More are renouncing U.S. citizenship as IRS cracks down

[Judi Lynn]

Source: Miami Herald/El Nuevo Herald

More are renouncing U.S. citizenship as IRS cracks down
Posted on Sunday, 05.13.12
As pressure from an International Revenue Service crackdown increases, the number of those giving up U.S. citizenship is also rising.

By Aflonso Chardy
[e-mail]

A growing number of U.S. citizens who live abroad and have bank accounts there are making a radical decision to avoid paying taxes: They’re giving up their U.S. citizenship.

Last year, 1,780 Americans relinquished their citizenship to avoid disclosing foreign account information to the Internal Revenue Service. This is a sharp increase over 2010, when 1,485 renounced citizenship. In 2009, the number was 731 and in 2008 226.

The increasing numbers of Americans renouncing citizenship is the result of an IRS crackdown: Within the past three years, the agency has stepped up efforts to track down and prosecute U.S. citizens who evade taxes by hiding money and other financial assets in foreign bank accounts.

Alan Weisberg, a prominent tax attorney with the Miami firm of Weisberg and Kainen, said he has noticed an increase in interest by some clients in exploring the possibility of renouncing citizenship.

Read more: http://www.miamiherald.com/2012/05/13/2798237/more-are-renouncing-us-citizenship.html#storylink=cpy

[The Magistrate]

1. Traitorous, Treasonous Scum, Ma'am

[Angry Dragon]

3. +77,734

[harmonicon]

8. ? (nt)

[LadyHawkAZ]

2. Even if they drop citizenship

wouldn't they still be liable for the taxes they evaded paying before they renounced?

[harmonicon]

9. Fuck no!!

The US is the only country that expects its citizens to be doubly taxed when living in a foreign country. I suppose by US law they're liable for them, but it's a law that contributes to the US being a laughing stock, and no foreign government would give a damn what the IRS wanted if that person was paying taxes in their country of residence.

The double taxation of US citizens is unfair, unjust, and well past its time to end. If we want to keep these folks as citizens, step one might be to get our treatment of our own citizens up to the level of a first-world country. Ending double taxation would be a good start.

[happerbolic]

13. Double Taxed....

...You mean State + Fed?

[wickerwoman]

27. You're taxed in the country you earned the money in

and taxed again by the US.

But it only kicks in after around $60,000 I think.

[Art_from_Ark]

78. If you live a full year in a foreign country, the threshold income is about $92,000

in US dollar equivalent. For example, if I made the equivalent of $92,000 in Japanese yen working in Japan as a resident of Japan for a full year (2011), then I might be subject to US taxation if the US tax bill were higher than the Japanese tax bill-- but in that case, I would pay the difference, not the full US tax. However, various deductions can increase that threshold.

But I think this article is about a different law, the law that requires the reporting of foreign bank accounts (not related to the IRS). Of course, if you live in a foreign country, you're going to have at least one foreign bank account. It used to be that you didn't have to report such bank accounts, then the Treasury Dept. imposed a reporting requirement for all foreign accounts if the cumulative total at any point in the year reached or exceeded $10,000 US equivalent. That seems like a pretty low threshold, especially here in Japan, where if people have less than $10,000 total in their accounts they consider themselves "poor". Anyway, the reporting requirements have become increasingly detailed, and a penalty can be imposed if accounts are not reported to the Treasury by June 30 of each year.

On edit: The article is wrong about reporting foreign bank accounts to the IRS-- they are actually reported to the Treasury Department, not on the US tax return. The IRS only cares about foreign bank accounts if the interest is above a certain threshold.

[happerbolic]

13. Double Taxed...

...You mean State + Fed ?

[Sen. Walter Sobchak]

22. Except we don't for the extreme majority of expats

[quote]If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is now adjusted for inflation ($91,400 for 2009, $91,500 for 2010, $92,900 for 2011, $95,100 for 2012). In addition, you can exclude or deduct certain foreign housing amounts.

You may also be entitled to exclude from income the value of meals and lodging provided to you by your employer. [/quote]

http://www.irs.gov/businesses/small/international/article/0,,id=97130,00.html

The problem with the crack down is the extreme majority of those being targeted are the children of American expats with few or no ties to the United States who wouldn't be taxable even if they knew they were obligated to file a return.

[BlueMTexpat]

32. You're right about the children of US expats

and some information and education about the tax code is sorely needed because it's one of those tempests in a teapot for the most part.

I know that here in Switzerland that US consular authorities have held several meetings with US expats to try to explain how this works. But otherwise, it's all too often the blind leading the blind.

[Sen. Walter Sobchak]

54. Where I am you can't leave the house without tripping over an "expert"

But to hear what other expats have been told I would think listening to them is a great way to end up in tax court.

Of-course for the high-net-worth tax evader there is now a whole new breed of foreign private banks with no US ties what-so-ever for hiding inconspicuous assets. So what was the point of this again?

[harmonicon]

50. I know that it won't apply to most, but I don't think that matters.

It's completely wrong on principle.

[6502]

29. Yes and no....

I live overseas and still file tax returns to the US.

The rule works something like this: everything you earn in a foreign country UNDER about $81,000 IS NOT TAXED.

Anything ABOVE $81,000 is taxed.

So, if your earn, let's say $81,001, you then will pay taxes on $1.

They figure you are already being taxed by the local government in the country where you live.

In exchange for the protection of the US, access to embassies, favorable treatment in the country where I live, support for my country back home, I find the arrangement reasonable.

[BlueMTexpat]

33. Me too! :) eom

[harmonicon]

51. You're advocating a citizenship tax, which I think is unjust.

I may never live back in the US full time, and I'll likely never make the kind of money that would be taxed, but I'm still furious about it. Every US citizen has access to embassies, etc., and they don't have to pay an extra tax for it. No one should have to. I'm pretty sure that that UK, France, etc. do pretty well by their citizens with embassies and such, and they manage to do it without taxing them twice.

[maxrandb]

63. Wouldn't it stand to reason

that those "Every US citizen has access to embassies, etc." you are talking about ARE PAYING TAXES TO THE UNITED STATES GOVERNMENT?

