
Help, I’m on the IRS hit list - DanielBMarkham
http://www.theglobeandmail.com/news/opinions/opinion/help-im-on-the-irs-hit-list/article2171697/
======
patio11
This issue periodically makes the rounds in expatriate communities, and I
think panicked blog posts outnumber actual enforcement actions by about 10,000
to 1. Anecdotally, _most_ Americans living abroad are probably non-compliant
on this one. They're not going to suddenly decide to break the kneecaps of a
couple million people, for the same reason that they don't audit every $50k
per year small business' office expenses every single year. They'd end up
hated and not meaningfully boost revenue.

All bets are off if you have signatory authority on a $30 million dollar
account in the Caymans and have forgotten to report interest for the last 10
years running.

P.S. Orthogonal to the disclosure of accounts issue but worth mentioning since
folks often commingle them: If you're an American living abroad, you should
file your taxes every year whether you think you need to or not. Same for
Americans in the US, by the way. The statute of limitations on unfiled taxes
is essentially infinite, but the window to audit a return is only six years,
so if you just file a 1040 with a zero on it every year and 20 years from now
the IRS decides to get frisky, you're covered for all but the last 6 years
automatically.

~~~
thaumaturgy
This op-ed, written for a major Canadian publication, relates the story of 2
people, and also mentions that the Finance Minister has been moved to start
writing to U.S. newspapers over the issue. So, I am extremely skeptical of
your 10,000-to-1 estimate on the matter.

It would make sense for the IRS right now to follow the RIAA's playbook --
send out a lot of letters and see who bites.

It would also be irresponsible in every way to realize that you're part of
such a list and yet still ignore it because you don't expect the IRS to
actually ever do anything about it. I've got extended family that uses that
approach to life, and it bites them in the ass all the time.

\--

On a personal level, I've noticed that you seem to be the antithesis of an
alarmist, whatever that is. When another round of "PayPal screwed me!" posts
and articles comes around, you seem to show up with at least one or two
comments along the lines of, "Hey, I use PayPal, it's never been a problem for
me, it shouldn't be a problem for you either"; shortly after the Fukushima
incident, you leveraged your intimate knowledge of Japanese culture to
powerfully downplay the seriousness of the matter, except that it turned out
that you were wrong, and the facilities did have problems before the incident,
and it did turn into a serious disaster. I didn't notice any comments from you
once that news started coming 'round.

So, all this is just to say that I think you have a different approach in your
thinking than a lot of people in matters like this. Whereas a lot of people
try to anticipate problems and minimize their future impact, you seem
comfortable with waiting to see if they actually become problems and then
dealing with them at that point. And, there's nothing necessarily wrong with
that, but it does mean that your opinion on things like IRS penalties may not
be to everyone's benefit.

~~~
tptacek
I hate to be "guy sticking up for Patrick all the time" (it's a consequence of
the way I read HN these days; see profile), but: I disagree with him on lots
of things, and it's when we disagree that I appreciate his presence on HN the
most. In fact, the most sickening comments on this site tend to be from people
who _share_ my general worldview.

We should hope to have 100 people who share Patrick's habit of moderating HN's
Internet-bred tendency towards hyperventilation.

I'd also like to point out that you focused on just one aspect of his comment,
diverting attention from the actual practical information he conveyed.

I worked out of Calgary for a couple years; I just got an accountant to deal
with all the tax stuff. That works too.

~~~
thaumaturgy
Of course. I put extra time into writing that comment to minimize the chances
that it would come across as rude or impolitic. Clearly I should have spent a
little more time on it.

Look, I'm a pretty mercurial dude, and I know that, so I appreciate in general
people that can take a little of the huff and puff out of situations. I
appreciate patio11 specifically because he's a valuable member of HN, who
contributes often, and can be considered an expert on a variety of topics.

That said, he -- like everyone here -- isn't above criticism. I wouldn't have
even bothered to comment except that his comment was the top in the thread,
and based on my experiences, ignoring stuff like this because it probably
won't actually matter isn't a good idea -- even if it's true.

I find it distasteful that I've had to defend myself on this. This will be my
last comment on this matter.

------
noonespecial
I've filed my FBAR's (my wife calls them f(u)bars, I can't argue).
Unfortunately, the rules for money abroad fill books. If you're an American
with money abroad, you're probably unknowingly violating a list of federal
laws as long as your arm.

Many contires have reciprocal tax agreements with the US so that income taxed
by your host nation isn't taxed again by the IRS. It may just be a matter of
paperwork for the authors of this blog to demonstrate that they've been paying
Canadian taxes.

It is _very_ difficult to stop being an American and getting harder all the
time. Its like a giant invisible curtain... (like its made of iron or
something, heh) Not to keep you from leaving, but to make sure your money
can't.

