From Just Me:
10 reasons the U.S. is no longer the land of the free
the opportunity to add reason number 11..
FATCA and citizenship taxation.
There are lots of comments, and mine will get lost, but here is what I added for what it is worth….
Well, it pains me to say that your list is pretty comprehensive and on point.
If I were to add just one, it would be this…
FATCA and the domestic equivalent which I call DATCA. Total world wide bank account surveillance!
FATCA is the acronym for Foreign Account Tax Compliance Act which was part of the 2010 Hire Act. It is designed to turn the entire worlds financial Industry (not just banks) into IRS data collectors and report account information on all “US Persons” around the world.
US persons includes more than just citizens, it is Green card holding immigrants too!
This new reporting requirement is added on top of the current Foreign Bank Account Report (FBAR) form that the IRS is using as its penalty tool of choice for assessing draconian penalties on Expat citizens who have bank accounts in the countries they are residing, but innocently failed to fill out the administrative form. You have probably heard it as “Tax Cheats hiding money off shore”, but that qualifies as the top 10 mischaracterizations in the press for the past 3 years!
In response to this act, the IRS has used it’s regulatory authority to attempt to impose a similar data collection requirement on all US banks of non US resident deposits in America. (DATCA) They are supposed to submit this data to the IRS, presumably to distribute to the tax offices of 192 countries around the world!
Stunning when you think about. I guess the IRS thinks that what is “good for the goose, is good for the gander”, and the comedic irony of this, is now some in Congress are opposing the unilateral IRS action of the IRS, when they probably voted for the HIRE act that started this whole thing.
Google this, from Accounting Today. “Congressman Tells IRS to Back off on Bank Disclosures”
If you have never heard of FATCA, then I would encourage you to read James Fallows trilogy at the Atlantic which is now called the FATCA chronicles. Google these titles:
Fatca: The Menace You’ll Hear About in 2012
The Fatca Menace!
The Fatca Chronicles: Tales From China, Canada, and Estonia
The freedom of Americans to conduct business and have accounts overseas is being seriously eroded, and has very detrimental impacts on Expats abroad. It is an export job killer, but that is another story for another time!
That is quite a list and thank you, Just Me, for adding FATCA/DATCA to the mix.
Yes, the ten on the list were based in homeland security, but the list of lost freedoms is very very long. The taxation issue has numerous examples and that all leads into what Roger Conklin talked about, with the restrictions on businesses setting up overseas. The government is more concerned with taxing everybody than with helping them create wealth to tax.
Much of that legislation is thanks to clowns like Carl Leviathan from Michigan and Charlie “tax cheat” Rangel from New York.
They regularly use Americans abroad as their “whipping boys” because we have no representation and therefore no way to fight back.
Here is an addition that just got entered by Patric Hale, who has been making good comments on various WSJ stories I have seen…
There are more than the 10 you write.
If you try to leave the USA to live somewhere else, this is what happens:
First, the IRS will monetize ALL of your assets and you will have to pay a 30% surtax on these for the audacity of wanting to leave the USA.
Then when you get to where you’re going, only the State Department can actually grant you “freedom” from being an American. But before you can give up your US ctiizenship you have to schedule an appointment with a US consul providing all of your reasons why you want to expatriate yourself permanently.
And if it is for tax reasons, you will be DENIED!
That’s right – you have to prove to the consul that you have paid the right amount of taxes for the past 8 years before the State Department can grant your wish to expatriate.
Of course, since the tax code is 77,000 page long, I hope you are a speed reader! But if you merely want to reside overseas w/o giving up your citizenship, that’s when the IRS decides to REALLY turn the screws on with FATCA, FBAR, and other intrusive regulations on expat Americans (7,200 pages of the code and 668 forms according to the IRS’ Tax Advocate General’s last report) for the audacity of simply wanting to live and work abroad. You must pay all of the local taxes and then US taxes, too, of course. And individuals carry ALL of the forex exposure on the tax issue.
If you happen to be a green card holder and return to your native land, even if you were in the USA for only for one year, the IRS claims the right to tax you on your worldwide income as a US citizen for another 10 years. And, if you don’t fill out the IRS’ forms perfectly, they now have the right – and are exercising it vigorously – to charge you a fee of $10,000 EVEN IF YOU DON’T OWE ANY TAXES!
NONE of those “evil” countries the author points to does any of this. In fact, the USA is the ONLY country that imposes this draconian tax regime on its expats and previous foreign residents, to say nothing of the gestapo tactics that they are now imposing.
