FATCA, U.S. citizenship-based taxation (which includes much more than taxation) and restrictions on financial and retirement planning are causing many Americans abroad to renounce their U.S. citizenship.
The US Government is well aware of the problem that FATCA (coupled with US “citizenship-based taxation) has caused for Americans abroad. The proof comes from the following two tweets: 1. 2014 – Don Beyer (currently a Member of Congress) was the US Ambassador to Switzerland from 2009 – 2014. In this interview he acknowledges some of the problems of FATCA (incredibly acknowledging that FATCA has led to divorces.
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) October 14, 2018
2. September 24, 2018 – A comment by a Foreign Service Officer in Frankfurt acknowledging the problems the United States has caused for its citizens living living abroad. He also acknowledges that people are renouncing their valued U.S. citizenship. I have linked directly to his comment. But, I suggest that you take the time to watch the whole video. You will see “heart breaking” stories of people who feel that they can no longer remain U.S. citizens. (Thanks to Solomon Yue for his tireless efforts in advocating for tax changes to “Save U.S. Citizenship” for Americans abroad!)
Must see and reach your own conclusion: A US Foreign Service Officer in Germany attending @SolomonYue session in Frankfurt discusses relationship between #FATCA and US citizenship renunciations https://t.co/BGIRjMmImD
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) October 13, 2018
The United States would rather have FATCA than have Americans living abroad.
FATCA is a tool to enforce (what the United States refers to as) “citizenship-based taxation”. In practice (as patriotic as it sounds), “citizenship-based taxation” is actually the U.S. policy of:
Imposing “worldwide taxation” on people who are “tax residents” of other countries and who do not live in the United States.
I will be conducting information sessions (some formal presentations and some informal discussions) during the next few weeks as follows:
Bangalore, India – October 22
Brisbane, Australia – October 25 (with Karen Alpert) – 19:00 – 21:00
Auckland, New Zealand – October 31
Sydney, Australia – November 1 – 19:00 – 21:00 The address is 58A Macleay Street – Entrance near Baroda Street – Potts Point NSW 2011 – There is a train you can get to Kings Cross Station.
Dubai, UAE – November 4
Limassol, Cyprus – November 7 Who: John Richardson, B.A., LL.B., JD (Toronto based lawyer) When: 19:00 – 21:00 Cost: Free, but preregistration is required for all sessions except the October 25 session in Brisbane (where you can just appear) Registration: Please send an email to: citizenshipsessions at citizenshipsolutions.ca
This post will be updated as further information becomes available. Feel free to check back! Topics discussed:
Although there will be variation from location to location, the topics covered are likely to include: Continue reading →
The primary story is of a U.S. professor who pleaded guilty to an FBAR violation and was subjected to a 100 million FBAR penalty. Notably the “tax loss” was 10 million dollars and the FBAR penalty was 100 million dollars. It appears that Mr. FBAR is becoming an important tool in the arsenal used by the United States Treasury.
The more interesting (for the purposes of expatriation) was the role that a “false Form 8854 “Expatriation Statement”) may have played in the guilty plea.
The story has been reported at the following two sources:
U.S. Professor to Pay $100 Million Tax Penalty Over Swiss Accounts https://t.co/Jb88OZlhR1 via @WSJ – about not paying his "fair share"
What is most interesting is the description from the Department of Justice site which includes:
Horsky directed the activities in his Horsky Holdings and other accounts maintained at the Zurich-based bank, despite the fact that it was readily apparent, in communications with employees of the bank, that Horsky was a resident of the United States. Bank representatives routinely sent emails to Horsky recognizing that he was residing in the United States. Beginning in at least 2011, Horsky caused another individual to have signature authority over his Zurich-based bank accounts, and this individual assumed the responsibility of providing instructions as to the management of the accounts at Horsky’s direction. This arrangement was intended to conceal Horsky’s interest in and control over these accounts from the IRS. In 2013, the individual who had nominal control over Horsky’s accounts at the Zurich-based bank conspired with Horsky to relinquish the individual’s U.S. citizenship, in part to ensure that Horsky’s control of the offshore accounts would not be reported to the IRS. In 2014, this individual filed with the IRS a false Form 8854 (Initial Annual Expatriation Statement) that failed to disclose his net worth on the date of expatriation, failed to disclose his ownership of foreign assets, and falsely certified under penalties of perjury that he was in compliance with his tax obligations for the five preceding tax years.
Horsky also willfully filed false 2008 through 2014 individual income tax returns which failed to disclose his income from, and beneficial interest in and control over, his Zurich-based bank accounts. Horsky agreed that for purposes of sentencing, his criminal conduct resulted in a tax loss of at least $10 million. In addition, Horsky failed to file Reports of Foreign Bank and Financial Accounts (FBARs) up and through 2011, and also filed false FBARs for 2012 and 2013.
The point is that the false Form 8854 (used primarily to provide information about whether one is a “covered expatriate” and to calculate the Exit Tax) was used as evidence of part of a conspiracy to evade taxes. This is an interesting use of the Form 8854, which is primarily an “information return”.
Obviously this a “general interest” post with extremely unusual circumstances. But, it is an example of how associations with others, in the “Wide and Wonderful World of U.S. Tax Forms” can become a problem. This is also a reminder the “information returns” DO matter!