~~~
_delirium
> It is very difficult to stop being an American and getting harder all the
> time.

We could make it like Denmark does: Danish citizens born abroad have 4 years,
between the age of 18 and 22, to elect to keep the Danish citizenship, which
requires renouncing any other citizenships they might possess at that time (no
dual citizenship). If they _don't_ wish to be a Danish citizen, they simply
don't make such an election, and it automatically expires at age 22.

That'd be reasonable to me--- let U.S. citizenship to those born abroad expire
automatically at age 22 unless they actively elect to keep it, so people
who've never lived in the U.S. and don't wish to have the citizenship aren't
saddled with it.

But imo it should have a deadline like that, so people actually decide if they
want to be a U.S. citizen or not, with the rights and responsibilities that
entails, not try to play both sides until it's financially advantageous to
pick one.

~~~
DavidSJ
_Danish citizens born abroad have 4 years, between the age of 18 and 22, to
elect to keep the Danish citizenship, which requires renouncing any other
citizenships they might possess at that time (no dual citizenship). If they
don't wish to be a Danish citizen, they simply don't make such an election,
and it automatically expires at age 22._

Is that true even if they don't have dual citizenship (i.e. are they still
required in that case to explicitly elect to keep their Danish citizenship
between the ages of 18 and 22)?

~~~
_delirium
It appears not; one of the exceptions to the loss of citizenship at 22 is "If
loss of Danish nationality will make the child stateless".

If I read it correctly, that's required under the Convention on the Reduction
of Statelessness
([http://en.wikipedia.org/wiki/1961_Convention_on_the_Reductio...](http://en.wikipedia.org/wiki/1961_Convention_on_the_Reduction_of_Statelessness)),
which Denmark's signed, and which commits a state to "grant its nationality to
a person, not born in its territory, if either parent had that State's
nationality and the person would be otherwise stateless". But in any case it's
also part of Danish domestic law.

------
DanielBMarkham
I've been watching this story develop over the last few years, and while I
think that the current impact is overblown, I don't think that reduces the
importance or the future impact of the story at all.

The way this story gets spun is that the law is for big tax dodgers and the
IRS has better things to do than pursue the little guys. I think that's a bit
of misdirection. The problem is that, as far as I can tell, every ex-pat is
guilty of something and that the U.S can come take large amounts of money from
them. It's just a matter of whether they want to or not. It's usually said
that the amount of money is just too low and the politics of abusing so many
people abroad are idiotic.

After 9-11, that doesn't wash with me any more. If citizens living in the
states are subject to draconian security measures and it doesn't much seem to
matter what sorts of protests there are then it's only going to be worse for
people who are more out-of-sight. People in the states can easily be made to
feel like every ex-pat with a dual citizenship has something to hide. If you
can treat folks who live here like they do, folks living overseas are nothing
but a bunch of numbers. Worse yet, we'll see monetary laws made for terrorism
being brought to bear in the process.

Which leads me to my conclusion that the only thing slowing down the IRS is
data processing. They're plugging more and more into the international banking
community and will begin automating collection and processing on all of these
opportunities. I understand my opinion is just guesswork, but there it is.

I think you have two choices. Either collection is a political activity, in
which case you're saying that your wealth and freedom is basically dependent
on political connections, the optics of the processing, and the mood of the
IRS -- a terrible situation to be in. Or you're saying that collection is owed
and it simply costs too much to pursue, which I believe to be the case. If
this is true, collection is only a matter of time.

I'd love to see a U.S. politician stand up for ex-pats, but I don't think it's
going to happen anytime soon.

P.S. And don't even get me started on the fact that if you're a corporation
you are allowed to make money overseas and keep it overseas without paying US
taxes, but if you are a regular citizen any money you make could be subject to
US taxation on top of local taxation.

~~~
Hyena
Stand up for ex-pats how, exactly? They owe taxes, that's all.

