Why Have So Many #Americansbroad Considered #Expatriation? It’s Probably Not What You Think… http://t.co/wByZ2Mulwf
— U.S. Citizen Abroad (@USCitizenAbroad) October 15, 2013
So, while the media sound bytes tell you that expatriation is all about tax, don’t believe it. Sure, that’s a part of it, but the reality is much more complex.
My own experience with expatriated clients backs this up.
- One who had lived in Switzerland for more than 40 years gave up her U.S. citizenship only after all of the banks she dealt with there closed her accounts. They didn’t want to deal with all the reporting requirements the USA requires if they accept U.S. account-holders. It’s easier just to fire their American customers.
- Another client received a letter from the bank that had issued a mortgage years earlier for her home in Germany. The letter threatened to cancel her mortgage unless she could prove she was no longer a U.S. citizen. Rather than face a huge balloon payment, she gave up her passport.
- A Canadian client contacted me after receiving a bill from the IRS for $20,000, despite being (he thought) 100% compliant with all U.S. tax and reporting obligations. He’d even hired a big-name U.S. accounting firm to prepare his tax returns each year, at a cost of more than $5,000 annually. He never owed any U.S. tax because taxes in Canada are higher than in the USA, but he still got screwed. It appears a Canadian educational savings plan account he’d set up for his daughter was the problem. Under Canadian law, gains in the account are tax-deferred—but not under U.S. law. That led to a big tax bill—and his decision to expatriate.
The fact is, more than 7 million Americans now live abroad. Many of them can no longer hold bank accounts, qualify for a mortgage, or set up a tax-deferred account for retirement or their children’s education.
@US Citizen Abroad
Could you tell me where this came from? Especially regarding the Canadian..Perhaps you can send this information on to Elizabeth May, as she answered an email I sent her today regarding http://www.international-adviser.com/profiles-and-analysis/analysis/us-banking-lobby-urges-congress-to-challenge
that was put on by @just me
today on http://isaacbrocksociety.ca/2013/06/27/hr-2299-calls-for-withdrawal-of-fatca-iga-reciprocity-tool-datca-lite/comment-page-3/#comment-582672
You will see my comment on what I wrote Elizabeth May and her response. 🙂
The recent articles about expatriation such as the ones in “The Economist” and “Los Angeles Times” are definitely getting closer to the truth about the plight of Americans abroad. Everyone who contributed to such recent articles (along with several others) deserves the highest of praise because the issues affecting ex-pats are finally making their way into the main stream media.
However, such articles are still falling short of the mark by not mentioning the “real underlying problem” affecting ex-pats which is citizenship-based taxation (CBT). It is just plain unfair to force Americans permanently living outside the US to pay for the “public goods and services” that only people who live inside the US get to use:
– US highways & roads
– Railways
– Bridges
– Dams
– Power grid
– Schools
– Hospitals
– Fire
– Police
– Courts
– Medicare
– Medicaid
– Food stamps
– Unemployment insurance
– Obamacare
– Etc.
None of this stuff is available to people who live outside the US unless they physically return to the Homeland to use it.
FATCA and FuBAR are only symptoms (albeit deadly) of the disease of CBT which is the real underlying cause for so many ex-pats to renounce or relinquish their US citizenship.
Like cancer, CBT must be fought. If not, its victims (Americans living outside the Homeland) will continue to be forced to renounce or relinquish US citizenship.
The American Diaspora is disappearing at an accelerating rate and unless the situation changes, it will inevitably become extinct.
@JoeBlow
I agree. Thats an important factor.
Something else that constantly gets overlooked it that it IS double taxation.
I love how the ill informed comment trolls in these mainstream articles always claim we want to use all the services of the US yet not pay taxes. I DO NOT want to use ANY services of the US! I would be more than happy as an expat to sign a waiver that enables the removal of CBT in exchange for no “services”. It could be that simple really. If you want “services” then file and be compliant, if you do not then you’re on your own -which gets put in writing or by oath at a local consulate.
I pity the Canadian in the last example.
This just illustrates why deciding to play ball with the IRS is probably the worst decision one can make.
@Cerium398
The problem is by not going to the IRS is you set your self up for a bigger trap they have set.
