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The proper care and feeding of the Green Card – An interview with “long term resident” Gary @Clueit

UPDATE 10 SEP 2018

Gary replied to this same post on the Citizenship Taxation Facebook Group. .

Gary Clueit In the example of the Covered Expat inheritance 40% tax on heirs I gave during the interview, I misstated that there was no credit available for any foreign estate tax or IHT paid, giving the UK as an example. Apparently, the amount due to the IRS can be offset by any amount paid to a foreign country. It makes no difference in my case, since my domicile is a country that has no estate or inheritance tax.

Also, only 4 OECD countries (Japan, South Korea, France, UK) have an estate tax equal to or more than the US. Every other country either has none (including 15 OECD countries), or is at a lower rate than the US. Which means, unless you are domiciled in one of the very few high tax countries, your heirs will still lose a significant portion of their inheritance.

It is one thing to pay death taxes where you are living/domiciled. It is an entirely different matter to have to pay anything to somewhere you once lived, left and paid an exit tax on ALL unrealized gains at the time. And zero credit for any increase in wealth since you departed.

Exceptionalism at its best!

*******

Cross-posted from Citizenshipsolutions

JR 24UG2014 pic

                  INTRODUCTION

The Internal Revenue Code of the United States imposes worldwide income taxation on ALL individuals who are U.S. citizens or who are otherwise defined as “residents” under the Internal Revenue Code. “Residents” includes those who have a visa for “permanent residence” (commonly referred to as a Green Card).

        John Richardson

A visa for “permanent residence” is a visa for immigration purposes. Once an individual receives a visa for “permanent residence” he will be considered to be a “resident” under the Internal Revenue Code. His status as a “resident” for tax purposes continues until he fulfills specific conditions to sever his “tax residency” with the United States. The conditions required to sever “tax residency” with the United States are found in S. 7701 of the Internal Revenue Code. (Basically a Green Card holder can’t simply move from the United States and sever tax residency.)

In the same way that U.S. citizens are subject to taxation on their worldwide income even if they don’t reside in the United States, “permanent residents” will continue to be subject to taxation on their worldwide income until they take specific steps to sever tax residency in the United States. In certain circumstances Green Card holders living outside the United States can avoid filing some of the “forms” that are required of U.S. citizens living abroad.

The steps to sever tax residency are found in S. 7701(b) of the Internal Revenue Code. Those wishing to explore this further are invited to read my earlier posts about Gerd Topsnik: Topsnik 1 and Topsnik 2. Those “permanent residents” who qualify as “long term residents” will be subject to the S. 877A Exit Tax rules if they try to sever tax residency with the United States. It’s probably easier to secure a “permanent residence visa” for immigration purposes, than it is to sever tax residency for income tax purposes.

On September 5, 2018 I had the opportunity to participate in a conversation with Mr. Gary Clueit who has been a permanent resident of the United States for 34 years. The following tweet links to the podcast of the conversation. Anybody considering moving to the United States as a “permanent resident” should listen to this podcast.

Mr. Clueit has previously written on how the S. 877A Exit Tax affects his situation. The following two tweets link to posts which capture his writing.
 
First, from CitizenshipTaxation.ca:

Gary Clueit:

As a long-term GC holder with no way to escape “covered expatriate” status, the article doesn’t really cover all the insidious side-effects. For example, determining the $2M net worth threshold does not cover any assets you might have had before moving to the US, or assets due to bequests from relatives that have never set foot in the US. Even after paying the exit tax on the “deemed sale” of everything you own worldwide, you will have to pay actual capital gains when you do actually sell. And every penny of any bequest or gift you make to someone resident in the US (i.e. a child or grandchild, even if they are not US citizens) is then further taxed at 40% (that they have to pay) with no limit. So, for example, if your net worth is $2.5M on the date of expatriation (i.e. covered expat), you pay the exit tax. Say your wealth increases to $250M AFTER you leave the US – if your heirs live in the US (again, whether citizens or not) and you leave that wealth to them, the entire $250M estate will be taxable to them at 40% regardless of the fact that 99% of your wealth at the time of death was created outside the US.

Even if GC holders decide to stay in the US, they are perpetually screwed. Besides never being allowed to vote (not really an issue since one never desired to be a citizen), though they are still expected to pay taxes on worldwide income. The worst comes at death:
US citizen spouses can transfer or gift an unlimited amount between each other. If you are the spouse of a GC holder the maximum transfer is $149,000 annually.