As if that weren’t enough, the IRS is now getting ALL banks EVERYWHERE to report any US citizen who has an account with that bank, or the bank risks having the IRS impose a 30% withholding on ALL transactions with the USA. Consequently banks are dropping US citizens as customers and expats are having a hard time just getting a checking account.
So it is true that the U.S. is no longer the land of the free. Even Stalin and Castro are shaking their heads wondering why they hadn’t thought of that!
While I agree wholeheartedly with the general sense of what Patric Hale is saying, there are some errors in the above list. I think it is extremely important to try and be as accurate as possible. Not only because others in this situation will become confused but we need to avoid the hysteria and inaccuracies that are commonly reported in order to be considered seriously.
I do not know where he gets the idea that one pays a 30% tax on all of your assets when you leave the US. I left 30 years ago and have never paid a dime in US taxes.
You do not have to prove to the State Department that you have paid your taxes. There is a single question of one of the forms to complete in connection with renunciation. On DS-4079, under Question 13, which asks “What ties do you retain with the US”
(e) Do you file income or other tax returns? If yes, please explain.
I will fully renounce this coming Friday and have simply indicated my accountant does all the work. A friend simply checked the box “no” and his renunciation has been completed. At a group meeting of 22 people in Toronto in October 2011, mention was made that there would be “no mention of the 800 lb gorilla in the room.” IOW, they didn’t want to discuss it at all. And 8 years of filing refers to the Overseas Voluntary Disclosure Initiative/Program which has to do with becoming compliant, not renouncing. When form 8854 is filed, you are to certify that you have fulfilled all tax obligations for the previous 5 years.
Thanks for your contribution to the comments, Just Me. It was an interesting read through the comments to see more some becoming aware, and your including FATCA (and DATCA), citizenship-based taxation, etc. Erosion of rights — it is all part of the same thing that society has let happen. With more exposure and people waking up, perhaps this won’t be the norm. Isaac Brock is part of that process. The more awareness, the better to get people asking the right questions.
“Then, do you think the average Joe six pack gives a damn about the constitution?
what he wants is his beer and football game!”
“Death of a great nation is always a suicide; that is what is happening now.”
nobledreamer – I regret the elimination of the comments that you posted to the Renunciation thread of Expat Tax Forum. Please consider writing up a summary posting for Isaac Brock Society that incorporates your experiences and observations, going back into October details on the never-happened second group meeting. Those fall events should not become lost history.
We have some posts and threads at Expat Forum archived. I just don’t know which ones, as that was left to some of the operatives. Someone who is still a member of the expat forum could ask the owner nicely if he might make the archive available to him or her, as the amount of time spent in some of those threads was enormous, and he is a real a– for deleting them, but try to say it nicer than that.
Thank you for your kind comments. When the forum was suspended, I seriously considered trying to copy the most important threads but it was a rather unrealistic idea. So much information and work lost…….
I actually was not present at the meeting – I am repeating comments from 2 other ExpatForum posters who were there. Perhaps they could be contacted with this idea. I will see what I can do.
I don’t know why there never was a second meeting. I started contacting the consulate around Oct 23; the process for scheduling the two appointments has changed about 4 times. At this point, both appointments are to be booked online as “notarial and other services not listed above.”
Dear Nobledreamer – Thank you for your comments. If you left the USA many years ago, then you may be unaware of the new IRS changes in this regard. As for ensuring your taxes are in order before expatriating, this, too, is a recent development – and might be part of the FATCA changes. I will research and come back with more specificity so we are clear.
This is already useful detail and (as I recall) more than was up at Expat Tax. Here’s hoping the two attenders will document this particular situation – or at least help you to do so. Having a good record of shifting local policies may prove useful in the future.
Migration of the archive to Isaac Brock Society would be useful. I hope that can be achieved.
@ Patric Hale
Hi Patric – Thanks for your reply. I hope I have not offended you.
I am horribly aware (unfortunately) of the recent changes. What I am saying about the compliancy of taxes and renouncing is that so far, there is a loophole. DOS does not ask anything about taxes at the renunciation interviews. I have had the first one. Others report the same thing. In the past, they actually did ask this and often tried to force people to do the 8854. The disconnect is that IRS claims one does have to be compliant (which is true) and reading their site tends to create the fear that it must be done before renouncing. However, by the time one files 8854, renunciation has already taken place. Does that make sense? Some people renounce before filing any of the 5 years of tax returns, FBARs, as a way to try to protect against the possibility of exhorbitant penalties. It can be done and is being done by people who are willing to take the chance they may never be able to enter the US again.
