52 thoughts on “Residence Based Taxation for Americans Abroad”
@Bob…
In addition to what USCitzenabroad provided you, we have also had a fairly robust debate here on IBS about the quiet disclosure issue.
There is much disagreement between Attorneys on this issue, but what is certain, the GAO over looks the obvious excess collection of penalties related to tax failure in their latest report on the OVDP, and instead focused on telling the IRS to go after QD’s for more penalty collection. So, their intentions are plain to see. This is NOT a compliance effort, this is strictly a Penalty Collection regime.
It is not the government does not know about this issue, there is regular commentary from the government explaining why they believe citizen based taxation is appropriate. I believe it can be summarized as the US have a worldwide military presence that serves Americans throughout the world. The government will cite examples such as Grenada, the Maersk hostage rescue, and other examples of where a global military presence benefited Americans abroad.
We may disagree with the need for a global military or its benefit to Americans abroad, but the not ignorant of the situation.
@Dale A. Walters, technically, the US government should financially compensate Americans abroad for being the direct victims of America’s horrible foreign policy.
@Dale A. Walters
Then how can the USG justify taxing a USP who lives in a country where there’s no military presence? If military representation is their justification for taxing us, it’s yet another example of taxation without representation.
Dale A. Walters,
That is blatant discrimination if the US thinks they are protecting someone as an American in Canada — ask me if we want that “supposed” protection. Another unwanted ‘benefit’ as is US citizenship given to my US son, who is denied the ability to renounce.
Before I renounced, I would have said — No thanks, I’ll take my chances.
Will this mighty US protect my Canadian neighbours as well? Will the US tax them?
@Calgary411
A US military presence in Canada would be called an invasion.
Very nice video. They might want to change the title from “RBT” to “Residency Based Taxation” or something with those keywords in it so it can be found via search engines. But good job ACA. This is exactly the friendly, informative, quick video that we need.
I think I’ll submit these to a number of expat-related bloggers who I know also care about this issue and see if I can get them to post & tweet about it.
Hi @jennifer,
It would be good to have the video distributed more widely, and you’re right, having it entitled “Residence based Taxation” would tell people who aren’t familiar with the acronym and the issues what it was about.
It has been a struggle to tell this story effectively.
Calgary411, Oh, I can answer this question for you. Americans see Canada as a free-loader b/c they believe that Canada deliberately underspends and undermans its military b/c we have theirs to protects us – being such close neighbors and all. That’s why USP’s in Canada should be paying taxes. We are freeloaders and evaders, benefiting from the US military by proximity and strategically enjoying the fruits of America while also getting “free” healthcare and living in a socialist nation.
Yeah, I know that makes no logical sense at all but trust me that is what too many of them think.
In reality Canadians have a much greater awareness of what and who America and Americans are than vice versa. A blogger, whose name and blog I can’t recall anymore, had a great quote about Americans and Canada, “Canadians know all about America but Americans don’t know fuck-all about Canada.”
@Dale A. Walters, The US income tax was initially based on residence. The reason why they added citizenship was to punish people who left the US to avoid the military draft during the Civil War. It was only decades later that the US came up with the idiotic “benefits of citizenship” theory because it didn’t want to bother changing the system, but it’s nothing more than a lame excuse. The US is simply very hesitant to change anything that it has been doing for a long time, even when it makes no sense. Its position is not even consistent because it allows the foreign earned income exclusion. Many congressmen already disagree with citizenship-based taxation, and now the Senate Finance Committee claims that the US system of taxation is based on source and residence, ignoring the concept of citizenship altogether. It’s just a matter of time and they will eventually change the system.
Thanks for the comment, YogaGirl. You’re right — I’ve heard that BS more than a few times. The US has no idea that many here think there are other ways to help solve the world’s problems than maintaining a Military Industrial Complex (with how many military bases around the world, encroaching on other countries) and all that entails, including trillions of debt.
And, neither to they want to know anything about our “socialist” health care, paid for with our taxes. Not perfect, but we are inclusive and have a better outcome for less per capital cost. We don’t hear over and over again of anyone who has gone into bankruptcy to pay medical bills for their family here in Canada — and many other countries.
