Category Archives: accidental Americans

Proposal by @JoeBiden to increase the GILTI tax has particularly vicious implications for #Americansabroad

Introduction

Taxation is what America is about and America is about taxation.

Perhaps it’s better to say that:

Politics is about taxation and taxation is about politics.

Once Upon A Time In America

The primary legislative achievement of President Trump’s first term was the 2017 TCJA. It’s important to note that the TCJA had it’s genesis in the work of Michigan Congressman Dave Camp and was the result of a long term project of reworking the US tax system. It is absolutely incorrect to suggest that the TCJA was developed by the Trump Administration. It should not be referred to as “Trump Tax Reform”. That said, because of the “politics” involved in enacting the TCJA, the Trump Administration and Republican Controlled Ways and Means Committee, did impact the legislation at the margins. (Rate of repatriation tax, etc.)

Like all tax legislation the TJCA had clear winners and clear losers.

The TCJA Winner(s)

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Good discussion on renouncing US citizenship AKA #citizide: The good, the bad and the ugly

This is one of the better interviews regarding US citizenship renunciation, covering a wide range of important issues.

Does the US provide #Americansabroad any benefits? Shouldn’t US #expats who find US @taxationabroad onerous just renounce their US citizenshp?

On May 30, 2020 the following question appeared on Quora and prompted some interesting answers and discussion:

As a defender of American “freedom”, how do you justify the fact that US citizens have to pay taxes to the US even if they live and work abroad (even if they have never been to the US but got their citizenship through their parents)?

I along with others attempted to answer the question. Here is my answer.

_________________________________________________________________________________________

Some of the most interesting analysis comes from the comments to the answers. See the following answer and comment. I have turned David Johnstone’s comment into a post.

One of the answers to the question included the suggestion that:

If someone lives and works abroad as an American citizen, he or she must be enjoying SOME benefits or they would logically renounce their US citizenship instead of paying US taxes. That would be a good solution for anyone facing this question. Just go!

David Johnstone responds to this answer with the following comment:

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Seeking short social media – twitter and facebook posts – explaining why @citizenshiptax and #FATCA are wrong

On June 3, 2020 I plan to do a podcast with Anthony Scaramucci of Skybridge Capital and SALT Conference fame. The June 3 podcast has its roots in the following @Scaramucci tweet which was the subject of discussion at the Isaac Brock Society.

Mr. Scaramucci’s tweet generated a great deal of discussion. If you click on the tweet, you will see, what some of the responses were.

A third party individual has arranged for me to do a podcast with Mr. Scaramucci. This will take place on June 3. In order to provide background information for “citizenship taxation”, FATCA and how they impact Americans abroad, I would ask that you reply to the following tweet. It is your opportunity to contribute to the conversation.

Feel free to leave a comment to this post. I will ensure that it finds its way into the twitter thread.

John Richardson – Follow me on Twitter @Expatriationlaw

Podcast – US Citizenship: Retain or Renounce – Streamlined, Relief Procedures For Former Citizens

(Interesting discussion in the above twitter feed.)

On April 30, 2020 I hosted a discussion with Karen Alpert, Laura Snyder, David Johnstone and Keith Redmond. The discussion touched on a variety of subjects of interest to Americans abroad and Accidental Americans.

The discussion included a segment on the September 2019 IRS Relief Procedures For Former citizens and how they compare to Streamlined compliance.

Bottom Line: It’s complicated. People are different. Different solutions for different people. But, for many:

“All Roads Lead To Renunciation”.

Americans abroad and relief under the CARES Act: How do they get it and how much do they get

The context

Many countries including Canada and the United States have offered monetary relief to help their residents during these difficult times. (In addition to monetary relief, as Virginia La Torre Jeker as reported here and here: the United States has relaxed the deadline for filing 2019 tax returns. Canada has made similar allowances.)

