Introduction and purpose
In the summer of 2025 Latife Hayson of The Interchange, an Australian living in the United STates included an episode about U.S. citizenship taxation. Although mainly from an Australian perspective, the video (and shorts) will be of interest to U.S. citizens living all over the world.
Full Video:
US Expat Tax Explained: Navigating Citizen-Based Tax Traps & the Push for Residency-Based Taxation
Shorts:
Prologue – August 2011
Today is August 26, 2025. This coming weekend is Labour Day weekend. It was almost 14 years ago to the day that many U.S. citizens (and some former citizens) in Canada and around the world were being pressured to enter into the 2011 OVDI (“Offshore Voluntary Disclosure Initiative”). Those who entered that program, offered a substantial percentage of their wealth to the IRS, to avoid punishment. The punishment would have been for the failure to comploy with laws they had no way of knowing existed. Shockingly, many who entered the OVDI program agreed to penalties that were completely disproportionate to their noncompliance. Interestingly, many who (1) entered the program and (2) used the opt out provision paid little or no penalties.
The OVDI program was predicated on the generation of penalty threats from the IRS and the tax advisers delivering those threats to the individuals impacted. The nature of the threats evolved. Toward the deadline for entering OVDI the IRS offered increased penalty to nonresidents who didn’t know they were U.S. citizens. As noted by Robert Wood on August 11, 2011 writing in Forbes, the IRS agreed that individuals who didn’t know they were U.S. citizens would pay a reduced rate of 5% for the privilege of participating in the OVDI program. Mr. Wood describes this special concession to those who didn’t know they were U.S. citizens as follows:
You are invited to read the complete post on the Isaac Brock Society here.
From The OVDI Trauma Of 2011 To The Continuing Trauma Of U.S. Citizenship Abroad Today
John Richardson – Follow me on X.com @Expatriationlaw
Introduction:
Much of living as a U.S. citizen abroad is learning to cope with a life of trauma. Posts discussing the trauma are here here, here and here. For Americans abroad, preparing to file a U.S. tax return is a form of trauma.
The U.S. extra-territorial tax, form and penalty regime reminds Americans that they are:
“Subject to certain penalties, for uncertain conduct!
Those who do not file tax returns worry about the consequences of not filing.
Those who do file tax returns worry about the consequences of filing.
Thinking about the issue of trauma, I was reminded of a presentation that I did in 2015 in London, UK. It was titled:
Sacred Trust: Counselling Clients Through The Trauma Of “U.S. Citizenship Abroad” In A FATCAesque World”
(The audience was a group of U.S. tax professionals. I am not sure that they really understood the message. But, the presentation was a welcome diversion from the usual technical tax talk.)
I had forgotten about the presentation, but was reminded of it today. Looking at the slides, I think I agree with everything I said in 2015. If anything, it has gotten worse!
Here is the presentation:
A PDF version is here:
AI Generated Podcast generated from the 2015 presentation
John Richardson – Follow me on X.com @ExpatriationLaw
Introduction and purpose
In 2010 few people even knew what citizenship taxation was. It is now 2025. Awareness of the existence of citizenship taxation has expanded. An understanding of WHAT citizenship taxation actually is (it’s the the U.S. applying its worldwide tax, reporting and penalty regime on non-U.S. source income received by nonresidents) and how it impacts the lives of Americans abroad is still not understood. The nature of citizenship taxation is more fully explored in the following post:
The Road To Tax Reform For Americans Abroad: Part 2 – What Is US Citizenship Taxation?
How tax academics view citizenship taxation
Although, there have been articles about citizenship taxation written by various academics, few if any, have included a description of how U.S. citizenship taxation results in the U.S. imposing a more punitive form of taxation on Americans abroad. Of course, one must have actually experienced the reality (as opposed to the theory) of citizenship taxation to understand it.
To put it another way:
Generally, academics view citizenship taxation purely from the perspective of a U.S. tax return and a U.S. citizen living outside the United States. There is no consideration of how living as a tax resident of another country impacts U.S. tax filing.
Generally, U.S. citizens living outside the United States view citizenship taxation from the perspective of building a live outside the United States (that includes taxation) with the U.S. tax imposed on that life.
These are TOTALLY different perspectives!
Introduction and purpose:
This is the second post motivated by the Dan Duggan extradition proceedings. The first post was:
U.S. Australian Extradition Treaty: 1974 Original Treaty And 1997 – How Does It Apply To Dan Duggan?
