Before moving to the post, if you believe that Americans abroad are being treated unjustly by the United States Government: Join me on May 17, 2019 for a discussion of U.S. “citizenship-based taxation” as follows:
"What Is The Future Of Citizenship-Based Taxation?" Prof. William Byrnes (Texas A&M Law), Prof. Edward Zelinsky (Cardozo Law), John Richardson (Canadian attorney who represents US-Canada dual nationals), Kat Jennings (CEO Tax Connections) https://t.co/LP63MHEFYS
— William Byrnes (Tax Monk) (@williambyrnes) May 5, 2019
You are invited to submit your questions in advance. In fact, PLEASE submit questions. This is an opportunity to engage with Homelanders in general and the U.S. tax compliance community in particular.
Thanks to Professor Zelinsky for his willingness to engage in this discussion. Thanks to Kat Jennings of Tax Connections for hosting this discussion. Thanks to Professor William Byrnes for his willingness to moderate this discussion.
Tax Connections has published a large number of posts that I have written over the years (yes, hard to believe it has been years). As you may know I oppose FATCA, U.S. citizenship-based taxation and the use of FATCA to impose U.S. taxation on tax residents of other countries.
Tax Connections has also published a number of posts written by Professor Zelinsky (who apparently takes a contrary view).
You will find Part 1 to Part 11 of this series of posts here.
Laura Snyder discusses the “emotional toll of U.S. non-resident taxation and banking policies
Laura Snyder has written (in addition to her original four posts) a series of five posts describing and exploring “The Emotional Toll of US Non-Resident Taxation and Banking Policies“. Part 10 of this series (comments of Nando Breiter) was a prologue to Ms. Snyder’s five posts.
Now over to Laura …
“Maybe that’s the Only Way Out:”
The Emotional Toll of US Non-Resident Taxation and Banking Policies
Post 4 of 5
This is the fourth of a series of five posts relating to US taxation and banking policies as they relate to persons who do not live in the United States.
As John Richardson has reflected in prior posts, it is important to hear from people who are actually impacted by those policies and who have the courage to speak about their experiences. As John also observed, their experiences bear little if any relation to the theory. Further, their experiences belie the prejudices commonly held against them.
The bulk of each of the five posts of this series consists of comments that current and former US citizens and green card holders living outside the United States submitted in response to a recent survey. The comments are organized by prevailing theme. More specifically, each post focuses upon a particular emotion and/or dilemma that Americans commonly experience as result of US non-resident and banking policies. The comments presented in that post exemplify the experience of that emotion and/or dilemma.
Each post first presents the comments. As you read through them, the emotion and/or dilemma that is common to them should become obvious. However, in case it isn’t, each post finishes with a brief explanation both of the commonality and of its significance for any defense of US non-resident taxation and banking policies.
The comments have been edited in part to protect anonymity and in part to facilitate analysis.
“I have regular discussions with my kids about what it will mean, when they reach adulthood, to be US citizens living outside the US, and about the hardships they will face. My 15-year-old son is seriously considering renouncing his US citizenship when he turns 18. This will make me very sad but I will understand. My 17-year-old daughter doesn’t know yet what she will do. Even though she has never lived in the US she identifies strongly with the country and for her being an American is an essential part of her identity. She is weighing that against the hardships she will face. Either way, it will be a very difficult decision for her and regardless of whether she decides to keep or renounce her citizenship, the consequences will not be positive ones.”
“Living as a US citizen abroad has proven to be a challenging and frustrating endeavor. I feel as if my citizenship puts me at a significant disadvantage compared to my peers. I have had difficulty planning for retirement; I have been declined use on investment platforms; I have difficulty wrapping my head around all of the US tax law to the point that I have taken time off of work to try to get it all figured out; and I have not been able to find an acceptable tax agent at a reasonable cost to help with any of this. My US citizenship is the single largest stressor since moving [outside the United States] and I am appalled that my country of birth treats me like this. I will be renouncing my US citizenship as soon as possible if the tax situation is not fixed. Living in this manner is unsustainable.
“The whole bundle of issues with FATCA, CBT, FBARs etc is incredibly stressful. I got into compliance even feeling unsure that it was the right thing to do, considering the risk of inordinate penalties had my ‘conduct’ (i.e. not knowing I had to file) been considered ‘willful’. At this point I am filing each year, hoping that the system will change. At some point, the fact of not being able to save efficiently into mutual funds and not being able to buy and sell a house in the UK without being hit by an extra-territorial US tax means that unless something changes, someday I will have to renounce my citizenship – which would make me very sad indeed.”