Interestingly, with respect to access to monetary relief:

Canada’s “CERB Benefit” approach appears to be to simply get cash into the hands of affected people. The benefits may or may not be taxable. But, filing a tax return is not a prerequisite to receipt of benefits.

The U.S. “CARES Act” approach appears to use the tax system as the mechanism for delivery of benefits. Early indications suggest that (at least for Americans abroad) filing tax U.S. tax returns will be a necessary condition for the receipt of benefits. Could benefits really be conditional on filing tax returns, when there are so many people who do not meet the threshold for filing U.S. tax returns?

It appears to be much easier to access the relief in Canada than to access the relief in the United States. Additionally, Canadians do NOT need a lawyer or accountant to understand the program. But, that’s an issue for another day …
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Exercising broad regulatory authority, US Treasury has clarified the meaning of “resident” for #FBAR Purposes

Introduction – Looking For Mr. FBAR

What’s new?

I haven’t written a post about Mr. FBAR for quite some time. But, a post about the recent Boyd case at Tax Connections, by Darlene Hart got me thinking about FBAR again. For those interested – where the IRS successfully argued that it was appropriate to impose penalties on each individual account – here is the case:

HBe

And for a hint at the commentary:

Those who know little about Mr. FBAR might find this introduction to FBAR – although written in 2012 – helpful. Incidentally, it’s pretty obvious that Russia’s Foreign Bank account reporting laws were based on an admiration of Treasury’s success with the FBAR rules.

The purpose of this post

The purpose of this post is to explain:

1. The Congressional FBAR statute – Title 31 Section 5314 – which delegates to Treasury the responsibility of determining ALL aspects of FBAR administration including:

– who is subject to FBAR reporting

– the financial thresholds that trigger reporting

2. It is NOT the Congressional FBAR statute that defines the absurdly low $10,000 threshold for reporting. Rather it is Treasury. Although FBAR penalties are now indexed to inflation, the FBAR reporting threshold remains at $10,000. To put it simply: through inflation, Treasury has found a way to increase both the number of FBAR violations and the penalties associated with those violations. (There is a reason it’s called “The FBAR Fundraiser”).

3. It is not Congress that imposes the FBAR requirement on Americans abroad. It is Treasury. In fact, Treasury has recognized that they it has the right to exempt Americans abroad from the FBAR requirements, but has refused to do so. To be specific, Treasury’s 20111 statement found on page 10327 (middle column) was without explanation:

With respect to the comments raised by United States persons living abroad, FinCEN does not believe that an exemption is appropriate simply because a United States person chooses to live outside of the United States.

Treasury offered no reason for this decision.

Commentary on this decision at the Isaac Brock Society may be read here.

4. Treasury has by regulation “tinkered” with the meaning of “resident” over the years. I note that in 2012 (as explained by Phil Hodgen and others) the meaning of “resident” was not defined by statute. Rather, it is through Treasury regulations, that the word “resident” is given meaning. By 2017 Treasury had adopted the statutory meaning of resident used in the Internal Revenue Code (Section 7701(b)). (By expanding the definition of “United States” to include possessions and territories, it appears that Treasury has expanded the penalty base to include U.S. “Nationals”.) The FBAR statute is found in Title 31. The Internal Revenue Code is Title 26. There is neither a requirement nor a reason why Treasury should have used the definition of “resident” in Title 26 as the the meaning of “resident” in Section 5314 of Title 31. There are many different ways of defining “resident”. For example, for U.S. Estate and Gift Tax purposes, “residency” is defined in terms of domicile …

My point is this

Individuals and groups attempting to achieve justice for Americans abroad, Accidental Americans, Green Card Holders and all “U.S. Persons” would be advised to focus their efforts on U.S. Treasury. Yes, the lobbying of Congress should continue. But, meaningful change can be achieved without Congress even being aware of it. U.S. Treasury has the authority and ability to fix the FBAR related penalty and reporting injustices imposed on Americans abroad. But, FBAR is just the beginning. Almost all of the problems of Americans abroad can be fixed by Treasury.