~~~
yoyar
You don't understand the issue. The IRS is going after people who owe nothing
in taxes but haven't filed. Some are senior citizens and may be totally
unaware that they were supposed to file. The US gov't is bankrupt and
desperate for money and they don't care who's lives they ruin. They're trying
to squeeze as much money out of anyone they can lay their hands on.

~~~
yoyar
@Hyena No, you don't. Which is clearly apparent based on your previous
comment, which was incorrect. Calling my statement hysterical isn't an
argument either. Claiming that you do understand doesn't make your statement
any less incorrect.

~~~
JoachimSchipper
[Psst, you can reply to deeply nested comments if you click "link" first. Note
that there is a reason for the "flamewar timeout", though.]

~~~
yoyar
Thanks for the Pro-Tip! Now I know. :)

------
jellicle
Let's be clear about this.

The U.S., alone among the multitudinous nations of the world, asserts that
people who live and work outside of the U.S. and have no financial connection
to it should pay taxes to it.

These include people who have never set foot in the United States in their
entire lives and have never done anything to interact with the United States
in any way whatsoever.

These include people who are not allowed to vote for any U.S. office (don't
correct me; you're wrong. Some of the people affected by this are allowed to
vote, but not all).

It is the very definition of taxation without representation, which one might
have thought would be a foundational principle of the U.S.A.

Every single other nation in the world taxes people on their income earned in
that country. The U.S.'s policy is an embarrassment; a clearly unjust,
illegitimate law.

There is a bright side. The happy truth is that the U.S. has zero enforcement
power outside the country and that this edict can be ignored by anyone who
truly does not live or work in the U.S.

~~~
braindead_in
"These include people who have never set foot in the United States in their
entire lives... "

Can you elaborate on that? It sounds a bit incredulous.

~~~
barry-cotter
Just US citizens. FYI a person can be credulous, meaning gullible, and a claim
can be incredible, meaning hard to believe, but I'm not even sure incredulous
is a word.

~~~
Symmetry
Incredulous is basically the opposite of credulous. It totally is a word,
though the grandparent used it incorrectly.

<http://dictionary.reference.com/browse/incredulous>

------
matrix
If you have worked overseas or are an immigrant or otherwise a reside of the
US, you may be unwittingly in violation of this law, and at risk of penalties
so extreme that it defies belief.

In some countries your employer is required to open and contribute to a
retirement fund similar to a 401(k). In Canada, it's called an RRSP, in
Australia, Superannuation. If you have such an account, it's considered a
foreign account and subject to FBAR - nevermind that you can no longer
contribute to it, or benefit from it until you are at retirement age. In some
cases, the law in the foreign country prevents you from closing or withdrawing
from this type of account until you are at retirement age.

If you forget to report one of these accounts, or had no idea that you were
supposed to report it, you face a $100,000 fine, seizure of the account, and
jail time. If you cooperate with the IRS you might "only" lose the account.

This law was designed to target off-shore tax shelters, but the way it was
written, the definition of "account" is vague, and the threshold levels so low
that it affects millions of people. There is simply no justification for a law
this broad and sweeping which such harsh penalties - it's an example of
legislative overreach if I ever saw one.

------
mark_l_watson
I have heard that during the fall of the Roman Empire, the tax collectors were
so brutal that Romans living on the outskirts of the empire sometimes welcomed
invaders because they were thought to be better than dealing with the Roman
Roman tax collectors.

Similar situation now?

~~~
Duff
Not at all.

Roman tax collectors were private contractors who were responsible for paying
Caesar his due. Upon winning the bid, the collector would pay Rome in advance,
and collect the taxation over a period of time. They had broad powers to
ensure that the tax was collected. At the end of the period, the collector
received an interest payment from Rome, plus he got to keep anything collected
over his bid.

As you can imagine, these tax collectors were rapacious, especially if
collections were under quota. Bankruptcy in Rome was not pleasant.

In the modern US situation, you have circumstances where folks are choosing to
live overseas as expats, often times taking advantage of dual-citizenship,
which is not prohibited by US law. Other countries, like France, require you
to choose one nation's citizenship at age 18. Notice the expats aren't whining
about collecting both US and foreign benefit payments.

------
daniel_solano
> Nobody can explain why the IRS has suddenly decided to enforce this law,
> which is aimed at money-launderers with offshore bank accounts. I guess the
> Americans need the money.

I don't think the law is necessarily aimed at criminals. The law is primarily
sold as targeting people who try to avoid or evade taxation by keeping
significant wealth and income overseas.

In any case, the reason for renewed vigour in enforcing the law is clear: the
federal government is spending record amounts of money and needs to milk every
source of income it can.

edit: fix typos

------
rickdangerous1
It used to be that there were two countries which taxed citizens regardless of
residency, USA and Libya. Now I guess there's just one.