As a whole, we in Canada absolutely know much more about the US (even those of us who aren’t from there), as well as other countries, than vice-versa. As a whole for knowledge and travel, we hold an interest in the entire world, not just what’s inside our borders and our history books.
Thanks for the chuckles I got listening to Jim Carrey.
@badger, most Americans won’t watch the video unless it is titled: “Big Corporations & Fat Cats Offshore”.
@Dale, well that’s their line but, the reality is more like they need CBT to support their huge military industrial complex and all the needless ongoing wars they perpetrate on innocents around the world. Maybe we should be asked since we left if we agree with or need this sort of “protection” Perhaps the reason we didn’t go back there to live had to do with being in countries that don’t see military actions *protection* as a primary liability *benefit* of citizenship. Canada sees citizenship benefits in terms of health care, good education, freedoms and rights. I don’t think we need to import a *benefit* we didn’t ask for after we became Canadians *or citizens of other nations* However, they see anything, it always comes down to the same myopic view point.
When you contrast how every other nation except Eritrea treat their expats with the way the U.S. justifies their treatment of these people, the U.S. stands out and not in a good or moral way.
This video makes perfectly valid points, all points the U.S. will ignore. Every law they have in place regarding expats is for punishment. We dared to move elsewhere therefore we “owe” them our “fair share” makes zero sense to anyone.
There is one benefit to CBT that seems to be overlooked:
Chances are you need to passport to work in the country you are resident, especially to make a business trip – eg. to another country or maybe to check-in to a hotel. There you go! Deduct if you can – it’s legit and one benefit few homelanders would consider making use of.
@noname
Thanks for the tip, but unless I’m entering the US I always use my Canadian passport. Interesting twist that it would be a deduction in the course of doing business in the US.
The Youtube title was updated per input from IBS… 🙂 It now says Residency Based Taxation, and not just RBT.
Good work, IBS. Thanks, Just Me and ACA. I wonder if Hawaii and Alaska made it onto the map. I’ll have to have another look. Good explanatory resource!
ACA should do another animation showing some track runners from different nations running around a track with of course the American with a ball and chain around his ankle with CBT written on the ball.
Next time a homelander tells you about the great protection your US tax dollars buy you while abroad, just quote from here:
“The U.S. Government recognizes that dual nationality exists but does not encourage it as a matter of policy because of the problems it may cause. Claims of other countries on dual national U.S. citizens may conflict with U.S. law, and dual nationality may limit U.S. Government efforts to assist citizens abroad.”
If the US Government recognizes that dual nationality exists but DOES NOT ENCOURAGE it, then why do they hold on so tightly? We are chattel and they don’t want us to have the benefits of the countries in which we choose to live, birth and raise our children, work and pay our taxes.
Just what ARE they saying, Calgary411?
Are they encouraging US citizens to renounce US citizenship in order to avoid having dual citizenship, or remain only permanent residents of the country where they reside (which in itself wouldn’t prevent conflicts either) or are they suggesting you NEVER LEAVE the US other than for brief tours?
Are our sons who are Canadian born therefore discouraged from accepting dual nationality, giving cause to believe that they are not automatically US citizens? How can they on one hand say they are automatically US citizens at birth and discourage it at the same time, unless of course they would like our sons to renounce their Canadian citizenships?
bubblebustin,
I do run off at the mouth about this and get very down in the mouth because the US talks out of both sides of its mouth.
The saying “talking out of both sides of your mouth” is generally taken to mean that you say one thing and mean another, or that you say one thing to one group of people and something different to another group. Basically, it implies that what you say is untruthful or contradictory.
But if mouth is the esoteric wisdom link to the truth … and truth has both an exoteric (public) and esoteric (hidden, guarded, protected) aspect — then it may imply that from a wisdom perspective — you might speak “in tongues” or “parables” so that everyone gets the message they are able to hear and understand.
Related sayings include to “run off at the mouth” of the Nile and to be “down in the mouth” as in that guy who was swallowed by a fish for three days (funny .. if fish is a link with death … then was he dead three days?)
If the US cannot give CLEAR definition, then we must interpret. Yours is the same as mine would be.
