry
I sense your panic and urgency to do “the right thing”. If you have recently discovered the joys of US CBT that is a normal reaction. Having looked at your circumstances, I urge you to take a step back and look at your situation with a little less emotion.
You do not have a US birthplace. Presumably, you have a passport from your European country, that shows that birthplace. You have never lived in the US or had any significant connection with it, other than your mother. It would probably be worth finding out if you were registered as a “US birth overseas”. If not, there is nothing to link you to the country at all.
This is just my view but I think you would be crazy to do anything about this. Don’t get a US passport or make any claim to citizenship. Definitely don’t file anything with the IRS. If you want to take the work opportunity, go through the visa process as a citizen of the country that you were born and raised in.
You aren’t American, so don’t do anything to turn yourself into one!
@Iwannacry, I take it from your posts that you have no official documents showing you are American, i.e. no US birth certificate or certificate of birth abroad from a US embassy, no US passport, no SSN, etc. You have done nothing to claim your American citizenship, i.e. applied and provided documents to show that your parent met the residency requirements outlined here:
http://travel.state.gov/law/citizenship/citizenship_5199.html
http://canada.usembassy.gov/consular_services/citizenship-claims.html
If this is the case, then just forget you have an American connection. THEY DON’T KNOW ABOUT YOU! You were born in Europe, you travel on a European passport with your European birthplace shown in it. You’ve entered the US as a tourist from Europe. There is nothing that needs “fixing”. So take that posting, apply for your visa as a European citizen and enjoy.
@notamused, as it’s an online application you don’t need many documents when filling it in (passport, travel itinery, etc), but you may need more when you go for the interview at the embassy. And I forgot about that damned 183 days rule.
Maybe it would be best to stay home, if it’s not going to cause you any grief work-wise Iwanncry.
@Iwannacry
It’s critical to know whether you were registered as a US citizen at any point. If the answer is “no” then you should behave as any other citizen of your country would, with the same tax considerations they would have. As far as we’ve been able to ascertain, US citizenship is something you have the option to claim – or not.
If you’ve been registered, that’s another story.
Sorry for the delay.
@notamused/bubblebustin: Well, my US parent “helpfully” did register my birth. I’ve been shown a copy of the form. I was also given an SSN. Asking for a visa would indeed by impossible (I’ve seen the forms, one would have to lie on them).
@Osgood/MediaFleecestealer: Thank you for your caring words. My birth was registered. And I was also given a passport as a child (when I was told of this situation, I was shown that passport – it has only recently expired).
And a followup: Not that it matters to the real situation here, but the reason I even consider going with my job (again, temporarily) is that I’ve been told (between the lines) that my reasons for not going (this whole situation) are “silly”. My boss apparently has relatives in the same situation “who have worked for many years in the US, even with a US employer, and certainly never had anything to do with the IRS when living outside the US”.
(This doesn’t really relate to the point here – it’s just an explanation as to why I’m even considering going).
@Iwannacry
Sorry to hear that. 🙁
Has your home country signed a FATCA IGA? Even if it has, the banks may not ask you about US personhood, since you have no obvious US indicia which they would have access to, from what you’ve said. If they do ask, however, you’ll be put in a difficult situation, since you have a SSN and passport…
Apart from the banks, however, it may be just a matter of time before the US catches up with you, since you are fully registered. You could:
1) sit it out and hope for the best,
2) file for the past 5 years as well as going forward,
3) renounce now, file for the past 5 years and be done with it.
I think if you go to work in the USA, 1) and 3) will no longer be options.
I really wish I had better news for you…
p.s. I think your boss’ relatives are in for a big surprise sooner rather than later…
Yeah, because they didn’t realise the implications of doing so. No one did really until recently. If you mean they’re also American/Europeans then you should tell them to look at these links:
http://www.irs.gov/Individuals/International-Taxpayers/U.S.-Citizens-and-Resident-Aliens-Abroad
http://www.irs.gov/Individuals/International-Taxpayers/U.S.-Citizens-and-Resident-Aliens-Abroad—Filing-Requirements
They’ll get a shock.