~~~
peteretep
Unrelated: when the US had its difficult moment recently, someone on my
Twitter feed pointed out that "Now all the AAA countries have free universal
health care!"

~~~
sp332
Universal healthcare isn't free. Maybe it's not a bad deal, but it costs a
_lot_ of money.

~~~
_delirium
Well yes, and "free over-the-air TV" isn't free either; it costs quite a bit
of money to produce and broadcast. It's free in the sense of no payment at the
point of receipt. Same with, say, a "free" library card or county park.

~~~
sp332
Well, broadcast TV is free to the recipient. But most people getting "free"
healthcare are also paying for it.

~~~
nl
Here (Australia) we have one broadcast channel paid for by the government (ie,
by taxes). In this case TV is _exactly_ the same as the free healthcare we get
(also paid for by taxes).

~~~
cheez
In Canada, healthcare is partially paid for by future taxes.

~~~
nl
What does that mean exactly? You run a deficit budget?

~~~
cheez
Yep. And the !#!$ers are promising to increase funding to healthcare by 30% in
5 years. Doctors already got a 100% raise last decade in some provinces and
one of the biggest cost is physicians.

Meanwhile, the doctor lobby lobbies its ass off to prevent cheaper
alternatives like nurse practitioners or the reduction of importance of
hospitals for anything but emergencies or weird shit.

~~~
nl
If the biggest cost is physicians then it appears (as an uninformed spectator)
that you have a well-functioning health system.

In many systems the biggest costs are administrative overheads and payments to
drug companies.

~~~
cheez
I'm probably only slightly more informed than you since I live here.

However, that's not indicative of a well functioning system. I can't find a
nice pie chart for you, but it's about 20% of costs. It is the largest
_single_ cost.

And it is kept high by absurd education requirements in many cases. If you
read a few healthcare books about the American system, you will probably find
similar criticisms. There are so many government sanctioned monopolies in the
healthcare system that it's impossible to change it.

In Canada, the healthcare system is basically a non-competitive rationed care
system. If you know someone who personally knows the surgeon you need, you
will get the care you need. However, if you do not good luck to you. I've had
personal experience with this in my family (on the good side, prognosis was a
minimum of x months to live without surgery, surgery was scheduled for x + y
months(!) and we had to use our considerable network to get the surgery
faster.)

But it was free, right?

Trust me when I tell you that the reason people are living longer is not
because of the Canadian government's healthcare. In fact, the quality of life
of many people is severely diminished because of the cost spiral.

But in general, it works very well for I-impaled-myself-in-my-crotch emergency
care.

Edit: I should add that I have physicians in my family and they are very happy
with the current system. In particular, compensation. I completely agree with
their viewpoint: it's fair pay for the level of education they've had to
receive. However, 90% of the work is routine and could be carried out by
people who have less education. From my discussions with people in the
healthcare system, this would reduce costs dramatically and potentially
improve outcomes as well.

------
DirtyCalvinist
The fact that a person who has not lived in the US for 30 years, has been a
citizen of a foreign power for 30 years and has never earned a penny in the US
nor held directly any US assets must now worry about the long arm of the IRS
is ridiculous and unjust. Regardless of whether the law's aims are necessary
and just or not.

~~~
jellicle
Indeed, there are people who have never set foot in the United States but the
U.S. is claiming they owe income taxes on every cent of income they've ever
earned.

------
Vivtek
It's easier to shake down non-voting overseas residents for money than it is
to require GE to pay fair taxes, so ... there you go. Gotta pay for those
missiles somehow, after all.

We're #1!

~~~
_delirium
Overseas U.S. citizens can vote in federal-level elections, including for
Senator/Representative of the location they last lived in the US.

