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.
Grad school is one benefit. For all its faults, the US still has the lion’s share of the world’s top universities. There is no good argument for doing your undergraduate degree in the States, given the costs, but if you’re serious about an academic career then you’re likely going to end up in the US, and it’s very convenient to do so as a citizen.
Which is why my advice is to not think about giving up US citizenship before you’re certain you won’t use it, because without a US birthplace it’s very easy to “keep” it without suffering any negative consequences.
Thanks, everyone, for your input! Much appreciated.
Sorry if I come across as “overwought”. I’m simply trying to spare my kid as much inconvenience as possible.
Even if the tax reform passes, not enough will have improved as to make US citizenship attractive to hold on to. It’s a good, honorable, and worthwile fight for fairness and justice that Brockers and others pursue and I commend them. However, in my opinion most folks don’t want to spend their lives waiting for the US to be convinced of its own stupidity and finally get its act together. No, I think the steady flow of people giving up their citizenship will continue to grow.
Perhaps I am only feeling this negative because I just recently went through the whole compliance and renouncement rigamarole and am completely frustrated with the whole system.
Generally speaking, if your kids don’t have a US birthplace, there’s very little inconvenience (or none at all) they need be spared from. As long as they know how to respond when asked about US citizenship.
“Without a US birthplace, they can simply ignore their purported US citizenship. Banks will not identify them as US persons.”
Unless they are obviously of a mixed race in a monorace country. Unless their national ID number is linked to all data connected to them, including nationalities of their parents.
“If a parent is identified as a US person, the child can use another bank.”
Unless they live i a country where the employer dictates to the employee where they must bank to receive their pay.
“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?”
No, they do not. They need not determine if a client is a US persin anymore than you need to know if a snake is venomous. If not sure, you avoid the snake. If the bank is unsure, they avoid the potential client.
“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). “
Does your daughter “look” Canadian? My children do not look Japanese.
“Generally speaking, if your kids don’t have a US birthplace, there’s very little inconvenience (or none at all) they need be spared from. As long as they know how to respond when asked about US citizenship.”
Folks, through work I have been associated with people who job is to create what is in their mind, a perfect society. They are selling key components of this right now, with the “perfect society” as a selling point. Key components include, a cashless society, Big Data, Fintech (Financial Technology) and others. Personally, I think they are mad and can never see they dream realized. For one, it requires a simple, world wide regulatory system for the Fintech portion. The concern is how various nations will use these services and the tech thst allow them.
We are moving towards a cashless society very quickly. Big Data is already being set up. The belief that whatever privacy we and our children have in regards to where we or their parents were born will remain private is based upon a belief that these technologies do not and will exist and would not be used it such a way if/when the do come into being.
“Even Canadian consulates processes all your applications late if living overseas for more than five years as they get upset that these people are not contributing to our economy and should not be provided quick services as my Canadian friends told me about their frustrating experiences with Canadian consulates when they passed five years limits.”
When I paid for passport renewals and notarizations they did not seem unduly slow. Maybe your friends, after living outside of Canada too long, forgot how slow Canada Post is.
“This individual was a USC who sought to free himself from FATCA and all the rest by becoming a Japanese National. However, J law requires a new JN to relinquish the former citizenship with in 2 years. He, not wanting to pay the exit tax, did not renounce/relinquish. Somehow, he got caught and lost his JN.”
So now he’s stateless except for US Tax Citizenship. The US needs to issue a US Tax Passport to stateless former US citizens. (Former US non-citizen nationals who lost US nationality can be stateless but aren’t eligible for US Tax Passports.)
“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?”
The why is that the US engages in child abuse, but ignore that for the moment. Your daughter has to wait until she’s 18, not 18.5. The deadline is 18.5. She has a 6-month window of opportunity. Apply for that appointment now.
“BTW can anyone direct me to a forum/thread that discusses filing/reporting obligations for USC minors who stand alone”
It doesn’t matter if she stands alone. Even if she was Baby Elle, she has to file her own FBARs, and if her income exceeds threshholds she has to file US returns. Just remember though, the only people who have been penalized so far are those who tried to comply, those who gave the IRS the bullets.
“If the child was never registered with the US consulate, there will be no traced”
That’s not JapanT’s experience.
Pet lover – “Perhaps I am only feeling this negative because I just recently went through the whole compliance and renouncement rigamarole and am completely frustrated with the whole system.”
Maybe you just need to give yourself a break and stop thinking about it now that you’re done. Enjoy your freedom and get back to a normal, FATCA-free life. 🙂
@JapanT
Okay, granted, if you live in a racist autocracy where anyone who is not ethnically pure is discriminated against, then yes, your mixed-race children will have a difficult time of it. Probably they would be better of moving to the US in that case.
@Norman Diamond
“”This individual was a USC who sought to free himself from FATCA and all the rest by becoming a Japanese National. However, J law requires a new JN to relinquish the former citizenship with in 2 years. He, not wanting to pay the exit tax, did not renounce/relinquish. Somehow, he got caught and lost his JN.”
So now he’s stateless except for US Tax Citizenship. The US needs to issue a US Tax Passport to stateless former US citizens. (Former US non-citizen nationals who lost US nationality can be stateless but aren’t eligible for US Tax Passports.)”
No he’s not. His Japanese Nationality was rescinded because he did not give up his USCship with in the 2 years as required by Japanese law. However, having had his visa cancelled by gaining J nationality, losing this nationality made him a USC living in Japan without a visa. Being married to a JN and I think with children, his future with his family would be very insecure.
“It doesn’t matter if she stands alone. Even if she was Baby Elle, she has to file her own FBARs, and if her income exceeds threshholds she has to file US returns. Just remember though, the only people who have been penalized so far are those who tried to comply, those who gave the IRS the bullets.”
