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from the breaking-up-is-hard-to-do dept.
The USA has been making life difficult for Americans residing abroad; FATCA causes plenty of problems; but so does citizenship-based taxation. The IRS and Treasury department have made the reporting and taxation more onerous, and stepped up their collection efforts.
The result should be a surprise to no one: more and more Americans are handing in their US citizenship. Total numbers are unavailable (the lists published by the government include only a portion of the total), but undisputed is the fact that the numbers are increasing rapidly.
Having lots of citizens want to leave is...embarrassing. One solution could be to review the policies leading to people to hand in their citizenship. Another would be to make the fee unaffordable, especially for people living on second- or third-world incomes. It's obvious, of course, which route the USA has chosen: It now costs $2350 to hand in your US passport; more than 20 times the international average.
(Score: 0) by Anonymous Coward on Wednesday December 03 2014, @01:28PM
It is weird that US ex-pats have to file a tax report. A friend who is living outside US has to decide whether her new baby should get US citizenship - it is not an obvious choice. Condemn said child to file US tax reports forever... but get advantage of easier immigration, etc.
(Score: 3, Informative) by VLM on Wednesday December 03 2014, @01:47PM
It is weird that US ex-pats have to file a tax report.
We are also one of the few countries in the world who tax citizens based on total income, not where it was earned.
My understanding of this from working with international teams, is a Japanese citizen working in USA pays USA taxes on USA income but Japan doesn't care, what with the USA not being a part of Japan territory. The other way around, the USA wants its cut. There are various exceptions such that USA citizens often don't have to pay very much, often $0.
There is a huge racket in paying people $250 or whatever to fill out your tax forms in the USA, and overseas they charge about 10x as much because they can. So thats where you hear those stories about people paying a tax accountant $2500 to file forms with the USA paying the USA $0 or whatever.
(Score: 3, Insightful) by bradley13 on Wednesday December 03 2014, @03:02PM
They don't charge 10x as much internationally just because they can. The filing requirements really are pretty awful.
- You have to send information about all of your accounts, retirement funds, investments, etc. to the Treasury Department. You send the same information, of course in a different format, to the IRS. If those are jointly held accounts, this likely violates European privacy laws. Obey US law or obey the law where you live, choose one.
- You have all of the usual tax filing requirements, only you don't get 1099s and other IRS-ready statements from your employer, bank, etc. What exchange rates do you use - the rules are very unclear. Finally, there is a whole layer of special rules and forms just for the international taxpayer.
Sure, for Joe Average, the tax owed usually comes to $0.00. Unless your income is small enough that the standard deductions cover everything, getting to that bottom line is insanely difficult. Just to take a minor example: mortgage interest is deductible, right? Well, maybe. Depending on where you live, it will probably be capped. The cap changes based on your location and filing status; your filing status options depend on the nationality of your spouse. And on, and on, and on it goes...
I had always done my own taxes in the US, and I tried to do them here. Eventually, I just had to give up - the requirements had gotten insanely complex and there was no easy way to figure out what the changes were year-to-year. So the last few years before I renounced, I hired an IRS-certified tax preparer. Tax bills $0, tax preparation bills $4digits.
Everyone is somebody else's weirdo.
(Score: 2) by Whoever on Thursday December 04 2014, @04:25AM
As a naturalized US citizen with investments in my home country, I have the same issues. I pay an accountant $600/year to handle all of this.
Some years ago, I was an expat with a large multinational (based in the USA) and that company paid its accountants 10x (in todays terms) what I pay my accountant. Perhaps they had a fixed rate and there was a lot more work involved for some expats, but I doubt it. I think it's just that accountants working for large partnerships are able to overcharge their clients.
(Score: 1, Interesting) by Anonymous Coward on Wednesday December 03 2014, @02:31PM
US Expats may have to file, but they get a massive exemption on income earned overseas. If you are living in Norway, $90k may not go very far, but in much of the world that's a massive income. From the IRS website:
> 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 adjusted annually for inflation ($91,500 for 2010, $92,900 for 2011, $95,100 for 2012, and $97,600 for 2013). In addition, you can exclude or deduct certain foreign housing amounts.
(Score: 0) by Anonymous Coward on Wednesday December 03 2014, @02:39PM
> US Expats may have to file, but they get a massive exemption on income earned overseas.
I guess the problem is the amount of hassle and bureaucracy this costs - a $1000 bill and couple days work every year to fill out a pointless form that has an answer of 0. I confess, I don't understand the details, its just what I hear anecdotally.
(Score: 0) by Anonymous Coward on Wednesday December 03 2014, @03:01PM
Hell, even if you live in the US full time, filling out taxes is a PITA on that order of magnitude.