This is the first of a series of posts in which I will explain how Treasury can solve almost all of the problems inflicted by the U.S. Government on Americans abroad.

John Richardson – Follow me on Twitter @Expatriationlaw

Appendix – For those who want to better understand the technicalities: Let me explain you …

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A public service announcement during this Holiday Season: Uncle Sam Is Demanding Retired Accidental Americans for Their Life Savings

Uncle Sam Is Demanding Retired Accidental Americans for Their Life Savings

(Some Holiday Season wisdom sent to me from an anonymous source)

Meet one of the most fascinating anomalies of our time, the accidental American. That is to say, folks who were born in the United States but who were not raised there. Whether you identify as an American or not, Uncle Sam is itching to take your money. Here’s what you need to know about being an accidental American, apologies in advance for the inconvenience.

Breaking it Down, Prepare to be Outraged, You Should Be

You might want to brace yourself for the inevitable frustration that will ensue. Picture this, you’ve lived in Spain for most of your life and were born in the United States. You’re about to retire and are getting excited about getting the chance to wind down, relax, and spend more time with your family. Unfortunately, Uncle Sam sees your retirement as his cue to come knocking on your door demanding money.

Uncle Sam Wants to Turn Your Life Savings Into Back Taxes

The money that you worked the better years of your life to accumulate is something to be proud of as a productive citizen. Uncle Sam, less affectionately known as the IRS, is determined to drain your life savings. The U.S. government will tell you that you owe money to them for back taxes. Any rational mind will readily surmise that these claims and demands are as fanciful as they are unfair.

We aren’t talking about a few hundred Euros here. You could easily owe tens of thousands of dollars to the U.S. government for no reason other than having been born in the United States of America.

Unfortunately for all of us retired accidental Americans, Uncle Sam couldn’t care less over the reasoning. The cold hard fact is that America is a business. President Calvin Coolidge spoke some of the most honest words ever uttered by a politician when he said, “The business of America is, business.” That’s it plain and simple. When Uncle Sam comes gunning for your savings, don’t ask him why he’s doing it, it’s just business.

You Are Not Alone

As an accidental American, you are not alone. There are thousands of people who are suffering from the same injustices. Through arrogance, greed, delirium, or all three, the U.S. government is helping itself to the savings of people around the world.

The IRS is an ever-hungry machine that is intent on strangling every red cent out of people that it possibly can. Given the lofty powers awarded to it by way of the U.S. government, they can be a scary bunch. However, staying informed on the monstrous policies that you’re unfairly expected to comply with is always a good idea. The U.S. government has deliberately made it as difficult and as painful as possible to preserve your savings from the ravages of Uncle Sam’s insatiable fiscal desires.

Over the years, governments have been driven to squeeze citizens of their savings. Some governments are fair when it comes to this. The disturbingly innovative voraciousness of the U.S. government’s mechanisms for sucking money out of its citizens is highly concerning. Of course, that voraciousness extends to accidental citizens around the world.

Stay Informed and Stay Angry

It’s always advisable to stay informed on these matters so that you can at least anticipate the damage before it hits you. Unfortunately all staying informed is going to do is let you know what to expect and be a bit proactive about it. The policies themselves aren’t changing and they have shown no signs of doing so any time soon. Why should they? The U.S. government is making a killing by raking in all of that money from accidental Americans.

Skimming from their life savings is a cash cow that will be hard for Uncle Sam to give up. That’s why you should be upset. The IRS is actively targeting your life savings and will use unrelenting bureaucratic forces to get a chunk of it. You have a right to be upset, no one should have to dole out so much of their hard earned money because of a fanciful design in policy.

(Some Holiday Season wisdom from an anonymous source)

John Richardson – Follow me on Twitter @Expatriationlaw

IRS Relief Procedures For Former Citizens Update – Relief For Former Green Card Holders Coming!

