Category Archives: Issues regarding US persons abroad

No matter how much money the IRS will lose, the IRS, Washington, and mainstream media want to tax US expats. The IRS and Washington want a government jobs program for accountants in the public and private sectors. And FATCA is the enforcement tool of USA’s stupid extra-territorial personal income tax system of Citizenship-Based-Taxation (CBT) (or US-person Based Taxation).

Note that USA and Eritrea are the only governments of the world that tax their expatriates and emigrants.  But is USA making any money (tax revenue) out of the effort?

America’s first goal is to use U.S. expat citizens to fund the U.S. tax-preparer industry. A typical taxpayer is required to pay about $500 a year to hire a U.S. tax professional to fill out expat tax forms that are exponentially more complicated than tax forms for Homelanders. USA wants for the entire adult (over 25 yrs) U.S. expat population to pay for this. So, the compliance industry is fleecing the citizenry right good–a wealth transfer from those of modest means to tax preparation corporations (so what else is new?). But is the IRS gaining revenue?

We can look at what IRS costs are incurred, assuming that the IRS is successful in forcing every tax-eligible expat to file. The IRS is able to estimate the cost of each filer–unfortunately the IRS does not share those numbers with the public (it would defeat its self-serving job-security interest). Note that expat returns are at least doubly complicated than those of homelanders. Normally, the poor would be relieved of their need to file–-but with Obamacare, even the poor are required to file expat exemption papers. For example, expats can never be eligible for Obamacare, yet expats who file must file a form to exempt themselves from Obamacare penalties.  Hence, it is likely that the entire adult expat population will file forms which can give IRS job security. 56% of the world are adults above 24 yrs, and there are 8.7 million U.S. expats. One could expand the analysis to try to determine the number of “US persons”, but this article will limit the scope to US citizen expats. (8.7 million)(0.56)* (processing cost of one filer)(doubled)(% above filing threshold).

In addition, there is a similar-but-different population of FBAR filers to consider. Each FBAR of every account of every expat who possesses more than $10,000 of financial wealth must also be processed. These FBARs must be filed and compared to the data which is obtained through the FATCA ethnic-identification system.  FATCA’s public costs could also be considered in the calculation–FATCA is a big loser to the world’s economies. FATCA’s costs to the IRS government system are partly addressed in Wikipedia. However, “The I.R.S. “has been unable to ascertain all potential costs beyond those for IT resources”.

It’s important to remember that, despite media propoganda, FATCA and FBAR are not taxes and do not create tax revenue. They are expensive unconstitutional enforcement means of the money-losing extra-territorial tax regime system. Although sold to the public as revenue-enhancers by “increasing tax revenues”, enforcement methods and control systems always only add costs. This government doublespeak shows up in every Congressional spending bill (correctly stated as not a tax) but as “revenue enhancement”.

But does America’s extra-territorial taxation system take in any money? If America succeeds with its FATCA and finds ALL of its 8.7 million expat-chattel in the world, how many dineros will it bring to itself? Let’s calculate some examples using IRS tax tables.

53.7% of US expats live in countries which have higher marginal tax rates than USA’s top 39.6% rate. No matter what their income, US cannot tax them up. More than half of the people filing expat taxes should (rightly) owe nothing. Zilch. Zippo.

27.4% of US expats live in countries with tax brackets in the 35% to 39.6% region. With USA’s taxing-up method, it could gain a maximum of 4.6% tax (average 2.3%) from the richest of any residents. But a single person must make over $413,200 per year to pass this 35% marginal-tax threshold—however that person can exclude at least $100,000, so a person must make more than $513,200 per year to be taxed in this bracket. The only significant country in this category is Mexico, where 52.3% of the population is below the poverty line and 90% earn less than $33,000 per year. In order for America to get any money out of Mexico, they would have to fleece Mexico’s 1%’er’s . So, in Mexico, more than 99% of the US-expat tax filings would be wasted energy. To know how much money America could squeeze out of Mexico, one would have know the percentage of 1%ers who are dual citizens. The quantity of Mexican US persons to be taxed becomes negligible.

The other cash cows in this category include Algeria, Argentina, Cyprus, Ecuador, Morocco, Norway, Thailand, Turkey, and Vietnam. How many Turks or Argentinians could America fleece? (oops, side point: I forgot to mention that the IRS disallows tax credits for the Norwegian 7.8% tax it labels “social tax”. The IRS wrongly taxes Norwegian residents due to a loophole it wrote into tax treaties and tax regs)

Ok, so we’ve gone through 81.1% of the expat population’s tax returns — and the only thing that has been achieved is that 80.826% have (rightly) contributed no tax revenue to USA and less than 0.274% may have (unrightly) been taxed-up by USA by a tax ranging from 0% to 4.6% of their annual incomes.  Oops, I forgot — only 56% of that population are adults. This whopping sum ought to pay for a few dozen aeronautical toilet seats.