(Score: 2) by CRCulver on Wednesday December 03 2014, @03:02PM
(Score: 0) by Anonymous Coward on Wednesday December 03 2014, @03:21PM
Yeah buddy I hear you, it's like I own two cars and have to pay for BOTH of them!!
(Score: 0) by Anonymous Coward on Wednesday December 03 2014, @03:51PM
(Score: 0) by Anonymous Coward on Wednesday December 03 2014, @06:51PM
Don't let the door hit you on the way out.
(Score: 0) by Anonymous Coward on Wednesday December 03 2014, @03:28PM
Oh, the horror of trying to live in the third world on $90k a year.
(Score: 2) by CRCulver on Wednesday December 03 2014, @03:43PM
(Score: 5, Insightful) by caseih on Wednesday December 03 2014, @04:27PM
Since no one would voluntarily live under such a system, especially an American citizen, they must be living under duress I think. Rather than tax them, the US gov't should invade and rescue them.
Seriously, though, there are tax treaties between most so-called "welfare states" and the US. Taxes paid in your local country do count as a deduction against taxes the US claims against you. In simple cases, you will never owe the US government anything. However the costs from the added complication of trying to stay in compliance with US tax law are burdensome. As another poster said, you owe the US $0, but your tax accountant $4000. It's a huge scam. Besides being a bizarre interpretation of constitutional law (the US income tax claim on citizens abroad), the real reason this is becoming a big issue is that the US government is broke and they are desperate to find cash anywhere. And news stories of rich people "hiding" their income overseas has really got public opinion onboard, sadly. Most Americans at home have little concept of the nuances of situations of many of citizens living abroad.
My neighbor was born in the US, and has always been proud of her US heritage and citizenship. Recently though as retirement approached, she realized that when they sell their home and farm land (which is their retirement savings essentially), Uncle Sam would hold out its hand for half of her share of the money. Sounds fair. Except that by taking that money that leaves her with half her retirement money. Now she's followed Canadian tax law her whole adult life, and everything is onboard with Canada, and its capital gains exceptions. After some difficult soul-searching, she decided to become a Canadian citizen and renounce her US citizenship. She never had plans to live in the US (all her grandkids are here), but she would have kept her citizenship, as it was part of her identity, had it not been for the increasing difficulty of complying with US tax laws. This story gets repeated across Canada.
One recent story that illustrates the ridiculousness this US money grab has reached, the CBC reported on the plight of a disabled man who by weird quirks in American law has US citizenship. In short, the US gov't is after his bank account. But he can't renounce because the US does not see him as fit to understand what renouncing means. So he's in a quite literal catch-22.
http://www.cbc.ca/news/canada/u-s-fatca-tax-law-catches-unsuspecting-canadians-in-its-crosshairs-1.2493864 [www.cbc.ca]
(Score: 0) by Anonymous Coward on Thursday December 04 2014, @07:38AM
My in-laws retired to Canada over a decade ago and they're working hard to finally ditch their US citizenship. As the previous poster said, it's not the taxes, its just following the law - finding an accounting firm that can handle both Canadian and US accounting has become almost impossible/unafforable.
(Score: 0) by Anonymous Coward on Thursday December 04 2014, @08:12AM
The tax treaties don't help with regard to penalties... and if you have $10k or more in total foreign banks you have to file an FBAR every year.
The penalties for not filing an FBAR are up to $10k per account per year.
If wilful.. the penalty is up to the GREATER of $100,000 or 50% of the account per account, per year.
You don't even need to tack on years of interest to see how onerous this can be.
And remember.. that can even occur with $0 income and even if you filed the FBAR the previous year (which usually makes it a wilful violation the next year ).
So imagine someone who was born to American citizenship ( via parents ) but never travelled to the U.S. and has $10k in the bank in Canada/Uk etc...
http://www.irs.gov/uac/Newsroom/Offshore-Income-and-Filing-Information-for-Taxpayers-with-Offshore-Accounts [irs.gov]
(Score: 2) by caseih on Saturday December 06 2014, @07:09PM
Mod this up. This is very important information. I have been following the situation for some time now, and I knew about the banks reporting to the US, but I had not even heard about this form before. Wow. Crazy.
(Score: 1) by dltaylor on Wednesday December 03 2014, @04:41PM
Not so. The amount of tax collected by the other governments is deductible from the US-taxed income. Same with states within the US. California taxes are a line item on Schedule A (in California, for example, a portion of the vehicle license fees are a property tax; the amount you pay for that goes on "Other taxes" line).
(Score: 0) by Anonymous Coward on Thursday December 04 2014, @02:09AM
It is weird that US ex-pats have to file a tax report.
No, US is not the only country that has this system. There is also the great nation of Ethiopia. So 2.