US expats given hope of lower tax bills
Republicans edge towards eliminating need to pay levies overseas and at home
published in the Financial Times
by Demetri Sevastopulo and Barney Jopson in Washington
You can read the article by answering a simple question that appears when the page loads. I cannot post the entire article due to copyright restrictions.
Here are some excerpts:
Millions of US citizens working overseas could see their tax bills lowered by an overhaul of the tax system as Republicans edge towards eliminating a requirement for American expatriates to pay taxes both overseas and in the US.
Kevin Brady, the Republican head of the House ways and means committee, which is drafting a tax reform bill, said lawmakers were considering the measure, which has been the focus of lobbying by Republicans Overseas, a group of party donors around the world.
“It is under consideration. They have made the case,” Mr Brady said in response to a question from the Financial Times at a Christian Science Monitor breakfast. “Lawmakers representing that area of the tax code have made that case.”
The US Chamber of Commerce, a business lobby group, has urged policymakers to consider US-only taxation for individuals, too, arguing that taxing foreign income hurts American managers at the overseas affiliates of US exporters.
Mark Mazur, who was the top tax official in Barack Obama’s Treasury department, said he supported the change, arguing that it was necessary to address the “inequity” of an expat paying tax on the same income to both the US and a foreign government.
“If you take two people, one works in London, one in New York, working for the exact same US multinational — if they make the exact same amount of money you might think they should be taxed exactly the same,” said Mr Mazur, who heads the Tax Policy Center.
Solomon Yue and Michael DeSombre are also mentioned in the article.
There are quite a few comments with JC doing Yeoman’s Duty.
“…legislate a requirement for our local citizens requiring them to submit forms certify this or that for a foreign government?”
The IGA doesn’t require residents to self-certify; it requires FIs to identify accounts with indicate and ask the account holder to self-certify.
If only the IGA did lay obligations directly on the accountholder. There would be fewer arguments about standing, if that was the case. That’s exactly why it only obliges the FIs – who have to comply or face a far worse fate than a paltry fine.
“With indicia”. Not “with indicate”. Predictive typing!
“JapanT- what is it you’re trying to get me to explain? The legislation implementing the IGA was passed in order to implement the IGA as agreed between my country and the US.”
Why did your country agree to the IGA?
Ok, so amend “legislate a requirement for our local citizens requiring them to submit forms certify this or that for a foreign government?” to read …”legislate a requirement for local FIs to cerlfy this or that about local citizens for a foreign givernment?”
“With indicia”. Not “with indicate”. Predictive typing!”
If you figure out a way to turn it off so it stays off, please share!
“Why did your country agree to the IGA?”
The joint statement gives a rationale.
https://www.treasury.gov/resource-center/tax-policy/treaties/Documents/FATCA-Joint-Statement-US-Fr-Ger-It-Sp-UK-02-07-2012.pdf
More than that I do not know, being a humble citizen, not a government spokesman.
“Ok, so amend “legislate a requirement for our local citizens requiring them to submit forms certify this or that for a foreign government?” to read …”legislate a requirement for local FIs to cerlfy this or that about local citizens for a foreign givernment?”
A requirement for FIs to identify US Person account holders and obtain certification of status. We seem to be going in circles.
Good lord, this is a master class in poor reading comprehension.
Look, we all know who is ultimately responsible for this mess. We know why countries sign IGAs. That is not in dispute.
The question asked was this: are there specific examples of banks requiring proof of compliance with US taxes by US persons (excluding examples we know of from Switzerland) in order to open or keep accounts?
These examples would presumably involve customers providing documentary evidence that they were submitting US tax returns or FBAR forms, or in an extreme case proof of having entered OVDI or the streamlined program.
These examples would NOT include banks requesting that customers sign W8s or W9s, or obtain SSNs or TINs, or sign CRS forms. While that might ultimately be caused by CBT and FATCA, it is not evidence of US tax compliance per se.
Clear?
The motive force for the IGA that led to your local legislature writing laws requiring local banks to any of this is the US. Further, your country and all others signed not because they agreed to the mutual benefits that all would enjoy, they signed because they were extorted into doing so.
Clear?
So clear we don’t need to be talking about it. We know.
If I must comply with a demand fir documentation or lose my bank account, I do not give a flying fuck if the requirement is a direct requirement to me from the IRS or indirect to me from the IRS via my bank, I still must comply or lose my account and the reason remains the same, the IRS demands it.
Clear?
The rest is just word games.
But JapanT, no one has been trying to say otherwise.
Very clear. So clear in fact that we were discussing an entirely different question.
Exactly.
re the IGA subject. What I have right now is a FFI trying to get me to answer their forms about tax residence (by which mean countries that consider me taxable, ie the US). So far I am ignoring them.
They appear to be asking for self-certification. I wonder what would happen if I answered that I have no idea what they are talking about, just send whatever info on me they want to the Belgian Gov’t. The Belgian Gov’t would receive account info, but no TIN or SSN. What would they do with that info, given that my accounts are low value, who knows?
I also wonder what they do with a CLN (I don’t have one). File it away and take me out of the US Person box? What happens if people lie about this? What’s the penalty for lying to your bank? Who knows?
Lying might be counter-productive, especially if you’ve got a US birthplace. That creates a situation the bank has to resolve.
There’s nothing you can do to prevent the account being reported, if you can’t self-certify as non-US-tax-resident. If you’re filing, best to tick the box and file Schedule B, and report any interest earned on the account.
CLNs get copied and kept on file at the bank to save the bank’s skin during audit.