As for your situation, well you could continue to refuse to take up the post, but that depends on how your boss is likely to react, i.e. will you end up being fired because of doing so. Can you find another job easily if it came to that? But you also need to consider that at present you’ll be travelling on a European passport that makes no mention of you being American and presumably the company in Europe will continue to pay your salary into your European bank account. So there’s no obvious American connection unless you make one. Could you lie on the visa forms to get one? Did you need to apply for a visa when you visited as a tourist? If so, then again you’re on record as being European, not American.
To be rid permanently of your US citizenship you’re going to have to renounce and probably do the necessary back filing. I say probably because again it’s your decision. If your passport doesn’t have an American birthplace then there’s no reason for any bank to suspect you of being American. You could likely renounce and then ignore the back filing without too much trouble. Just stay out of the US in future to be on the safe side.
Or simply continue to ignore your American birth registration and carry on as you have been before you found out. Unless you tell anyone, they won’t know and won’t bother to ask because there’s nothing to indicate you’re anything other than a European citizen. You can show a European birth certificate, passport, driving licence, etc, so why would they consider you to be anything else?
@Iwannacry
I’m sure that you don’t wish to provide false documents any more than you wish to disappoint your employer. The tragic part is, like US persons now being shunned from foreign business where they may have more than a 10% interest in that business, there are people like you passing on opportunities that could benefit your career. I see that your boss doesn’t “get it”, but that’s understandable, as the situation is preposterous! It doesn’t help that the whole situation stresses us out to the point that anyone listening to us might think we’re overreacting. You need your boss on your side if you are to remain with the company you’re with. That involves him seeing the situation you’re in more clearly.
@notamused: As far as I can tell, my country has signed up, but nothing has really “happened” yet. I’m quite sure that my bank never asked me any questions about dual nationality at all when I became their customer (at which point I didn’t know about my second nationality anyway).
Regarding your three points:
1) I realize this is not a great option. The only positive thing about it as far as I can tell is that it is a clear sign that I am not in any way benefiting from my US citizenship, and not considering myself at all related to the US.
2) I guess this is a hard question to answer, but: Would you, by gut feeling, think that filing and then going is inherently more risky than just filing?
3) Can one renounce and file five years back at the same time? One doesn’t have to file for the five years back, wait for it to be processed (something I can imagine takes forever), and then renounce? Would one, as far as rumor knows, be given “special treatment” (read: punished) if filing while renouncing?
@MedeaFleecesteeler: I would not be fired. It is a temporary job anyway. Not going wouldn’t do anything to my position except ruin my relationship with my boss. This relationship is not long term anyway, but is certainly an important door opener for my future career. Sorry to bother you all with this boring minutiae of my specific situation 🙂
Regarding getting a visa: I will not lie to go on a visa. That feels wrong to me, nomatter how “unfair” my situation is. When I’ve been going to the US as a tourist, I’ve been doing so without knowingly lying, since I did not know of my citizenship. Moreover, my country is a visa waiver one and in that case I don’t think the forms even ask the relevant questions.
Regarding going on ignoring my Americanness: Yeah I mean… I’ve lived all my life as a non-American. Nothing has really changed. But now that I know… I think I’d be living my life in constant fear, as if I’d done something wrong.
@bubblebustin: Yeah, tell me about it. People truly don’t grasp how crazy this is. I actually talked briefly to a lawyer (of the friend-of-a-friend-of-a-friend kind, but a highly recommended one) in my country about this. Sure, it was a highly “we’re talking unofficially here, this is not legal advice” kind of talk, but he essentially concluded with: “if you’re not wealthy, your US parent is not wealthy, and you’re in good standing with this country’s tax authorities, don’t worry about the US – you’re not the one they’re after”. That was my realization that nobody knows anything. It’s scary.