Upon death, a citizen can leave an unlimited amount to their spouse. If your spouse is a GC holder, the max is just over $5M. If you spouse is a nonresident alien, the maximum is $60,000. Amounts above that are subject to 40% estate tax.

There is also the possibility of being caught up in double estate tax issues when you die.
This is the ultimate in taxation without representation – one of the founding principles behind the creation of the US. Tea parties were held!

Second, from the Isaac Brock Society:

Perils & Pitfalls of Being a Green Card Holder

gary clueit

I am posting this comment of Gary Clueit that appeared on the Robert Wood article couple of days ago. Over the past few months, we have “met” Gary on FB, Twitter etc. Especially the Wednesday Tweet Rally- A group that just keeps on giving!!

by Gary Clueit
continued at the original post here

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For more on Green Cards please see the following three articles by John Richardson:

Green Card Holders; the Tax Treaty TieBreaker rules and taxation of subpart F and PFIC income

Green Card Holders, the Tax Treaty Tie Breaker and REporting Forms 8938, 8621, and 5471

Green Card Holders, the Tax Treaty Tiebreaker and Eligibility or Streamline Offshore

German Foreign Minister Calls for an Independent EU “SWIFT” System

Update 27 August 2018

For anyone interested in more details about this development please see: here
and here
Hat tip to Tim Smyth

interesting: One of the factors irritating to the EU is the “repatriations of billions of dollars in profit from Europe by U.S. based tech giants” (Bloomberg) an outcome of course, from recent U.S. tax reform (TTFC)

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I have become fascinated by an ongoing development in Europe stemming from Trump’s actions against Iran. First, there is the United States pulling out of the Joint Comprehensive Plan of Action
JCPOA, (aka the Iran nuclear deal in which Iran promised to stop development of its nuclear program in return for a lessening of sanctions and increased trade relations). After the withdrawal, Trump issued harsh sanctions against Iran.

Over the last couple days, a number of expats have tweeted/posted a
condensed version
of this story. I was curious know more about it.

On August 21, German Foreign Minister Heiko Maas wrote an editorial for the German paper, the Handsblatt. He called for a “balanced partnership” as counterweight to the US actions regarding Iran.

At first, this might seem completely unrelated to our situation however, one aspect of this “Balanced Partnership” may include an option for trading outside of the U.S. SWIFT system.

Maas said Europe needs a to set up EU payment systems independent of the United States if it wants to save the nuclear deal.
 

“That’s why it is indispensable that we strengthen European autonomy by creating payment channels that are independent of the United States, a European Monetary Fund and an independent SWIFT system,” Maas wrote. “Every day the deal is alive is better than the highly explosive crisis that would otherwise threaten the Middle East.”

One might wonder if anyone in the U.S. has bothered to realize what the effects of pulling out of the Iran deal are. For those who are not fortunate enough to have the Atlantic Ocean as a shield, the ramifications of uncontrolled Iranian development of a nuclear arsenal are dangerous and potentially life-threatening. Perhaps those who remember WWII or those engaged in recent Middle East conflicts can appreciate this. Doubtful for those in America, given the impenetrable shell of mind-numbing exceptionalism.
.

Further, the EU Foreign Affairs Minister, Federica Mogherini, has taken the bold step of encouraging companies to disregard Trump’s threats should they continue to do business with Iran. She said:

“it’s up to Europeans to decide who they trade with.”

How refreshing! The development of a spine against what is nothing less than another massive example of U.S. economic imperialism.

The EU has created a new law to protect European companies from the punitive measures the U.S. will take against those who dare to defy its will.

With the new rules European companies are granted the right to challenge US sanctions in European courts and seek
compensation from the U.S. government or American companies. In practice, this path promises to be cumbersome and
costly and even the Commission acknowledged that there is no precedent in such cases.

The blocking statute has never been implemented, although one was issued for the first time in 1996 in connection to economic
sanctions against Cuba and Iran. Back then, the threat was enough to persuade the US to suspend secondary sanctions.

“The threat was enough to persuade….” reminds one of how the world responded to #FATCA, no?