~~~
msbarnett
This presumes that all overseas citizens ever lived in the US, which isn't the
case.

~~~
_delirium
Ah, that one's trickier. It looks like, for 19 states, but not the other 31,
you can register in the state if your parents would be eligible to register
(i.e. because it's either where they currently live, or where they last lived
before moving abroad): <http://www.fvap.gov/reference/nvr-res.html>

------
jedberg
> It’s taxation without representation.

No it isn't. She still gets to vote in US elections if she wants to. That's
WHY they still collect taxes.

I'm not saying it is right, but that is the explanation usually given. Because
even though you don't live in the US, you still receive benefits, like
protection from the military and other benefits that all US citizens get.

I actually don't think it is entirely unreasonable to tax ex-pats, especially
since the first $80K is exempt.

~~~
msbarnett
That's actually not true. As the son of an American, my parents filed for US
citizenship papers for me after my birth in Canada, where I've gone on to live
my entire life so far.

I file tax returns with the IRS every year, but I'm not eligible to vote in
any federal election, because I haven't lived in any state for more than 6
months, so there's no state's electors to assign my vote to.

For some of us, this quite literally is taxation without representation.

~~~
jedberg
Fair enough. I wasn't aware that you had to live in some state for 6 months.

But are you sure you can't get a Federal only vote? I guess that would put you
in the same place as DC, who also don't get representatives, which is jacked.

The should let you vote in the state closest to where you live or something.
Of course, that would mostly boost the coastal states, wouldn't it. :)

~~~
CWuestefeld
There's another quirk of binding up federal, state, and local voting into a
single act.

I live and vote in New Jersey (not to mention pay property taxes, etc). I also
own a cabin in upstate New York, on which I've got to pay property taxes as
well. The thing is, since I am an NJ resident and I vote here, I'm forbidden
from voting in New York.

Given the way we structure our voting, this restriction is necessary: I'd be
able to get two voices in Washington, otherwise. However, the flip side of it
is a situation of "taxation without representation" -- and that's not fair, as
Schoolhouse Rock tells us.

~~~
jedberg
They could make it work if they wanted to. They would have you designate a
"home" address for both federal and state elections, and then let you vote in
all local elections for which you are entitled (because you own land). That
would be fair.

In fact, I know that as a Berkeley landowner, my in-laws are allowed to vote
on the local Berkeley issues, even though they vote on the state and federal
stuff at home.

------
viraptor
Does anyone know if there's any universally recognised way to cut off all
connection to some country? It might be of course impossible if you have
citizenship of only that country - but for people with dual citizenships it
seems like there should be some way...

IANAL of course, but how is USA saying "you cannot renounce your citizenship"
different from another completely unrelated country saying "according to our
laws you are our citizen now"? Why is it binding if you do not have and do not
want any relation to that place?

~~~
daniel_solano
It's not so much that you cannot renounce your citizenship, but it is severely
discouraged. After some high-profile cases of wealthy individual renouncing
citizenship, congress passed laws to make sure that if you want to renounce
your citizen ship you need to have paid all of your taxes. Additionally, you
may need to pay an additional "exit tax" if you have had significant income or
have significant wealth.

As far as becoming another country's citizen, that gets to be fairly complex.
Some nations recognize dual citizens, others do not. How that exactly works
out depends on the particular circumstances. In any case, the U.S. generally
likes to keep its citizens within its grasp.

~~~
vitalysh
I guess what was by suggested by viraptor is the absurdity of the situation.
What stops Russia to say that any person born on earth is required to fill in
tax returns on their entire worldwide income. You enter Russia without paying
taxes? Bam -> jail.

~~~
hvs
They could. And Russia would immediately lose a ton of business. There are no
"laws" between countries. Just treaties and agreements. If you don't want to
be subject to another countries laws, don't go to that country (or live in a
country that enforces other countries laws).

------
cheez
So the solution is don't be a US citizen. Jesus Christ, what insanity.

~~~
micah63
That doesn't work either, even if you get rid of your american citizenship,
they still come after you for the past years.

~~~
timcederman
And for 10 years after renouncing.

------
gopi
This is not only affecting the expatriates but also foreign people who work in
US temporarily (like in a h1b visa). Most of them were not aware of this rule
and now they have to pay 25% of the money they have in bank accounts in their
native country.

~~~
kmt
Are you sure? Unless they turn into citizens (say, via green card) why would
they have to report? I would think not even green card holders would have to
(although looks like they do, according to
[http://www.taxesforexpats.com/expat-tax-advice/green-
card.ht...](http://www.taxesforexpats.com/expat-tax-advice/green-card.html)).
Do you have a reference for your claim?

