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 12 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 …
“I Made a Poisoned Gift to My Daughter:”
The Emotional Toll of US Non-Resident Taxation and Banking Policies
Post 3 of 5
This is the third 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.
“Within days of their respective births in [the early 2000’s]) I registered my children at the US consulate and obtained for them certificates of birth abroad. For me it was very important that they have US citizenship. Of course I had no inkling of the hardships this would create for them. If I were a new mother today, I have trouble imagining that I would register them. It would be an agonizing decision for me but in the end I think I just wouldn’t be able to do it. I would see it as “inflicting” US citizenship on them…[Today], I cannot open bank accounts for my children because they are US citizens. I tell them on a regular basis that when they reach adulthood, they will need to open accounts without my involvement. I’ve also warned them repeatedly that when they do, they must lie about having US citizenship – they must deny that they have it – they will be able to do this because they were born outside the US. No parent wants to tell their children to lie, but if it’s choice between that and their leading a normal life then I choose that they lie.”
“I am worried about the consequences for my daughters who are just beginning their adult lives. I do not want them to have to choose between their American citizenship and their careers.”
“I worry about [my son] losing out on job opportunities or being unable to bank properly.”
“Everything is in my husband’s name which would cause me major problems were he to pass away. I am very upset that my kids are dual citizens…The whole situation has deeply affected me since I received the FATCA letter from the bank three years ago.”
“I made a poisoned gift to my daughter, putting her in the same situation. Since I know that I do not sleep anymore…citizenship based taxation is unfair as tax laws are uncompatible from one country to another.”
“My children are foreign born dual citizens and cannot hold a child trust fund which was a government sponsored scheme, because they are US citizens as well. Their foreign citizenship is taking precedence over their local home born citizenship.”
“The situation of our children is outrageous: dual national, never having lived in the US, these “accidental Americans” are expected to pay US income tax?! I deeply regret having registered their births and obtaining US passports for my children.”
“I desperately regret registering my sons’ births abroad, as they are now subject to this regime. I own a small business and it has been horribly affected by the repatriation tax and will be going forward by the GILTI – so much so that I am having to figure out how I can pass ownership of it to my spouse. I will soon own nothing on my own.”
“It is an issue which has created tension in my family as we are all angry about it but have disagreements about how to deal with it.”
“[Neither my wife nor my children are] US citizens. Recently I have spent US$4,500 to obtain professional advice on how to set up a family trust that would not subject my non-citizen spouse or children to penalizing US taxation but it seems it is simply not possible for me to do so. I also face financial disadvantage in [my country’s] retirement scheme as it is subject penalizing US taxation requirements. My inability to make these investments and to otherwise assure my family’s finances places significant strain on my marriage.”
“The stress of all this is horrible and it causes strain in our marriage. My husband inevitably ends up paying for my US taxes to be prepared (to say I owe nothing) and resents it. He does not want to be involved in FBARS etc… I am sad we got our kids registered as US citizens. At the time FATCA etc were not known or enforced, if it had been I would have… never burdened them with this horrible ordeal.”
“My non-US citizen] spouse is angry when he must turn over his information to the IRS.”
“My wife is understandingly not happy having her funds reported to the IRS, so we even talked about divorce for tax purposes only.”
“I was taken off all of our joint accounts with my husband since I am an American and our bank is subjected to very stringent rules for Americans so they prefer not to have American account holders.”
“My husband is not a US citizen. We don’t have a joint bank account because of this mess. I’m afraid I will be turned away from receiving a mortgage, which means everything will have to be in his name.”
“My wife and I specifically avoid having a shared bank account.”
“My husband and I have separate bank accounts, which causes problems with estate planning. He owns apartments and I have a rental house. Neither of us dares to put the other’s name on any of the properties. It’s no trouble while we are alive, but when one of us dies it’s going to be a real problem.”
“When I got married, I insisted to my partner to keep all our assets separated (very uncommon in our culture), because I wanted to keep him safe. It was a long and painful negotiation, which really tested the trust we have in each other. Finding a public notary to write our wedding contract was awfully difficult – no one would have touched me with a stick, and I can’t afford to take a lawyer each time I have a question related to the US tax system… I think my husband resents my anxiety, especially the month or 2 leading up to filing; US CBT and Fatca are, if not daily, weekly conversation topics.”
“Being subject to two tax systems simultaneously causes me a great deal of anxiety which also has a very negative effect on my husband. I cannot afford the compliance costs, and need to save for my retirement… I want to renounce in order to safeguard our future (and my husband supports this decision) but the renunciation process is expensive and humiliating, and I have ageing parents in the USA who I need to see and may one day need to care for. I feel that my family and I will be harmed no matter what option I choose. This has caused me innumerable sleepless nights over the past two and a half years. It made the purchase of our first home nerve-wracking and panic-inducing instead of joyful; we saved for 15 years to buy a home and throughout the purchase process I was terrified that we would not be able to get a mortgage because of my US birthplace.”
“I have had to decline being an executor of my sister’s will, and will also have to get professional executors, rather than family, for my will. I have also declined to be a financial attorney for my elderly mother because of FATCA, and have left this responsibility to my sister.”
“I was asked to serve as Trustee by my cousin. His assets exceeded two millions. His banks were against my involvement due to my being a dual citizen Swiss/US. I could not help him. Instead he made a bad choice. This cousin recently died I am a heir and now I find out that my cousin had been financially drained by his trustees. I have guilt feelings and I am angry.”
What is common feature of these experiences with US non-resident taxation and banking policies? It is concern for family: daughters, sons, husbands, wives, sisters, parents, cousins.
Here are the words used to describe the experiences connected to family: “must lie about having US citizenship,” “worried about the consequences for my daughters,” “major problems were he to pass away,” “very upset that my kids are dual citizens,” “poisoned gift to my daughter,” “deeply regret having registered their births,” “tension in my family,” “significant strain on my marriage,” “burdened them with this horrible ordeal,” “when one of us dies it’s going to be a real problem,” “tested the trust we have in each other,” “my husband resents my anxiety,” “very negative effect on my husband,” “my family and I will be harmed no matter what option I choose,” “divorced for tax purposes only,” “I have guilt feelings.”
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.
What is that makes U.S. citizenship different from other citizenships? In 2014 I conducted my first interview with Andrew Grossman.
John Richardson – Follow me on Twitter @ExpatriationLaw