Crossposted from RenounceUScitizenship
RT @fatca_fallout Renouncing US Citizenship — Trend, Overreaction or self-defense? onforb.es/Z0RIubbit.ly/TPAUOV #FATCA
— U.S. Citizen Abroad (@USCitizenAbroad) December 13, 2012
Nobledreamer’s comment to this article about renouncing U.S. citizenship is worth a post and that is exactly what this post is. One of best descriptions of the problem I have seen. It’s in language and a format that anybody can understand it. Thanks!
Thank you for outlining main points of tax requirements involved in expatriation.
I feel it is extremely important to make a clear distinction between those who live in the US and decide to expatriate and renounce/relinquish their citizenship and those who already live abroad and decide to renounce/relinquish their US citizenship. I do not know anyone who has left the US for tax reasons and then renounced their citizenship. So I cannot speak to any aspect of this particular situation.
As to Americans living abroad who decide to renounce/relinquish their citizenship, the issue primarily, is not one of taxation but rather, of onerous penalization for not filing the Foreign Bank Account Report (FBAR). FBAR is part of the Bank Secrecy Act (1970), designed to track money of US Homelanders who have foreign accounts to money launder, support terrorism etc. It was not enforced for 40 years. Virtually no one living abroad had ever heard of it. Once the IRS achieved success with breaking the bank secrecy laws in Switzerland, in 2009, this little-known form was added into the pot of the US government’s misleading campaign against tax evasion.
Americans living in foreign countries pay taxes to the governments of those countries. Along with FBAR, most were unaware they were required to file/pay US taxes as well. This is in no way, equivalent to Homelanders who purposely seek out places “offshore” to avoid tax. However, IRS has gone after honest Americans abroad who had no knowledge of their obligations. Instead of encouraging them to come forward in a reasonable way, the IRS has engaged in a vicious cycle of fines, penalties, interest and whatever else they can think of to persecute those who are simply presumed to be guilty.The stories of those who have tried to comply by entering the Offshore Voluntary Disclosure Initiative are truly horrifying, many enduring 2 years of confusion, being threatened with penalties equivalent to their entire retirements. These are people who by and large, owe no tax to the US.
Some of the reporting requirements defy any level of reasonable logic. A US citizen, stay-at-home mother for instance, who likely has no income and is signed onto her non-US citizen husband’s accounts, is required to report HIS bank account numbers, balances and so on. I doubt any US Homelander would be willing to do the same if living in the US, married to a foreigner with a government who demanded the same, or else be prepared to lose a considerable portion of savings, retirement plans, etc.
Now FATCA promises to be even more punishing. Financial institutions across the globe will be required to report their American clients’ personal banking information. The US government will coerce this by reporting by withholding 30% of an institution’s entire US holdings if they do not comply. Banks in Switzerland have begun to close those client’s accounts without notice, including the renewal of mortgages. Congress and the IRS are fully aware of this and do nothing to mitigate this truly destructive practice. There is no excuse whatever, for this gross misapplication of power. A recent article pointed out that terrorists will be able to pinpoint identification and location of Americans living abroad, thus putting them in harm’s way. I cannot imagine any American, abroad or not, feeling that this is the way a government should act toward it’s own citizens.
The numbers of Americans abroad renouncing is higher than the government will admit. The “Name-and-Shame List’ published in the Federal Register is hardly an accurate representation of how many are doing just that. Look to the long waits at European embassies and consulates, the number of expatriates banding together in Canada and Switzerland trying to get their message out via online forums and you’ll get a much better sense of how widespread this “trend” is.
Not about tax, nor political discontent, the larger issue is the complete betrayal by one’s country in an attempt to gauge for money to make up for the horrific debt the US has. Add the cliches of “tax cheat,” “traitor,” and the guaranteed reaction such labels produce, and those who expatriated for reasons such as marriage, education or employment can count on being treated in the same manner as those who may leave the US for tax purposes.