~~~
sp_
No reference, but I'm a H-1B holder and I file FBARs. I am part of a German
Expat forum and the opinion there is pretty cut and dry that H-1Bs have to
file. Every year that forum has a big thread to make sure everybody is aware
of it. Having my savings confiscated for screwing up FBAR reporting is
literally my number one fear I have about living in the USA.

------
azulum
i for one am in favor of abolishing the IRS completely. i'm convinced a more
inefficient and backwards institution does not exist in the US. sadly, though,
the best solution i have seen proffered is the fairtax
<http://www.fairtax.org/> (which has, sadly, been hitched to the tea-party
horse). the fairtax is a consumption tax (basically a sales tax, but stated as
inclusive like the current income tax not exclusive like state sales taxes) on
any new final goods or services within the US.

a consumption tax, however, is the most regressive form of tax in existence.
so to combat that, you do simple math. every citizen receives a something they
call a prebate, a check in the mail or direct deposited for the amount in
taxes up to the poverty level at the beginning of each month (about
$200/month). no individual pays taxes by filling out a form, they only have a
yearly form to fill out to receive the prebate. all taxes are collected at the
point of sale (used goods are exempt) reducing compliance costs and the
incentive to tax dodge. so illegal immigrants pay taxes without getting a
prebate. corporations that manufacture within the US but export their goods do
not. corporations that import goods do. tourists pay taxes. people who are
crazy and live off the grid do not. SS and medicare are not collected
separately. investment is not taxed. and it's price and cost neutral (that is,
the myriad taxes we pay but don't realize: SS, medicare, income, payroll are
already hidden in the price of everything we buy and this just makes it
transparent).

as a libertarian that knows markets fail all the time, i believe the policies
should be dynamic and robust. that is, use the reduction of the market to make
quick and dirty decisions and heavily regulate those areas that are prone to
failure (or just prone to negative externalities while promoting the positive
externalities). enough with the waffling centrism—certain things need to be as
libertarian as possible while others, particularly dealing with OPM (other
people's money) and general welfare of individuals need to be as socialist as
possible. and i am fairly confident that that will never happen. alas

~~~
rprasad
In other words, you would replace the IRS with the PRS (pre-revenue service)?
And Main Street with the Back Alley, where you pay no taxes at all? And
incentivize export businesses over domestic businesses (b/c exported goods are
never taxed)? And over-incentivize capital investment even more grotesquely
than it is now with a mild capital gains preference?

There's a reason the Fair Tax was DOA. It's an over-engineered solution that's
worse than what we have right now.

~~~
azulum
for tl;dr—this is exactly the type of reaction i expect from those who don't
stop to think deeply before punching out a response. there is no real content
in your reply, only distraction.

 _In other words, you would replace the IRS with the PRS (pre-revenue
service)?_

no, i would abolish the IRS and repeal the whole damned tax code and start
over. if PRS is what you would call it, i am partial to
<http://www.prsguitars.com/>

_And Main Street with the Back Alley, where you pay no taxes at all?_

used goods would not be taxed since they were already taxed. and back alley
deals will always be there—so what. better to keep however many million
companies in line than 300 million people plus however many million companies.
it lowers the tax burden, which is more efficient, which swamps any extra back
alley deals that may take place under a consumption tax than the current
labyrinthine code.

 _And incentivize export businesses over domestic businesses (b/c exported
goods are never taxed)?_

you do understand that we are a net importer of goods (though far and away a
net exporter of ideas)—this means that we consume more goods at home that are
not made here than we make and send abroad. i'm no rabid proponent of balanced
trade, especially since our ideas are worth far more than a million trinkets
from emerging markets, but making our goods more competitive in a global
market can foster actual manufacturing jobs (remember those?), especially when
the cost of labor in the east starts to be less of an advantage for those
countries.