This development could be incredibly helpful to us in at least two ways. First, the oft-discussed demise of the US dollar as the world’s reserve currency would clearly aid governments in divesting themselves from #FATCA. While not a direct hit at #CBT, such a move would take the “sting” out of what has come about since the H.I.R.E. Act ( 2011 for most of us). At the very least, it might stop the ongoing damage Europeans with “U.S. taint” are experiencing with the closure of bank accounts, mortgages etc. While Canadians are not currently experiencing this, a blow to #FATCA would enable them to:

  • decide to remain under the radar far more comfortably
  • put a huge dent into the screaming scare-tactic commentary of the tax compliance
    community and hopefully, their outrageous fees as well

Secondly, such a move might empower these governments, to support the requests of their own #Americansabroad citizens whether they be accidentals, dual citizens of other countries with residence in those countries as well as those who have yet to file I-407 for their greencards.

This would also encourage more effort from earlier efforts in various countries as well as the newer ones.

Here is a comparision for BRICs-US. Can you imagine the combined effect of the BRICs & the EU’s financial independence from the U.S.? Don’t you wish these countries could have thought of this BEFORE the U.S. stuffed #FATCA down the world’s throat?

I’ve been reading a book called “What We Say Goes – Conversations on U.S. Power in a Changing World,” by Noam Chomsky (2007). Chapter 6 – Invasions and Evasions – took place in Cambridge Massachusetts on February 2, 2007. In spite of the fact this Q & A predates FATCA and uses health reform and media reform as examples, I was struck by how well section this applies to what is happening to us now. So many are dissatisfied with R.O.’s TTFI proposal. People seem to expect a one-size-fits-all solution. At the beginning of our involvement with this, the phrase “It’s a marathon, not a sprint” was a sort of mantra. Part of that marathon is accepting that it will likely take a combination of a number of different solutions before it’s over.

Q. “I want to ask you about tinkerers versus overhaulers, reforms- cosmetic improvements and adjustments to the system – versus substantive structural change.”

A. “…..Tinkering, to borrow your word, is a preliminary to large-scale change. There can’t be large-scale structural change unless a very substantial part of the population is deeply committed to it. It’s going to have to come from the organized efforts of a dedicated population. That won’t happen and shouldn’t happen, unless people perceive that the reform efforts, the tinkering, are running into barriers that cannot be overcome without institutional change. Then you get pressure for institutional change. But short of that realization, there is no reason why people should take the risks, make the effort, or face the uncertainty and and the punishment that’s involved in serious change. That’s why every serious revolutionary is a reformist. If you’re a serious revolutionary, you don’t want a coup. You want changes to come from below, from the organized population.

What is needed is support from our entire population for each and every effort that will contribute to the end of this miserable situation. I cannot imagine any of us saying to the Accidentals – “I’m sorry, but since your proposal won’t solve my specific problem, I will not help.” Or an accidental being indifferent to specifics involving duals. There may need to be more lawsuits and stronger movements within individual countries. We all have to be on board as a solid, unified group adjusting and adapting as the process moves on.

The U.S.government is already a huge, disorganized, dysfunctional mess.

We cannot afford to be the same. We have to be better than that.

ENFORCING THE EXIT TAX AGAINST EXPATRIATES: CALIFORNIA STATE BAR RECOMMENDS CHANGE

Excerpted from ENFORCING THE EXIT TAX AGAINST EXPATRIATES: CALIFORNIA STATE BAR RECOMMENDS CHANGE by Joseph R Viola December 8, 2017

This piece is a report of an article by Helen S. Cheng and Dina Y. Name of Withers Bergman LLP by was originally published in the November 13, 2017 issue of Tax Notes.

Here is a summary (leaving out details of the Exit Tax with which we are all already familiar):

In theory, surrendering your U.S. citizenship for tax purposes can be expensive. However, the IRS sometimes has difficulty enforcing the exit tax against expatriates. Now the State Bar of California is recommending legislative changes that would make enforcement easier and expatriation more expensive.

Once an exit tax is assessed, the IRS has authority to place tax levies on the person’s domestic accounts, but has limited authority to collect the amount owed from any property held overseas.

To correct this, the State Bar of California’s proposal recommends that the U.S. legislature amend the Internal Revenue Code and related laws to close the information gaps and improve communication between the departments. The proposed laws, if adopted would essentially change the order of filing, requiring a U.S. taxpayer to complete Form 8854 and pay the exit tax before completing expatriation through the State Department or Department of Homeland Security. They would also allow the departments to exchange information about expatriating taxpayers, to the extent necessary to enforce the exit tax.