Seems to me that there is quite a big difference between someone living overseas and NOT paying taxes, using the US Embassy, and someone who pays taxes in the United States and needs to go to the embassy while on vacation or something.

What am I missing?

[harmonicon]

65. No, there's no citizenship tax.

If you don't make enough money to be taxed, are unemployed, etc. you will not be turned away from using the services of an embassy. Just like how there's no poll tax, there's not citizenship tax, and there shouldn't be.

[maxrandb]

66. So it's progressive taxation that you oppose? n/t

[maxrandb]

67. And when's the last time

an unemployed, destitute person was vacationing in the South of France?

[harmonicon]

70. The south, I don't know.

Paris, well, me, two months ago.

[harmonicon]

69. No, it's progressive taxation that I want.

We need sensible tax policy in the US, which means strong progressive taxation, as far as I'm concerned. The European countries which do that are generally better off than the US. They manage to get by without asking for income tax from their citizens living abroad.

[jwirr]

52. Thank you.

[BlueMTexpat]

31. Sorry, but the great majority of US expats are not "doubly" taxed.

That's purely and simply a RW canard.

I should know. I am one and have been for the past 18 years.

Yes, I must file tax returns in both the US and in my country of residence - which happens to be Switzerland. I also file state income tax returns in the US because my husband and I have property in the US. The Swiss forms take into account all liability for federal, cantonal and communal taxes. They also take into account worldwide "wealth" which means the value of all property owned and all financial and/or brokerage accounts (excluding IRAs) and assess a tax on that.

The US and Switzerland have reciprocal tax treaties, which means that there is every attempt made not to "doubly" tax and if any income above the exclusion, which is quite a lot when one considers the average annual wage of the average American, is also taxed in Switzerland then one is able to deduct the value of the foreign taxes paid on that same income from the liability owing to the IRS.

I came here to work for international organizations many years ago and as a retiree was therefore eligible for a C permit, the Swiss equivalent of a US green card which I now have. Due to my long residence and close connections to this country, I am also eligible for dual US-Swiss citizenship. But I have not taken that final step.

Many US citizens living abroad, especially those who may never have lived in the US or previously filed returns with the IRS, simply do not understand how the US tax code works. They have always taken the privileges of their citizenship for granted, without understanding the commensurate responsibilities. If they bothered to inform themselves and 'fess up, they might actually be surprised.

Now those who have specifically tried to keep their financial holdings and dealings away from IRS attention may be understandably nervous. There are some few other US citizens, for various reasons, who have recently been asked to close their accounts from Swiss banks, generally the smaller cantonal banks, and I know personally of one case where a US citizen relinquished her US nationality because of that. But since I came initially as an international civil servant and my dealings have always been with one of the major banks, I have not been asked to close my account. At least, not yet, although there was a time early in 2009 when I had some difficulty in accessing that account for a short while. Since that time, all issues involving US nationals must be routed through that bank's central office in Zurich. So yes, there has been a tightening of controls.

I would suspect that most of those who fear IRS scrutiny and for cause generally vote Republican in any event.

But the overwhelming majority of us who have always followed the rules have nothing to fear. And FYI, the American Democrats Abroad chapter in Switzerland (ADACH) is one of the most active - and growing chapters - of US expats. We true Dems are not renouncing our citizenship!

[grantcart]

44. You have explained it well.

[BlueMTexpat]

59. Tx, grantcart - you're one of my faves! eom

[grantcart]

62. Thanks.

Its kind of an arcane issue that only Americans have to face as other countries don't tax non resident citizens.

It is, however, fair.

Also the IRS only bothers to follow up with expats who work with the American Government or American companies where they can get records.

[harmonicon]

53. I don't think it's a "RW canard".

I've lived out of the US for five years now and have never made enough to even file taxes back home (I'm a doctoral student with just a bit of part-time work here and there). What I object to is the principle. I don't think you should have to file a tax return in the US if you're filing one in Switzerland. It's just simple - no more, no less. It's not that I feel sorry for the wealthy or anything, but I want all people to be treated equally and justly.

[BlueMTexpat]

58. As an American citizen - wherever I live - I

believe that we should all be treated fairly.

There is an obligation for me as a US citizen to file an IRS return, even if it doesn't mean that I actually pay more in taxes than I otherwise would. If I choose to benefit from privileges of my nationality such as say, my right to vote, I should at least be willing to accept the responsibilities.

But that's just MO.

[harmonicon]

61. But paying taxes has no relationship to voting for those living in the US.

To me it seems like a sort of "citizenship tax" for those who live abroad. For yourself, you're saying that it's a sort of poll tax, which we know is illegal. If it's illegal to charge a poll tax to those in the US, it should be illegal to charge a poll tax to those living abroad. Other countries are able to deal with their citizens living abroad - remember that the US benefits mightily from that as well - and aren't worse off for not asking a double tax on them.

[sofa king]

42. I don't want to keep them as citizens.

I want them to leave.

A U.S. citizen who stays out of the country for fifty weeks a year pays virtually no income tax--the "Halliburton dodge" that mercenaries and contractors in Iraq used to further bilk the United States during the Iraq War.

So the double taxation issue is a non-issue for the vast majority of Americans overseas... except for those with a shitload of money, those who want to exploit dual citizenship by using the US as their home nation for more than two weeks a year without paying taxes, and those who have stolen more than they think they can hide from the United States.

So fuck those people. Their motivation for leaving spawns from the same base instincts that brought this nation to the brink of disaster. We shall profit from their swift departure.

[Katashi_itto]

45. That is total B.S. Doubly taxed...go learn the tax code, thats a total myth.

Parroting RW talking points, jezus,

[harmonicon]

55. What other countries do this then, huh?!

I don't appreciate having my opinion labeled a right-wing talking point.

[Chan790]

80. You have failed to understand the intricacies of tax-law and rhetoric.

Simply, double-taxation doesn't mean taxed by two jurisdictions. It means taxed on the same earnings twice, something that never occurs for US expats unless absolutely-unavoidable because any foreign tax paid is fully-deductible and 99% of US ex-pats do not meet the threshold to be taxed in the first place on foreign earnings.

