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.
“Perhaps but I think it is more to protect banks from non USC US persons.”
The point is, the accountholder can’t sue, so they can’t stop their account from being reported. But in practice, if they’ve told the bank they’ve renounced, and offered proof, the bank’s probably not going to report the account.
Refractory means the accountholder didn’t respond, or responded by refusing to give the requested information.
“But the IRS has just given them a break on the requirement to obtain the SSN, ”
At this point I feel that if the IRS decided to ease off, whatever the IRS does just creates more confusion and stress for FFIs. Whether they blame us or not, the easiest way to rid themselves of this nightmare will be to rid themselves of us, at least in their collective minds.
Undoubtedly.
““Perhaps but I think it is more to protect banks from non USC US persons.”
The point is, the accountholder can’t sue, so they can’t stop their account from being reported. But in practice, if they’ve told the bank they’ve renounced, and offered proof, the bank’s probably not going to report the account.”
Got it.
“Undoubtedly”
What a time to be alive, eh?
In HK they will report you if you don’t sign the WBEN non US person form or W9 form for US citizen. In most countries of the world even in Nepal they are asking if any US citizen/ permanent resident or not certification required by law and to be reported as recalcitrant account holder to IRS if info not provided. This is the reason why I stated earlier if you can get away without compliance you are lucky in that country. The rest of us can’t and had no choice and now thinking seriously for renouncing the dreaded compliance nightmarish country. Seriously I don’t have taxes to pay since my income is pretty low but my reporting costs me more every year. But visiting my children would be problematic with all the US laws. Canadians are lucky they can get away with it.
@Harrison
Are employers demanding a W9?
‘Refactory or recalcitrant ‘ Here I see the language being used as recalcitrant account holders whose account info is being sent to IRS automatically as they have not provided any info about their citizenship or permanent resident status. This is what I saw in several different countries not just one. As I stated as per yahoo news India had a mega event last year where everyone had to sign in FATCA certification or face account freeze and reported to IRS. I am sure some Indians in other countries were upset at their information being sent to IRS and account seizures who weren’t able to provide their info in time.
@Japan that I don’t know for sure but will ask around definitely. I am self employed businessman. But I am sure the employers will ask for W9 if they have US passport or green card. Most foreign employers I have heard about do not want US citizens as workers also as too many demands on them by only one govt in the world, the dreaded US govt.
@Harrison
“@Japan that I don’t know for sure but will ask around definitely. I am self employed businessman. But I am sure the employers will ask for W9 if they have US passport or green card. Most foreign employers I have heard about do not want US citizens as workers also as too many demands on them by only one govt in the world, the dreaded US govt.”
I have been reading that but have not found conclusive evidence of it in Japan, yet. Two entities I worked for have recently rid themselves of all non JNs in our former sections. There are plenty of domestic reasons for this however.
As the IRS does not collect account balance and transaction data on account holders in the US, I am left to wonder what utility that info has to the IRS. I am wondering if they may be collecting this data to study ways to implement a wealth tax and/or to force companies that employ USCs outside the US to comply with the same reporting and withholding requirements that dimestic US companies must follow. Both have been proposed, discussed and debated in the various limbs of the US gov. monster.
Plaxy wrote:
I would say, if a person opening a new account wasn’t born in the US, and doesn’t see him or herself as American, and has no intention of ever being American, they can truthfully answer that they are not a US citizen even if their parents registered their birth at a US consulate and got a US passport for them. Why should a person be bound by foreign law if they themselves have never agreed to do so?
Totally agree, but it doesn’t work that way in real life. As I menioned at the beginning of this thread, I just relinquished US citizenship in summer. Unfortunately, in 2002, when my daughter was born, I made the mistake of claiming citzenship for her, so she’s a dual. It would be nice to be able to apply the logic in the above quote and allow me to renounce that citizenship just as easily as I was able to get it bestowed. My child never asked for it; it was a decision I made. Why can’t I undo it? Why does my daughter have to wait until she’s 18.5? She has this USC burden that I am responsible for, yet I am powerless to change it.
BTW can anyone direct me to a forum/thread that discusses filing/reporting obligations for USC minors who stand alone (i.e. my daughter is now the only USC in the family and I had been claiming her as a dependent on my returns – so what now)?
“She has this USC burden that I am responsible for, yet I am powerless to change it.”
It’s up to her, not you. She doesn’t have to accept the burden of US citizenship, if she wasn’t born in America.
Once she’s old enough, she can open an account at a bank of her own choosing and truthfully answer “no” to any questions about US citizenship. It works fine. I’ve seen it being done.
Alternatively, if she wants to, she can claim the US citizenship she’s entitled to, and give the bank a W-9.
“…my daughter is now the only USC in the family and I had been claiming her as a dependent on my returns – so what now)?”
She’s not obliged to file because you claimed her as a dependant. The IRS doesn’t have the power to enforce CBT on her because she was claimed as a dependant on the US tax returns of a former US citizen.
“Refractory means the accountholder didn’t respond, or responded by refusing to give the requested information.”
Correction – recalcitrant is indeed the word, not refractory.