Introduction

On December 17, 2019 Gary Carter published a post on Tax Connections, which outlined the “Options Available For U.S. Taxpayers With Undisclosed Foreign Financial Assets“. It contained an excellent overview and analysis which included a discussion of the IRS definition of “non-willfulness” under the Streamlined Program. In commenting on the definiton of “non-willful” he noted that:

The IRS definition of non-willful covers a lot of territory. Negligence, for example, includes “any failure to make a reasonable attempt to comply with the provisions of the Code” (IRC Sec. 6662(c)) or “to exercise ordinary and reasonable care in the preparation of a tax return” (Reg. Sec. 1.6662-3(b)(1)). Further, “negligence is a lack of due care in failing to do what a reasonable and ordinarily prudent person would have done under the particular circumstances.” (Kelly, Paul J., (1970) TC Memo 1970-250). The court also stated that a person may be guilty of negligence even though he is not guilty of bad faith. So the fact that you ignored the FBAR filing requirements for many years, and failed to report your foreign income, might be negligent behavior, but it’s probably not willful. That means you likely qualify for one of the new streamlined procedures. On the other hand, if you loaded piles of cash into a suitcase and lugged it over to Switzerland to conceal it from the IRS, you don’t qualify, because that is willful conduct. If you believe your behavior may have been willful under these guidelines, consult with an attorney before submitting returns through one of the streamlined procedures. We work with attorneys who are experts in this field and we would be happy to provide a referral, free of charge or obligation.

Notably, the definition of “non-willfulness” for the Streamlined Program is the same as the definition for the new “IRS Relief For Former Citizens Program”.

Part A – IRS Relief For Former Citizens Who Relinquished U.S. Citizenship After March 18, 2010 (the date FATCA became law)

The program was announced on September 6, 2019.

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Naomi Osaka does NOT automatically relinquish US citizenship by choosing Japanese citizenship

Citizenship is becoming more and more interesting. In my last post I wrote about Canada’s Conservative leader Andrew Scheer’s U.S. citizenship. Theoretically, on October 21, 2019, Canada could have it’s first U.S. citizen Prime Minister. (Think of the extra pressure that the United States could bring to bear on Canada.)

The newsworthiness of U.S. citizenship continues. There has been much discussion of citizenship as a prerequisite to compete for countries in the Olympic games. This week, it is being reported that tennis star Naomi Osaka , a dual Japan/U.S. citizen is complying with a Japanese law that requires her to choose either U.S. or Japanese citizenship. A number of media outlets are reporting that Ms. Osaka is relinquishing U.S. citizenship. Is this really true? Interestingly the Toronto Globe and Mail initially reported that:


The Globe later (presumably realizing their error) changed the title of the article to:

“Naomi Osaka set to represent Japan at Tokyo Olympics”

Note that there is no U.S. law that requires her to choose one citizenship over the other. Ms. Osaka is apparently linking her “choosing Japanese citizenship” to a desire to represent Japan in the upcoming Olympics. A number of media sources are reporting that by choosing Japanese Nationality (under Japanese law) that Ms. Osaka is relinquishing/renouncing U.S. citizenship under U.S. law. This is probably incorrect. The act of “choosing Japanese nationality” under Japanese law does NOT automatically mean that Ms. Osaka has relinquished U.S. citizenship under U.S. law. As a matter of U.S. law:

Unless Ms. Osaka’s “choosing Japanese Nationality” meets the the test of voluntarily and intentionally relinquishing U.S. citizenship under Section 349(a) of the U.S. Immigration and Nationality Act, then “choosing Japanese Nationality” will NOT result in the relinquishment of Ms. Osaka’s U.S. citizenship. The act of “choosing Japanese citizenship” under Japanese law does NOT automatically result in the loss of her U.S. citizenship.

Every country is free to decide who it’s citizens are or are not.

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