Because you don't accept that, you are parroting the talking-points that RWers feed to low-information voters to combat laws designed to prevent them from using off-shore accounts and dummy foreign addresses to hide assets and earnings. You've staked-out a RW position on this issue.

I could say "Only monetarism and austerity will put Americans back to work!"--the fact that I don't like being called a RWer for saying it does not mitigate in the least that it is a RW talking point. If you don't want your opinion labeled as a RW talking point...abandon the RW talking point.

[harmonicon]

83. I'm honestly baffled by this response.

I've said time and again that what I'm against is the principle - the policy. I know that I'll likely never owe any income tax to the US while living abroad. That's not what bothers me. What bothers me is having this ridiculous system that's out of line with first-world countries.

It is possible for me to object to parts of tax law on principle, even if they'll never apply to me.

Perhaps my deeply ingrained anarchist viewpoints are further from normal than I thought, but this is really a no-brainer for me.

[Art_from_Ark]

81. Canada and the UK, for starters

http://www.cra-arc.gc.ca/E/pub/tg/t4131/t4131-e.html#P170_16551

http://www.hmrc.gov.uk/cnr/faqs_general.htm#8nr

[harmonicon]

82. Those are not related to taxing income earned in a foreign country.

So, it's not the same. I think people should pay capital gains taxes wherever their money is held. No problem there.

[Art_from_Ark]

84. Canadians and Brits living in foreign countries

often have to file tax returns for their home countries. That was my point.

I live in Japan but have to file a US return. I have talked to Canadians and Brits who say they have to file returns in their home countries as well. But I've never had to pay US tax on income that I have earned in Japan while living in Japan.

[harmonicon]

85. And you likely won't.

It really does only have an effect on the very wealthy, but I still object to the US charging income tax to citizens living abroad. Canadians and Brits do have to pay taxes related to accounts and other things in their native countries, but not income tax.

[UCmeNdc]

89. Germany will Tax your US income

Germany Taxes income if you live there and receive the payments into a German Bank.

[dkf]

4. France Entrepreneurs Flee From Hollande Wealth Rejection

Jeremie Le Febvre, the 30-year-old founder of private equity marketing-services firm TBG Capital Advisors, plans to move to Singapore from Paris this year.

Not because of President-elect Francois Hollande’s pledge to boost taxes; rather for what Hollande’s victory says about how wealth is viewed in France, the entrepreneur said.

“What’s really driving my departure is the fact that I don’t share the values that emerged during the election, the rejection of ambition and success,” he said in an interview. “It’s part of France’s difficult relationship with money, but it has reached a new level. Even if it’s utopian, I need to believe for me and my descendants that the sky is the limit.”

France, the fifth-richest country and home to some of the world’s wealthiest people, including LVMH Moet Hennessy Louis Vuitton SA Chief Executive Officer Bernard Arnault, doesn’t celebrate its affluent. Hollande, a Socialist who once said “I don’t like the rich,” and who plans to slap a 75 percent tax on income of more than 1 million euros ($1.29 million), reinforces the sentiment that in France to be rich is not glorious.

Hollande’s rhetoric against wealth and finance is prompting some in France to consider leaving, and European rivals are welcoming them. “Bienvenue a Londres,” or welcome to London, Mayor Boris Johnson quipped in January. Switzerland and Belgium have been just as warm.

http://mobile.bloomberg.com/news/2012-05-10/entrepreneurs-in-france-flee-from-hollande-s-rejection-of-wealth.html

[The Magistrate]

6. Run To The Rock, the Rock Won't Hide You, As TheSong says, Ma'am

These critters will find sooner or later there is no place to run to, no patch of earth they will be let stand upon, without rendering up cash in quantity....

The fact is the rich are one element societies and countries can do very well without.

[dkf]

16. Moving to Singapore seems to be a trend.

It makes sense that people will move to where they are wanted and appreciated. If the successful innovators are demonized, why shouldn't they go elsewhere? The United States is no longer the gateway to wealth. That has gone international.

[The Magistrate]

23. They Will Not Like It There For Long, Ma'am

It is an odd little place, and the natives are much, much better at the game....

[dkf]

26. Why wouldn't people be happy among Asians?

It sounds like Eduardo Saverin is having quite a time there

[gadjitfreek]

30. The successful innovators at WHAT???

The US is still the gateway to wealth for the unscrupulous. There was a time when the employee and employer were on more even footing...a few decades ago. What has emerged is a kind of indentured servitude where record profits have resulted from record productivity from ever-fewer and more poorly-paid employees doing the work. The "innovators" get richer while those who actually do the work become ever more desperate. And if these innovators are responsible for the kinds of innovative financial instruments that crashed our economy, I wish they would pull up stakes and get the hell out.

I have heard some euphemisms for the disturbingly wealthy like "job creators" and now "successful innovators". Most of these people got where they are because they have no conscience and no hesitance to squash others down in their quest to garner obnoxious amounts of wealth. Interesting study done that demonstrates that the incidence of psychopathy in the financial industry (which really doesn't produce anything tangible) is about ten times higher than in the general population. I would take that one step further and attempt a study that includes politicians.

[The Magistrate]

98. At Smash And Grab, Sir: At Finding New Ways To Grab Money By Smashing Other Peoples Enterprises

That is pretty much what the general run of 'financial innovators' specialize in.

[CreekDog]

73. Are you so deluded that you think taxation = not wanted/appreciated?

is that the dumbest thing you've ever posted here?

[suffragette]

68. Leave it to the financiers to take the money and run.

I'd say they're well-practiced in doing so.

[CreekDog]

72. sounds like their home is where their money is

despite having more than most of us could imagine.

[Lydia Leftcoast]

5. But not all who renounce U.S. citizenship are tax dodging

Some simply decide that they prefer a different country.

I personally know three American-born Japanese-English translators who have taken or will take Japanese citizenship because they have Japanese spouses, are raising their children in Japan, and have been there so long that it feels more like home than the U.S. does.

However, if the renouncer is simply buying a Barbados passport or the passport of some other cash-strapped country and renouncing U.S. citizenship, then one has to suspect that person's motivations.

