Monthly Archives: June 2012

As reported by the Guardian here:

http://www.guardian.co.uk/business/2012/jun/15/us-property-attracts-foreign-buyers

A combination of the weak dollar and the collapse in the US housing market has resulted in US property starting to look more and more appealing to foreign buyers, the majority of whom apparently come from Canada, Mexico, China and the UK.  Four in ten homebuyers apparently want to live in the US full-time, whilst the others were purchasing holiday homes or time-shares.

I was surprised to see at the end of the article a mention that many buyers knew to stay out of the US for longer than 6 months each year “for tax reasons”, but do you think that they all really understand the implications of FATCA and the FBAR, especially the 40% of homebuyers looking to move to the US?

Also, my understanding of the “Substantial Presence Test” is that staying up to six months each year is much too long and could still trap most of these homebuyers into becoming “US persons”.  Here are the guidelines from the IRS’s own website:

You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:

1. 31 days during the current year, and
2. 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:

• All the days you were present in the current year, and
• 1/3 of the days you were present in the first year before the current year, and
• 1/6 of the days you were present in the second year before the current year.

If the above is met, then the person is considered to be “US resident for tax purposes”.  There are exemptions for foreign diplomatic staff, students, professional athletes and trainees temporarily in the US.  No exemption for holiday home-buyers.

How many people do you think are aware of this fact, not to mention the FBAR pitfalls that come attached to this?  Let us also not forget the new US government push to attract wealthy investors from overseas to purchase property in the US and be given a path to residency and citizenship, sponsored by no less than Schumer himself.  Conspiracy? Absolute indifference so long as money continues to flow towards the US?  Or maybe a bit of both of the above and total willful blindness to the damage that the US is doing to its image overseas and the goodwill that it is losing?

Canada continues to press for fair tax deal with United States, Finance Minister Jim Flaherty’s Letter to CARP Members

Minister of Finance Jim Flaherty responded to CARP’s request that he address some of the membership’s concerns with the following letter:

Canada and the United States are neighbours, allies and friends.  We share a common border and common values.  One of those values is fighting tax evasion and ensuring that everyone pays their fair share.

Recently, the U.S. government introduced legislation called the Foreign Account Tax Compliance Act (FATCA), which will require non-U.S. financial institutions to enter into an agreement with the IRS to identify their U.S. account holders and report their account information to the IRS.

…

“Today the President laid out a very different vision, one where everyone—no matter who you are, where you’re from, or how big your bank account is—pitches in together to rebuild the foundations of our country and economy.”
Did you hear the President today?

While this sounds, in theory, to be a noble idea worthy of taking into consideration, it is, in practice, troubled with a number of significant hurdles which need to be overcome.

Around 6.2 million American citizens abroad already pitch in together to rebuild the foundations of the countries and economies where they reside outside of America, as explained in Taxation of Americans Abroad.  Asking them to do the same for two countries and two economies puts a greater burden on them than any other group of people, with the exception of the totalitarian nation of Eritrea.

“Congress could amend the Tax Code to end the discriminatory practice of taxing U.S. citizens with a bona-fide residence abroad. However, this appears highly unlikely—U.S. citizens living abroad have essentially zero influence in Congress.”
100 Year Legacy of Expatriation Due to Taxes

In a totalitarian regime, citizens living abroad have essentially zero influence in Congress. America is likely not defined as being a totalitarian regime, and yet Americans abroad are told that they can’t vote when they attempt to register with their address or documents where they live.  To register, they have to ask someone in the US if they can use their address for that purpose. For example, the Massachusetts Voter Registration Form Request requires a US address.  The same applies to Americans abroad who attempt to get an id card or drivers license, as further explained in “Your are an Invalid Resident!”

“Approximately 6 to 7 percent of civilians living abroad voted in the 2008 election.  There is evidence that a large portion of the population was not successful in its attempt to participate. The largest problem for Americans abroad is not having their ballot rejected, but ensuring that their ballot is returned on time.”
Overseas Vote Foundation

Even if they can register to vote, they are told that they can’t vote locally, or their vote doesn’t count.  Americans abroad are further compensated with their lack of political representation with an up to 50% slash to their US Social Security benefits through the Windfall Elimination Provision.  If they lose their employment abroad, they will be denied unemployment benefits in the US.

“The U.S. Government does not offer an unemployment insurance plan in which overseas Americans could voluntarily enroll to protect themselves upon their return to the United States.”
American Citizens Abroad

The idea of  being together seems to stop at the border, such as with Medicare, or State Farm which writes:

“Each of the investment products and services referred to on the State Farm Mutual Funds web site is intended to be made available to customers or prospective customers residing in the United States. The customer’s U.S. permanent residence address must be a street address.”
State Farm

Yet, it doesn’t end there.  When Americans apply for some bank accounts abroad or even banking services in the States, they may be rejected or treated differently from other Americans.