I hope that you are beginning to see the ridiculousness of the situation. The GAO has full access to this type of data, and should have been able to calculate this same data. They should have been realizing that the costs of processing millions of returns is ridiculously high in comparison with the ridiculously low revenue potential to be gained from fleecing the 1%’er expats in Algeria, Norway, or Vietnam.

Well, politics is an endless source of black humor. You ought to know that the story just gets more and more ridiculous if one analyzes it further.

America’s extra-territorial US-person-based taxation (CBT) is a big big loser for America. And CBT helps even more to show that the taxing decision makers in Washington are truly a bunch of losers.

Ben Steverman, a reporter for Bloomberg (New York), is preparing a personal finance article on special tax issues that expat lambikins face as they file US taxes from outside the jurisdiction of the USA. He understands these lupine tax obligations have become increasingly aggravating and expensive.

Interested lambikins should contact him before Monday when he hopes to conduct his interviews. He can be reached at his bloomberg.net email address, (bsteverman@).

cross-posted from citizenshipsolutions.ca
 
Please remember that the “dual citizen exemption” is available ONLY to those who meet the “five year tax compliance test”.
 
Introduction:

This is the 3rd of seven posts (all linked at the bottom of this post) analyzing the “dual citizen exemption” to the S. 877A Exit Tax which is found in S. 877A(g)(1)(B) of the Internal Revenue Code. Please remember that the “dual citizen exemption” is available ONLY to those who meet the “five year tax compliance test”.
 

Don Chapman of @LostCanadians: There WAS Canadian Citizenship before the 1947 Canada Citizenship Act https://t.co/TSMWOGEnWl

— Citizenship Lawyer (@ExpatriationLaw) February 18, 2016

 
I recently wrote a general post about the “dual citizen exemption to the S. 877A Exit Tax” rules. In order to qualify for the exemption, one must (among other requirements) have been BORN (at birth) a dual citizen (which is why this exemption could never be available to one who naturalized as a U.S. citizen).

The precise language includes:

became at birth a citizen of the United States and a citizen of another country

What does this mean for those who were born before 1947 and are claiming to have been born “dual Canadian U.S. citizens”? It’s not as simple as it sounds. I had not fully appreciated (or had not yet faced up to) the difficulties until I became aware of the tortured history and unintended consequences of the 1947 Canada Citizenship Act.

Continue reading →

March 8, 2016 UPDATE: Legal fees paid — on to Federal Court for Charter trial contesting Canadian FATCA IGA legislation.

Canadians and International Supporters:

You came through once again: $594,970 for legal costs have now been donated and our outstanding legal bill is finally paid off.

Thanks especially to those who donated even though they never had any “spare” money to give, and despite this gave over and over and over again.

This last round of fundraising also shows that our Canadian lawsuit remains dependent on the kindness of our International Friends: There would be no lawsuit without their financial help.

Know that a very generous donation (today) from a supporter in the United States made it possible to pay off the remaining legal debt. Also please appreciate that there would be no lawsuit without the help of the Isaac Brock Society which has kindly let us use its website to solicit funds.

Our next step is the Constitutional-Charter trial in Federal Court.

For this we need more Canadian Witnesses, and my next post will be devoted only to a request for Witnesses willing to go public, like our Plaintiffs Ginny and Gwen.

For the future: I want a win in Federal Court — and I want the new Liberal Government not to appeal that win.

Thank you all for your support,

Stephen Kish,
for the Directors,
Alliance for the Defence of Canadian Sovereignty

Continue reading →

“In this Essay, Professor Patrick Weil reexamines the constitutional function of the passport in relation to American citizenship. The State Department recently developed a policy of passport revocation whereby some Americans are transformed into de facto stateless persons….

……”

http://www.yalelawjournal.org/forum/citizenship-passports-and-the-legal-identity-of-americans

The article approaches the issue of revoking passports for any reason. Revoking passports of unsuspecting U.S. citizens overseas was enacted in the 2015 FAST Act. If a person owes $50,000 in taxes, a passport may be revoked. In the propoganda that was released with the passing of the bill, it was said that this bill was written to catch people in America who had not paid their taxes and who may want to flee the country. However, the bill has lots of text relating to the revocation of the passport for all purposes except for the expat to return to the Homeland. This bill was written to enforce the FATCA dragnet.