@Fred (B)
What you have sounds like the basic CRS form that FIs will start using to screen customers.
In Canada there’s a standard government version that FIs can use if they wish:
https://www.canada.ca/content/dam/cra-arc/migration/cra-arc/E/pbg/tf/rc518/rc518-17e.pdf
Or they can create their own (random example):
https://www.empire.ca/sites/default/files/2017-06/FATCA-Self-Certification-form-EN-web.pdf
This form is for the customer to self-certify their tax residence(s). If they don’t report a foreign tax residence (US or other) then the form would just stay on file with the bank. If the customer does report a foreign tax residence, that information is passed on to the national tax authorities, who then pass it on to the appropriate foreign governments, and set up automatic reporting of balances etc.
Because this is self-certification, you tell the bank what you want to tell them. They may believe you, or they may not. That depends on the sort of information that banks have on file (in some countries, FIs record citizenship and/or place of birth; in others they do not) and how seriously they take FATCA compliance. In Switzerland, you’re basically fucked; in Canada nobody cares or checks.
If a customer with US tax residence can not or will not supply an SSN or TIN, the most recent IRS guidance suggests that the FI is not in violation of FATCA rules provided it nags the customer to do so at least once per year.
If you have renounced, you simply do not check the box for US tax residency. If the bank wants you to confirm, they might ask to see your CLN. (Of course if you renounced without properly exiting the US tax system, you’re still a US person as far as the IRS is concerned. But the bank has no way of knowing this. Fun times!)
Banks may also choose to close or restrict accounts of suspected US persons, whether they comply or not with the CRS requirements. That isn’t because of CRS directly, but banks setting their own policy because they are paranoid about dealing with Americans.
The consequences for lying to a bank are not clear. I’ve done it here, several years ago. It was not difficult and nothing bad has happened. But that is a bit of an open question going forward, and a concern for many.
I find the wording of the forms to be so unclear – what exactly does “tax resident” mean? – that many US persons will fail to check that box because they quite honestly believe that it does not apply to them. Accidentals who never lived in the US as adults and who simply assume that they have no US tax obligations, or green card holders who left the US years previously without filling out the I-407 – all of these people could quite easily believe that they were not US tax resident, and complete the form incorrectly.
Here, you get asked “Are you a US citizen? Y N”
You also get asked place of birth.
And then you get to list countries of tax-residence, and TINs.
No room for much fuzziness. But you don’t have to respond. If you don’t respond, a bank is supposed to report the account, so it’s probably a good idea to assume that’s what they’ll do.
@plaxy
The bank would report suspected US personhood if you failed to respond AND you had some sort of US indicia, I’m guessing. (You’re in the UK, correct? Sorry if I’ve forgotten.)
More to the point, when you open an account, what does the bank do to confirm that you have given them correct information about US citizenship and place of birth?
In Canada you’re not asked about birthplace and only required to show a drivers’ license as ID when opening an account. So they really have to take your word for it if you fail to tell them that you’re a US citizen.
Nononymous – ” if you renounced without properly exiting the US tax system, you’re still a US person as far as the IRS is concerned.”
Once you’ve renounced, US tax law doesn’t apply to you, except for US-source income/assets. It doesn’t matter what the IRS thinks.
@ Nononymous
After reading 3 pages of overnight comments, finally there’s some straight-forward, useful information. I’ve put those forms on file and I have a good idea of how we would fill them out, if ever required. Thank you!
Note that, in Canada, per Canada Revenue Agency, if your financial institution requires proof (very rare here, but it has happened), if your relinquishment was pre-4-June-2004 and you don’t have a CLN:
“8.33 Generally, it is the CRA’s view that an explanation demonstrating a relinquishment of U.S. citizenship (other than by a renunciation before a U.S. consular or diplomatic official) before June 4, 2004, and in accordance with the U.S. Immigration and Nationality Act (Title 8 of the U.S. Code) as it existed at the time of relinquishment, is sufficient to demonstrate a reasonable explanation as to why an account holder does not have a CLN. . . .”
CRA Guidance on enhanced financial accounts information reporting
“The bank would report suspected US personhood if you failed to respond AND you had some sort of US indicia, I’m guessing.”
Best to assume so. Who knows what they actually do.
“When you open an account, what does the bank do to confirm that you have given them correct information about US citizenship and place of birth?”
The Model 1 IGA requires them to ascertain place of birth and ask the US citizenship question when opening an account. As it’s a new account, it’s easy for them to ask, and reject you if you don’t respond or can’t provide documentation.
I didn’t send the Fatca form back in 2015 (I am in the UK as most know here). I didn’t send it back because I did not know my social security number at the time. It had to be looked up after my OMG moment. I have been in the UK my whole adult life but did have an old social security number.
Nothing happened. and even if my information was sent, i simply don’t care. what’s a bunch of balances going to mean anyway, With no social security number, they can’t match my records to my return. They could dig deeper but why bother on what I am sure the IRS would consider a normal account, not millions. In my case nothing has happened since 2015 and the bank has not asked again in that period and I still bank there.
What is interesting is that I just had to open a new account, I did this by phone because it was basically an upgrade on my current account and they did ask place of birth, nationality but when I said I was a UK citizen only (and had a US birth place of course from an earlier question). they did not question me at all and simply accepted it.
@plaxy
“Once you’ve renounced, US tax law doesn’t apply to you, except for US-source income/assets. It doesn’t matter what the IRS thinks.”
De jure, I think US tax law still applies, on worldwide income. De facto, I can’t see how it matters provided you don’t have US assets or income to tax.