[PDJane]

7. A friend has renounced her citizenship this year.

She's not rich, but she has lived here for longer than she's lived in the US. Her family is here, her career is here, her life is here.

Add that to her disdain for current American politics, and you have an excellent reason to leave. I suspect that taxes aren't the only thing that causes people to give up their citizenship. The implosion of the American political system seems to be a good reason, too.

[suffragette]

91. You make an important distinction Lydia

That article would have been much better if its author had done the same.

[davidpdx]

10. As someone who is an expat living overseas, I understand what is going on

Unlike those who gave a knee jerk reaction. They changed the laws to go after the rich people who were rich and the US Government is making foreign banks report accounts held by Americans. If we have over a certain amount of assets, then we have to fill out additional paper work. The laws were not known by most expats and until this year were not enforced. Starting with taxes for last year, the US Government is enforcing it. The law made many expats nervous because we didn't know what exactly would be required or taxes including residences abroad. My understanding now is that it is 600K and primary foreign residences do not count.

Those who had dual citizenship and are married to foreigners (in most cases this is the case) have been giving up their American citizenship because of the problems with these laws. I do not have dual citizenship, but am eligible for it in the country I live in, but would not give up my American citizenship.

You can't put all of these other people in the same pot with the guy who has a stake in FB that did the same thing. They are different motives.

[dkf]

17. The guy from FB was Brazilian to begin with.

He only became a citizen in 1998.

[davidpdx]

87. Yes I know that

But again it's not the point I'm making.

[nanabugg]

75. With shape the most foreign countries are in...good luck!! They will (expats) not escape "auterity"

They only think they will. People who don't want to pay taxes here shouldn't be citizens.

[davidpdx]

86. Again you miss my point

It's not about austerity or taxes, but that people moved overseas for other reason. Originally I moved overseas for a job and planned on staying a year. I married someone in the country I live in and still have to file US taxes (but am except because I pay Korean taxes). So once again my point is that not everyone is rich and trying to escape taxes.

[lonestarnot]

11. Whatever, but they shouldn't be allowed to ever return and anything they owe the U.S. should

be frozen if it is attachable until the debt to IRS is paid.

[wickerwoman]

28. Oh FFS.

I've lived overseas for nine years. I went to university in another country, work in another country, I live in another country. If I made enough money, should I have to pay taxes to the US even though I use none of the services?
And if I gave up US citizenship to avoid being double taxed (because I already pay taxes to the country I earn the income in) I should be banned from returning to the US for my dad's funeral? Really?
The point is somewhat moot because I don't earn enough for the US tax on foreign income to kick in, but if I did I would feel it was ridiculous and it's one of the few things that would make me consider seriously giving up US citizenship.
Go ahead and call me a traitor. But seriously? People should lose their right to travel in the US simply because they chose, perfectly legally, to be a citizen of another country to avoid being double taxed on income from a job created by another country based on an education earned in another country when they use absolutely none of the US's services?

[BlueMTexpat]

34. Check out the US tax code.

Even if you make so much that you have income above the already generous exclusion and expenses that can be applied against it, if you pay taxes on that in your country of residence, you can also deduct those taxes from any outstanding US liability.

Believe me, it's not all that onerous. See my post above b/c I am also an expat. Although as a retiree I will never earn enough - and even so, I am still working part-time b/c my pension, SSI (yes, I get that too!) and other income are mere pittances compared to the COL here - to earn income above the exclusion - if I by some miracle ever will, that actual amount in taxes I must pay will not be duplicative.

US tax liability already is one of the lowest in the world.

One thing that you should know though if you are seriously consider renouncing your US citizenship. I understand that there is some risk that you may indeed not be allowed to travel within the US. Check it out.

[treestar]

93. I think they should give up US citizenship in that instance

And therefore, have to apply for a visitor's visa like any other foreigner. If that visa is denied, well too bad. It is up to the US which foreigners get to come here.

[wickerwoman]

100. That's fine.

But the visa shouldn't be denied because they gave up US citizenship. They should be treated the same as anyone else from another country.

Simply choosing to legally immigrate to another country doesn't make you a "traitor" who should be punished by denied access to family still living in the US.

[lonestarnot]

99. I really don't care about how you feel on this. If you are an American citizen and you owe taxes

and you would rather relinquish your fucking citizenship than pay the tax debt, then you keep the fuck out and never come the fuck back for any reason ever period! You don't pay us for what you use, then you don't use it.

[Spider Jerusalem]

103. it doesn't work that way

Americans renouncing US citizenship with annual income of 200k or more and/or assets of 2 million or more are subject to an "exit tax"; the IRS treats all of the renunciant's assets as if they'd been sold at market value and tax at the applicable marginal rate is levied on that sum (with the first $600K exempt).

[lonestarnot]

107. K so America gets something. And they can't come back.

[xfundy]

12. And, no doubt, mostly good True Christian™ Cancervatives.

USA! USA! my ass.

[BluegrassDem]

14. Pretty simple solution

Just tax them a certain percentage of their income to give up citizenship. Just call it a renunciation fee. The richer you are, the bigger fee you pay to drop your citizenship. You get them either way!

[dkf]

18. That is how it works now.

There is a capital gain on everything they own. They are paying to renounce their citizenship, but not renouncing means a lifetime of taxes even if they aren't here.

[Maine23]

20. A free person should not have to pay to give up citizenship.

would that not make them a slave?

[14thColony]

24. There's already a renunciation fee

Started a few years ago. You technically have to be up-to-date on your taxes in order to renounce, and THEN you pay the renunciation fee once your application is accepted.

[DallasNE]

19. This Is All The More Reason

We need to see Romney's tax returns prior to 2010. Did Romney in those earlier years report income from those secret Swiss bank accounts and started in about 2009 to report that income because the Swiss bank was reporting it to the US IRS. Don't know that is the case but it is a good reason why we need to see those earlier year tax returns.

[OffWithTheirHeads]

21. I'm sorry, this is real simple.

If you lived in the United States and, because of our laws, made a fortune so great that you, your kids and your grandkids will never have to worry about having a roof over their heads or enough food on the table, you also owe the country and the people who made that possible, a share of your income that will enable others to achieve the same. You used our streets, our police and our infrastructure to help you achieve what you have. You have an obligation to insure that others have the same oppertunity by supporting those same services that you relied on to achieve your wealth.

