The agony of US citizenship for US citizens living outside the US

cross-posted from renounceuscitizenship blog

The agony of US citizenship for US citizens living outside the US
 

 
U.S. citizens cry out in agony! But, the U.S. government Silence is Deafening .

The cries are getting louder and louder! Inside the U.S. only Taxpayer Advocate seems to be listening. Outside the United States, American Citizens Abroad continues to soldier on. In Canada, the home of (probably) the largest number of U.S. citizens (many of who are also Canadian citizens) the Government of Canada is listening. Finance Minister, Jim Flaherty, has been consistent in his position that FATCA is intrusive and unnecessary and the Canada will not collect FBAR penalties. He has been consistent with the sentiments expressed in his public letter of September 16, 2011. U.S. citizens in Canada are in a far better position than U.S. citizens in other countries. Furthermore, Mr. Flaherty has been responsive to citizen’s concerns, recognizing that Canadians are desperate for help. The evidence is building. to protect themselves from the U.S. government. Take the above poll which is from a previous post describing how renunciations of U.S. citizenship are soaring under Obama. Consider the following wisdom from a U.S. citizen living in France.

Homeland Americans do not love their “Domestic Abroad” and routinely characterize them as “traitorous Benedict Arnold’s.” Now these citizens abroad are in a complete panic now that they are aware of the U.S. tax and reporting requirements. They are facing the same compliance issues as U.S. immigrants and they are now encountering discrimination in their host countries (loss of local banking services, for example, or limited retirement investment opportunities or even being cut out of business deal by non-US partners) as a result of FATCA.

Many of them cannot easily return to the U.S. – if they did they would have to close their businesses or leave their jobs, get divorces from their foreign spouses and, in some cases, leave their minor children behind in the host country. Contrary to popular belief in the homeland, the vast majority of these people are not millionaires and run a real risk of arriving back home in the U.S. with limited assets, if not in a state of outright penury. On the other hand, they can no longer continue to reside in their host countries as U.S. citizens where they risk paying double taxes (U.S. taxes in addition to host country taxes) and must pay the increasing cost of compliance (international tax specialists to file the 1040 and a whole host of other forms demanded of overseas citizens who have built lives abroad and are permanent residents of their host countries). Even Nina Olsen, the IRS Taxpayer Advocate in the U.S., said in her 2011 report:

The complexity of international tax law, combined with the administrative burden placed
on these taxpayers, creates an environment where taxpayers who are trying their best to
comply simply cannot. For some, this means paying more U.S. tax than is legally required,
while others may be subject to steep civil and criminal penalties. For some U.S taxpayers
abroad, the tax requirements are so confusing and the compliance burden so great that they give up their U.S. citizenship.And that sums up quite nicely what is, in fact, happening. Those who are in the know and can afford it are mostly “complaining and complying” while those who cannot are renouncing U.S. citizenship. 2011 was a banner year for renunciations of U.S. citizenship. 2012 will be worse (see this and this excellent analysis over at Overseas Exile.)

http://thefranco-americanflophouse.blogspot.ca/2012/03/diaspora-tax-war-of-2012-stakeholder_27.html

In addition to the current Government of Canada, the Official Opposition of Canada (NDP) is taking the IRS assault on Canadian citizens very seriously. Individual MPs have made an effort to respond and educate. Individual MPs have organized public meetings. Interestingly, the newest NDP MP, Craig Scott is a law professor/human rights lawyer. Furthermore, he attended a public meeting about FATCA. He would be a great addition to the cause. Interestingly there has been very little support from the Liberal Party of Canada. Here is a letter from Bob Rae. Although the Green Party of Canada has only one seat in the House of Commons, their leader Elizabeth May (who was born in the U.S.) has expressed her support for Canadians.

As the FATCA implementation date comes closer and as we find ourselves in tax season, many U.S. citizens (whose only crime is to live outside the United States) are living in a state of desperation and agony. Some samples:

This man gives the word “prescient” real world application:

In closing, some “psychotherapy for U.S. citizens living outside the United States” – the Widsom of Moe Levine:

We are living in interesting times.

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