This account could well have had PFICs that require the filling of form 8621. Not filling this form keeps the statute of limitations from running on the return till you do file it. In practice this means that 2006 and later tax returns are kept open if you don’t file 8621. All accruing interest and penalties on the interest on the penalties. Currently 3% per year compounded daily but it could go through the roof when people start seeing the US debt as the big problem it is.
@Neill
Well, thanks for the info Neill
My personal philosophy is I won’t be playing ball with the good folks at the IRS until I absolutely have to. I’ve made arrangements. We will leave it at that.
@Joe Blow,
Atticus and I were just talking today about how hard it is to get average Canadians on our side when describing FATCA. Unfortunately when you talk about ‘taxes’, people don’t care because they see this as a problem of ‘Americans’ which doesn’t affect them. Yes, CBT is the root of the problem. Without it, FATCA would not be anywhere near as much of an issue and issacbrocksociety would not even exist. However, average Canadians seem to understand better when you leave out CBT and just talk about the account info of Canadians (non-US spouses) being sent to IRS or of Canadians with little ties to US. They don’t get the tax thing unfortunately. It is very difficult to talk to about FATCA, CBT, etc with people who know nothing about it without making it just ‘a problem of Americans’.
… or even to talk to some other ‘US Persons’ in Canada about US Citizenship-Based Taxation. You would think the entitled US-CBT concept should have been drilled into us somewhere along the many years in school on one side of the border or another. I was a reasonably good student, but I honestly don’t remember learning anything about citizenship-based taxation in my growing-up years in the US, nor in my adult years in Canada while I was living as a Canadian after taking Canadian citizenship in 1975. If it was discussed in my school years (Civics classes?), I was absent or it went completely over my head.
Really, I think very few of us until we’re living this horror knew the concept of citizenship-based taxation. Not even many of our government representatives in the US, Canada or any other country really know the concept, that differs from the rest of the world (save Eritrea). I may be way off, but that’s what I think. It is vital that we all understand we’re talking of apples and oranges (CBT vs RBT) before moving on to explain the injustice of FATCA. It just goes over people’s heads, which frustrates and tires the likes of us.
WhiteKat,
I agree with your point when it comes to explaining the issues to Canadians.
However, with regards to the article in The Economist, the audience is global. And the LA Times has an audience of mostly American homelanders.
The inherent unfairness of CBT and the reality of double taxation for unearned income, non-recognition of other countries’ retirement plans, and non-recognition of VAT (19-20% in some countries) are issues that still need to have light shed upon in the mainstream media.
Progress is definitely being made in the mainstream media but we still have a long ways to go until journalists are able to explain the entire situation (nightmare) expats are facing.
@Northernstar
http://nestmann.com/why-have-so-many-americans-considered-expatriation-its-probably-not-what-yo
@Calgary411
Even if you had heard about CBT, you may have believed that if you earned less than a certain amount you wouldn’t have to file. The IRS has done an almost criminal injustice to USP’s for creating a situation for the vast majority where the only portals for information and remedy are through high priced accountants and lawyers. What struggling family will take food out of their kid’s mouths to satisfy the IRS’s requirements to prove they don’t owe a dime in tax? The situation is INSANE.
On a lighter note, it’s encouraging to read that there are those within the US who recognize that the issues that affect us negatively also affect them:
http://isaacbrocksociety.ca/2013/09/20/from-us-treasury-myth-vs-fatca/comment-page-8/#comment-585853
Thanks, bubblebustin — and badger. Thanks, Julie L. Kessler. What a good and true read that was! Julie knows; Julie has lived in other countries; Julie is not the typical homelander. The typical homelander should listen to what she says now that she’s back in the US.
@USCitizenAbroad.
Thanks for giving me the website. .
I am forwarding that website to friends. Interesting to see this today as I was just talking to a Canadian (pure one) about this FATCA. She asked me for more IBS cards as she knows of some “American Persons”. She like most everyone thinks this is absolutely crazy and unjust. Keep talking everyone to your friends and strangers about FATCA, we may make many aware
Keep after your MPs and government lawmakers. My friends are awestruck when I tell them that some of the Congress members in the US government want to recognize me as a Traitor and ban me from the USA for not wanting to be an American anymore.