Outline:
Part A – About U.S. Extradition treaties
Part B – Examples Of Using Extradition Treaties To Facilitate The Application Of U.S. Law:
Part C – Why countries really need to end their extradition treaties with the United States
Part D – The Dan Duggan Case – Why Australia Should Refuse Extradition
Appendix – Michael Lynch – AI – Who Would Have Imagined An Extradition Treaty Being Used In The Context Of A Private Contract?
To U.S. Citizens Residing Outside The United States
Re: Continuing Efforts Of Republicans Overseas To End The Double Taxation Of Americans Abroad
Republicans Overseas continues to (1) recognize President Trump’s commitment to end the double taxation of Americans abroad and (2) remains committed to the goal of ending this double taxation. The goal cannot be achieved without the support and committment of the community of individual U.S. citizens living outside the United States.
Achieving changes of this magnitude is “NOT A Spectator Sport!”
Here is how the assistance of individual Americans abroad (wherever you may be) is required:
On behalf of Republicans Overseas, Republicans Overseas Tax Committee and Solomon Yue, I am reaching out to the community of U.S. citizens abroad seeking:
– written testimonials explaining how the U.S. tax code has resulted in double (and damaging) taxation in a manner that would NOT be experienced by U.S. residents
– examples could include: transition tax, GILTI, U.S. taxation of tax deferred retirement planning accounts, your pensions being unjustly taxed as foreign trusts, problems of using non-U.S. mutual funds for investing, PFIC, etc. We need specific testimonials describing exactly how the U.S. tax code imposed on Americans abroad leads to this result.
– penalties that have been unjustly levied on the failure to report (or late reporting) of the normal instruments of financial/retirement planning in your country of residence (Penalties imposed on TFSA, ISA, small business corps, etc.)
– taxation on phantom capital gains on the sale or refinancing of your home outside the United States
– having to pay the 3.8% Obamacare surtax on non-U.S. investment income while not being permitted to offset the foreign tax payable by using foreign tax credits
– being denied access to normal banking and brokerage accounts in your country of residence because of FATCA
– having your career opportunities limited because of a reluctance to hire, partner with, or invest with “U.S. persons”
– former U.S. citizens who feel they were forced to renounce U.S. citizenship because they could not afford the enormous compliance costs associated with U.S. citizenship or because the U.S. tax code limited their career opportunities
– other?
In other words, we want to document the actual damage!! I will assist you in drafting your testimonial so that it accurately explains HOW the U.S. tax code has resulted in double taxation.
Republicans Overseas is continuing its years long mission to end the unjust double taxation of Americans abroad. President Trump has committed to ending the unjust double taxation of Americans abroad. It is expected that there will be a second legislative opportunity in the fall of 2025.
Actual testimonials focusing on double taxation are critical. The testimonials are required by mid September 2025.
Please contact John Richardson if you are able to assist:
citizenshipsolutions@protonmail.com
Prologue
As an older post I wrote confirms, Americans abroad are subject to special provisions and those special provisions include a number of information returns!
My reason for writing and the purpose of this post
I am not a tax preparer. I am an expatriation lawyer. In this.capacity, I either:
– see U.S.tax returns prepared by a tax preparer; or
– discuss the necessity of U.S. tax compliance when a person wishes to become U.S. compliant through either the IRS streamlined or the IRS Relief Procedures Programs.
Americans abroad have many reasons for wishing to be U.S. tax compliant. In many cases it is associated with expatriation. In some cases it is part of estate planning (in many cases it is better to die without being a U.S. citizen). In. some cases it is to renounce and NOT create barriers to inheritance for U.S. citizen children. In some cases it is because they are likely to inherit U.S. income producing assets. In some cases it is because they fear noncompliance. In some cases (regardless of fears of penalties) they believe in. compliance with the law. The point is that U.S. tax compliance (it’s a huge industry) is an important part of people’s lives.
Regardless of one’s view of the U.S. citizenship tax regime, there are large numbers of Americans abroad who either attempt to meet their annual filing obligations or who desire to meet those obligations.
In this context I offer two important (I think) thoughts:
First, forms and tax returns are dangerous things and should be filed correctly. If you are going to file, you might as well do it correctly.
Second (and more importantly), for U.S. citizens abroad the filing of U.S. tax returns is a major cause of significant trauma in their lives. It is NOT a question of filing a. 1040 that just reports “foreign income”. It is, because of the large number of penalty-laden information returns, an accusation that is based on a presumption of “wrong doing”. (U.S. residents and their tax preparers who think this is hyperbole, just try living as a tax compliant American abroad!)