@Iwannacry, yes you can renounce and back file at the same time, that’s what I did this year.
Get this through your head – YOU DID NOTHING WRONG! You didn’t even know. There are thousands in the world like you, suddenly finding out they have a connection to America via their birth being registered by their American parent/s. It happens, but no one ever thought that the US government would be hounding its own citizens over unpaid taxes. Parents who did this are shocked and dismayed that their children are being put in an uneviable position when they thought they were bestowing a nationality to be cherished on them.
What you have to do is take your time and work out the best way forward for you, both for your immediate job situation and for your future life. Seek out the advice you need to make an informed choice and then make the decision/s that are best for you personally.
@iwannacry
You are getting good advice from other IBS persons. You are in the same position as my children were, except that they always knew they were registered (obviously I had no clue about the obligations this entailed, otherwise I would never have registered them). They – and you – were born duals – which does somewhat simplify the process. They have renounced after filing back years to the IRS and Fbars – a lot of work but doable if you have a fairly uncomplicated financial situation. Like you, they felt no big US connection and could see that careerwise being a US dual was a disadvantage rather than an advantage. Go with your own gut feeling and don’t let others pressure you.
@iwannacry,
Just to be clear, when you renounce you have until June of the following year to file your back taxes and your partial return for the year in which you renounce. My 90-yr-old mother is renouncing next week. She’ll have until June to file 2013 and the 5 previous years. If she waited until January to renounce, she’d have almost a year and a half. You can of course file to catch up before renouncing if you want to.
Re renouncing and form 8854
As I understand it, 8854 is due with the following year’s tax return. E.g., renounce in 2014, it’s due June 2015 with your return.
However, according to Phil Hodgen, the tax return filing date can be extended to Oct 15, and even to Dec 15. Getting an extension to Oct 15 seems fairly straightforward, less so for Dec 15. For someone that wants to renounce first and do the 5 year catch up later, this may be a useful thing to know.
See: http://hodgen.com/2012-filing-extension-until-december-15-2013-heres-how/
@tdott, just remember that the extension doesn’t apply to any FBAR’s that need filing. They HAVE to be filed by the 30th June regardless of any other tax filing that needs to be done. And when the 30th falls on a weekend, as it did this year, you need to get them done that bit earlier.
See the recommendations made for tax reform of the US tax system as applied to ‘international’ individuals abroad http://meetings.abanet.org/webupload/commupload/TX334800/otherlinks_files/TaxReformProposals.pdf
Recommended reading!!
I found the link here, where you can read a summary of the submission:
‘US Tax – International Provisions: KISS – Keep It Simple Sweetheart’
December 9, 2013
“On December 3,American Bar Association, Section of Taxation: US Activities of Foreigners & Tax Treaties Committee (“Committee”) submitted to Congress various “Options” offering proposals for simplification and clarification of various international tax provisions of the Internal Revenue Code.”…….
http://blogs.angloinfo.com/us-tax/2013/12/09/us-tax-international-provisions-kiss-keep-it-simple-sweetheart/
IBS might also want to add these links to other threads or make it a separate post? Particularly germane to FBAR and FATCA thresholds, duplication, pitfalls, expatriation and exit tax, etc.
Readers at IBS will be familiar with some of the issues and arguments made by the authors – the American Bar Association, Section of Taxation: US Activities of Foreigners & Tax Treaties Committee and as made by others elsewhere before.
The IRS and Treasury already know all this, and have been told much of it before. Personally I believe they won’t do anything about it. They are deliberately blind. They maintain the insanely low threshold for FBAR reporting, retained at 10,000. for > 40 years, the random due date and and the fact that there are many things about it that trip up those who have committed no crime, owe no US taxes, yet are still threatened and penalized with confiscatory penalties – as is well known to the IRS and Treasury previously. The many ‘pitfalls for the unwary’ have been identified before, and the IRS and Treasury continue to use the FBAR as a club – without regard to any underlying criminal intent or US tax owed.