“Last year I made contact with the US Consulate to see about renouncing… I see there is little appetite for change. I see GILTI. I see the fee for renouncing quadruple… I worry about…harsher penalties against US citizens abroad and their financial interests…I worry about the financial blackmail I will live under if I keep my US citizenship, AND my relationship with my partner, who is the major financial contributor to all our investments and our home. [On the other hand,] I still have family in the US….what happens if my family needs me for a medical emergency and I cannot make myself available? But maybe that’s the only way out.”
“Most foreign spouses refuse to declare their assets to the IRS, so we cannot hold joint bank accounts; important assets like house and car are only in my husband’s name. Such a situation could be dangerous in some cases… I will certainly have to renounce my US citizenship if my husband dies first, as I cannot manage the double taxation.”
“I am extremely discouraged and, due to the financial consequences, am having to seriously consider renouncing my US citizenship. I desperately do not want to do so, as my family is in the US and, even if I never return to live, I still consider the US ‘home’.”
“I am not compliant with US CFC reporting as it is ridiculous for a company my size, and now Repatriation Tax and GILTI risk to increase my US tax burden on top of the heavy tax burden [in the country where I live]. Consequently, I am having to look at liquidating my company and turn to consulting agencies and fronting companies (also costly) in order to keep working and not be in blatant noncompliance with US tax rules. I have also considered relinquishing my US nationality but really want to avoid such a drastic move.”
“Opening a new bank account where I live now is troublesome. Opening a US side bank account without living there is impossible. FBAR regulations take me 24 -30 hours a year, I pay more than $400 a year to get my taxes done…The business laws for small businesses have to stop…. It is ridiculous. I am tired of this and it is leading me to consider to renounce my US citizenship. I am tired of being harassed.”
“Our account was blocked for months because of a computer glitch in which my French husband was thought to be American. For all that time he could not buy or sell stocks. If he dies before I do, I fear that I will be in an intensely complicated tax situation of which I have no understanding. I never, ever wanted to renounce my US citizenship but it is becoming clear that I may have to do so. At present, I owe no taxes but have to pay a professional tax accountant each year as there are so many new forms and they are so hard to understand. With age, I will be even more dependent and if something happened to my husband I would have huge bills to pay the tax professional and perhaps the IRS as well. It is an untenable situation.”
“In order to escape this cruel and unjust system, I feel I have no choice but to renounce my citizenship. This makes me very sad and angry that my own country is forcing me to do this. The outrageous fee to renounce adds insult to injury and is just another form of punishment for leaving the homeland.”
“I do not want to give up my U.S. citizenship, because my entire family is in the US. I worry about having to care for a family member, or what I would do or where I would live if my husband was killed on deployment. However, I will be applying for citizenship where I live because I don’t know if I can run a business and provide for my son while having these threats from the US government hanging over my head.”
What is common feature of these experiences with US non-resident taxation and banking policies? It is reflected in just one word: “renounce.”
Here are the words used in association with the contemplation of renouncing US citizenship: “very sad,” “very difficult decision,” “consequences will not be positive,” “single largest stressor,” “financial blackmail,” ”unsustainable,” “only way out,” “dangerous,” “desperately do not want to,” “drastic move,” “untenable situation,” “harassed,” “cannot manage,” “no choice,” “forcing me to do this,” “punishment for leaving the homeland,” “threats hanging over my head.”
As was the case in the previous posts in this series, these are not the words of people who are merely inconvenienced by the preparation of their annual tax returns. These are not the words of people who are shirking their tax obligations in the countries where they live. These are not the words of wealthy people who moved overseas for the purpose of avoiding US taxation.
These are the words of ordinary Americans seeking nothing more than to live ordinary lives in the places where they live. But US non-resident taxation and banking policies make it impossible.
Any credible defense of current US non-resident taxation and banking policies must take these words into account. It must acknowledge the experiences that are behind these words. It must either propose realistic means to end the anguish such policies cause or, if not, then it must own this anguish and make clear in what manner it is acceptable and justified.
I was struck by the following comment from Greg Swanson that appeared at Tax Connections:
When you have most fellow citizens that do not care, at all, about right of groups of people like expats, then the experiment of America has failed. It has become a zero-sum game; fighting for only an individuals own rights at the cost of another group of people. Most Americans have no understanding for Americans who have left the country, no matter the reasoning. This is a level of stupidity that didn’t even exist in the days of Benjamin Franklin. It breaks my heart to see this level of blind arrogance that has developed from our home country. But we cannot seem to get press or politicians to pay attention, and the popular belief is that we should be punished. In my opinion, expats should take steps in securing another nationality and renounce before the situation even gets worse. At this point, there only seems to be one Congressman that supports us, and the rest ignore the issue or provide only lip service.
2. For an objective discussion of renouncing U.S. citizenship I interviewed Buffalo immigration lawyer Joe Grasmick.