The great fear is that they will tighten this up and one will have to actually do the filings before renouncing but so far, so good. 😉
I went back to the expat forum for other reasons and came across a thread that somehow was not removed when they created the separate section for us (the first time).
You have probably seen this article; one of the two people I mentioned, is interviewed in the article.
OK, that makes sense. DOS simply is ignoring the IRS – good for them! How long that will last…?
No offense taken; I, too, want to get my facts straight.
Thanks. That was some of the material of interest. But not your posts #473 on Nov 23 and #508 on Dec 1 (on the major Renunciation thread). Unfortunately those are the only notes I took.
I am a evil person over there–I am marked: “Banned”. If someone who has not yet burnt their bridges could kindly ask the owner to provide them with a copy of the threads that have disappeared, because they are an important resource, that could be put up here in PDF format. (Or did one of our folks already copy down the renunciation thread?).
But let me just say, that I predicted this would happen–that the Expat Forum would delete entire threads. And that is why I set up the Isaac Brock Society and launched it on December 12, because I realized I could not risk putting my writing in that venue.
You cannot be denied renunciation nor relinquishment for tax reasons. There is no provision for this in any legislation that I’m aware of. If you think you have a specific piece of legislation (NOT some web post or wikipedia nonsense but an actual weblink to a Justice or IRS website posting, please provide it on this thread).
Also be aware that Article 1 of the US constitution (section 9) prohibits Congress from passing ex post facto legislation. That means they can’t retroactively clobber people who committed expatriating acts prior to February 6, 1994 with Form 8854 or Section 877 (which came into effect on that date). They can only apply whatever legislation was in effect at the date of your expatriating act.
State has no choice but to date a CLN for an expatriating act committed with intent to relinquish (on your oath and supported by your answers to their form DS-4079) on the date you committed the expatriating act, NOT the date you told State or State issued the CLN. The IRS itself admits this in a report to the US Congress in May 1998, reference posted in one of my replies on the renounce/relinquish thread on this website (the original report is actually posted on the IRS website!). Also that’s the precedent set in my own case of a 1976 CLN, which was issued 14 months after I became a Canadian with intent to relinquish, and my expatriation on that CLN is dated 1975 when I became Canadian. I can provide an affidavit to this effect and a notarized copy of my CLN, my declaration form, and State’s cover letter for my CLN, at notary and postage cost, if your lawyer thinks you need that as supporting evidence. Please contact me privately on this if you wish.
People relinquishing or renouncing after 1994 are subject to the exit tax/Form 8854/five years of back filing rubbish, but those who expatriated before 1994 only need to file one form 1040 NR (see references also on the above-mentioned thread) and submit some additional documentation to the Treasury Secretary to qualify for the exception granted to such cases in a 1996 amendment to the relevant Act (basically, you submit copies of your CLN and of your statement to State WHICH YOU SHOULD PRINT OUT BEFORE YOU GO TO THE MEETING AND MAKE AND KEEP A SPARE NOTARIZED COPY OF IT in case they refuse to give you a copy of your own oath, which some consular officers have done according to reports on the other website). See IRS Notice 97-19 on these points, also on the IRS website.
If in doubt, and just to be safe, verify this with a lawyer, but insist the lawyer research those references. There might be some hidden wrinkle buried somewhere that I’m not aware of (I’m not a lawyer).
I believe there is a Supreme Court ruling that says you have a right to renounce or relinquish your citizenship for any reason you want … that they can’t deny you. What comes after, and what they can and can’t enforce when you’re in Canada and not crossing the US border any more, are another story.
As an afterthought — I read somewhere that Congress passed something to allow ex post facto tax legislation. Congress can’t do that on its own, due to Article 1 ex post facto ban in the constitution, any change to which Article which requires a constitutional amendment, which requires I believe 2/3 votes in both houses plus the presidential signature PLUS ratification by 2/3 of the state legislatures (34 states). As far as I know that’s never happened. Congress passes all kinds of crap the Supreme Court strikes down later, and anything like this is going to be one such manure pile if it ever gets challenged. In my non-lawyerly opinion …
I have no recollection of what posts #473 or #508 were about though I do know my general tendency of mind so if any content was included in your notes, perhaps, I could re-construct it.
I read that copying from the expat forum was against the rules. If anyone did copy the Renunciation thread, it should not be posted here. Petros, I know if you had it, you’d make a point of doing that, but for the rest of us…….. ROTFLMAO 😉
No other content transcribed. You were the source for the temporary anticipation of the never-happened second Toronto group meeting.
That’s because I was on the list and wanted it done right away! 😉