My children were all registered, and had childhood US passports. As adults, none of them were interested in being US citizens, so they never did that deal. They all opted for single citizenship of the country where they were born and raised. FATCA has not affected them in any way.
Forgive me but this is important. There are many people in this world with no ID at all. There are many with no formal address. There are even more with no proof of address. There are even more with no proof of employment income nor financial Statements to prove self employment. This whole concept of doxing the world, restricting cash transactions and access to bank accounts is insane and abusive of mainly poor people.
http://www.worldbank.org/en/programs/id4d
I think the headline is misleading. Lower tax bills are not really the point (though desirable). The burden of compliance cost and process and extra-territorial enforcement is the problem.
Thanks, Plaxy.
I thought there would have to be a paper-trail of information returns over five years so she could renounce at 18.5 years of age, despite the fact that she has zero accounts or assets and is, therefore, way under any thresholds.
The whole reporting and filing issue has been weighing on my mind lately, since learning that my daughter will be required to complete two (possibly paid) internships as part of her occupational training and might need to open a bank account.
I/we just don’t want anything to do with CBT or FBAR or IRS ever again, and I get a rash whenever I hear things about kids caught up in all these issues.
WE ARE TRYING TO KEEP IT SIMPLE until she can renounce.
“I thought there would have to be a paper-trail of information returns over five years so she could renounce at 18.5 years of age, despite the fact that she has zero accounts or assets and is, therefore, way under any thresholds.”
Under US law, a young USC can pay to renounce. If your daughter doesn’t want to be a US citizen, she doesn’t have to do that.
If she opts to renounce, she doesn’t need a paper trail. She doesn’t need to file any returns since she’s below the threshold. She can file a form 8854 swearing under penalty of perjury that she has complied with US tax law for the past five years. Which she has, since she has no assets and no filing obligation even under US tax law. Which she is not subject to unless she chooses (as an adult) to take up US citizenship.
Honestly, she can open an account and just answer no to the question.
@ Petlover,
Also, she can do it right away at 18. No need to wait for 18.5. There’s a six month window where 18.5 years is the cut-off point for where one “won’t be treated as [a] covered expatriate, and therefore won’t be subject to exit tax”, despite if their net worth is over $2,000,000. Form 8854 instructions, page 3, column 1.
One good thing in the interim, as far as banking and FATCA, banks don’t have a clue if a person has been registered as a USC, so if asked she can just mention her Canadian citizenship, and even if they ask place of birth, it’s not the US, so that won’t raise any red flags.
Honestly, I think people get needlessly overwrought about the status of their children born outside the US.
In practical terms, I don’t think it’s particularly important whether children born outside the US “are” or “are entitled to” US citizenship (assuming the US citizen parent meets the residency criteria, of course); it’s an interesting theological debate but doesn’t mean much in terms of how they live their lives.
Without a US birthplace, they can simply ignore their purported US citizenship. Banks will not identify them as US persons. If a parent is identified as a US person, the child can use another bank. Furthermore, banks should not be expected to interpret US citizenship law – they would need to prove that the parent met the residence criteria to pass along citizenship. Are they going to do that?
If the child was never registered with the US consulate, there will be no traced, and they can enter the US on a non-US passport. (The only potential pitfall is a foreign-born child travelling with a US citizen parent carrying a US passport – questions might then be asked about the child’s status, though again the border officers would need to ask about the residence criteria to make a determination.) If the child was registered with the consulate but does not use a US passport, it’s fine at present though in the future it’s possible that a database could match the name, date of birth and place of birth against US records. (Possible but they’re going to need to do some serious database work before it’s even close.)
My daughter was born in Europe, to Canadian parents. Being a dual citizen and not knowing any better, I signed her up at the US consulate before we returned to Canada. Since then she’s never held a US passport and has had no difficulty entering the US on her Canadian passport, partly because I also travel on my Canadian passport (which despite the US birthplace has only caught their attention once). She has been advised that at
(cont’d – this really is a crap comments interface)
She has been advised that at 18 she can renounce if she wants – we’ll even pay the fee! No need for any tax filings as her earnings are well under any thresholds, and we wouldn’t be so stupid as to mention the RESP. Or she can simply live her life knowing that she has an “inactive” US citizenship that will cause her no problems whatsoever provided she keeps her mouth shut. My recommendation is to wait on renunciation until mid-20s or thereabouts, because citizenship is pretty handy to have if you’re thinking about grad school south of the border, but under no circumstances should she attempt to become compliant with US taxes.
My recommendation is to tell her her options – not forgetting to point out that America has treated its expats like absolute shit, and in no way deserves her loyalty – and let her come to a decision in her own good time.
@plaxy
That’s pretty much our policy. Here are your options. Here’s what I recommend.
When I was younger, everyone wanted to go to school in California and friends were jealous of my US citizenship. Now, thanks to Trump, you can’t persuade Canadian teenagers to go near the place. It’s completely toxic.
Being American wasn’t considered cool among my children’s peer groups, fortunately. 🙂
But I agree it’s up to the child to choose. Undeniably, there can be benefits.