Therefore, the tax compliance question for Americans abroad is a question of how do they mange their trauma. The issue is how do they manage the tax filing issue in a way that minimizes the associated trauma. Are they likely to be audited? I don’t think so. Are they likely to think about the possibility of audit and penalties? Yes, many of them do. Furthermore, learning about previous filing mistakes is – for many people -incredibly traumatic.
The purpose of this post is to help with the management of trauma.
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The Organization Problem – How to read this post …
Identifying the information that is needed.
I have noticed that Americans abroad have difficulty organizing their information. Remember, tax preparers are not mind readers. They know very little about you. The simply process the information you provide. Sure, they have questionnaires (with varying degrees of detail). That said, I think it would be helpful to provide an overview of what it means to file a U.S. tax return, what information is relevant and how to think about retrieving that information. Those of you who wish to renounce U.S. citizenship will want to be in a position where you can certify five years of U.S. tax compliance.
I have written this post primarily from a Canadian perspective (I live in Toronto, Canada.) Although the information is generally applicable to all U.S. citizens living outside the United States, some of the information is specific ONLY to Canada. So, please don’t be lazy. Get informed! Stay informed!
While providing an overview, the information in this post cannot be complete. It is written for the average person, with a simple life and mainstream investments that are easily understood and characterized.
Finally, if you are filing U.S. taxes abroad for the first time, I suggest you should start with the following simple question:
“What would my U.S. tax tax return contain in terms of forms, schedules, etc.?”
In any case, I am writing this post because …
Yesterday I compared the U.S. tax return and the Canadian tax return of a U.S. citizen living in Canada. The Canadian return was 14 pages. The U.S. return was 59 pages. The person had a very simple life (retired and living off the usual pensions). He did NOT owe any U.S. taxes. That said, he was NOT compliant with his U.S. tax filing obligations. The reason was that his “foreign assets” were not reported properly on Form 8938. I suspect that this person had no idea how to properly identify and organize the foreign financial asset information to properly transmit it to his U.S. tax preparer. This is perfectly understandable. Assuming no Canadian Controlled Private Corporation (a presumptive instrument of tax evasion from a U.S. perspective), or other controlled foreign corporation, most tax filers will be required to file:
– FinCEN 114 AKA FBAR
– Possibly Forms 3520 and 3520A (make sure that you really are dealing with a Trust or have received a foreign gift)
– and possibly more
This post is to provide very simple advice on how to organize this information to provide to your tax preparer.
U.S. tax filings are more about the disclosure of information than about the calculation of tax
Generally, you can assume that ANY and ALL financial accounts and financial assets (brokerage accounts, pensions, individual shares in non-U.S. corporations) must be reported. The reporting issue is distinct from the tax issue.
Foreign real estate owned directly by Americans abroad is NOT (at present) subject to separate reporting (although income earned from them is taxable).
Preparation for the filing of a U.S. tax return should be viewed as four categories of. tasks:
Category A – Identifying The Relevant Information
Category B – Deciding How That Information – In Terms Of The Relevant Forms – Is To Be Reported
Category C – Reporting The Information On The Relevant Forms
Category D – Deciding Whether Any Information Returns Must Be Filed Even If A Tax Return Is Not Required (For example: Form 5471, 8621 and Form 3520 and Form 3520A may have a filing requirement even if a 1040 is not required!)
Category E – Does Your Country Of Residence Have Rules Requiring The Reporting Of Foreign Assets (similar to FBAR, Form 8938, etc.)?
Be careful!!
Canada (and other countries) have very strict rules governing the reporting of foreign assets.
Once these three tasks have been. completed, one is ready to place the income on the actual tax return (1040 or 1040NR) and Schedules.
What follows are the ten steps that should prepare you to give your information to your tax preparer.
Commentators may be misreading the motivation for H.R.4501
It’s human nature to view and interpret the world based on our own experiences. Therefore, many Americans abroad (and their advocacy groups) interpreted the Hurd bill H.R.4501 as a sign that Congressman Hurd recognized the problems of citizenship taxation. This may not have been true. I now believe that H.R.4501 may have been an attempt to exempt one specific American citizen from U.S. taxation.