Headline: US encourages Canadian-born to renounce extraneous Canadian citizenship!
@Calgary411
I always enjoy what you write, regardless of what your mouth is doing 🙂
@Bob…
In addition to what USCitzenabroad provided you, we have also had a fairly robust debate here on IBS about the quiet disclosure issue.
There is much disagreement between Attorneys on this issue, but what is certain, the GAO over looks the obvious excess collection of penalties related to tax failure in their latest report on the OVDP, and instead focused on telling the IRS to go after QD’s for more penalty collection. So, their intentions are plain to see. This is NOT a compliance effort, this is strictly a Penalty Collection regime.
It is not the government does not know about this issue, there is regular commentary from the government explaining why they believe citizen based taxation is appropriate. I believe it can be summarized as the US have a worldwide military presence that serves Americans throughout the world. The government will cite examples such as Grenada, the Maersk hostage rescue, and other examples of where a global military presence benefited Americans abroad.
We may disagree with the need for a global military or its benefit to Americans abroad, but the not ignorant of the situation.
@Dale A. Walters, technically, the US government should financially compensate Americans abroad for being the direct victims of America’s horrible foreign policy.
@Dale A. Walters
Then how can the USG justify taxing a USP who lives in a country where there’s no military presence? If military representation is their justification for taxing us, it’s yet another example of taxation without representation.
Dale A. Walters,
That is blatant discrimination if the US thinks they are protecting someone as an American in Canada — ask me if we want that “supposed” protection. Another unwanted ‘benefit’ as is US citizenship given to my US son, who is denied the ability to renounce.
See http://isaacbrocksociety.ca/2013/07/07/frustration-abounds-as-answers-are-not-received-accidental-americans-born-abroad-to-us-parents-and-not-registered-with-the-us-are-they-automatic-us-citizens-or-do-they-have-the-o/
Before I renounced, I would have said — No thanks, I’ll take my chances.
Will this mighty US protect my Canadian neighbours as well? Will the US tax them?
@Calgary411
A US military presence in Canada would be called an invasion.
Very nice video. They might want to change the title from “RBT” to “Residency Based Taxation” or something with those keywords in it so it can be found via search engines. But good job ACA. This is exactly the friendly, informative, quick video that we need.
I think I’ll submit these to a number of expat-related bloggers who I know also care about this issue and see if I can get them to post & tweet about it.
Hi @jennifer,
It would be good to have the video distributed more widely, and you’re right, having it entitled “Residence based Taxation” would tell people who aren’t familiar with the acronym and the issues what it was about.
It has been a struggle to tell this story effectively.
Calgary411, Oh, I can answer this question for you. Americans see Canada as a free-loader b/c they believe that Canada deliberately underspends and undermans its military b/c we have theirs to protects us – being such close neighbors and all. That’s why USP’s in Canada should be paying taxes. We are freeloaders and evaders, benefiting from the US military by proximity and strategically enjoying the fruits of America while also getting “free” healthcare and living in a socialist nation.
Yeah, I know that makes no logical sense at all but trust me that is what too many of them think.
In reality Canadians have a much greater awareness of what and who America and Americans are than vice versa. A blogger, whose name and blog I can’t recall anymore, had a great quote about Americans and Canada, “Canadians know all about America but Americans don’t know fuck-all about Canada.”
@Dale A. Walters, The US income tax was initially based on residence. The reason why they added citizenship was to punish people who left the US to avoid the military draft during the Civil War. It was only decades later that the US came up with the idiotic “benefits of citizenship” theory because it didn’t want to bother changing the system, but it’s nothing more than a lame excuse. The US is simply very hesitant to change anything that it has been doing for a long time, even when it makes no sense. Its position is not even consistent because it allows the foreign earned income exclusion. Many congressmen already disagree with citizenship-based taxation, and now the Senate Finance Committee claims that the US system of taxation is based on source and residence, ignoring the concept of citizenship altogether. It’s just a matter of time and they will eventually change the system.
Thanks for the comment, YogaGirl. You’re right — I’ve heard that BS more than a few times. The US has no idea that many here think there are other ways to help solve the world’s problems than maintaining a Military Industrial Complex (with how many military bases around the world, encroaching on other countries) and all that entails, including trillions of debt.
