cross-posted from the Isaac Brock Society
“Check out the top 20 Tax Blogs in 2015! “During 2015 readers of Tax Connections Worldwide Tax Blogs arrived from more than 200 countries and spent an average of 12:45 during each visit. These are mighty numbers…”
Interestingly, of the 20, at least 10 of them, dealt with issues that affect us.
Delighted to notice:
I read John’s post again. These excerpts stick in my mind:
Your problem IS actually attempting to live as a “tax compliant” U.S. citizen outside the United States. It’s easy to live as a U.S. citizen abroad who is NOT “U.S. tax compliant”. What is very difficult is to live as a “U.S. citizen abroad” who IS “U.S. tax compliant”.
U.S. citizens, regardless of where they live in the world, are subject to exactly the same provisions of the Internal Revenue Code. At first blush you might think this is fair. No.
The problem is that the U.S. tax code imposes punitive taxes and reporting requirements on “all things foreign to the U.S.”. As a U.S. citizen abroad, your life is completely “foreign to the U.S.”. Therefore, your life will be subject to punitive taxes and reporting requirements. You will learn this as you become more and more U.S. tax compliant.
This situation is not about tax.
Those drawn up in this mess do not have tax problems.
They have compliance problems. Once filed, THEN they WILL have tax problems.
So what say the accountants and lawyers. You won’t owe any income tax. Unlikely to receive penalties, fines, interest. So what’s the big deal?
By governments not addressing what the tax laws actually mean–in the life experience of those affected (including their immediate “alien” families) they are disabling a whole class of citizens from participation in the normal opportunities available to other citizens, based upon nothing less than a U.S. claim of ownership; due in most cases merely for having been born there.
This is what we have somehow failed to communicate clearly enough. Perhaps it will take a couple of more years before the damage begins to be more obvious.
- It’s not the money as painful as it is to part with.
- It is the stigma of being presumed guilty.
- It is the puzzlement that people simply cannot grasp the distinction between middle-class folks living outside the US with legitimate “foreign” accounts & Homelanders with offshore accounts.
- It is the frustration of not having any truly good/effective choices.
- It is the sadness of losing the identity one was raised with.
- It is the rage at being forced to give up one’s birthright.
- It is the unfairness of having to pay so much more than a Homelander to file a NIL tax return.
- It is the unfairness of having to report government-registered tax- deferred accounts that are parallel to US equivalents; and having to pay on undistributed amounts.
- It is the confusion of not having ANY idea of what is really required & often receiving conflicting advice.
- It is feeling the resentment one’s spouse has at having THEIR financial privacy violated.
- It is the feeling of being put at extreme financial risk by having to remove a stay-at-home parent from accounts in order to avoid the spouse’s resentment
- It is the guilt at having registered a child as a US citizen, never having imagined it would involve them in a mess like this.
- It is the hopeless inability to protect a disabled person who cannot renounce. Even expats do not go near the reality that many of us will develop dementia and our families may be stuck dealing with our “US-ness.”
- It is the fear that one may be unable to return to the US to visit aging parents or be at their bedside/deathbed
- It is the isolation one feels from friends and family at realizing almost no one understands WHAT one is talking about & no one wants to hear it anymore.
- It is the betrayal of one’s adopted government who will protect the banks at the expense of citizens. And disgust that CBT simply isn’t understood or studied before these decisions were made
- It is the grimness of the financial outlook in one’s later years due to inability to save properly and possibly lose more by selling one’s principal residence.
- It is the TERROR of what the US will resort to down the road.
