Moodys Tax Advisors Blog, July 4, 2013: Blog Renouncing your US citizenship: New law may keep you out forever! by Alexander Marino JD, LLM (US Tax)
Under the proposed amendment, a renouncing individual who would be classified as a Covered Expatriate under §877A, must prove to the Department of Homeland Security by “clear and convincing” evidence that he or she did not renounce for tax avoidance purposes. The burden of proving this negative falls on the renouncing Covered Expatriate if he or she desires to ever re-enter the US.
In a nutshell, all Covered Expatriates will now have the burden of proving that tax avoidance was not a primary purpose of their renunciation. Under the original Reed Amendment, the burden was with the US government to show that the renouncing US citizen did so to avoid US tax. This shifting of the burden of proof is enormously important and greatly increases what is at stake for a Covered Expatriate. Under the original Reed Amendment the advantage was clearly with any renouncing US citizen (whether a Covered Expatriate or not). It can be very difficult for the US government to meet its burden of proof regarding tax avoidance motives. Under the proposed Reed-Schumer Amendment, the advantage would be squarely with the US government when dealing with a Covered Expatriate.
Under the newly proposed regime of the proposed Reed-Schumer Amendment, the importance of avoiding the US exit tax under §877A could be even more important than before. Not only will the repercussions of being classified as a Covered Expatriate under §877A result in a deemed disposition of the renouncing individual’s worldwide assets under the exit tax rules, but the burden to prove that a primary purpose of the renunciation was not to avoid US tax, falls on the Covered Expatriate and not the US government.
The Reed-Schumer Amendment is not law yet, but the danger of inadvertently being barred from the US while also being hit with the US exit tax are real concerns for those considering renouncing if it becomes law. Any US citizen, who renounces their US citizenship with either the original Reed Amendment or the proposal Reed-Schumer Amendment regimes in place, needs to understand the repercussions and timing of this decision.
Click HERE for a summary of filing and reporting obligations required by US citizens residing in Canada.
bubblebustin, I checked out that FB group and their most recent discussion is quite a back/forth concerning a young lady who is dual from birth and only just found out she should be filing income tax and found out about FBAR during the discussion. Some of the advice was fairly accurate but most of the attitude was “no big deal” and that FATCA won’t be a problem. The young lady was most fearful about border crossing and being detained, which I don’t believe has happened yet where compliance is concerned but can’t be that far off if FATCA isn’t derailed.
Your comments on this thread reveal you to be a very interesting person. A thought on your specific words:
“it is hard for me to articulate this into words; whether written or spoken. For me success has never been a part of my life. Sure I have had little successes here and there, passing tests, getting something small that I would have liked; but nothing that I could really call a career or any sort of life-advancement.”
I remember once listening to my father describe his father who (I never met my grandfather) I gather never had any kind of consistent career. Anyway, as I understand the story, at one point (how times change) my grandfather was actually driving from gas station to gas station trying to sell some kind of automotive product (anti-freeze or something). Anyway, as the story goes, my grandfather pulled into this station (my father was with him) and gas station owner started screaming:
“You again, get the hell out of here …”
My grandfather returned to the car and said to my father:
“Well, we are one step closer to our next sale.”
You speak of “career or any sort of life-advancement”.
There is a huge difference between having a career and having a life. I’d opt for the latter all day every day.
Your comment got me thinking about another aspect of:
U.S. citizenship is like living in an abusive marriage. Virtually all people who leave abusive marriages always say: “I wish I had left earlier”.
I have observed how one thing the abuser will do is to try to separate the person abused from their friends, family, etc.
This is exactly what the USG is has done and continues to do to U.S. citizens abroad.
1. It starts with the creation of a climate of Anti-Americanism. I am convinced that part of the reason that there is so little resistance to FATCA is that it is US citizens who are being abused. Who cares about them? In fact, it’s okay to abuse U.S. citizens because we don’t like the US. This has been a very long term problem (it’s been better and worse over time, but’ it’s always there).
2. Through the FBAR Fundraiser and related things, the USG has inserted itself between the US spouse and the non-US spouse. I am quite certain that a number of marriages will be pushed over the brink by this. Given what you know now, if you were NOT a U.S. citizen, would you even consider marrying a U.S. citizen?
3. Employment: US citizens cannot be in a position to have signing authority over bank accounts.
4. Business partnerships and corporations – Sorry, can’t do it. Don’t really want the IRS in my life.
5. Financial planning – Sorry there are no products for you.
To repeat: The USG is behaving like many abusers. The person abused (U.S. person abroad) is being separated from friends, family, opportunity, etc.
You need to end your relationship with the USG now!
I read that too. You observed “Some of the advice was fairly accurate but most of the attitude was “no big deal” and that FATCA won’t be a problem.”
Watch these apologists turn like bad cottage cheese if you even attempt to give evidence that it is a “big deal”.
Nice to see your recognition and prioritization of the Antiamericanism factor. This is an aspect of the circumstances that I brought forward and elaborated on many months back. As I watch Brockers ponder the official entrails and cling to hopes of rights, contradictions, numbers, whatever — I shake my weary head. Sauve qui peut.
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