It is high time that Americans learn that the country they grew up in, no longer exists. The “American exceptionalism” that we were taught to believe in, needs to be seen for what it has become, an excuse for the government to do whatever it wants with no concern for the consequences. ALL Americans lose in this process.
Great job, Nobledreamer! You speak from the heart and that comes through.
There are many good comments, and remarkably after a day old there are no gutter-sniping comments about tax-evader-cheats.
@Renounce-Thanks for this. I really appreciate it.
@Bubblebustin – and thanks to you too! It seems there aren’t usually very many comments for articles at Forbes. And a relief not to have to deal with the usual, as you describe.
*Indeed! Great post @Nobledreamer, and thanks to @Renounce for bringing this to our attention! 🙂
Bravo Nobledreamer! Right on target.
Outstanding, Noble Dreamer! This is the best description of the current expatriation situation I’ve ever read. I saw it earlier today when JustMe provided the link to the Forbes article. I read your comment and went wow, this is IT, it really tell it like it is! Eloquent, succinct, comprehensive – an almost impossible combination when it comes to this topic! Explaining the emotional aspects of this in a matter-of-fact way as well – also no mean achievement.
This is the story that almost all persons inside theUS are oblivious to as they are being fed absurd lies and distortions. This really should be an op-ed piece in a major US newspaper or news magazine
Noble indeed, nobledreamer!
Thanks for highlighting nobledreamr’s summation, renounce!
@USCitizenAbroad
Thanks for giving this Noble Dreamer Forbes comment the attention it deserves. I had added the link over at the “ask your question” thread, but glad you have it the separate post it deserves!
I posted to the Forbes article some rants about the inequalities caused by double taxation especially in the situation of Switzerland. Perhaps some of you could go into such detail as to the situtation in your country, based on your own observations, experience, and research.
What I still cannot understand is with 5-7 million Americans abroad, and only a few hundred thousand tax returns to the IRS from abroad (I don’t remember the exact figure but I think we have discussed it here somewhere on IBS), where are the other couple of million “taxpayers”? They are either unaware of double taxation or are just telling the IRS to go to hell by their silence. FATCA should awaken this mass of people as they start to lose bank accounts and get persecuted in other ways. But we need to accelerate the outcry.
If millions of us start complaining, maybe governments will listen. Maybe Congress will understand what they have done.
I met someone last night who was born in Canada but is a US citizen. She knows all about the situation although she hadn’t heard about the new so called ‘streamlined’ procedure. She has a SSN and an old, expired passport. She has made the decision to lay low and if the bank asks if she is a US citizen she said she’d say she isn’t.
Citizenship based taxation enforced by FATCA will turn vast numbers of otherwise honest people into liars.
@bubblebustin,
Into liars (including me for my son who has a developmental disability and for whom I am denied the right to renounce on his behalf) and/or into someone living under constant threat and wondering when / if they will be caught or turned in to the US IRS through the Whistleblower Program, especially troublesome with an actual social security number and an actual expired US passport. Sort of like Russian Roulette. Who knows what the next steps will be to “get” such people into “compliance”?
@Calgary411
This person’s predicament has upset me as much as yours and the other couple I heard about who put all of their assets in the non-USP’s name. This person I spoke to last night has RRSP’s, TFSA’s-all those things normal Canadians have. She couldn’t at first understand why I would enter OVDI, but then realized that the road to compliance is the same for renunciation, something she will be unable to do on the route she’s taking. Personally, I look forward to the day when I not longer feel under siege, rather than spending the rest of my life looking over my shoulder and being voiceless.
@bubblebustin,
It’s too stressful a way for me to spend the rest of my days too — wasted energy and wasted time that could be better spent on positive endeavours. I am OK with my decision about my son (at this point). It seems entrapment for so many — as it may be entrapment for new needed labourers coming to Canada’s oilpatch. Awareness, sunshine and fresh air is the only way to attack the monster. And, still so many heads in the sand.
(On another note, I just got a reply back to my email to Alberta’s Associate Finance Minister, advising what I presented will surely be brought to Mr. Fawcett’s attention before the meeting with Finance Minister Flaherty.)