- It is the incredulousness that the US can do this not having enforced FBAR or tax law for decades yet the claim “ignorance of the law is no excuse” outweighs their lack of due dilligence
- It is the cruelty of not really being American (accidentals) in any real sense of the word & yet told you are at equal risk as if you had grown up there, voted, had a passport etc
- It is the extra layer of vulnerability given the poor record of the IRS with identity theft plus the expected violation of tax information being shared with the FBI, DHS, etc (this goes against the tax treaty terms in sharing of information)
- It is the hypocrisy of telling people in spite of expatriating acts that resulted in clear and complete loss of citizenship decades ago, that they are still US citizens because the State Department did not issue CLNs-in fact, did not even mention them when people confirmed the rules with DoS and/or without their knowledge or voluntary acceptance, their citizenship was later restored (and only told once this miserable Tax Citizen situation entered the picture)
It would be one thing to do this to a few hundred or a few thousand people. But 8.4 million? Imagine the hidden costs:
- lost time at work
- need for counseling-both indivdual and couples and even the kids
- medication for psychological issues as well as for effects on physical health
- self-medicating behaviour-alcohol & prescription drugs
- abusive behaviour fuelled by overall situation
This will cost the government, just the same as any 30% penalty for a non-compliant FFI. Bet nobody did any studies on that.
And make no mistake about it, there will be consequences from this incredibly poor choice by governments around the world.
Badger made a comment on a different thread that puts this all in perspective:
It’s beyond evident that the US extraterritorial citizenship-based tax system seeks to force people living outside its borders, who’ve already paid their ‘fair share’ in full (and possibly higher that US taxes) to the country where they actually live, work, earn, hold their assets and enjoy ACTUAL benefits (ex. Canada) to pay unconscionable and useless sums to US tax lawyers and accountants to prove via complex (and dangerously labyrinthine paperwork fraught with bankrupting layers of penalty structures) that they owe zero annually to a foreign offshore tax and financial crimes enforcement agency (IRS and FINCEN), for the rest of their lives, and to twist or forgo or lose the legitimate enjoyment of their legal, local disability and other government derived benefits, savings and ordinary financial arrangements (e.g. avoiding anything the US levies punitive tax and penalties on – like Canadian mutual funds)is clearly immoral financial and economic warfare. It is also an unjust impugning of individuals without cause or proof – deeming them criminals before the fact (FBAR and FINCEN) which is forcing us to fend off aggressive assault and injury from afar. The assault and injury includes ALL of the NON-US taxpayers and NON-US citizens living in NON-US countries who must now pay via their local NON_US taxes to implement and defend the misguided and immoral local implementation of foreign US laws on their local institutions, agencies and fellow residents.
The fact that the compliance burden falls heavily even on people whose assets, income and means is ordinary and even BELOW the median or average – and who have no political voice or influence demonstrates that there is definitely a class component. There is nothing ‘progressive’ about it.
There is also a definite and clear US bias and added layer of assault against those with disabilities and minors living outside the US – via the US tax and penalty structures imposed extraterritorially on the disability benefits and grants and education savings, grants and other benefits provided by our local government and fellow taxpayers to provide for the material support and education of those who cannot provide for themselves.
We are under direct assault from the US – who is actively and WILLFULLY pursuing a path which destroys or seeks to decimate our legitimate activities and local savings, family homes (often our largest single nest-egg asset), ability to engage in normal financial roles as individuals and as family units, threatens our ability to act effectively as an executor, hold employment or voluntary roles with any signatory or co-signatory capacity, etc.
And, laughably and ironically, it is only those with the most significant means and thus significant opportunities, that have the resources and access to specialized assistance and avenues to work around US laws no matter how punitive and stringent they become for the ordinary masses.
The now ubiquitous fee of 2350. US dollars – both now imposed whether to renounce or to relinquish, and the denial of even that avenue of ‘relief’ to minors (until the US judges them ‘mature’ enough) and those deemed legally incompetent (denied by the US forever), or to those who cannot pay the fee, has created a burden that falls far more disproportionately on those of lesser means. The 2350. is a bigger burden proportionately to those who have less ability to pay. A family may face multiples of the 2350. in order to free all of its members.
That does not include all the compliance and financial planning costs and forgone opportunities and now growing potential denial of travel (via the newest passport restrictions passed) in order to exit in the manner that the US – with growing collusion by the State Department, demands.
May we be successful in defeating both the US extraterritorial assaults, as well as the Canadian government’s collusion with the destruction of our Charter and Constitutional rights and wellbeing by a foreign government.
This is not ‘just’ about taxation per se – as USCitizenAbroad has said, this is about ‘life control’.