Anything less is simply greed and treason.

[Blue_Tires]

102. +1

[14thColony]

25. Keep in mind not everyone in this situation got there the same way

My fiancee was born in Europe but with US citizenship. When she turned 18 she also got citizenship in her home country. She went to university in Europe, lives in Europe, and has a career in Europe with a European company. She has no SSN because they were not issued at birth when she was born. She's only visited the US about 10 times and has never lived there.

Yet she is still obligated to pay US income tax just like she was resident in the US, while still paying the income tax of the country in which she works and lives. Yes, there are agreements between the US and other countries to give credit for each others' taxes, and the IRS doesn't tax the first 95K or so of income, but nonetheless the US is one of the few countries in the world (only?) that taxes its citizens where ever they are, regardless of whether or not they've ever even set foot in the country. Besides her, I personally know of four other people in the same situation, and I don't exactly have a large network of acquantances and friends where I am.

[BlueMTexpat]

35. It's really mostly a tempest in a teapot.

There is an obligation to file, but because of individual circumstances, there may be nothing actually to pay.

It's not all that complex. If people really do not want to retain US citizenship, then let them renounce it. But there may also be some adverse consequences that they haven't yet thought about, just as there may be advantages to retaining it, even if it may not seem so to them. They should think it through very carefully and get some fact-based advice before they do something that they may come to regret.

In and of itself, however, the tax liability excuse is IMO nothing more than a red herring.

[mainer]

47. Let's see. She lives abroad, pays taxes abroad, and gets HEALTH CARE.

Why would she hang on to her US citizenship?

So many of us on DU talk about the advantages of living in Europe. But when some people actually choose to do so, we diss them?

[BlueMTexpat]

57. If you're implying that I'm "diss-ing" anyone,

for living in Europe, you're way off base. Especially since I live in Europe.

But I am saying that relinquishing one's nationality is a very serious thing. It is entirely different from simply living and working abroad.

[Ms. Toad]

36. Hard to an article seriously when it can't get the name of the agency it is reporting on right...

IRS = International Revenue Service ?

[SemperEadem]

37. so that means that if shit goes down in their new home country

they can't then run to the American Embassy for protection.

[MattSh]

43. But if shit goes down in the USA

they don't have to figure out a way to get away!

[mainer]

48. Do you really think the US embassy would protect them better than, say, the Uk embassy?

I seem to recall that when foreigners were trapped in Beirut during an outbreak of fighting, the US citizens were trapped for days without rescue, while the French and Italian citizens were immediately evacuated.

[SemperEadem]

97. no, the question is : do I really care?

and the answer is: I don't.

[blkmusclmachine]

38. Now we see who's NOT "Too Big To Fail."

Selective enforcement.

[caseymoz]

39. Extremely dumb of them.

They think they'll be treated better overseas? They think people in other countries are going to welcome confirmed cheapskates? People who would betray their native country before paying even one of the lowest tax rates?

They won't find too many other nations that appreciate their Randian contributions to society. They'll be treated as foreign and known for being faithless no matter where else they go. They will be able to keep their hard earned money, up until the time their host country has had enough of upper-class invaders.

I say to them: lots of luck in countries that don't want you and have no reason to trust you.

[Spider Jerusalem]

104. Switzerland and Monaco, to name two, are full of rich tax exiles

the only reason you never hear about Americans in those places is because Americans are taxed on the basis of citizenship and not residency; there's no benefit to an American citizen in moving to a country with low or no income tax.

[caseymoz]

106. Yes, and ultimately, the natives will get tired of them.

I've heard of Americans in those places. The native rich will get tired of those foreign rich taking advantage of their liberal tax laws. Or, more likely, the middle and lower classes in those places are going to resent wealthy foreigners and feel more slighted by them than by the native upper class. And we're also less likely to hear about that happening. It's going to seem like a good thing at first, but it's going to get old.

[harun]

40. Leeches

[tru]

41. If I were younger

and didn't have family and roots here, I'd move to Denmark and ask for citizenship there. Granddad made a mistake emigrating from Denmark to the U.S. This has nothing to do with taxes and everything to do with living in a much more humane country.

[Smilo]

46. Oh poor babies............

being asked to follow the laws of the country and help the country that has given them everything.

They really make me sick - they are not Americans in any sense - they will shop around the world until they find a country where they can continue to defraud and abuse the systems.

What is galling is that these people are so super rich yet they are scared of losing a penny - makes you wonder if they ever finish going to the bathroom or pinch of early with a big shit eating grin on their faces - believing they have outwitted the bathroom gods.

[mainer]

49. The "country that has given them everything"?

Seems to me that the US gives its citizens NO healthcare, NO safety net, and an endless succession of wars.

An American living in Switzerland or France or Finland or Norway might actually be taking the wiser course.

[Smilo]

56. You are talking about the lesser mortals...........

this story and my comments were about the billionaires wanting to leave - they have had everything they needed and wanted up until now and now they fly the coop.

[JCMach1]

60. The comments above about exempt expat salary are correct...

I just really wish they would make a bank account exemption for people with reported income at, or just below the exempted amount.

Is it really the IRS's business what I do with my bank account if there is not a hint of wrongdoing on my part?

Many expats are going to get burnt by the requirements who have no reason to be.

If there is wrongdoing, make me present the evidence in the audit.

The majority of people with foreign bank accounts are just ordinary Americans working abroad.

Democrats Abroad has a group lobbying and working on these issues:

Dear Democrats Abroad member,

Democrats Abroad’s FBAR/FATCA Task Force has been working consistently to develop an effective strategy to alleviate the burdens placed by new and newly-enforced tax legislation on US citizens abroad. The specific legislation we are focusing on is FATCA and the FBAR.



The Foreign Accounts Tax Compliance Act (FATCA) requires U.S. taxpayers with specified foreign financial assets that exceed certain thresholds to report those assets to the IRS. In addition, FATCA will require foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest.



