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 9 of this series of posts here.
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) May 12, 2019
I began this “Citizenship Solutions blog” in 2014. The blog included a page (not very visible) called:
“Emotional counselling for those threatened by the FATCA Roundup”
The comments (occasional as they may be) are significant. The comments include a “ping back” to a discussion of great interest which took place at the Isaac Brock Society.
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”. This post is a prologue to Ms. Snyder’s five posts.
Prologue to 5 new posts about how #citizenshiptax and #facta affect health + state of mind. Already in this prologue read powerful story about some of effects. Don't forget 2 sign up for @Taxconnections discussion w/ @ExpatriationLaw + Ed Zelinsky May 17 https://t.co/kprWTZyecP
— Laura Snyder (@TAPInternation) May 12, 2019
Before returning to Laura, Nando Breiter will introduce us to “some” of the psychological and emotional aspects of trying to survive as an American abroad in an FBAR and FATCA world.
Part 10 of this series is based on a comment from Nando Breiter, made on Part 1 (the first post of the Laura Synder series). I thought Mr. Breiter’s comment was deserving of its own post.
There is a damaging psychological component to the US expat story that does not become evident until it is experienced. FATCA, FBAR, CBT, the transition tax and GILTI are all targeted at massive US based corporations or very wealthy US individuals. To be effective, the penalties must be very high and the regulations complex and utterly daunting. A US citizen of modest means will almost certainly not have the temperment to deal with being under a sustained attack from the US government designed to completely undermine their ability to function financially outside of the United States, isolated and alone.
US citizens living abroad are being sanctioned, just like the United States imposes financial sanctions on North Korea or Iran in an attempt to modify their behavior. The sanctions the US imposes on its expat citizens are largely designed to force them to move their business activity “back home” to the US. That might work with shell companies, but a small local business run by an American overseas, like a restaurant, cannot be moved. It can only be forced out of business.
Our small businesses are not shell companies. They have deep roots wherever they have been formed. Expat Americans themselves are not shell companies whose purpose is to avoid US taxation, and yet we are being treated as if we are. We know we are being senselessly sanctioned. The undermining of our livelihoods, of our financial security and ability, serves absolutely no purpose, no good, whatsoever. That in itself is psychologically stressful.
The horrendous complexity makes it all the worse, because as an individual, one cannot hope to gauge one’s genuine level of risk.
The stress is relentless. One US tax season now overlaps the next, just like it would in a massive corporation. I certainly can’t afford the level of professional help I would need. Everyone at the IRS I’ve spoken to knows far less about the transition tax than I do, and I AM utterly lost in attempting to deal with it. There are no clear instructions I’ve found that tie all the pieces together, only random bits of information scattered everywhere on the internet. The IRS did not complete its instructions for the transition tax until early 2019, and they are different from the scant information available in 2018 that I used to file my tax return, which is certainly incorrect, but the best I could do.
It is very difficult to judge what is authoritative. Following the advice of an IRS employee could easily be a mistake, as could following the advice of another expat, or a consultant catering to them. I’m obviously not a US tax lawyer, but I need to figure out how to think and act like one as I struggle to remain as compliant as I can afford to be, or rather, sink into non-compliance because I cannot afford anything else.
Everything I read provided by the IRS that now applies to me is written for IRS insiders, high level corporate accountants and lawyers specialized in international taxation that already have decades of background knowledge. As an native English speaker, I can understand each individual word of the the tax instructions that now apply to me, but never have I been so utterly intimidated by anything I’ve read before. I feel as if I would need years of legal and accountancy education to simply figure out how these tax regulations apply to my small company.
It seems that everything the IRS is doing is designed to deprive small businesses like mine of the operating capital they need to survive. Banks will generally not lend them any money, because an American owner makes them too vulnerable to US legal and taxation risks. So the only way to grow such a company is to slowly build a capital base through profits. But now, through the transition and GILTI taxes, the US wants to ensure that cannot happen.
To what purpose?
To destroy my ability to support my family?
Nope. Nobody cares. We’re just collateral damage, and we know it.
Please see a second comment from Mr. Breiter which appears on Part 3 of the Laura Snyder series.
Appendix – Some further thoughts …
A. Comments and submissions from individuals generally
Collection of comments from those individuals impacted by the extra-territorial application of U.S. tax, reporting and banking laws
Here is a link to the the complete collection of submissions (to the House Ways and Means Committee in 2013 and the Senate Finance Committee in 2015) from the small numbers who had the courage to comment directly to the U.S. Government.
B. The Patricia Moon Book – 190 pages of commentary from Americans abroad, Green Card holders and “Accidental Americans”
As part of the John Richardson and Stephen Kish 2015 submission to the Senate Finance Committee, Patricia Moon compiled the single most important collection of the comments of Americans abroad, Green Card holders and Accidental Americans. Someday these comments will be seen as a “message in a bottle” describing a terrible time in American history. Seriously, you won’t believe it until you read it (and many will still not believe it).
C. John Richardson and Stephen Kish submission to the Senate Finance Committee in 2015
Certain provisions of the 2017 Tax Cuts and Jobs Act, demonstrate that in spite of the massive efforts to educate Congress about the impact of FATCA, FBAR and citizenship-based taxation general, Congress completed ignored the pleas of the affected individuals. These provisions include: GILTI, the Transition Tax and even the requirement that individuals using the “married filing separately” category are required to file a U.S. tax return with income of as little $5 (five dollars).”