I am an American living in Prague and will be among those to give up their citizenship. The new FBAR requirements and the recently pushed through changes that require foreign banks to report are really a huge burden. It is a significant legal risk to be an American overseas. The fines are insane for failiure to report, even if you owe no taxes! You can easilly land yourself with a $20 000 - $80 000 fine for having a hundred bucks in the bank and no income. Indeed, it's not just double taxation, it's tripple taxation, because I have to have a special bank acount that is for Americans, and the fees for the "American expat" bank account are much higher than the ones for a normal bank account.
But I think that it is wrong to present this as a taxation issue. I would be fine with paying a percentage of my income in taxes. There are some benefits to being a US citizen, like that the army will rescue you if there is a civil war ;). But the fear uncertainty and doubt that surrounds these new regulations makes it nerve racking to be a citizen. Every expat I know here has nightmares about an audit comming and having all of their assets seized. And it has happened to some of them too! And that legal risk is no longer a form of taxation, because taxes are percentual (the more you earn the more you pay), but when you end up having to pay a fine that is higher than your net worth, that's just robbery.
We used to be a free nation, but thanks to austerity the 'r' had to be removed.
> There are some benefits to being a US citizen, like that the army will rescue you if there is a civil war
This is a common myth. If you don't intend to return to the USA there are no benefits to US citizenship, only downsides. The US may or may not rescue you if there's a civil war (see the fate of people in Yemen), but if they do, they will charge you for it at military rates you almost certainly cannot afford:
See "Will the US government pay for my travel? What will it cost?" which says, essentially, that no, it won't. This is unlike other countries which DO evacuate citizens for free and DO NOT charge taxes on non-residents.
My dad was evacuated from Yemen by the military when the civil war there broke out. That blue passport was his ticket out of a country that was rapidly disintegrating. He was not charged anything for that. So they don't always charge you (indeed I've never heard of it).
My dad was evacuated 15-20 years ago. Before that, Yemen was a poor but pretty peaceful country. I think we should evacuate the folks stuck there now, but the state department isn't wrong to say that they've had a lot of notice and shouldn't have been there in the first place.
Didn't know about that situation with US citizens in Yemen, one of the comments posted in response to the LA Times article says Russia ended up evacuating them? Is that true, or just propaganda? The only source is RT..
> but if they do, they will charge you for it at military rates you almost certainly cannot afford:
But the link you posted said "We charge you the equivalent of a full coach commercial fare on a comparable mode of transportation at the time that commercial travel ceases to be a viable option."
When was the last time you bought a full fare couch ticket? People are usually buying "double deep discount" tickets. Most of the time you can buy first or business fares for cheaper.
> they will charge you for it at military rates you almost certainly cannot afford
Your link says "We charge you the equivalent of a full coach commercial fare on a comparable mode of transportation at the time that commercial travel ceases to be a viable option."
The 45 minute flight from Port Au Prince, Haiti (after the earthquake) to Santo Domingo, DR cost $841.11.
I think this is because 'full coach commercial fare' is the most expensive coach option. Very few ever purchase it, excepting those who want full flexibility to change the schedule without extra fees, or request a class upgrade if available.
"If you don't intend to return to the USA there are no benefits to US citizenship, only downsides."
Seriously? US citizenship means you can travel with a US passport, which allows visa-free travel to many, many countries: https://www.passportindex.org/byRank.php
If you have a Euro passport, you might as well torch your American one. There is no benefit to being identified as an American overseas when you have a European passport. In fact I would argue it is more dangerous. My family that were stuck in Kurdistan were able to avoid violence against Americans because they had Swedish passports. That little blue book is a death sentence in some places where something else wouldn't be.
"If you have a Euro passport, you might as well torch your American one."
Even if that were true, what proportion of US citizens living outside the US (the class to which my comment and the immediate parent referred) have a 'Euro passport'?
That doesn't make what I said less true. You speak to counter the claim of downsides to having an American passport, I'm providing evidence of harm to your livelihood in some parts of the world for having an American passport (versus any other kind of passport).
Only in terms of the countries you can travel to without a visa. Go just about anywhere with a Canadian passport and they'll wave you past, almost like they're annoyed you think you might be considered a security risk.
I got a 6 month visa in the UK while laid over at Heathrow in under 10 minutes. Under "Reason for your stay in the UK" I wrote "a cigarette."
Why did you need a visa to get a cigarette? Canadians don't need a visa to enter the UK for tourism/transit/business, subject to some maximum amount of time (90 days IIRC, but definitely more than enough to buy a packet of cigarettes).
I was holding a carton of Marlboro Reds purchased in Berlin, so I didn't even need to buy any. I'm fairly certain we still need a visa, but it's basically an automatic process.
So, the US spends hundreds of billions of dollars a year on the military, but can't rely on it to protect its citizens to the degree that the Indian military (with a budget less than 1/10 of the US military's) protects its citizens? Sounds about right.
The state department has been warning people to avoid Yemen for over a decade. Likewise they've had over a year of notice as actual organized violence has increased in the country. Up until the summer last year, people could've left at any time on a commercial flight.
I lived in Nigeria during a period of violence when thousands died. One of my enduring memories was the reactions of the Americans living there at the time. They were so sure that the army would come and save them and when it didn't they were dumbfounded. When someone from the US eventually turned up after the violence had all died down all the US citizens were offered was the opportunity to be part of the convey out of the city.
I wonder where the dead set certainty that the army will save them comes from?
Uh, did any of those American citizens make their way to the US embassy? That's how you get out of the country if violence is breaking out. Nobody in government would even know you're there beyond some database.
Actually, no. There is no "supposed to." You can register with the State Department if you live outside the US, just like you can register with the US if you travel outside the US. The web site is http://travel.state.gov/content/passports/en/go/step.html .
Do you really think that every one of the millions of American citizens who travel or live overseas each year is supposed to tell the US about their current location?
Do you really think that every one of the millions of American citizens who travel or live overseas each year is supposed to tell the US about their current location?
I didn't presume there was such a requirement, but I also wouldn't have been surprised if the fine print somewhere made it a selectively enforced requirement. It doesn't strike me as more or less onerous than some other actions that are currently required.
There is no "supposed to."
I think you are correct, but when an official government agency "encourages" a certain behavior, it's not too much of a stretch to presume that one is "supposed to" do it:
We encourage all U.S. citizens travelling or residing
overseas to notify the closest U.S. Embassy or Consulate of
their contact information so that, in an emergency, we can
contact them to provide important safety and security
information, or support during a crisis.
"Supposed to" implies either a requirement or a moral obligation. There is neither. "Should" doesn't have that same sense. Perhaps the word you meant? It would very much surprise me if that fine print exists as I looked for terms like that when I moved overseas, to make sure everything was legitimate.
Such a requirement is very unlikely for travelers. It's just not practical given how often plans can change. (I visited a salt mine in Austria. To my surprise we crossed into Germany during the tour. Would I need to tell the US about those 20 minutes in Germany, and when?) How much would it cost to run such a system? What happens if the system breaks - and we know the foreign tourist tracking system breaks? What are the advantages to the US?
It's more possible for permanent residency. But the US doesn't even require that of domestic citizens, despite the clear advantages there would be to know where people live. So I don't think it's going to happen any time soon. And what would be the penalty of getting it wrong?
yes, movies like Tears of the sun. considering the number of US citizens, they are all over planet and it's a rather unreasonable expectation.
generally US citizenship meant much more in the past than it means now since there are more interesting places to live (albeit in long term US might still prove as best spot... or not).
When the most recent war broke out in Yemen, the Indian govt managed to evacuate its citizens from Yemen using their navy and if you take into account the size of the Indian diaspora in the Arabian Peninsula including Yemen, it wasn't an easy feat and I can't imagine that the USG wouldn't be capable of carrying out a similar evacuation plan or doing what it could to get their citizens out of harm's way abroad.
They weren't "abandoned". They were told very earnestly to leave, but they wanted to stay and work on mostly oil fields and continue to make admittedly large sums of money. In general the state department has been warning people about traveling to Yemen for over a decade, and likewise has been issuing travel advisories and other updates to the people living there. Far from "abandoned".
Indians in ME are across the economic spectrum, and mostly blue collar but there are also white collar. Yemen is very close to India. Your smug comments demonstrate your ignorance than anything else.
Do you think the government is going to come and forcibly remove them from the country if they don't want to leave? The state department has warned people against going to the country for over a decade, and likewise has issued advisories to all of the expats living there the entire time they're there. Anyone with any sense got out of the country a while ago. The vast majority of those left are foolhardy individuals who didn't think it would get as bad as it is.
I highly doubt there are many Indians in Yemen. It's a poor country and doesn't have many migrant labourers like the UAE or Bahrain do.
Also the Americans I knew seemed to expect helicopters to come pick them up and all that. Saying to your citizens they need to get out and we've got a navy ship in port that you can get on if you want isn't really evacuating your citizens.
Air India also played a major role in the 1990 evacuations from Kuwait. Considered to be the largest civilian evacuation, airlifting 170,000 Indians stranded in Kuwait.
Helicopters would come pick them up from the airport or embassy if it was necessary. The violence in Yemen started relatively far from the population centers where most expats are/were and progressed relatively slowly. They had plenty of time to get out of the country via normal transportation options. If outright combined arms conflict had suddenly erupted in the city, you can bet the various developed militaries of the world would have provided protection for their citizens to leave.
Also, a naval vessel absolutely qualifies as evacuating your citizens.
You can bet that if outright combined arms conflict had suddenly erupted in the city various developed militaries of the world would have provided protection for their citizens to leave. That's visibly demonstrated by every civil war. Give me an example of a developed military that's gone into an armed conflict to rescue citizens. The closest I can think of is the rescuing of hostages. That's not quite the same thing though and very rare.
No it's not. Especially so with the civil wars in the Arab world, they didn't spring up virtually overnight and almost across the board started well away from the capital cities where most expats and embassies/consulates are.
> Give me an example of a developed military that's gone into an armed conflict to rescue citizens. The closest I can think of is the rescuing of hostages. That's not quite the same thing though and very rare.
There are a variety of examples of this by practically every developed country. In the last two decades it's been relatively common in Africa and the Middle East. The US in particular has a number of such cases which can be found in this list: https://en.wikipedia.org/wiki/Timeline_of_United_States_mili...
Hostage rescues are very rare, I agree. That's an extreme measure.
It almost sounds like the insurance business. You're lured by the flashy ads. You sign the contract. Shit happens. The insurance company tries to weasel out if they can away with it. New insurers happily ignore the stories.
I'm also an expat, living in the UK. The FBAR isn't too bad at all, it takes 30 minutes to file electronically if your records are in order. The real burden is filing my annual taxes. I'm a contractor with a limited liability company, common setup in the UK. However in the US, this is treated as me having financial interest in a foreign C-Corp, which has an extremely complicated tax return. Fortunately I have a family member who is an accountant and loves new "challenges". Other people in similar situations spend several thousands a year to file their taxes.
I've heard elsewhere that foreign banks were closing down accounts of American expats because the customers aren't worth the FATCA paperwork. Have you encountered any trouble with that?
That can happen. One of my colleagues had this problem, except he solved it by not being American (he'd not returned a form which they'd sent, asking him to confirm his lack of American citizenship).
I expect the reporting requirements are a burden for small banks, especially ones competing heavily on price rather than offering a full service. I'm not American, but am a similar burden to a bank, and was strongly advised to open an account only with the country's largest bank.
Yes, sorry I mean that I'd read about this in several other places had assumed that it's become a common occurrence. But nvarsj's comment suggests that it's been no big deal for him. I'm curious if he's personally run into banking problems, or just the pile of tax paperwork.
I'm an American living in Europe. I report my income to the IRS every year, like you. Reading your comment gave me a scare -- what exactly would trigger the $20,000-80,000 fine or asset seizure?
Is it a failure to report income taxes at all? Or do you make so much more than $100k/year that the double taxation is killing you?