The Report of Foreign Bank and Financial Accounts (FBAR) must be submitted if you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account. FBAR legislation has been in place since the 1970’s but only recently has the IRS begun to enforce this ruling. The threshold is currently set at $10,000 and the penalties for not filing can be considerable.



We are fortunate in having well-placed contacts in strategic government positions, and have made some headway in our efforts. In point form; here is the latest update on our activities:



* We have been in regular contact with senior staff at both the IRS and the Treasury Department, who have been receptive to our concerns.



* We have developed a strong and sympathetic working relationship with members of the Senate Finance Committee responsible for the FATCA legislation.



* We have shared with our contacts at the IRS, Treasury and Senate individual stories illustrating the stress and challenges placed on ordinary overseas Americans. These stories appear to have made a significant impact.



* Our former DA International Secretary, Amanda Klekowski von Koppenfels, a scholar in the field of politics and demographics, has compiled a detailed stratification of Americans abroad, which clearly refutes any imputation of tax evasion as a general motive for living overseas. The statistical breakdown has been of great interest to the Senate Finance Committee, and may figure prominently as supporting material to our upcoming requests and submissions.



* We helped facilitate a letter from Carol Maloney, Chair of the Americans Abroad Caucus, to Treasury Secretary Geithner requesting congressional hearings. Secretary Geithner himself has acknowledged there are concerns with FATCA and we have recently learned that Treasury will host later this month a meeting of groups representing overseas Americans, including Democrats Abroad.



* We are reaching out to senators who have been major promoters of FATCA to bring to their notice that the anti-tax laundering legislation they introduced will have disastrous, unintended consequence for millions of law-abiding overseas Americans, as well as serious implications on foreign investment in the US.



* We are requesting inclusion in an IRS hearing on FATCA in Washington, DC on May 15.



* We are arranging a meeting with Taxpayer Advocate Nina Olsen Olson, whose 2011 report to Congress is highly critical of IRS handling of overseas tax filers.



* We are preparing resolutions to present to the DPCA Resolutions Committee at the May global meeting in Mexico. If passed, Democrats Abroad will then submit those resolutions to be considered for inclusion in the Democratic Party 2012 Platform.



We remind our members once again that Democrats Abroad and its FBAR/FATCA Task Force cannot and does not offer tax advice. All those facing problems or having specific questions are urged to seek professional tax and/or legal counsel.



Respectfully submitted to the DA Membership,



Your DPCA FBAR/FATCA Task Force,

This was from the most recent email...

[davidpdx]

88. JC thanks for posting that

Once again, the problem is the IRS are trying to crack down on the ultra rich (which I totally support) but making the requirements more difficult even for those who aren't rich and are not dodging taxes.

[maxrandb]

64. We've lost our "effing" minds

Last edited Tue May 15, 2012, 12:21 PM - Edit history (1)

Since when is paying taxes to support the government "of, by and for the people" a "bad thing"?

Fuck, it sounds like they want to join the "effing" Tea Baggers...and if that's the case, surrendering their US Citizenship IS A GOOD THING

I've had about enough of the selfish ass, Ayn Randian, self-made nuttery of the right...I JUST NEVER THOUGHT I'D SEE IT DEFENDED ON DU

[deutsey]

71. There is no America

There is no democracy.
There is only IBM and ITT, and AT&T, and Du Pont, Dow, Union Carbide and Exxon.
Those are the nations of the world today.

The film Network

[tabasco]

74. Buh bye!

Enjoy your wonderful tax-free life in Somalia, assholes!

[Yo_Mama_Been_Loggin]

76. Traitors

Most of them probably have R by their name.

[may3rd]

77. What countries are they flocking to that welcome their $$ ?

and will they still cast votes in the US ?

[treestar]

94. No, non citizens can't vote

So I'd hope this has the effect of lowering Republican support - since with that motive, the person likely would have voted R anyway.

[Maine23]

79. This is proof that higher tax rates cause a drop in the amount of money collected.

I think we need to have competitive rates.

[jberryhill]

95. Which "higher tax rates" are you talking about?

The tax rates in place under Reagan?

[La Lioness Priyanka]

101. yes a drop of 1700 people who don't even live here. nt

[Evasporque]

90. SO.... thats why the Bachmanns became Swiss citizens...

Protecting the the famliy $

[treestar]

92. This is good

It shows they put money above country - let's see if the country they are now loyal too always taxes them less than the US would have. It would serve some of them right if their taxes are actually higher due to this decision!

[Courtesy Flush]

96. They hate responsibility more than they love their country.

[CBGLuthier]

105. the almost Birchian response to this puzzles me

Dear god you would think they had actually shit on a flag and made some of you eat it.

Why the hell should people who no longer live in this country and have no intention of EVER living in this country again have to keep their citizenship or they are traitors or scum or treasonous all of which are absolute BULLSHIT statements.

You can not be a traitor to nor commit treason against a nation that you are no longer a citizen of and the mere act of renouncing citizenship does not equal these acts.

I would expect such reactions from the america love it or leave it crowd but not here.

[picadilly]

108. Can the US bear reciprocity ?

So, what if ... foreign countries did the same and taxed their citizens living and working in the US on any revenue above 4x their respective poverty line ?

Let's take for example, Mexico, poverty line being roughly US$1600/y/individual, vs US$11,000/y/individual in the US.

So, if Mexico applied the same law, any mexican living and working in the US would owe taxes to the mexican state on revenues above $6400/y/individual.

And if Mexico applied more of the same law, US banks would have to provide the state of Mexico with the information on financial holdings and movements of mexican account holders. Eventually, all this information exchange isn't free, and should give your local neighborhood bankster a prime "state regulations" excuse to hike account management fees up.

Incidentally, who thinks, retrospectively, that Nazi Germany should have had the same rights, as the US today, to scrutinize german jewish holders of bank accounts in the US, among the other german residants in the US, and prosecute them for fiscal evsaion, and obtain cooperation of the US govt to seize jewish assets in the US ?

Once put in perspective, this is really what the US govt is asking, AND getting from countries it sets it sights on to make it's citizens with foreign residancy abide to US law.

[picadilly]

109. The Expat Tax Is Law - The Door Is Now Closed!

The Expat Tax Is Law - The Door Is Now Closed!