And, neither to they want to know anything about our “socialist” health care, paid for with our taxes. Not perfect, but we are inclusive and have a better outcome for less per capital cost. We don’t hear over and over again of anyone who has gone into bankruptcy to pay medical bills for their family here in Canada — and many other countries.
As a whole, we in Canada absolutely know much more about the US (even those of us who aren’t from there), as well as other countries, than vice-versa. As a whole for knowledge and travel, we hold an interest in the entire world, not just what’s inside our borders and our history books.
Thanks for the chuckles I got listening to Jim Carrey.
@badger, most Americans won’t watch the video unless it is titled: “Big Corporations & Fat Cats Offshore”.
@Dale, well that’s their line but, the reality is more like they need CBT to support their huge military industrial complex and all the needless ongoing wars they perpetrate on innocents around the world. Maybe we should be asked since we left if we agree with or need this sort of “protection” Perhaps the reason we didn’t go back there to live had to do with being in countries that don’t see military actions *protection* as a primary liability *benefit* of citizenship. Canada sees citizenship benefits in terms of health care, good education, freedoms and rights. I don’t think we need to import a *benefit* we didn’t ask for after we became Canadians *or citizens of other nations* However, they see anything, it always comes down to the same myopic view point.
When you contrast how every other nation except Eritrea treat their expats with the way the U.S. justifies their treatment of these people, the U.S. stands out and not in a good or moral way.
This video makes perfectly valid points, all points the U.S. will ignore. Every law they have in place regarding expats is for punishment. We dared to move elsewhere therefore we “owe” them our “fair share” makes zero sense to anyone.
There is one benefit to CBT that seems to be overlooked:
Publication 529 clearly states that if you use your passport for business purposes, this can be deducted:
http://www.irs.gov/publications/p529/ar02.html#en_US_2012_publink100026911
Chances are you need to passport to work in the country you are resident, especially to make a business trip – eg. to another country or maybe to check-in to a hotel. There you go! Deduct if you can – it’s legit and one benefit few homelanders would consider making use of.
@noname
Thanks for the tip, but unless I’m entering the US I always use my Canadian passport. Interesting twist that it would be a deduction in the course of doing business in the US.
The Youtube title was updated per input from IBS… 🙂 It now says Residency Based Taxation, and not just RBT.
Good work, IBS. Thanks, Just Me and ACA. I wonder if Hawaii and Alaska made it onto the map. I’ll have to have another look. Good explanatory resource!
ACA should do another animation showing some track runners from different nations running around a track with of course the American with a ball and chain around his ankle with CBT written on the ball.
Next time a homelander tells you about the great protection your US tax dollars buy you while abroad, just quote from here:
“The U.S. Government recognizes that dual nationality exists but does not encourage it as a matter of policy because of the problems it may cause. Claims of other countries on dual national U.S. citizens may conflict with U.S. law, and dual nationality may limit U.S. Government efforts to assist citizens abroad.”
http://travel.state.gov/travel/cis_pa_tw/cis/cis_1753.html
If the US Government recognizes that dual nationality exists but DOES NOT ENCOURAGE it, then why do they hold on so tightly? We are chattel and they don’t want us to have the benefits of the countries in which we choose to live, birth and raise our children, work and pay our taxes.
Just what ARE they saying, Calgary411?
Are they encouraging US citizens to renounce US citizenship in order to avoid having dual citizenship, or remain only permanent residents of the country where they reside (which in itself wouldn’t prevent conflicts either) or are they suggesting you NEVER LEAVE the US other than for brief tours?
Are our sons who are Canadian born therefore discouraged from accepting dual nationality, giving cause to believe that they are not automatically US citizens? How can they on one hand say they are automatically US citizens at birth and discourage it at the same time, unless of course they would like our sons to renounce their Canadian citizenships?
bubblebustin,
I do run off at the mouth about this and get very down in the mouth because the US talks out of both sides of its mouth.
If the US cannot give CLEAR definition, then we must interpret. Yours is the same as mine would be.
@Calgary411
I always enjoy what you write, regardless of what your mouth is doing 🙂