I'm just trying to figure out what, other than their already-reported income being audited, has got all of your expat friends so spooked...
Many people didn't know about the new requirement, and they had to pay big fines.
What will be the next new requirement that startles people who don't have any contact with the country? No one knows. That is the risk, the uncertainty that there might be a requirement that you don't even know about...
It is even worse for US Persons in Canada, many of whom have never even been a US resident in their entire life. The reason is our tax treaty... If you file in Canada, you're good. At least that is how it was. Now they are going after these people because capital gains are exempted from this aspect of the treaty so they think they are compliant by having filed in Canada, but then find out a house the sold 10-20 years ago should have been declared even if they have never had to file US taxes before.
The Foreign Earned Income exclusion does not apply to capital gains, investment or any other "unearned income." So a retired person would by able to claim the FEIE exclusion -- they'd be taxed as if they lived in the United States (with deductions for foreign taxes paid.) Pensions, disability payments, annuity payouts.. not under the FEIE. So for a lower-income retired person, double taxation is a huge problem.
For me, I got an inheritance that I didn't really remember from a relative who passed away years ago. It was put into a foreign bank account since this person wasn't a US citizen and passed away in the country of their birth, and since I got it as a minor I basically ignored it, figuring I could just leave it as a bit of an emergency fund.
When I found out about the new rules and then remembered the bank account (10 years later!) I realized I was probably not in compliance. That's one thing that spooks people: $2000 in a bank account you forgot about can lead to disproportionate fines. I had to do a lot of paperwork to get into compliance, and because I had to transfer the money I actually lost a lot in a poor exchange rate (due to various constraints).
What austerity are you talking about? That's not a US thing. There's been no austerity here; government spending has continued fairly normal growth once you factor out the stimulus spending.
Although since that seems to be what a lot of EU governments are calling "austerity", perhaps we have had it.
Maybe it's just me, but when I think "austerity" I don't think such small-single digit percentages. If our government is that sensitive to such small piddling decreases in income, then the problem lies in the government anyhow, not the income decrease... on the timespan of your life, there will be years where the income will have to go down. Be it major famine, major natural disaster, or the need to fight an actual war again, you can't build a government edifice that only works if you feed it 105% of what it got last year, every year, after inflation, or it will fail anyhow.
Of course, expecting fiscal responsibility from a government is a fool's errand. Screaming like a stuck pig and running around yelling "AUSTERITY! AUSTERITY!" if one even breathes a threat to feed them less, and then blaming everything bad that ever happens again on the AUSTERITY is exactly what I'd expect from them. What on Earth will they actually do when something bad happens?
Anybody that thinks $1.1T is a "small piddling decrease" must be a truly wealthy person. Can you spare the government that pittance? We'd all benefit from it.
Remember how a large percentage of gov't administrators complained that their normal annual budget increase being lowered slightly was a cut? Remember how they cut services that didn't even depend on that increase in response? Calling it "austerity" is at least as honest.
If you have union contracts dictating that your costs go up by X% a year to roll over personnel, then a budget increase of less than that is indeed a cut as you'll be laying off personnel to meet the budget.
See also: Every departmental budget ever, public or private (non-unioned employees expect a small annual raise as well)
A prevarication is a lie in practical terms. Automatic budget increases are justified at the end of every fiscal year by spending all of the leftover money, i.e. unneeded money that was automatically budgeted is spent on crap solely to justify getting more unneeded money.
That may happen, but like the "cadillac welfare queen" is an exception, not the rule. For most departments, they run out of money before the end of the fiscal year.
I disagree. I worked in a few different government departments that depended on funding.
We always had a surplus at the end of the year and the boss would tell us to spend it on anything and everything because if we didn't, there would be less money in funding the next year.
The amount of waste was incredible and it made me angry. It's why I went into the private sector/started my own company.
You also almost could never get fired. We had so many bad employees that basically sat to get a paycheck and take up space. If you are really lazy, it's great.
Because of this game that is played, it's very difficult to tell if a department 'ran out of money' or just spent it to meet next year's budget.
Ask yourself, honestly, what percentage of the entire budget was that end of year splurge? In my experience it's very small, much smaller then the year to year cost inflation.
There's tons of waste in any large organization. In my experience, private companies have more waste (resources and personnel) then public organizations as they have much less oversight.
The goalposts are all over the place. The only reply I have for this is that private institutions only waste my money if I own them, the government wastes my money by force.
Lived in Australia for 5 years. Was several months late filing FBAR my first year. Did it on time my second year. Completely forgot my 3rd and 4th year. Filed 3 at the same time on my 5th year. I was never contacted by the IRS for failing to file on time.
The point being, it's scare tactics. I filed a complaint with the https://www.irs.gov/Advocate and they are well aware of the issue. They have brought it up repeatedly in their report to Congress. The IRS's response is an FU and it shows how toothless the Advocate's office is. You can see their report on international issues here https://www.irs.gov/pub/tas/2011_arc_internationalmsps.pdf, The reporting requirements section is close to the bottom.
Hi, I'm a Canadian business owner who does lots of US contract work and I have colleagues who are US persons in both countries.
Every time a US Customs agent asks me if I will ever be interested in becoming a citizen I laugh and tell them about situations like this.
When I was young I dreamed of moving to the US, now it is a huge joke because of all the paperwork and FACTA's "Hotel California" implications. Now I will never apply to be a US citizen. Especially because I would have addditional paperwork until I die.
BTW, this even affects Canadians and Canadian legal entities as we're all forced to declare we are not US Persons even if it is obvious we are not.
FACTA is an overreach of power and the IRS should do a better job pushing back against laws like this. The US was once known as "the place to do business" (at least in the Americas) but now it appears to be just a gigantic bureaucracy.
I think it is good people are renouncing their citizenship... Perhaps it is the only way to let the government know how bad the system is.
So to someone in the same boat as you you'd say just file the tax return and be done with it? I looked at the FBAR online form and could not imagine ever filling that out when I permanently live overseas, it actually infuriates me.
"the recently pushed through changes that require foreign banks to report are really a huge burden"
The OECD is adopting CRS which is a wider-reaching version of FACTA. 51 countries are adopting it in September 2017. Another 34 (including Hong Kong, Switzerland, Singapore, and the United Arab Emirates) will adopt it a year later, in 2018.
I have (some) hope that what we're seeing now is the teething pains and they'll go away in a few years. But (as a fellow expat) I agree it is not a great time right now :(
I thought you only had to file FATCA for bank accounts that had more than $10,000 USD in them at some point in the past year. Not a few hundred. Are you sure about that? (if so, oh sh*t)
FBAR requires you to report an account held overseas in excess of $10,000. This is separate from the reporting you do on your tax return and separate from the reporting institutions are required to do for FATCA.
FBAR is more insidious for the individual because any US taxpayer (not just citizens) is required to file an FBAR and $10,000 is a stupidly low number. Worse even if the money overseas isn't yours (in the case you have say signature authority over an account because of power of attorney) you still have to file. Even worse once one account tops $10,000 you have to report all of them even if they have zero balance. It's also not clear what constitutes an account. Example does a PayPal account count ?
The only conclusion I can come up with is that FBAR is basically there to make it easy for the Feds to do a Martha Stewart and get you for lying, because proving tax evasion is a bit hard.
(Disclaimer: Not an accountant. Consult an accountant for tax related advice)
It's a bit more complicated than that. Right now, you have to file for every bank account you own (or have signature authority for) if the combined worth is more than $10,000. So it's not as bad as I wrote at first, and I appoligise for that, I had forgotten about that factor. But it still surprises people.
Edit:
Oh, and the worth is calculated as the maximum value during the year. So if you get a contract filled for $10 000 and someone wires you the money, even if you imediately pay the rent and therefore have no money in the account, you still have to report the account.
You must file Form 8938 if:
1. You are a specified individual.
tick!
2. You have an interest in specified foreign financial assets required to be reported.
tick!
3. The aggregate value of your specified foreign financial assets is more than the reporting thresholds that applies to you:
If you are a taxpayer living abroad you must file if:
You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year
For once, the IRS pages on this topic seems pretty clear.
Not sure if you are aware of this or not but Form 8938 is different from FBAR. FBAR is filed with the department of the treasury and the threshold is only $10,000.
I think you need to report in any case, the $10,000 might be a threshold below which the bank does not inform you to the USA. The real threshold below which the bank needs to look at you is $50,000, or if you have stocks, funds, or investment-grade products, such as some insurances, $0, but some banks are using a lower threshold. Also do note that this is for preexisting accounts - new accounts need to be looked at and can end up being reported irrespective of the amount they hold.
You have to fail FACTA regardless if you hold an overseas account. If you hold less than $10k USD than it's a few check boxes and takes less than 10 minutes
Nope. You must file FBAR for all of your accounts only if the sum of them ever exceeded US$10,000 during the year. That requirement has been around for many years.
And the pertinent text from that page:
"Who Must File an FBAR
United States persons are required to file an FBAR if:
1. the United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported."
FATCA is a new burden on foreign financial institutions that requires them to report to the US government on US citizens who have accounts at their institutions. It's meant banks in several countries have refused services to US citizens and closed their accounts.
This is only if you are self-employed or a small business owner, correct? If you are an American living abroad and working for a company does FBAR apply to you?
Any United States person has to file if they have more than $10,000 held in a overseas account.
A United States person is defined as:
"United States person includes U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States."
(There are exemptions for very specific circumstances)
A lot of United States persons living overseas are unaware that they need to file, and a lot of permanent residents or H-1Bs in the US are unaware that they also need to file if they still have assets held overseas. They have ramped enforcement up over the last few years so a lot of people are out of compliance and don't realize it. Thankfully at least at the
At least part of the complication is that overseas equivalents of 401k funds that may be mandatory to contribute to are often considered to be bank accounts by the IRS.
Have you come across anyone who has been fined under this law? I have not and know many people who are rubbish at filing on time or even in the same year. I've not seen any enforcement commensurate with $20k fines willy nilly. Not that I like the law, I've just not seen it enforced.
This is a pretty huge problem in the US, though it doesn't get talked about much. The people who do suffer the penalties often get smeared so that people think this isn't a problem and couldn't happen to them ("It's like having Al Capone go to jail for tax evasion.").
For FBAR? There's an amnesty program in place which was introduced during the summer of 2014, which is better than then fines possible under the voluntary disclosure program. See http://www.forbes.com/sites/robertwood/2014/06/18/irs-announ... . That reduced the outrage some.
Even without paying the fine, http://www.thelocal.se/20120306/39522 reports "while Pamela may no longer be facing a seven-figure penalty, she's already racked up a bill of $40,000 in accountants' and lawyers' fees." Most of the cases I've heard of (the Reuters piece includes more) are of people who paid penalties under the voluntary disclosure program or had to spend a lot on accountant fees to get things straightened out.
And there's still the stress of worrying if a minor mistake out of ignorance when I send the information to my accountant might still end up with huge penalties in the future.
Well, obviously they can't. This is especially so for American citizens who are citizen by blood, have never set foot in the US, and have no family to visit.
But notice how they've been working on new rules like FATCA that go after the citizen's bank, assuming the bank does any sort of business in the US?
For all I know, in 10 years the IRS will force the bank to extract penalties directly from someone's account.
It seems rather strange to rescind citizenship because of tax issues, aren't there qualified tax advisors that can handle all of that for you? At least here in Germany they are quite affordable and usually pay for themselves because of the tax savings you get due to their advice. If you consult one you can also be rather confident that you don't accidentally forget about some new regulation.
For many people it isn't about taxes. It's the fact that due to FATCA they can't even have a bank account in the country where they have lived and worked for many years. Banks in some countries have closed the accounts of US citizens due to the cost of compliance with FATCA. Imagine suddenly being unable to cash your paycheck or pay your bills because as a US citizen you are a pariah to the banks of the country in which you live..