After last year’s failed attempt to pass an American expatriate tax, the US Treasury Department succeeded in sneaking the provisions into the miscellaneous revenue positions of the recently passed Health Coverage vailability and Affordability Act of 1996. Given the failure of their high profile campaign last year, the Treasury Department switched strategies this year and undertook one of stealth. While the press was talking about tax-deductible contributions to medical savings accounts (MSAs), provisions tightening the expatriation tax rules were implemented. Foreign grantor trust rules were also tightened under the law.

In order to provide the health insurance and care benefits provided under the law, a separate tax title adds certain revenue raising provisions. In general, these revenue offsets add provisions aimed at making certain that the United States get their fair share plus some when US citizens and permanent residents expatriate. In short, Uncle Sam would like to tell its expatriates that they earned their money from the United States, not in it.

A review of selected sections of the Congressional Record provides some additional insight into the thinking behind these new provisions:

It has come to the attention of Congress that some very wealthy individuals have been relinquishing their citizenship to avoid US income, estate and gift tax. The bill does not want to discourage citizens from exercising their right to expatriate, but does not want to provide a tax incentive for such an action . . .

If Congress truly wanted to eliminate the incentive for expatriation, it might be better to eliminate high taxation and put an end to the litigation crisis rather than creating another layer of government regulation and bureaucracy.

Congress believes the changes are consistent with existing tax treaties in conferring a tax credit for taxes paid in the foreign country, and to the extent they are inconsistent, the Treasury Department will re-negotiate the treaties to account for the changes. The new provisions take precedence over any treaties . . .

To make certain that other countries will not benefit from America’s brain drain, the United States will once again embark on a campaign to bully other nations into accepting America’s oppressive system of taxation and regulation.

The bill would subject former citizens to the expatriation provisions with no inquiry into their motive and requires individuals who exchange property that would otherwise be exempt from US taxation as foreign source income to immediately recognize US source income on any gain from such a transaction. The Secretary is authorized to issue regulations to treat removal of tangible property from the US and other conversions to foreign source income as currently taxable as US source income. For example, any income from stock transferred to a foreign source, such as dividends, would be converted to US source and immediately taxed . . .

Logic dictates that if this tax were to approach 100%, it would look quite similar to currency controls and foreign investment prohibitions. Since it only goes about half of the way, we can assume that we are 50% down the road toward American currency and foreign investment controls.

A new information-reporting requirement has been added requiring former citizens and long-term residents to complete information reporting at the time of expatriation .

Just to make certain that no one escapes from the United States without leaving all their wealth behind, the new information reporting requirements will make certain that the Treasury Department always knows where your assets are placed. Of course, if you fail to report, civil and criminal sanctions will apply. The new treaty negotiations will most likely include provisions to extradite those "expat tax evaders" back home for their "criminal act" of leaving a country that was once known as the home of the free. Our sources at the Internal Revenue Service tell us this treaty provision will be known as the Hotel California provision, you can check out, but you can never leave.

The bill also requires that a US person that receives a distribution from a trust must report that to the Service . . .

Now Uncle Sam is not only seeking to penalize those patriots that have placed their funds out of harm’s way, but now the potential recipients of those receipts. If the logic of current money laundering statutes apply as they do in most tax cases, the bank that accepts the cashing of the beneficiary’s distribution check from a foreign trust will be a co-conspirator in this "unpatriotic" affair.

Effective for transfers made after February 6, 1995, if a non-resident alien becomes a resident within five years of transferring property to a foreign trust, the transferor will be considered to have transferred the property on the date he became a resident . . .

The Statue of Liberty stands as America’s great symbol of open immigration with its famous inscription "give us your tired and poor". With this provision, any person who hopes to emigrate to the United States will definitely become both tired of complying with US regulations and poor after he complies with them.

If a US person receives more than $10,000 worth of gifts from one foreign person during any tax year, he must file a report with the Service. If he fails to file a report, the Service has the sole discretion to determine the taxation of the property received by the US person and the person is liable for a penalty of 5% of the value of the gift for each month he fails to file a report . . .

Currency controls and foreign investment restrictions work both ways. Not only will governments prevent you from sending your money out, but they will also prevent you from sending your money in without their fair share plus some.

The Service has the power to prescribe regulations to prevent the avoidance of the Estate, Trust and Beneficiary part of the Code . . .

This provision is known as an Abusive Transaction provision. It is commonly referred to by international human rights organizations as the arbitrary and capricious application of laws.

Once the Secretary of the Treasury establishes a reasonable belief that the expatriate's loss of US citizenship would result in a substantial reduction in estate, inheritance, legacy and succession taxes, the burden of proving that one of the principal purposes of the loss of US citizenship was not avoidance of US income or estate tax is on the executor of the decedent's estate . . .

If these provisions were making you feel a bit suicidal, please forget it. Uncle Sam is not only going to pursue you to the grave, but also your executors and heirs.

Other items in the Congressional Record provide an even greater insight into Washington’s motivations:

Because US citizens who retain their citizenship are subject to income tax on accrued appreciation when they dispose of their assets, as well as estate tax on the full value of assets that are held until death, the Committee believes it fair and equitable to tax expatriates on the appreciation in their assets when they relinquish their US citizenship. The Committee believes that an exception from the expatriation tax should be provided for individuals whose income and net worth are relatively modest . . .

If you are poor, you may leave; however, if you were a productive American in the United States that no longer exists, you must stay and pay or leave behind the fruits of your productivity. America’s Second Civil War has begun and it is known as Class Warfare.

Exceptions from the expatriation tax are provided for individuals. [An] exception applies to a US citizen who relinquishes citizenship before reaching age 18½, provided that the individual was a resident of the United States for no more than 5 taxable years before such relinquishment . . .

Since one cannot renounce their American citizenship prior to their 18th birthday, the children of an American resident overseas has only 6 months to renounce their citizenship and avoid the application of these laws. How many18-year-olds are capable of making this type of decision?

Under the provision, an individual is permitted to elect to defer payment of the expatriation tax with respect to the deemed sale of any property. Under this election, the expatriation tax with respect to a particular property, plus interest thereon, is due when the property is subsequently disposed of.