@Calgary411
EXCELLENT! All I got back from Finance Minister Mike De Jong’s office was an auto-reply that they got my letter.
At least two provincial ministers have been advised of FATCA for the meeting!
@Jefferson D. Tomas
I can speak to several Americans I know that live overseas, and are just ignoring the requirements, or as you say, “telling the IRS to go to hell by their silence.”
As @bubblebustin says, I am pretty sure that when FATCA shows up in their bank they will become full blown liars and attempt to hide their indices. They just need to keep their accent laden mouths shut, if they can! .
I haven’t seen it on a questionnaire yet, but I can foresee the day when it is added. “Does the client speak with an American accent?” Report them!
I think the combat terrorism mind set that will transfer to FATCA. “When in doubt, report.” “See something, say something.” Then natural response might be a growing ‘no ratting’ culture of the ghettos spreading to American’s abroad.
I attempted to post a comment over there yesterday, but it wasn’t published. I tried again tonight, but in case they still don’t publish it, here it is:
I really appreciate this comment (Arrow’s) about Savrin’s need to renounce in part
because being a US citizen now makes one a pariah in the international
business world. It’s true. People not wanting to partner with you or
even have you as an investor because of fear of the upcoming FATCA and
the consequences for them of having an American connection in any way.
We have fewer opportunities now because we are a U.S. citizens–not
because of our skills or anything of real importance–but because of the
burdens created by the US government and placed upon its own citizens.
Talk about betrayal.
I’m not wealthy like Savrin. But this is also one of my biggest
reasons. It harms Americans at every income level, even greenhorn
entrepreneurs just trying to make a go of it outside the U.S. This and
the overwhelming stress and complexity of trying to figure out the
filings and stay compliant every year even though I’ve owed no U.S.
taxes. (US annual filings are unbelievably, indescribably complicated as
a U.S. citizen and solo entrepreneur living outside the U.S. with a
business entity where I live.) That’s all part of why I’m working on
cementing citizenship where I reside to eventually renounce my US
citizenship. That and the sheer resentment that I now feel toward the
U.S. government for treating its own citizens who live outside the U.S.
as if they are nothing more than chattel, a way in which NO other
developed country treats its citizens abroad. This all takes time.
That’s part of the reason the renunciation spike will be delayed too, it
takes time for people to go through this process after having learned
how they are being harmed, getting citizenship instead of just residency
where they live, and then renouncing. It all takes time.
@Michael…
Excellent comment. Thanks for weighing in. I checked Forbes to see if it is there, and it is not. I don’t think they moderate the comments. At least this author does not, so not sure why it would not be showing up. It is a good comment that other readers of Forbes should see….
JustMe, Would you mind posting that on my behalf, if you have time? I tried literally a few more times and it says “you’ve already said that.” lol But still doesn’t show. I give up on this comment. Weird because I’ve posted comments using this Forbes account before.
I added an answer to the author’s title question:
A: Meaningful trend, based on rational analysis and practical realities. Renunciation is a topic of interest among U.S. expats the world over, literally. Everybody just wants to survive. Unfortunately, for the political class that means harming those abroad who can’t fight back. And for those abroad, it means swallowing the lump in your throat and making the decision to end the persecution because ultimately you have only one life to live. You can’t ask an abuser to stop and expect it to work. You have to leave the relationship.
@Michael…
If it doesn’t show up soon, I will post it on your behalf…
Good comment…
@Michael…
I just posted your comment on Forbes. It is under Arrows Comment.
JustMe, Would you mind posting that on my behalf, if you have time? I tried a third time and it said “you’ve already said that.” lol But still doesn’t show. I give up on this comment. Weird because I’ve posted comments using this Forbes account before.
I added an answer to the author’s title question:
@Michael.
I added that one two just a minute ago. 🙂
Awesome. Thank you! I appreciate it.
@Michael.
Not a problem. Now, if I would just learn when to use “Too” vs “Two”! 🙂
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