Cashing a paycheck is largely non-issue as cheques are almost gone in Europe (except France, UK and Ireland - but they're soon to be gone there too) - see https://en.wikipedia.org/wiki/Cheque#Europe
But it makes the problem even bigger, because there is a push to go cashless (like fines if you pay cash over a certain amount - starting around 10k euro) and it's working - Sweden has 40% less currency in circulation than 10 years ago.
You need a tax advisor/accountant who is qualified in both the US and Germany and has knowledge of cross-jurisdiction issues. These people are expensive. Until now, only big corporations needed such advisors.
In Germany they are commonplace because the German system is the most intricate snake nest of paperwork and bureaucracy. Love the country, but jesus christ how could the system ever be navigated by one person, let alone a foreigner?
Is Germany really as convoluted, or more convoluted, than the US case law, the patchwork of local tax legislation in the US, or the US tax code, for example? I never understood how those things could ever be navigated by one person.
My ex and I used to use the same accountant to file our taxes. As a Canadian citizen, our accountant charged me $100CDN, my ex who had joint US/Canadian Citizen was charged $500-$2000CDN depending on the year and the amount of work that needed to be done.
So, yeah, there are qualified tax advisors who can help but it's painful.
and even after that $2k is gone every year, you're still not sure you can't be fined.
I've had to fix my taxes every year that i had paid Ernest & young to prepare them for me. had i trusted them blindly as most people do, I'd be subject to a couple $20k fines. of course, those depends on you being big/of interest enough to be bothered by the irs. but i like to have clean books and not count on luck.
That's the real problem with the IRS. I've made mistakes on my taxes before and got a "Oops, you owe us $2000 more, pay by XXX to avoid interest and penalties" from the CRA. The IRS jumps straight to large fines and penalties, especially for ex-pats.
For simple cases like a German with only German income filing in Germany, yes. But you do that yourself, if you spend a few hours reading up on the deductions. In the case of the OP, there is no 'upside' (i.e., potential to get a return if your deductions are high enough); it'll cost you if you made any money, regardless of whether it's been taxed already elsewhere. Plus what the others have said.
What do you mean by "austerity"? The US government has spent $8T under Obama in new debt (and that beats the previous record set immediately before by George W Bush- it's not a partisan thing, both parties over spend.)
As an american who has lived overseas, I totally agree with you about FBARs, it's beyond unreasonable.
The FBAR requirement is not new. It's been around for decades. FBAR is part of the Bank Secrecy Act form 1970. The problem is the $10K threshold is not indexed for inflation.
The reason the fines are so high is to catch criminals & tax evaders.
If you have a couple of hundred in the bank you don't have a filing requirement anyway.
"3. I understand that:
(a) I will be billed for the cost of my/our transportation no greater than the amount of a full-fare economy flight, or comparable alternate transportation, to the designated destination(s) that would have been charged immediately prior to the events giving rise to the evacuation.
(b) My obligation to repay my loan will not be considered paid in full until it clears through the account of the Treasurer of the United States. (c) Until I have paid my loan in full, I and all listed U.S. citizen family members will only be eligible for a limited validity U.S. passport.
(d) If my loan is in default, I and all listed U.S. citizen family members will not be eligible for a limited validity U.S. passports.
(e) My loan will be subject to interest, penalties, and other charges for late payment as directed by law and regulation.
(f) I will be liable to pay any costs for collection."
If you're interested in reading the State Department Budget:
You'll notice that US Citizens Services is self-funded from fees collected from Americans using their services. I'm not saying that's wrong or right, but by comparison, the Social Security Administration doesn't charge fees for services.
In the Facebook group Citizenship Taxation, FATCA and Citizenship Based taxation are the key topics. There are countless stories of double taxation (despite normalization agreements, as those agreements don't cover certain taxes like French Social Charges.)
My primary complaint about Citizenship Based Taxation is that Americans abroad have no representation. You register to vote in your "state of residence" -- so while you can just pick a state at random if you want, the fact is that we do not have representation because the representatives from a state represent residents of that state. It is illegal to register to vote in a state in which you aren't resident. To register to vote as an overseas American, you effectively have to commit fraud.
There's also the related issue of "Accidental Americans" -- these are Americans who became Americans by virtue of birth to American parents even if they have never set foot in the US. Many of them don't even realize that they are Americans -- however, they have FULL tax liability to the United States on all their income for their entire life. When they open overseas bank accounts, banks often discover they are a "US Person" and thus their accounts are subject to either not being opened or subject to seizure by the US treasury department for failing to report the account per FATCA. Violations start at $10,000 per incident. Here's an article about those penalties: http://money.cnn.com/2015/04/01/pf/taxes/irs-penalties/
My opposition to Hillary Clinton and Bernie Sanders is based exclusively on their support for FATCA (Bernie voted for it) and Citizenship Based Taxation. Clinton was the one who introduced the $450 citizenship renunciation fee (now raised to $2300.) Democrats Abroad is on record opposing Rand Paul's repeated bills to repeal FATCA. They also oppose the lawsuit challenging both FATCA and the constitutionality of citizenship based taxation.
I know this was a long rant, but this issue is one I face continually and it has harmed a large number of people for minimal benefit.
The myth that American citizenship has "value" to an overseas American is just that.. a myth.
Blows my mind that you people can't even vote when living abroad. As a Swiss, the embassy registers me in either my home canton or my last residential canton for votes (i.e. all the people referendums) and elections. They send me the voting letters to my Japanese home address. Free of charge.
Things like this and the Flint water scandal make me want to never work in the US, even if it's just a year. Dealing with your tax authorities? No thank you.
They send me the voting letters to my Japanese home address. Free of charge.
I get letters like that, too, also addressed to Japan but bearing a conspicuous bald eagle. An American citizen is a resident of the last state one had legal residence in for voting purposes even if one has no particular intent to return to it. One's friendly local State Department employee will happily confirm this:
For voting purposes, your state of legal residence is generally the state wherein you resided immediately before leaving the United States, even if you no longer own or rent property or intend to return there in the future. Twenty-four states and the District of Columbia specifically allow U.S. citizens who have never resided in the United States to register where a parent would be eligible to vote.
I'm a US citizen living in Sweden. I still vote in the US, as if I were a resident from where I used to be. In fact, I have a ballot for two municipal offices on my desk right now. (This is the second ballot I've gotten this year. The first was for a school bond. The US has a lot of elections.)
In reference to briandear's comment "It is illegal to register to vote in a state in which you aren't resident", that simply isn't correct.
However, I don't know what happens with Americans who were born overseas and are citizens because their parents were citizens, but who have never been resident in the US. Ahh, https://www.fvap.gov/citizen-voter/reside gives details.
He's right and wrong. Living in Sweden, you cannot just decide to register to vote in New York City or Minneapolis just because, as you don't meet the criteria to register.
But, once registered, you can vote as an absentee indefinitely from wherever you came from.
I'm not sure how it works in other situations, but I know that a few of my friends who joined the military moved to Texas and New Hampshire, as the military treats you as a resident of the state in which you enter service for tax purposes.
I'll quote briandear more fully: "so while you can just pick a state at random if you want, the fact is that we do not have representation because the representatives from a state represent residents of that state. It is illegal to register to vote in a state in which you aren't resident. To register to vote as an overseas American, you effectively have to commit fraud"
None of that is right. You cannot pick a state at random. The representatives are also there to support the overseas voters and citizens. And you do not need to be a physical resident in the state in order to register to vote overseas in the state. Moveover, registering as an overseas voter is not effectively committing fraud.
So I disagree with you. briandear was wrong on all points relevant to the snippet I quoted. Otherwise, I think your first two lines make the same points I made.
However that doesn't account for State laws which, many are explicit -- the country in which you reside. I know that isn't how it works in practice, but technically, if you aren't a resident, you aren't a resident -- regardless of your parents.
Correct. But you don't need to be a physical resident to vote in a state. (Nor can you pick a state at random.) Here's what the government says, from https://www.fvap.gov/citizen-voter/additional-info :
> Citizens residing outside the U.S. may not arbitrarily choose which State to declare as their legal voting residence without meeting the State's residency requirement. The following are basic guidelines to follow in determining voting residency:
> * Your "legal State of residence" for voting purposes is the address where you last resided immediately prior to your departure from the U.S. This residence remains valid even though the citizen may no longer own property or have other ties to their last State residence and their intent to return to that State may be uncertain.
> * Voting in an election for Federal offices only may not be used as the sole basis to determine residency for the purposes of imposing State and local taxes. If you claim a particular State as your residence and have other ties with that State in addition to voting, then you may be liable for State and local taxation, depending upon that particular State law. Consult your legal counsel for specific questions or situations.
The qualifier "for voting purposes" is why there's no fraud.
Kindly point to the relevant state law which requires you to be a physical resident of the state, and thereby disallows deployed members of the military and overseas voters from voting in the state. There may be some, but I've not heard of one.
In any case, your complaint was about the lack of representation in Congress for overseas citizens, excepting by those who fraudulently declare residency in the state. The Uniformed and Overseas Citizens Absentee Voting Act says the state must allow overseas voters to vote in federal elections, and therefore do have representation, and without resorting to fraudulent means.
Thanks. I can't believe people on HN are defending FBAR. Go and take a look at the online form. It is disgusting how intrusive it is. I thought HN is supposed to be opposed to government intrusion into privacy.
There are many different scenarios which the law as it currently stands do not adequately cover for.
Scenario:
* Parent gains US citizenship through immigration. Parent inherits from grandparents.
* Person gains US citizenship through immigration. Person inherits from parents foreign bank accounts.
* Based on my understanding, US now has a claim on monies which have at no point entered the US, nor have been derived from US related activities.
* This is crazy.
I'm totally fine with paying taxes on income derived from being in the US but to have to pay US taxes on income derived elsewhere is just insane overreach.
I'm not a tax expert but don't think the scenario you describe is correct.
In most countries when you inherit it's the estate that is taxed and generally the estate is taxed in country of domicile of the estate rather than citizenship of the recipient.
In your scenario the estate would would be taxed by the country of domicile, and then the remaining money transferred to you. If you were a US person then you would be taxed on any interest or capital gains from that point onwards.
That said this kind of thing is generally fairly complex (determining country of domicile for example is not obvious) so generally you would involve an accountant or tax professional.
To be clear, the money is not intended to transfer into a US bank account. So for all intents and purposes, it has remained outside the US and will continue to do so.
The point being that the US has no business trying to tax income generated from funds that has never entered the country. Residence based taxation (like the rest of the world) would address this immediately.
Almost all countries tax foreign income of residents. In your example you would be taxed on gains beyond the initial amount in all countries that aren't considered to be tax havens.
(The non-domiciled rule in the UK being one notable exception)
You're wrong about voting: americans living abroad register in their last state of residence, and can vote in those elections. It's not illegal to do so. Most states have programs specifically to assist overseas voters, and the federal government provides overseas voting support to americans living abroad through the FPCA program. No fraud is committed.
I am able to apply for Czech citizenship as I have been in the country for more than 5 years. I now have to pass some language exams and interviews. I hope that the fact that my grandmother is Czech will help.
Will help with the language, or with the bureacracy? I'd be surprised about the latter, but I'd also be surprised if they gave much trouble to an educated productive individual. Hodně štěstí!
My grandmother is from Prague. I didn't actually "decide" to move here. My mother offered me a house that she was to inherit in return for comming to take care of an eldery aunt. It was a deal that I couldn't refuse...
To my knowledge there's treaties with the vast majority of countries to avoid double taxation if you're not making more than a very large amount of money ( filed taxes last year and ended up with a giant goose egg)
Further, these tax treaties differ from country to country and don't always offer the same protections. Here, read the 42 page US/France tax treaty (https://www.irs.gov/pub/irs-trty/france.pdf) and try to figure out how you'd be impacted if you were living in France.
We expats don't just have to hire accountants to do our taxes, we often have to hire international tax lawyers, EVEN IF WE DON'T EARN ENOUGH TO PAY US TAXES!