The paper:

Conclusion

“The State Department seems to be abusing its power with passport revocation—unknowingly in the case of Snowden, as the Department could at first glance rely on a jurisprudence that seemed until recently to favor executive power, and willfully in the case of the Yemeni Americans. It therefore seems that it is time for courts confronted with passport revocations to reexamine the constitutional function of the passport and its status in relation to American citizens who, since Afroyim, have gained more protection over their citizenship in relation to the state—including in relation to the Secretary of State. Today it is commonplace to say that new technologies infringe upon civil liberties—they often do. However, in the case of passports and the essential right of Americans to maintain a legal identity, new technologies offer an avenue to protect that very right. By affirming both that a passport belongs among the privileges and immunities of an American abroad and that the Secretary of State cannot revoke a passport as a matter of administrative routine, courts could make the passport an almost inalienable auxiliary of the American citizen abroad: the symbol and substance of an irreducible citizenship which the Supreme Court has already proclaimed.”

March 4, 2016, Troy Lewis – “AICPA Pushes to Ease Tax Burden on U.S.-Canada Accounts”

The American Institute of CPAs is asking the Treasury Department to provide tax relief to the cross-border savings accounts of U.S. and Canadian citizens.

In a letter that the AICPA sent Friday to the U.S. Treasury Department, the Institute asked the Treasury to adopt three specific recommendations that would provide tax relief to citizens of the United States and Canada who have various cross-border deferred and tax-exempt savings accounts which are often subjected to double taxation and unexpected current inclusion in income.

In addition, the AICPA urged the Treasury Department to work with the Canadian Department of Finance to provide similar relief as appropriate.  Requests comparable to the AICPA’s are being submitted by the Chartered Professional Accountants of Canada (CPA Canada) to the Canadian Department of Finance and by The American Chamber of Commerce in Canada (AmCham Canada) to both the U.S. Treasury and Canadian Department of Finance.

In the March 4, letter, AICPA Tax Executive Committee chair Troy K. Lewis explained that both the U.S. and Canada have tax provisions that allow individuals to establish tax-deferred and/or tax-exempt savings accounts. Article XVIII of the United States-Canada Income Tax Convention and associated protocols provides bilateral deferral of tax or inclusion in income for various qualified or registered pension or retirement plans, he wrote, but does not provide any relief from double taxation or current inclusion in income for other plans and accounts such as education plans, disability savings plans and, under certain circumstances, Roth IRAs.

…

Lewis identified individuals who are impacted as Americans living in Canada, Canadians living in the U.S., Americans living in the U.S. who contributed to Canadian plans while living in Canada and Canadians living in Canada who contributed to a U.S. plan while living in the U.S.

“Frequently, a cross-border move will result in adverse tax consequences such as unanticipated inclusion in income of amounts saved in a tax-deferred or tax-exempt account which may require the cross border individual to liquidate the accounts to avoid the adverse tax consequences,” said Lewis. “Often, the forced liquidation itself can result in unanticipated taxable income.  Furthermore, the U.S. imposes complex reporting requirements, such as those regarding foreign trusts and Passive Foreign Investment Companies (PFIC), for individuals participating in Canadian plans. These tax implications can adversely impact the individuals and their families, the social objectives of the countries and cross-border mobility.”

In the letter, Lewis wrote that the AICPA recommends that Treasury implement the following measures in order to reduce the tax and reporting burdens associated with various cross-border deferred and tax-exempt savings accounts:

1. Provide U.S. citizens and residents tax-deferred or tax-exempt treatment, comparable to that offered by Canada to its citizens and residents, for their contributions, income and withdrawals from properly established Canadian Registered Education Savings Plans (RESP), Canadian Registered Disability Savings Plans (RDSP) and Canadian Tax Free Savings Accounts (TFSA).

2. Exempt properly established Canadian RESP, RDSP and TFSA from classification as grantor trusts.  Additionally, exempt U.S. citizens and residents from various onerous statutory filing requirements for foreign trusts and PFICs which can currently exist for these plans.

3. Work with their Canadian counterparts at Finance Canada to provide similar relief from taxation and burdensome reporting requirements for Canadian citizens and residents who hold and contribute to properly established 529 Plans, qualified ABLE (Achieving a Better Life Experience) accounts and Roth IRAs in the United States.