This is my third post commenting on Congressman Hurd’s H.R.4501. The first two posts are here and here:
Part 1: Colorado Congressman Jeff Hurd Recognizes Problems Of U.S. Citizenship Taxation
Purpose and introduction:
Prior to Canada’s implementation of FATCA on July 1, 2014, the Canadian parliament held hearings. The hearings took place over two days in May of 2014. I appeared as a witness on Mary 14, 2014. Excerpts from the testimony appear in the above video. What follows is a transcript of my opening statement. I think I would say the same thing today.
https://www.ourcommons.ca/DocumentViewer/en/41-2/fina/meeting-35/evidence
The Chair (Mr. James Rajotte (Edmonton—Leduc, CPC)):
I call this meeting to order.
This is meeting number 35 of the Standing Committee on Finance. Our orders of the day, pursuant to the order of reference of Tuesday, April 8, 2014, are the study of Bill C-31, An Act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures.
Colleagues, we have two panels before us this afternoon.
In the first panel, we’re very pleased to welcome Mr. John Richardson, and, from the Canadian Bankers Association, the acting vice-president, Mr. Darren Hannah. From the Canadian Council of Chief Executives, we have Mr. Brian Kingston, and from the Office of the Privacy Commissioner of Canada, we have Privacy Commissioner Madam Chantal Bernier.
Bienvenue. Each of you will have five minutes maximum for your opening statement.
We’ll begin with Mr. Richardson, please.
[Expand]
Mr. John Richardson (As an Individual):
“Thanks very much for the chance to appear today.
I did take the time to watch yesterday’s session, which was actually enormously helpful to me, as I’m sure it was to you. I have a couple of thoughts, though, that are my own but directly link to that. The signing of the FATCA IGA can be seen as either good news or bad news.
First, interestingly, is the good news. It’s the point that Professor Cockfield made yesterday. In fact, what this does ensure is that Canada is absolutely 100% in compliance, no ifs, ands, or buts about it. That’s what it means to have signed that agreement.
Interestingly, the agreement specifically states that nothing happens until Canada makes it clear that it has done all of the legwork needed to actually implement the agreement, which I would assume to be all of the enabling legislation that we find in Bill C-31. Given that’s the case, as Professor Cockfield pointed out, there’s absolutely no reason to rush this whatsoever, absolutely none. This should not be in the dark recesses of an omnibus bill. It should in fact be brought to see the light of day in a separate bill.
The second aspect of this that’s very interesting in the IGA itself—and this question was asked yesterday—is who this applies to. It applies to U.S. persons and is defined in the agreement as “U.S. citizens or residents”. Now, what is extremely significant is that U.S. citizens are defined solely by the United States today, tomorrow, and forever. That means that someone who is a U.S. citizen today might not be a U.S. citizen tomorrow—and I’ll have more on this as we continue the discussion—but given that the U.S. has the right to define who a citizen is, given that I presume Canada would cede that right to them, I think it’s extremely important, absolutely essential, under any FATCA agreement that the definition of a U.S. citizen could never, never, never include any Canadian citizen who is a resident in Canada.
Third, we’ve got the whole problem of what FATCA actually means. Having watched a few of these committees, I see a lot of technical discussion of FATCA and a lot of discussion of regulations. In other words, there’s a lot of talk about how to implement this agreement, but precious little on what it actually means in terms of the lives of Canadians, and precious little in terms of what it means in terms of the country itself.
The simple fact of the matter is that FATCA, once implemented, will allow the U.S. to put a permanent capital tax on Canada every day of every year for as long as this agreement is in effect, simply by virtue of using U.S. citizens in Canada to tax and siphon revenue out of the country. It is a myth, an absolute myth, and it is completely wrong that under U.S. tax laws, U.S. citizens will not owe tax to the IRS. This is for two reasons. The first is that the U.S. tax code is hostile to anything foreign, and that would include anything in Canada in general, but secondly, anything that involves tax deferral, and it is plainly obvious that all of the pillars of Canadian retirement planning do in fact involve tax deferral.
So it is a myth that U.S. citizens would not owe tax. It is a myth. Interestingly, as I read in something yesterday, the opposite of truth is not the lie: the opposite is in fact the myth. This agreement will have severe consequences for Canada and Canadians.”
What follows is a pdf version:
Here is the video:
https://parlvu.parl.gc.ca/Harmony/en/PowerBrowser/PowerBrowserV2?fk=8332857
A trip down memory lane!
John Richardson – Follow me on X.com @ExpatriationLaw