Studies have repeatedly shown that the majority of expats are abroad to find a job, to teach, to volunteer, or for love. We're taxi drivers, waiters, English teachers, farmers, computer programmers, and so on. We're normal people who are being massively screwed by rhetoric in the US.
> We're normal people who are being massively screwed by rhetoric in the US.
Yup. Same goes for normal people who move the other way. The anti-foreign(er) consensus in the US political system/debate is almost as bad as the "tough on crime" madness.
And of course that's reflected in what people think. I remember being in a discussion after an interesting EE380 session (so not exactly bottom of the pile) and one of the guys started ranting about the evils of H1Bs driving down wages. I mentioned I was on an H1B and that what he said was illegal. He asked me how much I made, I asked him to guess. He mentioned a number. I said "multiply by at least 3". He kind of shut up after that...
>I mentioned I was on an H1B and that what he said was illegal
The problem is that some companies break the law by playing around with job descriptions and job duties. There are people who aren't against immigration but who are against the H1B visas.
But the problem there is companies breaking the law, not the H1B visas, the people or the companies that use them legally.
And of course the knee-jerk reaction is to make the laws even more draconian than they already are, when a significant portion of the problems are caused by the very draconian nature of the current laws (and non-enforcement against companies that flout them).
> The United States has entered into agreements, called Totalization Agreements, with several nations for the purpose of avoiding double taxation of income with respect to social security taxes. These agreements must be taken into account when determining whether any alien is subject to the U.S. Social Security/Medicare tax, or whether any U.S. citizen or resident alien is subject to the social security taxes of a foreign country.
You'll notice that's a much smaller list of counties.
(When I went to the local Swedish tax office to request a copy of the declaration that I needed to include in my US tax forms, to say I was covered under the Totalization Agreement, they didn't know at first what I was talking about. Asking for the form also must have triggered something, because a month or so later I got a phone call from the Swedish tax office asking for why I needed that information, and asking for a copy of my most recent US tax forms.)
As an expat myself I always had the ability to get these services from my employer, in some cases I have even insisted that this will be part of the employment contract just like any relocation package.
Yes, but the legal risk is that if you don't fill out the forms right, then you have your assets seized and you get a huge fine. It has nothing to do with how much you pay and everything to do with how good your accounting is.
There are treaties with some countries, but most of these treaties have "reverse loopholes." E.g., on any freelance income, a 15.5% Social Security tax from the first dollar, with no exemptions. Also, you pay the higher of both countries taxes for each kind of income. E.g., if the US has lower taxes than the other country in general, but higher taxes on cap gains , you pay the US the delta on the cap gains.
American citizens have to pay $2,350 to renounce citizenship? What kind of paperwork costs that much? (Or, why not just add more paperwork and charge $100K?)
> 1. Consular officers must confirm that the potential renunciant fully understands the consequences of renunciation, including losing the right to reside in the United States without documentation as an alien.
> 2. Consular officers must verify that the renunciant is a US citizen and they must conduct a minimum of two intensive interviews with the potential renunciant.
> 3. Consular officers must review at least three consular systems before administering the oath of renunciation.
> 4. The final approval of the loss of nationality must be done within the Directorate of Overseas Citizens Services in Washington, D.C. After that, the case is returned to the Consular officer overseas for final delivery of the Certificate of Loss of Nationality to the renunciant.
> Also, despite what the State Department says, I did not have “two intensive interviews”, unless two interviews at a window open to view of all waiting in the Passport Section at the London Embassy count. These were to make sure, first, that everything was correct on the (many) forms I had sent in, and, second, that I understood the seriousness of the step I was taking and finally to swear/affirm my renunciation. I thought it was all rather less intensive than it should have been, considering the seriousness with which I had approached it.
> the State Department notice gives an estimate of a consular officer’s time at $135 an hour working for 20 hours.
and confirms:
> “The questions are minimal and I didn’t spend more than 15 minutes at the window either time. It’s not intensive. They ask you: ‘Are you aware of the ramifications of your actions?’ And ‘Are you doing this of your own accord?” she said.
Given some of the stories of phone calls to Comcast's cancellation departments it sounds like renouncing your US citizenship is easier, but definitely more expensive.
I'm pretty sure I remember reading an article about what happens when you renounce your US citizenship, something along the lines of you being taxed for any assets you have (in the US) as if you had sold all of it on the day you give up your citizeship, please someone correct me if I am wrong, I will try find a source.
"To recap, if upon giving up US citizenship you own assets with unrealized gains of less than $626,000, you will not owe exit tax, no matter how wealthy you are. If you are required to pay tax it's less tax than you would have paid if you'd stayed in the U.S. and sold the assets. Plus, if any asset you pay exit tax on continues to rise in value post-renunication, all those additional gains are yours." [1]
Co-founder of Facebook had to pay taxes. He rescinded citizenship just before IPO when the assets were worth considerably less and just had to pay lower taxes.
He only became a US citizen as a teenager, so wasnt strongly attached to the US.
http://www.bloomberg.com/news/articles/2012-05-11/facebook-c...
When I was at the consulate looking at prices they had posted on the wall, they charged you that same amount if you wanted any evidence of your citizenship renunciation... So in total more than $5k.
Also from what I remember you are still required to file and pay taxes for five years after you renounce your citizenship...
I am British, and am married to an american. My wife moved to the UK and has never worked since. I had no idea about her obligation to file anything. She's been here for over a decade.
Like a lot of people we use a joint bank account. My salary, and anything else goes in there.
A couple of years ago I sold my flat in central London, and had 400K (600K USD) in there at various points. I have no idea how to bring my wife into compliance, as if I do, she will be expected to hand over 25% of the maximum balance of this account for every year it was undeclared to a maximum of 5 years. I.E. 125% of the maximum balance!
She remains unaware, and I don't file for her. We'd risk losing our house (brought with the proceeds of the previous sale), if I attempt to fix this. I live in absolute dread of the IRS, and what they may do to our happy family.
If you are both concerned, she can file back FBARs with a letter of explanation as to why she hadn't filed them (I had to do the exact same thing). I wasn't fined, and I was scared as hell.
Yes, this is one person's story. Personally, if you can, I'd get in touch with a tax solicitor and get a real professional opinion on your options, including how to insulate your assets in the case of any idiocy by the US.
One thing to keep in mind is that as stupid and horrible these laws are, they aren't meant for us. They're meant for real, actual tax cheats, and FINCEN has more interest in them than someone who's been ignorant and is now trying to make it right.
I'd stay under the radar. I have dual citizen friends (Australia) who have been there for decades and don't file and don't have a clue about it. They visit US frequently. This law deserves no respect.
If you lived in your previous home for at least 2 years, then you'd take it's original sale price plus closing/brokerage/etc costs as your "basis". Then take your later sale price subtracting those same costs. You get a $250,000 credit on profits.
So to me (a complete layman who's maybe not very good at taxes), that means if I buy a house for $200,000 plus 5% closing costs, my original expenses were $210,000. I later sell it for $450,000 minus 5% closing costs. That's $427,500. I've made $217,500 for holding onto the asset for two years. I should probably play the lottery. ;-)
Because I'm under the $250,000 single filing credit ($500,000 for joint filing couples, but I'm not sure how that'd work in your case since you're not a US citizen), I don't owe anything.
Say I did really well and made $400,000 in pure profit though (selling my $210,000 in the neighborhood of $600,000+).
You still get the credit so your taxable profit is $150,000 (assuming the joint filing credit wouldn't apply). That's taxed as capital gains. Not income. Which is a regressive tax. The highest rate is 20%. That'd be a $30,000 tax bill.
This all assumes you even put her on the title for the old property. If you didn't, then the sale doesn't mean anything necessarily. That she had access to the money through a joint banking account after the sale might complicate things?
In general I've found the IRS to be very helpful. They're not interested in prosecution (IME). They just want their due. And they're pretty flexible in making that happen.
Once upon a time I owed $15,000 in taxes from previous contract work, and hadn't filed in a few years because I was scared of the consequences. That's about the worst move. By not filing I racked up something like $1,000 in non-filing penalties each year as well as paying 10% interest on the amount owed.
When I finally did get my act together and contact them they waived further penalties, suspended the interest on the amount owed and set me up with a $300 a month payment plan.
There are a lot of horror stories out there. And bad things do happen to good people. But I'd like to imagine that most cases work out more like mine.
If I were in your position, I'd make it a priority to talk to a tax attorney, being sure they don't have a reporting obligation. It probably won't cost more than a few hundred dollars just to get some advice. Then I'd get a second opinion. Once I had some confidence I had a grip on the situation and how it was likely to play out, I'd talk to the IRS on my own, get on a payment plan if necessary, and put it behind me.
I'm not sure it applies in your situation, but stateside, simply avoiding filing properly is about the worst thing you can do. It doesn't just go away on it's own. That only makes it worse (interest and penalties).
But you know, I'm just some random guy on the internet. Figure out if tax attorneys have a reporting obligation and talk to one maybe? Good luck!
The problem is not that I made a profit in selling my house, it is that my wife had money in a bank account at all.
As she didn't file, she didn't know that you need to file an FBAR annually for each foreign account. And the penalties for not doing so are those mentioned above 25% of the balance a year for 5 years.
and there are plenty who do file who don't know to file an fbar too.
The issue with the FBAR is the transfer of the money from the house into a bank account.
If the money was in an account with the US citizen's name on it for any amount of time, such that the sum of all accounts with the citizen's name was over $10,000, all accounts must be reported.
Upset about this issue and want to make a positive difference rather than debating technicalities or simply waiting for the other shoe to drop?
It may be no surprise that FATCA and FBAR present several consitutitional issues. Chief among them are the following:
-As the IRS can unilaterally sign unauthorized pseudo-treaties with foreign governments, the Senate’s role in ratifying treaties is bypassed
-Fourth amendment: Private financial data is collected indiscriminately
-Eighth Amendment prohibiting cruel and unusual punishment, as well as excessive fines, may be leveraged when compliance is not perfect, and without Rule of Law provisions to ensure any protection for the accused.
(My recapitulation of points in [1] )
Thankfully, several large scale legal challenges on exactly these grounds are now underway- by Sen Rand Paul and 6 other expats [2] , and perhaps even more promisingly, by super lawyer Jim Bopp (who took down Mc-Cain Feingold [3]).
You can also donate a small amount to support the latter case: https://fatcalegalaction.com/contribute/
Thanks for reading, lets not give up hope, and remain fired up to the correctness of this cause because, in the words of Bopp - “The U.S. Constitution protects every citizen’s liberty and freedom, while FATCA undermines both,”
1. The IRS isn't signing binding international agreements, they're agreeing to cooperate with foreign governments in the reporting of financial assets, which is well within their legal privilege.
2. The fourth amendment doesn't apply to data you're legally compelled to surrender to the government. By your logic, every form 1040 that's ever been filed is a fourth amendment violation.
3. The eighth amendment has almost never been used in a constitutional case involving excessive fines. When it has, the court has primarily used it to prevent pseudo-fines that aren't really called fines in order to skirt the eighth amendment.
Sure, FATCA might be annoying, but a legal challenge has almost nothing going for it. Don't get your hopes up.
No one running for any office cares one bit about Americans overseas.
It's very easy to get support for 'sticking it to those tax dodgers overseas' and very hard to get people to care about the tax situation of people they don't know and feel they can't relate to.
"The US Treasury worked tirelessly to address many of these problems, and most have been resolved. If there are still problems with the law, then I believe Congress should hold hearings to see how it can be improved."
I bet they are wondering how to stay motivated on this one. Well a minor update to the legal system should fix the problem:
Welcome to Congress, we have now designated you a "US Congress Person" for filing purposes.
Being or having been a Members of Congress will require you to file all forms that could be requested of any "US Person".
In cases like FATCA you will also be required to disclose all accounts in your country of residence to meet our test of equivalence for "US Persons" abroad. Banks in the US will now be required to follow all procedures for FATCA for the special case of "US Congress Persons" or face 30% penalties. If Banks are unable to establish whether account holders are "US Congress Persons" they shall pay 30% penalties on all US sourced income.