In addition, the Bar recommends requiring expatriates to consent to ongoing personal jurisdiction in the U.S. for five years.This would allow the IRS to seek enforcement in U.S. courts, rather than filing tax collection matters abroad.

I haven’t seen anything else about this idea and have no knowledge that it has gained ground. However, were this to happen, presuming those who can remain under the radar will continue, those who need to renounce may find it a lot harder……….

Why Is Bank of America Asking Clients About Their Citizenship?

info citizenship

from The Nation

Interesting that FATCA, which predates CRS is not mentioned here.If the U.S. were interested in reciprocity, wouldn’t this be the focus? In fact, this is not FATCA or CRS. It is plain and simple discrimination. If the U.S. continues making the U.S.an unwelcome place for immigrants, we may no longer have to listen to the nonsense that our leaving is irrelevant due to the much larger numbers of people clamoring to get into the United States of America.

Excerpts:

Bank of America sent a customer a notice demanding details about their citizenship—and if they refused to answer, their accounts were promptly frozen.

Outside the United States, this is a normal practice. Dozens of countries have agreed to the Common Reporting Standard aimed at combating tax evasion, and began collecting citizenship information as part of that effort in 2017.

In the UK the banking industry has already been charged with collecting information on foreigners as part of a bigger plan to create a “hostile environment” for undocumented immigrants. Immigrants and advocates worry the United States could be next.

Under a separate law, foreign banks must collect citizenship information from Americans, ostensibly in order to track down potential tax-dodgers.

But domestically, they are not required to collect customer citizenship information.

Writing in The Hill, Gonzalez speculates that “some banks are more than willing to carry out Trump’s agenda of creating a system where immigrants have fewer economic rights than others.”

The American Bankers Association declined to comment on specific institutions’ policies, but said that “strict regulatory requirements” aimed at deterring illicit activities justify requests for personal information. “Banks of all sizes are required to collect a range of information about their customers to comply with the Bank Secrecy Act of 1970 and ‘Know Your Customer’ standards,” says spokesperson Blair Bernstein. “Since 9/11, these strict regulatory requirements have steadily expanded.”

A pending class-action lawsuit filed with the US District Court of Northern California against Wells Fargo claims that the bank refused to accept applications for student loans and credit cards from DACA recipients, which plaintiffs claim is a form of illegal discrimination under California consumer-protection law, as well as a federal civil-rights law originally drafted to protect emancipated slave “aliens.”

This policy is far more subtle than a stark red line on a map, but could result in the same outcome, with a segment of Americans’ being systemically relegated to an underclass. Whether intentionally or not, citizenship questions may well push more immigrants further into the margins.
 

Former Hamilton school superintendent pleads guilty to forging documents to get his children US citizenship

https://twitter.com/TriciaMoon21/status/1030567543013027840

 
Just a little something likely to amuse many expats
Really, it boggles the mind……..would appear nothing further reached the Consulate.
Those kids don’t know how lucky they are!

 

Excerpts:

Patrick Rocco’s case, which the judge called “puzzling,” leaves loose ends that Thursday’s court proceeding failed to answer.

Topping the list is why Rocco, who had a good career, no criminal record and a history of community service, broke the law to qualify his kids for dual citizenship.

While looking into the expenses, Figeuiredo inadvertently discovered emails between Rocco and Patrick Elliott, a vice-principal with the board, that hatched a plan to alter documents for the citizenship applications.

Rocco’s children are now aged 22, 21 and 19. He has been married 24 years.

On Jan. 5, 2015, Rocco, who was born in the United States, received correspondence from the U.S. Consulate in response to his inquiry about obtaining US citizenship for his children.

The consulate outlined the criteria, which included that one parent needed to be a U.S. citizen at the time of the child’s birth and living in the U.S. for periods totalling five years prior to the child’s birth, at least two of which were after the parent’s 14th birthday.

Rocco, who lived in Canada continuously since 1970 and has dual citizenship, did not meet the criteria.

On July 14, 2015 Rocco sent an email to Elliott that said: “I will call you, but need to change address on a PDF — I have the original as well that I scanned — any thoughts? Need to put in my US address and will explain.”