We can only conclude that this is the result they intend. Wielding the FBAR as a weapon of threat and economic destruction against those who live abroad – and have already paid taxes in full there. Using it as a fundraiser for the US deficit. As we have discussed before, the US doesn’t really want compliance – because the penalty regime nets it far more money than it could even assess from many of us abroad.
Let the renunciations and relinquishments continue for as many of those abroad as can see their way clear to do so. Even if the US were to make even slight improvements to the regime they torment us with, so much unecessary damage has already been done – and it is unrepentant and unapologetic. The US has proven by its actions that it does not deserve allegiance from citizens abroad. It has done nothing to mitigate the harm it has imposed. It has not addressed the issue of the Obamacare tax on those abroad – who cannot even benefit from US healthcare and already pay health taxes to the countries where they actually live http://americansabroad.org/issues/healthcare/foreign-tax-credits-and-new-medicare-tax/ http://americansabroad.org/issues/healthcare/new-health-care-taxes/ . It still holds thousands of krill and minnows in limbo in the offshore ‘voluntary’ programs – shifting some quietly from the OVD to Streamlined – but still with no good resolution in sight, while leaving the flaws and limitations of the Streamlined program unaddressed more than 16 months after it started. Some consular officials are still combative and some continue to make our rightful relinquishments and renunciations an adversarial process.
Unforgivable.
@ badger
So many bandaids but still the gaping, obscene wound of CBT or “existing worldwide tax system” as Dick Harvey likes to call it, remains. There’s nothing KISSY about bandaids plastered upon bandaids. They really don’t want to fix this do they. They just want to tinker (maybe) and if they do nobody will be able to keep track of their latest tweaks.
@Badger…
If it takes the American Bar Association 34 pages to describe KISS, there is no hope.
The basic solution for Americans Abroad, can be wrapped up in 3 words.
Abolish Citizenship Taxation!
That’s KISS.
Breaking News: The RNC will study the concept of Residency-Based Taxation (RBT) as a fair and equitable tax reform measure for 7.6 million overseas Americans. A RNC resolution in Support of RBT could be offered during the RNC Spring meeting… in April. Solomon Yue, Republican National Committeeman for Oregon will spearhead this effort. This idea was generated during a Q & A session of the first RO worldwide conference call with RNC Chairman Reince Priebus this morning, involving RO leaders from 19 foreign cities and countries: Albania, Beijing, Belgium, Germany, Hong Kong, Israel, Korea, Lebanon, Luxembourg, Mexico, Norway, Philippines, Russia, Shanghai, Switzerland, Taiwan, Thailand, Ukraine, and UK.
https://www.facebook.com/republicansoverseas
Again I’m sorry for waiting long between the replies. It’s so wonderful to ignore the whole issue for a few days every now and then.
I want to thank all of you from the bottom of my heart for taking the time to listen to my story and sharing advice. You have no idea how much strangers in similar situations can help relieve the feeling of being utterly alone.
@Iwannacry, I think it came as a big shock to all of us when we found out about FATCA and the need to be filing US taxes. Most of us had never heard of the law requiring this, I certainly hadn’t. To find that others are in similar situations to you and can help guide you in making your own personal decisions is a boon I’m forever grateful for.
Argument against CBT and associated burdens – published in the Harvard International Review
http://hir.harvard.edu/blog/jessica-dorfmann/the-cost-of-united-states-citizenship-abroad
‘The Cost of United States Citizenship Abroad’
By Jessica Dorfmann | December 3, 2013
…”The United States needs to get with the times and abolish citizenship-based taxation. The policy is tremendously unfair and detrimental to Americans living abroad, and it serves to anger and alienate citizens, many of whom have a lot to contribute to the United States in terms of international experience and skills. It is ironic that a citizenship so widely desired has come to feel like a burden for so many.”…
Selling services….
How To Respond When Your Foreign Bank Asks About Your IRS Compliance