The penalties for failure to file any form as a "US Congress Person" shall be no less than the highest established for other "US Persons".
Being convicted of some crimes and failures to file may limit your time in office but does not change your status and obligations as a "US Congress Person". If (Ex-)Congresspeople would like to renounce their citizenship they will automatically face the maximum 10 years of continued filing with the IRS as provided by the current regulations. "US Congress Person" like "US Person" can not be renounced separately.
Children of US Congress Persons shall inherit all filing birthrights of being a "US Congress Person".
(edit- fix mis-attribution of renunciation/IRS filing issue to FATCA)
This affects my girlfriend. She has a dual passport but only lived in the US to the age of six months. We are are British but live in Spain which already makes for complex tax arrangements, and this on top of things is just crazy. How the hell does the US think it has the right to tax people who haven't lived there for over 30 years?
That's debatable but as the article notes citizenship-based income tax has been part of US law for a long time without that much issue (the standard deduction is already pretty high, it's just a pain in the ass that you have to declare it but most expats have been living with that for a long time).
They are citizens of our country and are therefore responsible for funding the government. They have the right to just move back to the United States and enjoy the fruits of our country. Why shouldn't they have to pay up?
Taxes aren't a payment for services rendered.
If your girlfriend doesn't believe herself to be an American she should renounce citizenship. But you are asking to have her cake and eat it too.
Because 1) the question is why the US - unlike every other country except Eritrea - has this policy, 2) it's difficult or at least expensive to renounce citizenship, and 3) it's only been in the last 10 years or so that many Americans have even heard of this requirement.
As you can read in this thread, it costs over $2,000 to file renunciation, and your taxes need to be in order. Resolving the tax situation in this case sounds quite expensive. Oh, and I think you have to pay taxes for up to 10 years after renunciation, and you can't renounce until you're 18 years old.
Suppose you were born in the US while your British parents were finishing up a college education. You left the US when you were 6 months old. You've not back to the US, you have no US relatives, you don't know anything about US taxes, or Selective Service requirements, or other obligations of US citizens, and have no plans to even visit the US. Then at the age of 40 you realize that you are under US law. You want to renounce citizenship, but learn you'll need to pay $150K in penalties, even though you've been paying UK taxes all your life and would never have needed to pay US taxes had you filed. You only have $50K in savings.
What do you do, and how do you think you would feel?
Every country in the world bar the US and Eritrea don't tax their citizens who live abroad for so long. So it's certainly the norm not to do this, whether you want to call it the government's right or not.
In January, I got a tax refund from the British government, since I'd been paying tax on my income at a rate that expected me to earn that amount for the whole year. Claiming that was the first tax return I'd ever completed, i.e. the first time my taxes weren't correct automatically.
My only remaining "asset" in the UK is my student loan, and some money in an account to make the payments. I do not expect to communicate with the British tax office ever again.
Does your girlfriend have access to services as a US citizen? Such as embassies, entrance to the US without a visa, or evacuation in case of war? Who should pay for those services if your girlfriend doesn't want to?
You say this like other countries don't also offer those services. Almost every western country does, and none of them tax their citizens abroad.
The UK embeds the cost of consular protection and embassy services into the renewal cost of a passport - approximately £15 in 2010, probably more now. It's an insurance payment that most people will never use, so it doesn't need to cost very much per person.
Citizens of a number of countries can enter the US without a visa. They don't also have to fill out tax returns in the US.
>Almost every western country does, and none of them tax their citizens abroad.
This is certainly not limited to western countries, to underscore your point. Even India evacuated its citizens from Yemen, while the US did not. [1]
On that note, India also organized the largest-ever civilian airlift to evacuate tens of thousands of citizens from Kuwait during the Iraq invasion (1990). [2]
The USA charges people it evacuates from war zones, and may or may not do so at all. It is not obligated to do so.
Additionally, if she has dual citizenship, she would get it for free from the UK anyway even if she lives in Spain.
People with British passports also have 90-day visa free access under the Visa waiver program. Unless she intends to move there, there aren't really any benefits to being a US citizen, and certainly nothing that can justify extra-territorial taxation. She gets no services from the US government.
If she's come to the conclusion that she doesn't need any of the services that she gets as a citizen, for the reasons you've given, then why is she still a citizen? Either it's worth it (including any emotional attachment) when you balance it against the cost or it isn't.
But if she chooses to retain her citizenship then she's incurring a potential cost to the US, which surely it's reasonable for her to contribute to.
What costs? If she doesn't live there she imposes no costs on the USA. If she ever returned and started imposing costs, she'd also start paying taxes.
Why is she still a citizen? The article says she's in the process of renouncing. Not done already probably because:
• She might one day need to spend time with family or elderly relatives, even if she'd prefer to stay abroad.
• The USA does not allow you to give up your citizenship for tax reasons. She's probably screwed herself here by talking to the BBC, so I suspect she doesn't know that (edit: wrong, I missed the part in the article where it says Jane is a pseudonym). If they think you relinquished your citizenship to avoid taxes they can simply levy taxes on you anyway.
• Giving up citizenship is itself an expensive process and can trigger an "exit tax" that assumes you liquidated every asset you own on the day of renouncement, including things like a home. This exit tax can itself make giving up US citizenship financially infeasible.
• It costs $2350 and can take months.
In short, the entire US FATCA system is designed to screw over expats as hard as possible. It's very hard to get out and isn't at all justifiable under any moral or ethical code I'm aware of. The only reason the US can enforce it at all is the primacy of New York in the financial system and the incredibly aggressive Congress.
Oh, and I forgot the main one of course - lots of places won't let you become stateless. You need to be a citizen of another country already to give up your US citizenship. And that, in turn, is a very long term and difficult process.
This thread was originally about 'how the hell does the US think it has the right to tax people who haven't lived there for over 30 years?' You or I may disagree with those issues, but those people having rights as a US citizen and access to US consulate services may be why the US thinks it has a right to tax them.
To quote mike_hearn's earlier comment "You say this like other countries don't also offer those services. Almost every western country does, and none of them tax their citizens abroad."
I think your argument is a post hoc justification.
Plus, "access to US consulate services" makes no sense. Many if not most Americans living overseas pay no taxes to the US. The complaint is the hassle and expense of filing the paperwork, and the likelihood or at least worry about exorbitant fines.
Finally, who do you think uses those services more - American tourists and business people, or those who live in the country?
Elsewhere leoedin points out that 'The UK embeds the cost of consular protection and embassy services into the renewal cost of a passport - approximately £15 in 2010'. That sounds like it's more equitable, and it shows that consulate services are not expensive. I pay 20x that amount for my accountant to deal with my US taxes, and would gladly play a flat $100 "I live or travel overseas" fee instead.
It was pointed out elsewhere in this stories discussion that the Citizen Services section of the State Dept is "profitable". So there's no need to levy taxes to pay for embassies. Fees (like the $2000+ fee to renounce) more than covers their costs.
I am still failing to see what rights, if any, they actually get out of this arrangement. The right to vote ... except that the only issue that concerns them is the treatment of expats, and expat votes are spread around all districts meaning they are essentially ignorable. Not worth anything.
Agreed with everything you said, but it's worth pointing out that Congress doesn't set the expatriation fees, the State Department does, which falls under the executive branch.
Ostensibly, the fees were raised as a reaction to Eduardo Saverin's expatriation for tax avoidance purposes.
Maybe thousands of people who are paying tax in the US but aren't citizens? Pretty much every country has embassies and do not tax people when living abroad.
The embassies is also for people just traveling/visiting and not living permanently abroad.
> Does your girlfriend have access to services as a US citizen? Such as embassies, entrance to the US without a visa, or evacuation in case of war? Who should pay for those services if your girlfriend doesn't want to
My wife has those! guess what we don't pay a dime because we are citizens of... the rest of the world.
For what it's worth, at least part of the problem should be fixed when the EU's Payment Accounts Directive [1] comes into effect [2]. It prohibits both discrimination on the basis of nationality (as long as the customer is legally resident) in article 15 and enshrines the right to a basic bank account in article 16.
This does not solve the other problems with FATCA, but it should eliminate at least one practical and very real annoyance for Americans living in the EU.
It just represents total capitulation by the EU - all banks will be legally required to have a relationship with the IRS and do their bidding, as turning away US persons will not be possible any more. As that's extremely expensive, in turn, those costs will get passed on to all the non-Americans. So everyone else ends up paying through higher bank charges for the costs of IRS compliance.
It's not being done for the benefits of US citizens, that's just a side effect. The goal of the Payment Accounts Directive is to ensure that every EU resident has access to banking services.
This is exactly how the IRS treats all non-resident US tax payers. My ex, a joint Canadian/US citizen, had a problem with her taxes one year. The CRA (Canadian Revenue Agency) sent a letter that basically said "You appear to have made a mistake on your taxes, we think you owe an extra $XXXX. Check with your accountant, sorry for the bother if this isn't correct." the letter from the IRS basically said "You have defrauded the US Government of $YYYY. You will be arrested if you return to the US. You will be extradited if your country of residence supports extradition for Fraud. Fraud of this amount can result in <list of horrible penalties>"
Her accountant cleared it up in a few days, apparently someone at the IRS had made a mistake about Canadian Tax Law and reported the problem to the CRA which didn't verify it. It was a scary couple of weeks until we got the letter from the IRS which said the taxes were fine but included a warning about not letting this happen again.
Whatever happened to innocent until proven guilty? People make simple mistakes all the time. With something as bloated and obtuse as the US tax code the margin of error for honest mistakes is drastically increased. Criminal action should be classified as preemptive malicious intent. Glad to hear things worked out to you. Props to the CRA for it's professional conduct.
Also, many parts of the tax act have grey areas where even the CRA/IRS is unsure. You can call the CRA/IRS several times and get different opinions on a situation depending upon which agent you talk to.
So, I know a us born billionaire who rescinded his citizenship last year to avoid fatca.
He has successfully evaded both the US and UK tax authorities to the tune of half a billion or so, he tells me.
The guy gives crazy amounts to philanthropic causes instead. He doesn't want his hard earned wealth pissed away by clueless bureaucrats.
So. Anyone who tells you fatca has been a success is full of it. It penalises "normal" people, and the evaders keep on evading. Uruguay is where they've all now got citizenship.
He had to pay an exit tax on all his unrealized gains at the moment of rescinding citizenship, so it's almost certain that his taxes were much higher if he did so last year.
Details please, or it didn't happen.
Just for your own information: tax avoidance is legal and expected. Tax evasion is criminal and can result in prison. The distinction is that tax evasion is when you misrepresent the facts in your tax filings.
Actually, doesn't own a car, and spends most of his time in third world nations doing said philanthropy - but I'm not here to talk about his relative merits, just that fatca is ineffectual.
so he just earned all his money without using any government built/administrated infrastructure or any technology that was developed using government/tax money or any common good? I'm impressed. Must be hard developing your own internet, electrical network, build your own road infrastructure, legal system and police enforcement, schools and hospitals for your employees and in the end still end up billionaire.
As much as we like or dislike it, as a matter of fact we all use common goods and services provided by the government. For better or worse.
Perhaps some of those assumptions that you take to be axiomatic regarding the role of taxation in society, he did not agree with.
Use of public resources does not obligate you to pay taxes. The enforcers with guns obligate you to pay taxes. If you can escape the enforcers, you can escape the taxation. And that guy escaped the enforcers.
Also, you may want to take a closer look at the ownership and maintenance of communication networks, power grids, and hospital systems. Many of the so-called "public utilities" in the US are actually for-profit corporations that sometimes have to answer to a government regulator if a customer complains loudly enough. In fact, the only federally owned power grid company that I am aware of within the US is the Tennessee Valley Authority (though plenty of hydroelectric dams elsewhere are also federally owned), and it still buys 10% of the power that it sells from privately owned sources. It should also be noted that the TVA is not supported by taxes, but actually turns a profit.