A series of email exchanges over the next month has Rocco sending two Niagara University documents to Elliott asking him to change the address he lived at while he was a student there from one in Niagara Falls, Ont. (where he actually lived from April 1977 to December 1986) to one in Lewiston, N.Y., where he fraudulently said he lived from 1984 to 1987.

On Aug. 4, 2017, Rocco was arrested by Hamilton police…..charged with two counts of making forged documents and two counts of using forged documents.

Court heard there was no evidence of plans to use the citizenships for financial gain or to jeopardize U.S. security.

“This was the misguided result of an effort to give broader options to his children,” Rocco’s lawyer told the court, without elaborating.
 

Live Interview with Solomon Yue – Tweet Your Questions, Ideas in Advance!

http://www.thatchannel.com that channel graphic for interview
 
 
 
 
 

Reminder – Solomon Yue Visits Toronto

AMChamCanada logoDO_NOT_DELETE_AmCham_Canada_generic_event_image
 
 
 
 
 
 
 

A LIGHT AT THE END OF THE TUNNEL OR ANOTHER ONCOMING TRAIN: THE POSSIBLE END OF U.S. CITIZENSHIP-BASED TAXATION

Solomon Yue, CEO of Republicans Overseas will present publicly shareable information about the TTFI bill, and discuss its progress as it journeys through the legislative process. He will be encouraging AmCham Canada to lend its support in the global effort to encourage Congress to move forward with this legislation. Joined by John Richardson and Elena Hanson
When: Thursday, Aug 16, 2018 – 18:15 to 21:00
Where: St. Michael’s College, Alumni Hall, Room 400; 121 St. Joseph Street,Toronto Ontario M5C 3C2, paid parking near building; nearest subway station is Museum)
Cost: $20 +tax. Pre-registration is required. Registrations due August 13.
If you have any questions about the event, please contact carmina@gathersome-events.com
AmCham Toronto TTFI Event

Continue reading Reminder – Solomon Yue Visits Toronto

Identity Theft, and Social Security Numbers in a CRS and FATCA World

An excerpt from “Identity theft in a #FATCA and #CRS World: The Role Of the U.S. Social Security Number” cross-posted from citizenshipsolutions.ca

This morning I received a fascinating message from a third party who writes:

IDENTITY THEFT, SSN & CRS

With the creation of Social Security in the US after World War II, Americans were issued individual social security numbers for retirement contribution tracking and disbursement purposes. Over time, by convenience and not by design, these social security numbers morphed into national tax ID numbers and the only identification number used in all aspects of Americans’ lives — from getting a driver’s license, buying a car, enrolling in university, opening a bank account, buying health insurance and soon. The list is endless.

The IRS and the Social Security Administration regularly entreat Americans to be careful about to whom, why, and how they reveal their precious SSI. Indeed, identity theft is the fastest growing industry in the US and rarely a day goes by without yet another data breach making headline news (need a list??) or a warning of fake IRS forms (such as the W8-Ben) enticing people to provide private data never asked on those forms.

Europe, on the other hand, provides its nationals with distinct tax ID numbers. No single identifying number can provide access to and take control of all aspects of an individual’s life.

In comes FATCA and CRS.

And what does the IRS and USG compel us to do? Fork over our SSN to FFIs and foreign governments — and their myriad service providers, data bases and servers.

Aside from this requirement’s dubious legality under GDPR, having to fork over one’s SSN is akin to leaving your front door open with a big “Welcome” sign while you go off on holiday.

Americans get to choose between the risk of privacy violations and identity theft and the ability to bank. If they can find a bank that accepts them that is — not one online European bank will accept a client with the slightest whiff of “American-ness”, even if said
client is a dual national. Discrimination anyone?

It’s not as if there were no other options and the USG had no CHOICE but to put its citizens at risk. The IRS could issue TIN numbers separate from SSN. Americans abroad could prove their identity with a passport number and show their compliance with redacted FBARs and
8938s. Most FFIs in Europe are not even aware that our SSN is the unique number that controls our lives and understand the Solomon’s dilemma once it is explained to them. Yet they cannot do anything about it, they too are victims of the IRS’ extra-territorial reach.

While we wait for various efforts to reform or repeal FATCA to bear fruit, solving this dangerous conundrum should be simple and SSI numbers must no longer be used.

Conclusion

The U.S. tax compliance industry regards FATCA as “The Gift That Keeps On Giving!

For Americans Abroad, FATCA is “The Nightmare That Just Keeps Happening!

John Richardson