Crossposted from the RenounceUSCitizenship blog:

Interesting that @USTreasury acknowledges it can relax #FBAR for #Americansabroad but chooses FULL ENFORCEMENT https://t.co/3UfFUPZcLH

— U.S. Citizen Abroad (@USCitizenAbroad) March 7, 2016

The above tweet links to a posting on a Facebook group that reads:

US DEPARTMENT OF TREASURY ACKNOWLEDGES THAT IT CAN STOP FOREIGN BANK ACCOUNT REPORTING (FBAR) BY AMERICANS OVERSEAS BUT CHOOSES NOT TO!

The US Federal Register which reproduces Treasury’s deliberations, where it (1) acknowledges that it has the authority to exempt Americans abroad from the FBAR filing requirement and (2) makes a considered, conscious and purposeful decision to NOT exempt Americans abroad from the FBAR filing requirement. https://www.gpo.gov/fds…/pkg/FR-2011-02-24/pdf/2011-4048.pdf.

You should read from the beginning (if you can stand it), but if you go page 4 you will find the statement which is evidence of the clear, unambiguous, purposeful and wilful decision to NOT exempt Americans abroad from the FBAR filing requirement. The bottom line is on page 4 of the pdf (page 10237 of the Federal Register) which clearly states in the first full paragraph in the second column that:”

With respect to the comments raised by United States persons living abroad, FinCEN does not believe that an exemption is appropriate simply because a United States person chooses to live outside of the United States.”

The excerpt from the Federal Register is here:

FBAR 2011-4048

As you know, the primary effect of the FBAR requirement is to impose regulatory burdens, terror and penalties on Americans abroad AND to make them less employable.

In any event, Treasury states:

With respect to the comments raised by United States persons living abroad, FinCEN does not believe that an exemption is appropriate simply because a United States person chooses to live outside of the United States.

Could you please:

Comment on specifically why you believe (if you do) that Americans abroad should NOT have to disclose their “foreign bank accounts” to the IRS.

… And Democrats in Congress unanimously gave him that power. Republicans and Democrats in Congress had originally given that power to the Nobel Prize winner, but now that power moves to either President Trump or President Clinton. Indeed, it’s even possible that Secretary of State Chelsea Clinton may receive that power if nominated by her wedding guest President Trump.

In the FAST Act passed in December of 2015, Congress and President Obama empowered the President and his Secretary of State to rescind your passport, by decision power granted solely to the President’s IRS. “If the Secretary receives certification by the Commissioner of Internal Revenue that an individual has a seriously delinquent tax debt, the Secretary shall transmit such certification to the Secretary of State for action with respect to denial, revocation, or limitation of a passport pursuant to section 32101 of the FAST Act.”

Only a few years after discovering the president’s IRS had applied faulty criteria to the tax status of their boss’s opponents, the Republican-controlled Congress granted the Democratic-controlled IRS the authority to judge your tax status. If the judgement is negative, the President’s State department will take away your passport. President Obama gladly accepted the mandate with his signature upon the bill.

The money that will be raised from the threat of revoking passports was used in the Fixing Surface Transaction Act (FAST) to finance a make-work transportation bill.

Never mind that the President and Congress had sworn to uphold the Constitution. Revoking a passport is a penal action — a legal punishment. The Constitution has various provisions that are supposed to ensure a trial by judge and jury. But the FAST Act removes the judgement process from the court and delivers it to the IRS, with enforcement by the State Dept. How could that be Constitutional? Oh well, now the judgement will be up to President Trump or President Clinton. Let’s hope they like you.

How can someone have a tax assessment? I don’t know–ask the IRS. It’s all up to them–it’s not a court proceeding. And you aren’t assumed innocent, either. It’s quite possible that President Trump or President Clinton will make an “error” or might  “use inappropriate criteria”  upon your tax filing.

Wouldn’t you be notified? Well, move someplace without any forwarding addresses. You won’t get the notices.

But you can appeal? Sure. You can FILE SUIT against the government to stop them from rescinding your passport. That is, if you have lots of money.  Oh yeah–a little detail–if you sue, you are the PLAINTIFF and you have to prove the guilt of the DEFENDANT (The U.S. Government is assumed innocent until the citizen proves the government guilty).

There are 8.7 million US expats that have been complaining about this fascist legislation — to no avail. Homelanders have been happy enough with a law to punish people that live outside USA — with dependence upon their passports.

Now it’s time for Homelanders to find out how unconstitutional laws affect them.

Maybe it’s a good idea for homelanders to stay quiet about their opposition to President Trump or President Clinton. When you lose, your political affiliations might be noticed and someone you don’t like will be able to prevent you from leaving your country.