As tax dollars are also spent on such meritorious projects as the Tuskegee Syphilis Experiment, the Vietnam War, the War on Drugs, the War on Terror, the F-35 joint strike fighter, domestic surveillance networks, eminent domain abuse, civil forfeiture abuse, forced insurance schemes, chronic fiscal mismanagement, and countless others that an unfortunate minority of voters may consistently object to, I suppose that someone who avoids or evades paying taxes will have to replicate those things on his own as well.
If you tie an ethical obligation for paying taxes to anything a government does, you necessarily imply that withholding payment is an ethical means of protest against anything you object to the government doing, in proportion to the amount it spends on doing that thing. That strays dangerously far from the realpolitik situation, where your government will take its pound of flesh from you, whether you like what it does with it afterward or not.
The heart of the matter is that anyone or anything with an obscene amount of money has to eventually deal with London and New York, and the latter connection provides the access point by which the US IRS can bully and browbeat international banks into complying with any arbitrary and capricious rule that the US cares to institute, with the threat of losing an extortionate portion of any quantity of their money that passes through New York.
Many Americans suffer from the common delusion that life should, in some way, be fair, despite all available evidence to the contrary. This fuels all sorts of irrational outrage and bad behavior. In this case, expatriates are left to wonder "why is the US government spending so much effort on screwing me over for no reason?"
That's sorta the point. Expats aren't using the roads those taxes are paying for. That's why every other country in the world, aside from Eritrea, doesn't tax you when you're living abroad.
Yeah those must be some very long nights in the office. Makes me wonder where my billions went the many days I worked 9AM-3:30AM launching websites. Lost my sanity and health, but didn't even receive my million.
> The guy gives crazy amounts to philanthropic causes instead.
This. As a someone who leans libertarian, folks give me the "you must be greedy" look when I mention that I have an issue with income taxation. Not at all - like your friend, I'm rather selective about where I donate my money - to causes that matter to me. I'm a generous person and consider the coercion of the state to be neither altruistic nor efficient.
I'm honestly more offended by the implications that bureuacracy is a poor value proposition. Social security has minuscule overhead, government healthcare has far lower $ / covered individual than most private insurances with equal or greater satisfaction rates, while a number of private philanthropies piss away a large % of their receipts on fundraising & administrative overheads.
Bureaucracy does tend towards bloat and failure, both in the private or public sectors. I can quibble with your examples (I don't think they're appropriate), but even if we allow that they are indeed successes, for each one I can find a handful of very consequential failures (DoD, VHA, HUD, etc). Consider especially where government is tasked with providing a service, instead of shuffling money around to pay for it. This is admittedly a US-centric perspective, but why should I want to trade our poor governance for, say, European institutions with their attendant sclerosis?
The problem is often how the money has been made at first place. Bill Gates might be the biggest philanthropist in the world he didn't think about ethics that much when he ran Microsoft like the mob.
So you took advantage of a system paid for by others and then decided you wouldn't contribute back. That's fine, but also pretty much the definition of greedy/selfish.
Regardless what your "hardship" story maybe, it would have been harder if everyone acted the way you do now.
What? I haven't taken advantage of anyone. I file and pay my taxes like everyone else. It's just that dropping bombs on impoverished people and bailing out corporations do not align with my personal values. How does this make me greedy?
I didn't say get rid of government. There are plenty of nations with functioning societies and services ranging from those with zero income tax to a flat tax.
... Zero income tax? Care to name one. I would hazard a guess they derive revenue from some other source as their middle class is either non existent or they have piles of oil.
So you are saying you want higher business tax? Or a flat tax rate... How does the mechanism of tax relate to your view of coercion though? Isn't it coercion regardless the rate?
I just noticed that this year if you open a bank account in most EU places they all ask you if you are a US citizen or have a green-card for the US to tick a box on the account opening forms.
I'd really hate it if my own country would force all the banks in the world to report back to the "mothership" and hence track my every move around the world for what? The IRS? Sure there are also other implications such as total control over the movements of a citizen. Can see why people renounce their citizenship. This isn't freedom any more.
The use of the term "expat" rather than "immigrant" is interesting. I read a piece in the guardian the other day which framed that distinction in terms of white vs non-white (http://www.theguardian.com/global-development-professionals-...), but it's obviously a bit more complicated than that. I don't think the two terms are synonyms, but they are very close, and once you try to pick apart the differences, I think the distinction does start to unravel.
Thought experiment: think about how the article would have felt had it been titled: "Why American immigrants are giving up their passports". I think it would have felt different, and I wonder whether an American reader might have felt slightly insulted by that change.
I'd be interested to know whether other languages/cultures draw that same subtle distinction between "immigrants" and "expats", or whether it's just some vestigial remnant of the UK's colonial past.
Immigrant: person who's moved to a new country indefinitely
Expat: person who's moved to a different country temporarily
Also a 2nd definition from my personal experience
Expat: a person sent temporarily to another country by their company. Usually they are in $300k+ a year job and their company pays their relocation expenses and their rent.
As someone who has lived abroad for 8 years of my own choice, in other words I don't fit that 2nd definition of "expat", it was an eye opener how the 1% lives because there are entire industries set up to cater to them. Before I lived abroad I never saw that but living abroad all the English magazines target those type 2 expats and are full of ads for services far far beyond anything I could possibly afford. Example: ads for apartments starting at $6k a month to $20k a month plus. So, suddenly I was acutely aware of just how big a different there is.
The term for anyone working outside of their home country is 'migrant worker'. Some migrant workers are called expats. These tend to be rich, at least on a global scale.
Many foreigners come to the US as seasonal farm workers. Almost no one refers to them as, say, "Mexican expats", even though by your definition that's exactly what they are.
While on the other hand, Madonna is one of many Americans who are called "expat" but live overseas and have no plans (or at least no definite plans) to return. There's a long list at https://en.wikipedia.org/wiki/Category:American_expatriates_... if you want to see more.
There are rich arab or chinese expats in the west, are they called immigrants? I think expats refers to the temporary/revocable/definitely-not-forced status of the immigrant. In my greek native, expat and immigrant are used interchangably (ομογενής /μετανάστης)
That said, "expat" is the wrong term for someone who renounced his original citizenship. I guess they should be called "pats" now.
In the US context, Mexicans who come to the US for work, with plans to return to Mexico after 5-10 years, are called immigrants. Thus, "immigrant workers" not "expat worker" and "undocumented immigrants" not "undocumented expats".
The same is true in Europe. The places in town where North Africans, or Iraq, or Ethiopia live are often called "immigrant communities", not "expat communities." Even when the population has no plans to return, or are even native born.
While on the other hand there are many British people who retire and live the expat life overseas where it's warm and cheap, and don't plan to return to the UK. Or Arthur C. Clark, a British expat in Sri Lanka who had no plans to leave. The Sri Lankan government created the category of resident guest status in 1975 so he could stay.
This strongly suggests that 1) your understanding isn't correct, and 2) there is a social class distinction between "immigrant" and "expat".
The distinction is the focus on old vs new. The term 'expatriate' is much closer to emigrant than immigrant, where the emphasis is more on the fact that they left their home country rather than the fact that they came to another. It also lacks the emphasis on permanency that emigrant/immigrant have.
Additionally, the term 'immigrant' is much more ambiguous than 'expat'. An American expat is clearly an American citizen living abroad. An American immigrant could either be an American citizen who moved permanently abroad, or a non-American who permanently moved to the United States.
> Cuban expatriates in America, including many who risked their lives to escape the communist island, are torn about whether to return after Havana and Washington formally reestablish ties next year. ... The surprise move, which clears the way for bilateral trade and normal diplomatic relations, also offers unexpected new options for Cuban-American exiles, who once believed that choosing one of the two countries meant forever closing the option of living in the other. ...
That would imply that someone can be an expat without believing there's a chance of returning.
> And in 1959, as generations of Cuban expatriates began to settle in Miami following the Cuban Revolution, both the city’s Cuban community and the sandwich thrived.
How do you get generations of expatriates?
My thought is that we don't like Castro, so we focus on how the Cubans "left their home country", so call them expats. While with Haitians, who don't get the same treatment as Cubans, we focus on that they came to the US, and call them immigrants.
I work at a non-US bank and we can't have US citizens as clients because of fatca.
We would like to have them as clients but AFAICT fatca compliance would cost us a non trivial amount of money for the few (but relatively wealthy) potential clients
In his case, after submitting the paperwork and burning his passport on YouTube, he chose to not get another citizenship, which means he's now stateless.
Being stateless is not a good thing. It might seem that because you're member of none you are superior to all but having citizenship is not just a tax burden, it also allows you to partake in a lot of activities (such as travel, commerce and so on).
Getting bank accounts and other goodies when you're stateless is rather troublesome.
That's wholly a matter of individual preference. I know Mike Gogulski personally and I can attest to him being quite happy having made the choices he did, and no longer being part of what he perceives as an evil empire. The tax question never factored into his decision, it was moral questions that preoccupied him.
I applaud the mans morals but I foresee some practical complications in such trivalities as child-birth, hospitalization, estate planning (and eventual execution) and so on. None of those may apply to him and he's apparently thought this through very well but the wheels of government have a very annoying habit of grinding on with or without your consent and by placing yourself purposefully outside of the system you might find one day that this can backfire. I sincerely hope he has a back-up plan if he ever needs to be part of some formally recognized entity again, it's easier to lose a citizenship than it is to gain one.
For all practical purposes having Nicaraguan citizenship does nothing for the guy who empties the wastebaskets at work. From what little high school spanish I can remember, he seems fairly happy and unconcerned about all these supposed problems you list. He might be the first stateless person in your area, but I assure you he's unlikely to be the first non-american citizen in your area to have a child or visit the hospital or whatever else.
That he's unconcerned does not mean the problems of undocumented citizens aren't real. It likely means that he's simply not going to make too much of a point of it because it is not in his power to make a change.
Surprisingly enough, the relevant State guidance does say that the US will not prevent an individual from renouncing his or her citizenship even if they do not have another allegiance, though it recommends the consular official specifically warn such people of the difficulties of being stateless.
I've only known one truly stateless individual, but he was an Air Force officer in FRY who was in the U.S. on a joint NATO program when the civil war started, so the Pentagon worked with State to give him special status. Not the usual case.
Every form I see about financial matters here in Italy has a checkbox that I must tick to state I'm not a US person. No financial institution wants to deal with them because of FACTA. An unintended consequence for sure and I hope they'll fix it. Still it's telling about the general attitude of lawmakers all around the world.
One reason I'll never seek a Green Card or any kind of permanent residency. Such a shame for such an awesome country; I'd love to spend some years living in the US.
This story hits close to home. My wife and I had wanted to buy a home in Central America (I really enjoy that area of the world) and live there about 2/3 of the time, but also maintaining a modest residence in Arizona.
We gave up that dream when FACTA became a law. The US government is basically making it as nasty as possible for citizens to live abroad.
Why is the government doing this? I think it is simple economics. Americans spending their social security checks, and savings, in other countries slightly weakens our economy.
We also love living in Arizona, so life is good, but the FACTA laws are nasty shit.
US Citizen living and working abroad buys a house for X in local currency. Later sells same house for the same amount X in local currency. That local currency has appreciated by 20% against USD in the timeframe. And the IRS computes capital gains in USD, not in local currency.
Net result: the seller owes IRS "capital gains" taxes on 20% of the value of a house that was bought and sold for the same price.
You're a permanent resident until you formally renounce permanent residency at a US embassy or consulate. Some may permit mailing in your green card, others require you to appear in person. However, the process is or was free when I went through it.
I think there are other ways of losing permanent residence, but the only guaranteed ways are when you renounce or when the US takes it from you. Either way, you better have written proof.
If you're a long-term permanent resident (8 years or more), then you're subject to the same expatriation tax rules as US citizens. The IRS agents that I spoke to were all friendly and helpful, but unfortunately none of them knew the expatriation rules. It wasn't as bad as it may sound, but it wasn't fun either.