In order to elect deferral of the expatriation tax, the individual is required to provide adequate security to ensure that the deferred expatriation tax and interest ultimately will be paid… In the event that the security provided with respect to a particular property subsequently becomes inadequate and the individual fails to correct such situation, the deferred expatriation tax and interest with respect to such property becomes due. As a further condition to making this election, the individual is required to consent to the waiver of any treaty rights that would preclude the collection of the expatriation tax . . .

Only in Congress could one dream of a law that requires its former citizens to waive their rights in a foreign country in order to escape from the political, social, and economic tyranny of the United States.

Under the provision, special rules apply to trust interests held by the individual at the time of relinquishment of citizenship or termination of residency. In addition, an individual who holds (or who is treated as holding) a trust interest at the time of relinquishment of citizenship or termination of residency is required to disclose on his or her tax return the methodology used to determine his or her interest in the trust, and whether such individual knows (or has reason to know) that any other beneficiary of the trust uses a different method . . .

The latter provision is known as the "Stool Pigeon" clause as you are required to turn your fellow beneficiaries over to the Internal Revenue Service. Similar laws existed in Nazi Germany that encouraged children to turn their parents and neighbors over to the authorities.

If an individual holds an interest in a trust that is not a qualified trust, a special rule applies for purposes of determining the amount of the expatriation tax due with respect to such trust interest. Such separate trust is treated as having sold its assets as of the date of relinquishment of citizenship or termination of residency and having distributed all proceeds to the individual, and the individual is treated as having re-contributed such proceeds to the trust. The individual is subject to the expatriation tax with respect to any net income or gain arising from the deemed distribution from the trust. A beneficiary's interest in a non-qualified trust is the basis of all facts and circumstances. If the individual has an interest in a qualified trust, a different set of rules applies. In determining this amount, all contingent and discretionary interests are resolved in the individual's favor, (i.e., the individual is allocated the maximum amount that he or she potentially could receive under the terms of the trust instrument) . . .

The United States is quite generous in calculating the tax based on the maximum possible distribution. In their arrogance, it appears that the law does not detail how to recover the excess tax if the maximum level is ever reached. Alternatively, Congress never intended for former Americans to comply with this law.

If the individual does not agree to such a waiver of treaty rights, the tax with respect to distributions to the individual is imposed on the trust, the trustee is personally liable therefor, and any other beneficiary of the trust will have a right of contribution against such individual with respect to such tax. . .

Based on the above, no foreign financial institution with offices or business in the United States would accept the trusteeship of an American’s assets.

Under the provision, an individual is permitted to make an irrevocable election to continue to be taxed as a US citizen with respect to all property that otherwise is covered by the expatriation tax. This election is an "all-or-nothing" election; . . .

Congress is quite generous with this provision in allowing expatriating Americans to continue being chased by tax collectors for the rest of their lives overseas.

Under the provision, an individual is treated as having relinquished US citizenship on the date that the individual first makes known to a US government or consular officer his or her intention to relinquish US citizenship… A US citizen who furnishes to the State Department a signed statement of voluntary relinquishment of US nationality, confirming the performance of an expatriating act with the requisite interest to relinquish his or her citizenship is treated as having relinquished his or her citizenship on the date the statement is so furnished (regardless of when the expatriating act was performed), provided that the voluntary relinquishment is later confirmed by the issuance of a CLN [Certificate of Loss of Nationality]. If neither of these circumstances exist, the individual is treated as having relinquished citizenship on the date a CLN is issued or a certificate of naturalization is cancelled. The date of relinquishment of citizenship determined under the provision applies for all tax purposes . . .

Based on this provision, almost any American who now wishes to undertake the expatriation route will be subject to the tax. In short, the door has closed for most Americans.

Under the provision, the exclusion from income does not apply to the value of any property received bygift or inheritance from an individual who was subject to the expatriation tax. Accordingly, a US taxpayer who receives a gift or inheritance from such an individual is required to include the value of such gift or inheritance in gross income and is subject to US income tax on such amount .

This implies that if an American expatriate sends funds back to support his aging parents, his parents will need to treat these gifts as taxable income. If the parents fail to report these amounts, they could also suffer civil and criminal penalties associated with tax evasion.

Under the provision, an individual who relinquishes citizenship or terminates residency is required to provide a statement which includes the individual's social security number, forwarding foreign address, new country of residence and citizenship and, in the case of individuals with a net worth of at least $500,000, a balance sheet . . .

Given the desire to obtain balance sheets from expatriating Americans, it is only a matter of time before the IRS requires the inclusion of personal balance sheets of individual taxpayers with their Form 1040s or at least those they suspect might wish to expatriate.

In the case of a former citizen, such statement is due not later than the date the individual's citizenship is treated as relinquished and is provided to the State Department . . .

In short, this means that you cannot obtain your certificate of loss of nationality without providing the information to the United States government.

Further, the provision requires the Secretary of the Treasury to publish in the Federal Register the names of all former US citizens with respect to whom it receives the required statements or whose names it receives under the foregoing information-sharing provisions . . .

Now your friends and neighbors can know that you have expatriated. Although Congress respects the right of Americans to expatriate, it will publish your name in the federal register as if expatriation were a criminal act.

The provision directs the Treasury Department to undertake a study on the tax compliance of US citizens and green-card holders residing outside the United States and to make recommendations regarding the improvement of such compliance. The findings of such study and such recommendations are required to be reported to the House Committee on Ways and Means and the Senate Committee on Finance within 90 days of the date of enactment . . .

Uncle Sam has awoken to the fact that Americans living overseas are the most likely individuals to expatriate and as a result, they are gearing up to create a machine to attack them as well.

The provision is effective for US citizens whose date of relinquishment of citizenship (as determined under the provision) occurred on or after February 6, 1995. US citizens who committed an expatriating act with the requisite intent to relinquish their US citizenship prior to February 6, 1995, but whose date of relinquishment of citizenship (as determined under the provision) does not occur until after such date, are subject to the expatriation tax . . .

This means that if you have not already relinquished your citizenship or have only done so recently, you are subject to the expat tax. The door has closed, but not completely.


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