The issue of tax residence has gained so much attention since the “crackdown” on non-resident US Persons began in 2009. It is commonly understood that you pay taxes to the country/state/city-town that you reside in. (For an interesting comparison of differences between countries please see this incredible list compiled by the OECD). It simply does not occur to anyone that they would be required to pay taxes to a foreign government.
However, the United States claims jurisdiction due to citizenship. One does not even have to have touched foot in the U.S., according to U.S. law. Of course, due to the viciousness of the U.S. “FBAR Fundraiser” many people began to resist whether of anger or fear.
Not much has changed* , in spite of all the factors that have contributed to this debacle (and debacle it is, what could one expect when a country tries to take what is someone else’s, based on an idea of fake residence?).
For a detailed discussion concerning the determination of tax residence and related factors, please see here.
In this interview, John Richardson speaks with Olivier Wagner about tax residency and how a seemingly simple concept has become so terribly important in the 21st century.
In a #FATCA and #CRS world – the most interesting thing about a person is where has @taxresidency ESPECIALLY when he has > one. @Expatriationlaw interview with CPA @1040Abroad: ‘Episode 1 of: "A Tax Residency Primer"- Tax, Residency and #TaxResidency" https://t.co/6swfQmJO7i
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) August 8, 2018
- *DOS says 9 million US citizens live abroad
- *from 2009-2016, 100,000 taxpayers came into compliance via OVDP and Streamlined
- * in 2011 449,277 Forms 2555 (FEIE) were filed; see breakdown by country;
- * in 2011 3,921,628 Forms 1116 (FTC) were filed; see breakdown by country
- *in 2015, 1,163,229 FBARs were filed
- The numbers above strongly suggest that a large majority of non-resident Americans are not tax compliant
@plaxy. I was informed one time by an immigration agent that once inside the US I had my rights but as long as I am stuck in the airport and border area with border agents I have no rights. The govt had all the power to do anything they please within this area. So many US citizens by birth get stuck outside the US for months with their names in no fly list. I have read this on media and seen on TV shows too. I am not trying to spread any confusion but this is just information I have read on news and seen on TV shows. Even some tax attorneys whose clients were coming to US for tax advice did not hear from their clients for 6-8 months as their clients were simply whisked away by Federal agents on arrival at the airport. The attorneys found out after months of research that their clients are being held in prison by Federal govt. They had thought their clients never made it back to USA but later their families advised the lawyers that they did return to USA on the given date but families were never able to contact them too for months. Must have been very high profile cases that I read on tax blogs.
” I was informed one time by an immigration agent that once inside the US I had my rights but as long as I am stuck in the airport and border area with border agents I have no rights. ”
Correct – they don’t have to let you in unless you can prove right of entry. Not news.
“many US citizens by birth get stuck outside the US ”
Happy days 🙂
@plaxy not everyone is in our situation. We are quite willingly living happily outside US. They want to return back and are stranded at hotels and with friends and relatives overseas trying to get back to US to join their families. Everyone has their unique situation.
“They want to return back and are stranded at hotels and with friends and relatives overseas trying to get back to US to join their families. ”
It’s sensible to keep that right of entry if you have it and want/need it. It’s amazing to me that some Americans seem to think they have a right to cross any border without being challenged.
It’s easy for Americans (and others) to enter my country as tourists. Some assume they’re entering as of right, and get terribly upset and angry if a border guard stamps them in for less than the maximum of six months.
I can’t enter America as of right, now that I’ve renounced, but I would expect to be allowed in as a pre-clearanced visitor. If no clearance I wouldn’t fly.
The US no-fly list is of course a different kettle of fish. Extremely deplorable, but not due to renunciation or not paying CBT.
@plaxy. I believe Canadians are the only ones who don’t require a preclearance to enter US. Even EU, UK citizens have to get an online clearance before they fly to USA. Regarding US no-fly list even late Ted Kennedy had found himself on that list one time. Americans from all backgrounds were targeted on that list. Born US citizens were left stranded outside US waiting to join their parents and family and no govt aide could explain why they are in this list. There was no crime committed by them but everything was based on assumptions and it was challenging for lawyers fighting for their rights to return to motherland. I was reading this news as it happened all across the globe at one time. Many Americans now want to immigrate to Canada and it’s not just Trump but overall policies of US govt for past 2 decades, Canada is the best nation for living as per my friend also who immigrated to Canada from USA a decade ago and is very happy to divorce US citizenship.
Of course. The US is a very oppressive country.
The way around the no-fly list was to enter the US by ship. I don’t think there’s a no-float list.
@Nononymous. Funny statement but actually they could fly to Canada and get through the Canadian USA border or Mexico US border but this is no entrance to USA list not just a no fly list only.
Plaxy… According to the IRS Databook for Fiscal Year 2016
1,612,314 Returns from U.S. Territories other than Puerto Rico, U.S. Armed Service members overseas, and international. 7,341 Returns were examined, 6604 (field exam) and 737 (correspondence exam).
The risk of an audit if you are outside the US is next to nil.
Additionally, in 2015, the Inspector General did an reviewof 2010-12 returns with form 1116. They found that 73% of returns with FTC errors were submitted by paid tax preparers … and even there were 1,161 returns in that period met mandatory criteria for examination were not forwarded to international examination specialists for review.
The risk of an audit if you are outside the US is next to nil.”
The risk of an American tax audit if you are outside the US should of course be nil.
The point being:
They pick on the ones who try to comply.
Having no power to pick on the ones who, wisely, don’t.
> The risk of an audit if you are outside the US is next to nil.
What if they discover somehow you’re a millionaire? Say you’re a law-obiding citizen, paying taxes in your country of residence, bu by bad luck, you turn out to me a USA slave, hmm, citizen from birth.
Would you still say the audit risk is nil?
If you’re not filing US tax returns then by definition the risk of audit is zero.
If you are “discovered” as a US-citizen millionaire living outside the US, and you have no US assets, income or financial ties, then there is essentially nothing the IRS can do about it. Particularly if you have citizenship in your country of residence, you are protected from any attempts by the US to collect penalties or taxes owed.
“They found that 73% of returns with FTC errors were submitted by paid tax preparers …”
Since the IRS can’t even write correct instructions on how to complete Form 1116, this shouldn’t be a surprise. Also the IRS penalizes you if you try to tell the truth, so the best thing to do is just lie your head off.
“and even there were 1,161 returns in that period met mandatory criteria for examination were not forwarded to international examination specialists for review.”
Yeah no kidding. When for some reason the IRS assigns personnel to a non-resident citizen’s return, they assign someone from the Small Business / Self Employed section who knows nothing about international issues, who knows even less about Form 1116 than an ordinary idiot[*] knows.
[* i.e. a person who stupidly tries to comply but who otherwise would be ordinary]
“If you’re not filing US tax returns then by definition the risk of audit is zero.”
Right, in such cases the IRS does a Substitute For Return instead, designed maliciously to assess more than the correct amount of tax and compound it by assessing penalties. For a change, these actions actually comply with statutes and court rulings … well, partly.
And then you ignore whatever number the IRS concocts on your behalf, because you’re a citizen of your home country and untouchable.
“the IRS penalizes you if you try to tell the truth, so the best thing to do is just lie your head off.”
Or renounce and leave the lying to the lying liars.