You also have to file a preliminary tax return before you actually leave the country (informally called the sailing permit).
Anyway, just leaving the US isn't good enough when you're a permanent resident and until you're through the process you're on the hook. And don't forget to meet FACTA requirements for the year in which you gave up PR...
What sanctions are available to the USA in case of non-compliance if you do not ever return to the USA?
Personally I find all this 'citizen as property of the state' stuff to be rather revolting, and in direct contradiction of such sentence fragments as 'the land of the free'.
I don't know. My impression is that you don't officially lose your status until some US government official or agency confirms it. Presumably, you may not have intended to give up PR. Maybe you had a stroke or you were unable to meet the requirements through no fault of your own. But I'm speculating. I don't know.
As for the IRS, the rules are in the instructions to form 8854[1]:
> Date of termination of long-term residency.
> If you were a U.S. long-term resident (LTR), you terminated your lawful permanent residency on the earliest of the following dates.
> 1. The date you voluntarily abandoned your lawful permanent resident status by filing Department of Homeland Security Form I-407 with a U.S. consular or immigration officer.
> 2. The date you became subject to a final administrative order for your removal from the United States under the Immigration and Nationality Act and you actually left the United States as a result of that order.
> 3. If you were a dual resident of the United States and a country with which the United States has an income tax treaty, the date you commenced to be treated as a resident of that country and you determined that, for purposes of the treaty, you are a resident of the treaty country and gave notice to the Secretary of such treatment. See Regulations section 301.7701(b)-7 for information on other filing requirements if you are such an individual.
EDIT: These are the rules for long-term permanent residents (8 years or more). I don't know what the rules are for other permanent residents, if there even are any. But you're probably better off if you clearly state your intent and file I-407.
Can you use the systems rules to work around the system?
My guess would be "no". The rules are interpreted by the system to benefit the system. If this means that the rules are arbitrary, capricious, and inconsistent... so be it.
The definition of "US person" just linked to is not accurate for FATCA. You are still considered a US person even after you leave, because you must have had a green card, and even after that green card expires you are still a US person for another decade if you don't get it explicitly revoked:
This is why I think getting a Green Card and relocating to the US is a bad idea. The idea that I'd have to keep paying crazy amounts of taxes even if I decide to move on with my life five or ten years from now and relocate to Japan or Germany is nuts.
In my opinion working remotely from a nice and affordable country is the best bet for skilled tech workers. Right now the US market is good but maybe in the future the money will be in China. You can work for the same startups from your bungalow in a tropical country instead of having to live over there. Maybe you can rationalize moving there today because of high salaries but that will inevitably change and when that happens you might regret committing to the US.
America is one of the few countries that could get away with this, as being American has such a premium. It'd be nice to see them use their clout to force through legislation that stopped companies from playing silly beggars with their offshore profits if they wanted access to US markets.
What premium is that over say being the holder of passport from the UK, NL, DE, FR, ES, IT, CH, SE, DK, NO, FI, BE or any one of a host of other countries that don't have such crazy tax rules?
>What premium is that over say being the holder of passport...
You tell me; there's a whole article written here about how hard it is to give up the US passport. Here we have a woman who doesn't live in the country and doesn't want to pay taxes to the country, yet is torn up about not being "American". I don't get it.
Patriotism can be as deeply ingrained in people as religious beliefs. From an outsiders perspective the US seems like one of those countries where people defend it blindly like they would a religion.
I think it's important to note that, for the most part, both patriotism and religion need to be deeply ingrained in a person at a very young age for them to defend either so blindly.
US families take care of the religious aspect; US public school take care of the patriotism. If you weren't of the age where you simply don't question what you're told yet, I believe (perhaps hope?) both of these would die out in a few generations.
One of the supervisors for my Master's thesis was American but has lived in Canada since the '70s. He hasn't bothered to get Canadian citizenship. He's now retired living in BC. I'm wondering if he'll do it now.
The US economy and quality of life commands that premium.
Note - My fiancee is British and I've lived for 4 years overseas in the EU (UK 3 years, DE for 1). As the tax code as an American begins to squeeze more and more, I've become more reluctant to "pay" that premium, but there are indeed aspects of American life and opportunity that don't currently exist in the EU.
I constantly have to remind myself that people who browse HN learn strongly libertarian and are mostly well-off white males. Otherwise, saying that the US quality of life exceeds that of the UK, Germany or Switzerland is just blatantly false.
There was a time when Germany used to be the leading country in the world where almost all major thoughts and works were produced. Whether it was Literature, Art, Philosophy, Cinema, political thinking, Germany was the place to go (and because of close interactions, Austria).
Before that, it was Arab World, before that Ancient Rome, before than Ancient Greece.
Today that status belongs to America. If you want to produce anything which would make impact in the world, the most fertile ground for that is America. Even if a talent rises up say in Germany, the network effect of America attracts those individual to come to America. Maybe there is a smarter Elon Musk in South Africa, but the main point is that Elon Musk never came to America, this Elon Musk did.
I am not saying that somehow by being in America you automatically will be more likely to produce great thinking. Rather its more like being among more challenging and talented peers will bring your exposure and contribution to another level, something which isn't possible currently (even with the Internet) to be in Germany or Switzerland.
Just so I get this straight, you are claiming that America currently is the go to place for literature, art, philosophy, cinema and political thinking?
I'd accept such a claim for web scale technology and some other fields but for all of the above definitely not so much.
I missed technology and science in my list of things, but yeah that too.
If we use Nobel prizes as a metric, then US beats other countries by a wide margin in everything except Literature. (Surprisingly Germany and UK, the old world leaders still come close second, but then we ARE considering nobel prizes awarded between 1901-2014). In terms of per capita, US is ranked 19th, and UK, the only large country in terms of population ranks higher.
It's true that USA is world's third largest populous country, so in terms of absolute numbers it beats other nations hands down, but there are two things which need to be considered. If EU was a single nation with single language and no immigration restrictions, then you will get the same benefit of being in EU(400+ Nobel prizes) as much as you'd get of being in America(350+ nobel prizes), that is, more integrated intellectual networks. But EU is fragmented into different nations, and despite of being an open border, the linguistic and cultural disparities do fragment the number of people you could have been connected to.
Second point is, almost all major figures in art and literature in America have lived in NYC at some point or the other. This usually means that if you lived in NYC, there are future nobel laureates living here with whom you might be interacting. So I think that not only you need to be in America in order to access the biggest network effect of anything, you need to be in one of the larger cities like NYC or SF.
2. Where you see fragmentation, we see diversity and a richer ecosystem. Where you see cultural disparities, we see a complex interplay of different cultures over millennia. Homogeneous populations are actually at a disadvantage because they don't have that kind of activity.
> there are indeed aspects of American life and opportunity that don't currently exist in the EU.
But which are those? As far as I can tell, the only meaningful one I can see is unrestricted access into the US, and the ability to vote for the most powerful government in the world. That's not nothing, but it doesn't have much impact on most people's everyday life, unlike stuff like healthcare and pensions.
I suppose an American living in the EU does get to enjoy the best of both worlds in that regard, but is it really worth paying double taxes? Are there other aspects I'm missing?
What's the premium of having a US passport? Canadian, UK, Scandinavian, Dutch, HK, Japanese, really whatever developed nations passport seems to be a better deal.
> What's the premium of having a US passport? Canadian, UK, Scandinavian, Dutch, HK, Japanese, really whatever developed nations passport seems to be a better deal.
Exactly! I would be so happy to have a EU passport, that way I would have free travel/work access to the whole Euro zone and easier access to the UK.
That is a bit ambiguous, but it seems to be more of a reporting requirement and not the same thing. Anyways, even us expats are effected by it if we stay for more than 5 years without a 1 month break.
I've been in China for fifteen years, and haven't filed taxes for the past twelve, I think. I'm moving back to the States at the end of this year, and am deeply worried about integrating myself back into the good graces of the IRS.
Not sure if "powerful" is the right word either. It's more of a list of the best passports to have if you want to go on holidays. "Doesn't require a visa" usually means those countries don't require visas for short non-business trips (anything from 14 days to 6 months). E.g. you can visit the US with a German passport for 3 months for a holiday but it's extremely difficult to get a visa to move there indefinitely.
> E.g. you can visit the US with a German passport for 3 months for a holiday but it's extremely difficult to get a visa to move there indefinitely.
You do realise that works the same way for everybody and US visa-free entry is not a residence permit right? For instance as a US citizen you'd get visa-free entry to Iceland or Japan or New Zealand but can only stay for 90 days.
Yes, the point is that the ranking would look very different if it were based on the ease of long term residence instead of a short visit. Going from the US to Germany for a short visit is basically the same as going from the UK to Germany for a short visit, but going from the US to Germany for long term residence is much more difficult than going from the UK to Germany for long term residence.
And many countries have collaboration efforts going where one countries consular services will aid the citizens of another (usually neighbouring) country if they have no representation themselves.
For instance many EU countries embassies will give aid to the members of other EU states that do not have local representation.
One of the most important things embassies do is to give aid to citizens of their countries charged with crimes abroad.
> For instance many EU countries embassies will give aid to the members of other EU states that do not have local representation.
That's actually part of EU law. As an EU citizen, if you have no national diplomatic or consular representation in the country you're in you're entitled to help from any other EU member's embassy or consulate.
Doesn't US have bilateral tax treaties with (at least) Western European counties? And shouldn't such a treaty strive to protect American citizens from paying double taxes?
The problem isn't citizenship-based taxation, it's an odd concept but it's been there for a very long time, there's a relatively high standard deduction and IIRC your local income tax is also deductible. Expats have dealt with that for more than a century.
As the article points out, the problem is FATCA which doesn't come close to fixing the issue it's supposed to fix (income tax evasion) and completely breaks expats under the standard deduction limit.
The size of the limit falls every year as it's not inflation linked or FX adjusted. When it was first set it was truly very high and over time it's fallen to the point where now a pretty typical skilled job in a place like Switzerland will immediately push Americans over the limit.
Also, tax is complicated. Other countries often have mandatory pension or savings schemes for unemployment and these are not always recognised as such by the US tax code, meaning you can get taxed on your pension twice, etc.
Let's say I am an American citizen living in France. Why US government doesn't close a tax treaty with French and demand 20% of the total amount I pay for all the taxes annually in France?
It makes sense if it is bilateral ( US giving money to France for French people working there ) and common enough that both countries don't want to deal with the hassle.
The real problem is that the US is the odd one here. Every other country save 1 or 2 tax people income based on residence . So there is a legal clash that probably prevent any kind of sane and simple bilateral agreement like the one most of the first world countries have between themselves.
I'm surprised 10% of the comments are on the topic of Grenada-style evacuation from warzones. The total number of evacuee's vs total number of expatiates over the last couple decades must be a truly microscopic percentage.
I have a long term goal of moving to Canada; better health care system, I love winter sports and weather, etc. I personally know people in Belgium and Sweden and Ireland. Evac sounds very unlikely, and if there were a military invasion, it would probably be the USA doing it, so I'm anticipating coordination would be complicated to the point of uselessness (First cross the front lines of the battle without getting killed to enter the USA sector, then evac? Seriously?).
In addition to excessive paperwork, potentially higher taxes, loss of privacy, inability to obtain financial services (bank accounts, mortgages), Americans living abroad also deal with punitive treatment of pensions earned while abroad if they have also earned u.s. pensions and poor political representation...
I'd also suggest those of you living abroad to check out https://www.americansabroad.org/ a political advocacy group (i have no affiliation)
From the article, "In 2010, just 1,006 gave up being US citizens, but since then the numbers have risen every year."
Let's think quantitatively to see if there is really a net trend here. In the most recently reported year, there were approximately 680,000 new United States citizens through naturalization.[1] So barely more than 1,000 United States citizens renouncing citizenship is swamped by several hundred thousand new citizens each year. I am an American citizen who has spent two three-year stays working and living abroad during my adult life. I've read about this taxation issue for decades, and filed United States tax forms from my place of foreign residence, but I've never seen a good reason to renounce my United States citizenship, nor has anyone else in my family.