“As a direct result of existing and newly proposed U.S. regulations, many U.S. and overseas banks have closed accounts held by U.S. citizens living outside of the U.S., and many banking institutions outside the U.S. now refuse to open any new accounts for Americans. Recently enacted legislation from the Treasury and Congress will only worsen this situation.”
Banking Services Denied to U.S. Citizens Abroad

Of course, there are other issues as well, such as Americans abroad being the target of terrorist attacks responding to US foreign policy.  Americans abroad may also be denied residential tuition rates at US colleges.  We can’t even sign up for an American Sweepstakes, get a credit report from AnnualCreditReport.com, buy an app from Barnes & Nobel, watch a video at Amazon or subscribe to Netflix.  Yet, the most serious issue is the excessive government spending on that which does not “rebuild the foundations of our country and economy”:

“Uncle Sam is like the neighborhood wastrel who buys everyone a drink and cosigns everyone’s loans even though he is unemployed. When faced with bankruptcy, he immediately goes down to the bar and buys another round for the road.”
Solving The Debt Crisis: A Military Budget For A Republic

America does not need to be a super power.  Rather, It needs to cut its spending to repay its debts to “rebuild the foundations of our country and economy”.  A 50% slash on Social Security Benefits for all Americans rather than singling out Americans abroad, would qualify under the concept of “pitching in together” and cut spending by $407 billion.  One could even work together more and stop Medicare within the US border too for all Americans, pitching in a few more billion.

Did you hear the President today?  Sadly, I heard no mention of residency-based taxation or even representation for Americans abroad in the House and Senate.  What I did hear appeared to be a collection of bipartisan chatter which stopped in relevance at the border.  Maybe the President should hear Americans today for a change?

———————————————-

Cross posted from ExpatAmi

After two attempts to have Rickerby Wealth Group respond to my requests to have them cover the “elephant in the room” (FATCA) on one of their regular guest appearance on the morning news, Shaun Rickerby informs Global TV viewers of the impending US legislation. (My apologies for the low- tech recording off my PVR. Viewerrickerby2s need QuickTime Player-downloads are free).

Just read this on Jack Townsend’s site

Here is the accompanying document.

“On remand, the district judge entered an order of compulsion and contempt against M.H.”

Now what?

[Editor’s note:  This post clears up the issue of whether 8854 is required for people receiving backdated CLNs: If your expatriation date is before 2004, the rules are different]

In this post, I want to point out a clear contradiction both in the logic and the wording of the instructions for Form 8854.  This is a follow-up post to the question posed by USX about who must file the 8854. Continue reading →

Cross posted from ExpatAmi

On 04/03/2012, the Social Security Administration wrote that when I retire at the age of 67, I’ll get a mighty monthly Social Security benefit of $495, partially in exchange for the time spent serving loyally in the United States military.  If I was 67 today, then this benefit would enable me to afford to rent the cheapest one bedroom apartment in San Francisco for only $370 per month, according to WalkScore, and have $125 left over for food, drinks, electricity, health care, transportation, taxes, clothing, etc.

This would be the case if there was no expat penalty, also known as the “Windfall Elimination Provision“ (WEP). On WEP, the Social Security Administration writes:

If you work for an employer who does not withhold Social Security taxes from your salary, such as a government agency or an employer in another country, the pension you get based on that work may reduce your Social Security benefits… The Windfall Elimination Provision primarily affects you if you earned a pension in any job where you did not pay Social Security taxes and you also worked in other jobs long enough to qualify for a Social Security retirement or disability benefit.

Continue reading →

[Editor’s note:  This post clears up the issue of whether 8854 is required for people receiving backdated CLNs: If your expatriation date is before 2004, the rules are different]

(This comment from yesterday, buried at the end of an ancient thread, may have gotten lost in the perpetual flurry. So I repeat it here as a posting in its own right.)

Nobody has yet convinced me that any person who now relinquishes or renounces is not required to file Form 8854 to satisfy the IRS.

This official document says that 8854 applies to anyone expatriating after 16 June 2008.

And this official document says at 2.A — unless I can’t read — that for practically all of the Brock crew, unless you have already done the US consulate thing, you have not expatriated yet. Backdate that precious CLN to 1776 if you want, but when did you actually visit the US consulate?
Continue reading →

A headline from the morning news caught my attention:

“June 13 (Reuters) – Honda Motor Co Ltd said on Wednesday it will recall about 50,000 Civic small cars in the United States from the 2012 model year for a potential driveshaft assembly issue that could lead to loss of engine power. “

It occurred to me that there are more mechanisms in place to notify a consumer of an issue effecting product safety than the US government uses in informing its citizens abroad of their duty to pay US taxes. What if manufacturers were to leave safety recalls to foreign media, or to print it in mouse-type on the last page of a document that a consumer may or may now renew every 10 years, or adopt a laissez faire regard for the law that leads to sellers of the product not informing purchasers of an important safety instruction? Yet the US government continues to punish its citizens by way of onerous penalties and threats of exile for neglecting to report forms that these otherwise law-abiding citizens could not have reasonably known about, and continues to make little in the way of effort to facilitate.

Continue reading →