U.S. Senator Ted Cruz and London Mayor Boris Johnson are “high profile” examples of people who have the “unwanted citizenship” of the countries of their birth. Each of them has found the citizenship of the country of his birth to be inconvenient.
Ted Cruz was born in 1971 in Canada. He was therefore born a Canadian citizen. He claims to have been born to a U.S. citizen mother and was therefore a U.S. citizen by birth. (Whether he qualifies as a “natural born citizen” is a different question.) As a Canadian citizen he had the right (prior to renouncing Canadian citizenship) to live in Canada. Had Mr. Cruz, moved back to Canada, he could have avoided the U.S. S. 877A Exit Tax. Incredible but true. It will be interesting to see whether Mr. Cruz regrets renouncing his Canadian citizenship. As you will see, by renouncing Canadian citizenship, Mr. Cruz surrendered his right to avoid the United States S. 877A Exit Tax. Here is why …
The S. 877A Exit Tax rules in the Internal Revenue Code, are the most punitive in relation to U.S. citizens living outside the United States (AKA Americans abroad). To put it simply, with respect to Americans abroad, the S. 877A Exit Tax rules:
– operate to confiscate assets that are located in other nations; and
– operate to confiscate assets that were acquired by U.S. citizens after they moved from the United States.
There is not and has never been an “Exit Tax” anywhere else that operates in this way. The application of the S. 877A Exit Tax to assets located in other nations, is both an example of “American Exceptionalism” at its finest and a strong deterrent to exercising the right of expatriation granted in the “Expatriation Act of 1868“. But, the “Exit Tax” applies ONLY to “Covered Expatriates” and “dual citizens from birth” can avoid being “Covered Expatriates” …
As has been previously discussed, the Exit Tax applies ONLY to “covered expatriates“. There are two statutory defenses to becoming a “covered expatriate”. This post is to discuss the “dual citizen from birth” defense to being treated as a “covered expatriate”. I have discovered that this defense is NOT as well known or understood as it should be. The statute granting the “dual citizen from birth” defense to “Covered Expatriate” status reads as follows: Continue reading →
I came across the two following interesting article/comments on the same day at about the same time. They are significant NOT because they focus (as most of these articles do) on why Americans abroad must should come into U.S. tax compliance. Rather the focus on what it means to live as a U.S. Tax Compliant American abroad (something I have written on here). First the perspective of a “young dual UK/US citizen” living in the UK.
I am a young dual UK/US citizen. I left the States as a child with my family, and while I hold fond memories of the US, I have built my life so far in the UK and I don’t foresee myself returning stateside in the near or medium term. Life has just worked out that way.
I cannot understand how the US can treat its overseas citizens so poorly. After a horrible awakening to the nightmare of citizenship based taxation, complex reporting requirements and (terrifying) enforcement laws, I came into US compliance (at great expense, having hired a tax specialist to put together my 120+ page filing which proved that I didn’t owe anything to the US. Unsurprising for a 24 year old with no assets who has worked for only 2 years since college).
Now, I am compliant. What next? I look ahead and all I see are serious impediments to my ability to plan for my future appropriately, and, as dramatic as it sounds, to live a free and normal life in the country of my choosing. All thanks to US tax policy. It looks impossible to save and invest efficiently here in the UK; starting my own business is totally out of the question as long as I am a US citizen living in Europe, and I worry that I may lose access to basic banking services as a result of FATCA. These worries are just the tip of the iceberg. Something has got to give! Do I: a) give up my US citizenship, b) keep my citizenship and stay at my home in the UK, but severely limit my ability to save and subject myself to eternal US filing costs (financial and stress-related), not to mention permanent exposure to risk of US tax penalties that could wipe out whatever I do manage to save; or c) move back to the US with my tail between my legs, which seems to be what the US government is encouraging us to do (with a heavy stick rather than a carrot).
Accidentals don’t care about their US citizenship and want to be rid of it, and so they should be. I, however, am not an accidental, I am an American, and I detest this awful system which is putting me under immense pressure to give up my birthright, for no good reason.
The US must end citizenship-based taxation, and must introduce representatives in Congress for expatriate voters specifically — we have NO voice right now and we are being abused without a second thought from the US government. The stupidest part is that even in a world of perfect compliance (basically impossible), the amount of money the US will raise from shaking down its overseas citizens pales in comparison to the costs being imposed on those citizens, foreign governments and foreign businesses to comply with these maniacal rules.
For American expats, some of their financial struggles may be in part from the Foreign Account Tax Compliance Act, which aims to ensure that Americans living overseas pay their fair share of U.S. taxes.
Signed into U.S. law on July 1, 2010, FATCA took effect in July 2014. The first international exchange of taxpayer information between the IRS and foreign financial institutions, which is part of the IRS’ overall efforts to implement FATCA, took place in late September.
The information exchange involves certain intergovernmental agreements that not only enable the IRS to receive information from foreign financial institutions but also enable more efficient exchange by allowing a foreign tax administration to gather information and provide it to the IRS.
Many critics and expatriates argue FATCA is a compliance headache that often makes it difficult for Americans living abroad to maintain legitimate bank accounts — and curbs banks’ willingness to serve expats.
In 2010 the question was: why would an American abroad renounce U.S. citizenship?
In 2015 the question is: why would an American abroad NOT renounce U.S. citizenship?
How can a country treat its citizens abroad so horribly?