The most common complaint about United States policies around citizenship that I see here on Hacker News is the complaint that it should be much easier to come to the United States to work on an employment-based visa. (It's more difficult than many participants on Hacker News desire, but settling in the United States with an employment-based visa is sufficiently easy that I know people just in my own social circle here in the Midwest who have settled here from Britain, the Netherlands, Norway, Japan, Taiwan, China, India, Pakistan, Ghana, Nigeria, South Africa, Ecuador, Argentina, Korea, and a variety of other countries. Many people would like even more employment-based visas to be available, but they are already available by the tens of thousands.
Part of the problem is how difficult it is to understand what your obligations are, even if you intend to comply. And then there are things that are just plain unfair. Let's say that you live in Canada and you bought your house for $500,000 Cdn. Five years later you sell it for the same $500,000. Except during that time, due to exchange rate fluctuation, the house increased in value relative to the US dollar, going from, for example, $400K to $600K US. (Entirely possible, given how much change there has been in the two currencies over the last few years.) The US considers you to have made $200K US in speculation and expects you to pay taxes to the US on that gain. Even though there was no gain -- you live in Canada and bought and sold the house in Canadian dollars. Capital gains exemptions don't apply here--they consider this to be currency speculation. Mindboggling. And easy to get yourself in trouble over without realizing.
> "The United States is one of only two countries in the world that has citizenship-based taxation (the other is Eritrea)."
I very recently read that Brazil does this too - that no matter where you currently live or work, as a Brazilian citizen, you have to pay taxes on it to Brazil (someone correct me if I'm wrong)
It looks more like a prison:
- Follow rules (that you are supposed to somehow know)
- Forced to take on debts to survive
- Hope you don't get penalized or
- God forbid you need healthcare
It's a great country for people with money and resources. The common man is just screwed.
I wasn't familiar with Charles Rangel until I read this article..
For anyone who suspects the US is engaged in a "Buy American" (or else) campaign to sell domestic evasion/financial services, the man who apparently wants to be identified as behind FATCA seems to be the poster child of evasion the patriotic way:
I live in Japan, and when I went to open a bank account there was a lot of paperwork, including this funny form that said they would notify the American government of my address and how much money I had. I felt pretty violated by it- as if the NSA stuff wasn't enough, they now track me outside of the US. I don't make enough money to be taxed, but I don't like being tracked, either.
For all the people from HN dreaming of American immigration, be aware that 'US citizens' in this article (any anything else pertaining to taxation) should generally be read as 'US citizens and permanent residents'.
Also be aware that while renouncing permanent residency is much simpler (and you'll be sure to lose it if you're out of the country long enough), you may be exposed to significant tax liabilities for doing so - especially if you're holding illiquid startup stock.
"...foreign banks to identify US citizens among their customers to US tax authorities. The penalty for failing to do so can be as high as 30% of all a bank's dealings with the USA."
So, could any new, small bank start accepting americans as costumers but completely refuse to deal with the USA, not even a tiny transfer, or charge a 50% fee for each transaction?
> [Double taxation] has been the case in the US since the Civil War in the 19th Century
That's a fascinating detail to me, as it explains why the US, and pretty much only the US, has double taxation. I'm guessing they instituted it so Union citizens still had to pay tax even when living in the Confederacy?
I don't understand, isn't it easier to get around this by keeping your foreign bank account balance low (less than 10k) and transferring money on a regular basis to your US bank accounts to make sure it stays under 10k?
If you live overseas then you probably want to do thing like save up for retirement, or a house. While you can have a US bank account, it means taking a loss to change the money first to then from dollars.
You also have to be very careful with your direct deposit. If it goes into your local account (because it's expensive and more complicated to wire the money to a US account) and make $5K/month then you have to be absolutely sure that your local bank account doesn't have $5K in it. And be sure to watch the exchange rates!
If you sell a house, you can't put the profits into a local account but must figure out some way to have everything sent to the US. Which may not be easy.
In some countries, like Sweden where I live, the government can fill out your taxes for you, because they know how much you make - except for foreign accounts. If you have, say, $100K in a US account, drawing interest, then you have to declare it appropriately.
So no, it's not easier for the millions of Americans who live overseas to keep the bulk of their money in a US bank account.
I will also add that many (most?) US banks will not provide banking services for you if they know you live overseas. You have to maintain a US address. Even then, if they discover that despite having a US mailing address you actually reside overseas they will close your account. It's happening more frequently these days.
Wow, you're right! I looked into that just now. I figured USAA, which provides banking service to military and ex-military, and therefore likely has many members who live overseas, would be more likely to provide banking services to overseas Americans.
Reasons for giving up your US citizenship aren't officially listed, but one of the main reasons cited is Fatca - a 2012 law designed to target overseas accounts held by wealthy Americans.
I don't even have to click to know what this is about. God damn government wants to tax me despite being overseas.
Don't get me wrong here. I love my country but hot damn do I hate our government. HK or UK or Canadian passport would probably be nearly as good but without any of the bullshit.
> I don't even have to click to know what this is about. God damn government wants to tax me despite being overseas.
So turns out you don't know what this is about. It's not about the century-old citizenship-based taxation, it's about the additional legal and bureaucratic overhead of FATCA on both the citizen and the structures around them e.g. non-US banks refusing to deal with US citizens because they don't want to deal with the legal and financial risk of FATCA.
No, this is NOT primarily about taxes. It is about expensive reporting requirements -- the sort of paperwork usually done by billionaires and big corporations must be filled out by every American, even those with low-incomes.
Yes, taxes are still an issue! Look at how the Mayor of London just had to pay capital gains taxes to the US because he was born there. He sold his primary residence, which is cap gains tax exempt in the UK, and the profit exceeded the threshold in the US, so he had to fork over money to the IRS. It's a complete joke and scam.
Forms can be filled out. Look at Australia. If I want my retirement fund to be self-managed, I basically cannot because of inconsistencies in the tax treaty. And, what if I choose to live and work in Hong Kong or Singapore or the Cayman Islands? Why should the US have rights to tax my income above $100k if those states are tax-free? Did the US pay for my education? No. Not even my healthcare! The socialist states don't even do this.
The majority of people that I've read about who are complaining about the situation are not complaining about having to pay taxes, because they don't have to pay taxes. I don't have to pay taxes to the US because I don't make enough in Sweden.
But I do have to spent the time and money to have someone to fill out the forms.
I also have to worry that my bank might decide to cut me off, because they also have to "fill out forms", that is they also have "expensive reporting requirements". Even if you paid no taxes and had no problems with the tax treaty, you still might not be able to get a bank account in Singapore.
Yes, there are a lot of people who also don't like the taxes. It's an important point. But not the primary point, which is the expensive reporting requirements for both American citizens and banks which do business in the US and which have American citizens as clients.
That shows it tied with Finland and Sweden, and the only ranking it uses is how many countries you can travel to without a visa, which is a bit limited as a statement of 'power' (though it is definitely an important measure). Other important measures would be in how many countries there are consular services available for holders of a certain passport and a couple of others.
In addition to the additional metrics you mentioned, perhaps yet another to take into account is how hostile natives feel towards you when traveling in certain parts of the world--up to and including harassment, kidnapping, and (in limited locations) beheading risks.
In places (even here in Europe) where people tend to by default assume good English speakers to be American, I get better treatment by managing to convey that I'm not.
I find this topic very interesting and have been thinking about it for a few years now since I'm now allowed to get British citizenship. A few other things which might be important:
- The government and future possibility of US tax arrangements being implemented;
- How war prone the country is because one might be under the obligation to be sent to a war theatre being a citizen (not sure about this, just me thinking out loud).
Many nation-states impose not only conscription in wartime, but also universal conscription in peacetime for males of certain age. Some citizenships (e.g. Switzerland or Israel) would thus come with some pretty significant strings attached, buyer beware.
>Her voice cracks and her eyes well up. She is in the process of relinquishing her American nationality. Soon she'll visit the US embassy formally to renounce her citizenship, she says, under duress.
>"I'm very proud of being an American. It's what I am when I look in the mirror.
>"If it weren't for Fatca [the Foreign Account Tax Compliance Act] and the decision by the bank, I'd never be doing this. Never ever. It's just breaking me in half."
The US State Department's own numbers show that it is not the 1% relinquishing citizenship, It's normal Americans living and working overseas for long periods of time. These people are prevented from basic logistics required for having a life like opening and using a checking account.
I think of it this way: how insane would it be if my wife, a Russian citizen and US permanent resident who's lived and worked in the US for 12 years, could not open a checking account and was required by law to file taxes to the Russian Federation for her American high school teaching job?
It can be a huge hassle for normal US citizens living outside the US. Most banks won't deal with them because of the risks involved. As a US citizen abroad, just getting a regular bank account can be next to impossible.
I live in Singapore and when I was signing up for a stock trading account I asked what would have happened if I had to answer yes in the box that asked if I was liable to pay income tax in the US. The answer was plain: "you wouldn't be allowed to have an account with us".
I wasn't clear. I asked the question when I was signing up for a trading account, but the question was about normal accounts. Thus was at DBS which is the largest consumer bank in Singapore.
"
Jane has lived and worked in France for 30 years drawing what she calls a "humble" salary. She has filed a tax return every year even though she earns significantly less than $106,000 a year."
You are completely wrong and people with your attitude are part of the reason we expats are suffering.
Studies repeatedly show that that that majority of almost 8 million Americans living abroad moved to look for work, to find love, explore the world, do volunteer work, teach, and so on. We're largely middle class, just like most Americans back home. We're not rich (many of us teaching or volunteering are dirt poor), but we're putting up with a tax horror that Americans back home would revolt over if they had to endure it.
None of that puts her in the 1%. If she cared that much about tax she wouldn't be living in France. If you read the article you'd see it's because these people are having their bank accounts closed, or being unable to open them because of the onerous restrictions that Fatca puts on banks with expat American customers.
It sounds more as if she is having difficulty getting access to banking facilities on account of the additional reporting requirements the US insists on.
You are, seemingly deliberately, failing to understand that this isn't a 1% problem. The 1% have tax advisors and CPAs paid to take care of this for them.
This is affecting expats and accidental americans in their daily lives, even if they have no income. I am not the first to suggest it, but reread the article, and image that you earn $30K and live in france, and for some reason you're account is being closed, and you need to spend 1K post tax a year filing for a country you don't live in.
The simple solution would be to synchronize FBAR and FACTA to use the same reporting amount as this would remove the vast majority of people from having to report. $10K is far to low given exchange rates. $50K-$100K or higher would probably be a more realistic number.
My other comment (in reply to another comment) shows how I, a brit, have gotten myself into a problem with far more that 100K, without having any idea.
The best option would be same country exemption for FBAR and FACTA. Or stop taxing non-resident citizens.
If you live abroad & give up your citizenship, I think you should sign a waiver clause giving US government release of liability for any security, diplomatic services, basically anything you'd ever ask for. The US is off the hook for your safety and comfort, forever. Perhaps this is already part of the process, not sure.
IMO, depending on where you are living abroad, that might give one misgivings about turning in ones passport.
Isn't that exactly what giving up your passport does? And as long as you've acquired a new one from a developed country, you're probably better off anyway for safety and comfort (e.g. other countries may cover your medical care)
But I think that it is wrong to present this as a taxation issue. I would be fine with paying a percentage of my income in taxes. There are some benefits to being a US citizen, like that the army will rescue you if there is a civil war ;). But the fear uncertainty and doubt that surrounds these new regulations makes it nerve racking to be a citizen. Every expat I know here has nightmares about an audit comming and having all of their assets seized. And it has happened to some of them too! And that legal risk is no longer a form of taxation, because taxes are percentual (the more you earn the more you pay), but when you end up having to pay a fine that is higher than your net worth, that's just robbery.
We used to be a free nation, but thanks to austerity the 'r' had to be removed.