Indeed. In Canada, RESPs are not reportable under FATCA, according to the IGA. (These would be registered, tax-protected savings accounts for educational use, where parents and grandparents park money for university, with a 20 percent top-up from the federal government.) So while a US-citizen child would technically be required to report them on FBARs, as they can easily approach $100k after 18 years of maximum contributions, they will not be reported under FATCA and only the most boneheadedly honest sort of parent would think to do US tax filings on behalf of the child.
As ever, the ones who get screwed are the ones who volunteer themselves (and others) for the screwing.
“Okay, granted, if you live in a racist autocracy where anyone who is not ethnically pure is discriminated against, then yes, your mixed-race children will have a difficult time of it. “
There are a lot of places like this in world. And yet, it is the US that is the biggest victimizer for my familiy. Moving my family to the land of the aggressor is not even remotely on the table.
Besides, how do I get a visa for my JN wife? Do you know anyone who has gone that route? I know three. One a high school classmate, another a shipmate and the third a friend from college. Years and years of difficulty and uncertainty and tens of thousands of dollars. That’s if you are lucky.
“Does your daughter “look” Canadian? My children do not look Japanese.”
A rare moment of patriotism. One of the great things about Canada is that every conceivable colour, size, shape and flavour of human “looks” Canadian.
Okay, that was possibly a bit of liberal white privilege speaking there, we don’t always quite live up to that ideal, but generally get closer to it than most other countries.
@JapanT
I have no idea what sort of marginal, possibly shitty existence non-citizens have in Japan. (From what little I know, it sounds like a fun place to work for a few years but not a great long-term option.) But it seems to me that if your kids are born in Japan to a Japanese mother, they would be Japanese citizens who could plausibly claim to never having been US citizens (and therefore can’t give up something they never had) and there endeth the problem. Yes you’re American, but do Japanese banks or the government or whomever know that you met the residency criteria to transmit US citizenship to your kids? Tell them you moved to Canada at age three and never went back to the States – problem solved. Would the children be deported because you couldn’t afford to renounce their US citizenship? That seems absurd.
If mixed-race kids suffer discrimination in Japan, then Japan is the primary problem, not the US and its idiotic banking laws.
Frankly, if I were you I’d just sign W9s or whatever else you needed to sign in order to keep your banking access, then cheerfully ignore any correspondence from the IRS, in the unlikely event they were capable of sending any, on the grounds that they can’t collect from you anyway. It’s not the ideal situation but by choosing to live where you have, with only US citizenship, you’re not in the most advantageous position. Unfortunately.
Also, back in the day when we moved south for grad school it was fairly straightforward to get my wife a green card. It’s probably more complex now, plus you need to be up to date on your tax filings.
The burden of proof is not on the J gov. nor J FIs, the burden of proof is on the individual.
Part of the visa process is a check of places visited by the visa applicant. Also, as we have to send our passports to the Japanese Consulate to have the visa stamped into it, they can easily see every country I have visited and how long I have stayed in esch. So yeah, they know.
The level difficulty of getting a nonUSC spouse a visa to live in the US depends on their nationality.
My shipmate’s wife was a Philipina. Despite getting command permission as required of US servicemembers and finishing all the required paperwork before they got married, he was unable to get a visa for his wife, who eventualky died of dysentery in the P.I. leaving a huge mess trying to get his then 2 year old daughter to the US. He did get his daughter to the US, but people died in the process. His wife’s family not wanting to give her to him, P.I. police had to use force to get her. People died that day.
My classmate worked for the US gov.. His wife was from a Central American country. Last I heard, he was spending a fortune flying down to visit her and on documentation required to get her to the States.
My friend from college is a former Marine. He and I met his wife at a college party in the US. They martied in the US. After spending huge sums of money going through the State Dept., he was unable to secure any kind of visa for his wife after she graduated from collegs and she had to return to Japan. After ever more money and time spent, he eventually started going through the US Embassy in Japan, requiring frequent flights to Japan.
He was eventually able to get a visa for his JN wife, but only after huge sums of money and time, frustration and uncertainty.
“I have no idea what sort of marginal, possibly shitty existence non-citizens have in Japan. (From what little I know, it sounds like a fun place to work for a few years but not a great long-term option.) “
This is very true. I and most of the Westerners I know living here came for only a few years and then find ourselves more or less trapped.
Family issues aside, I was shocked to learn that my J bank issued credit card history is nonexistsnt in the US. Equally shocking was learning that not having any driving history in my state for 7 or more years negates any and all discounts I would normally enjoy towards my automobile insurance. Being a middle aged US male with no credit history nor driving history and without money is a very hard existance in the US. So stay here I must.
“Frankly, if I were you I’d just sign W9s or whatever else you needed to sign in order to keep your banking access, then cheerfully ignore any correspondence from the IRS, in the unlikely event they were capable of sending any, on the grounds that they can’t collect from you anyway.”
As long as FBAR fines are not used towards passport revokation nor an ID theif runs up a tax, fee a/o penalty bill in my name triggering the lose of my passport, sure, no problem.
The driving and credit history problem is not unique to the US. Friends moving to Canada (and to a certain extent even ourselves moving back from Germany) have definitely had issues with both.
“The driving and credit history problem is not unique to the US. Friends moving to Canada (and to a certain extent even ourselves moving back from Germany) have definitely had issues with both.”
True. They do a long way to explaining why those even in less than ideal circumstances do not return to the US.
The issues were hardly insurmountable. Just relatively low credit for a few years, and a bit more effort required when shopping for car insurance.
@JapanT
Given your insecurity concerning passport revocation, what exactly is wrong with compliance? Presumably you come in under the FEIE so no actual money is involved (other than the possibly hypothetical threat of penalties). It might be the least bad option given that you likely will only ever have US citizenship.