nevermind that we have an economy that relies mostly on non-exportable
services and manufacturing has by and large left our shores, on to the _highly
flawed_ rhetorical question to which i _must_ respond: a hypothetical export
company has to pay taxes on equipment and supplies to do business, and has to
employ people who purchase goods and thus pay taxes, only those items which
are non-finished goods are not taxed if exported. most primary and many
secondary goods are non-finished goods (think rubber for primary and tires for
secondary—the tires on the new vehicle are taxed as part of the whole vehicle,
the tires you by at tirerack are taxed when you buy them).

now imagine a global brand that still has manufacturing in the US as well as
in other places around the world wants to build a new factory that serves
north america. it might build in mexico, where the lower cost of labor offsets
the higher cost of shipping and dealing with another imperfect government,
then all of the goods it sells to the US (it's biggest customer) will pay
taxes to the US and all the goods it sells in mexico and to canada pay NO
taxes to the US. now imagine the scenario that the company decides to build
here in the US—it pays higher labor costs but can keep a closer eye on
manufacturing that makes it worth it. it employs several thousand people,
pumping a quarter of a million dollars into the pockets of americans that end
up supporting many other ventures that have no relationship to that company.
and guess what, it pays NO taxes to the stuff it sells in mexico and canada.
which would you prefer? oh, that's right, option 3 where said company never
bothers to consider the US because it would pay tons of taxes on those goods
sold elsewhere, all the while lobbying to congress for a tax break.

 _And over-incentivize capital investment even more grotesquely than it is now
with a mild capital gains preference?_

first, why should anyone ever be taxed for investing in the future?

second, do you understand that in this model, the investment would fund the
purchase of goods and services which would employ people and pay taxes—around
the world, not just in the US? do you understand that the benefit to the world
of more investment is greater than houses of cards sometimes built with that
investment? do you know that the fruits of investment has raised the standard
of living such that i can type something of a didactic diatribe via a high
quality laptop to some stranger that doesn't understand economics.

third, the capital gains is a clusterfuck, like everything else dealing with
taxes.

 _There's a reason the Fair Tax was DOA_

tell that to the people who are still supporting it. and if it does eventually
become DOA, it'll be because of the beloved lobbyists and special interest
groups

 _It's an over-engineered solution that's worse than what we have right now._

to which i can only respond:
<http://www.fourmilab.ch/uscode/26usc/www/contents.html> remember, that's just
the table of contents.

------
stevep98
Just want to point out that you could have reported missing reports of foreign
bank accounts under the IRS amnesty disclosure initiative which just ended on
august 9, 2011.

This program also covers 5471's, which hit me pretty hard. If you own even a
single share in a foreign business AND your parents own shares, those shares
are attributable to you in terms of determining if you have a controlling
interest in that company. If you have over a certain percentage, you are
required to file 5471's.

I just filed over 80 5471s for various companies for tax years since 2003. My
tax accountant said that the IRS has been nothing other than 'foaming at the
mouth insane' about collecting penalties, and that it is their attitude that
any failure to disclose is treated as an attempt to defraud or conceal
information from IRS, and that without exception, IRS always levies the
maximum penalty possible. So, that would have been 800,000$ penalties for me.

Bear in mind that I already declared to IRS and paid taxed on any and all
income earned from these foreign companies.

I can only hope they enjoy perusing my 400+ page filing. Apparently someone
has to type it all in. Love to do my part to keep federal employees employed.

<http://www.irs.gov/newsroom/article/0,,id=210027,00.html>

~~~
stevep98
Sorry, I linked to the 2009 amnesty. The 2011 amnesty program is described
here:

<http://www.irs.gov/newsroom/article/0,,id=234900,00.html>

------
mbeattie
Here's some advice:

If you are an American citizen, file your tax return.

Easy as that.

~~~
jarek
And, apparently, if you don't know if you're a U.S. citizen, check.

------
parfe
If you want the protection and support of US embassies and military while
abroad then pay your American taxes.

If you don't want to participate in American society renounce your American
citizenship to the IRS.

Took about 30 seconds to find the form.
<http://www.irs.gov/instructions/i8854/ch01.html> (expatriation 1994 or later)

EDIT:

First, you renounced your citizenship THEN stop paying taxes, obviously. You
don't get to stop paying taxes and then renounce your citizenship back in
time.

Second, [http://www.businessinsider.com/senior-us-marine-says-
multipl...](http://www.businessinsider.com/senior-us-marine-says-multiple-
platoons-are-headed-to-egypt-2011-2)

[http://www.marinecorpstimes.com/news/2011/03/ap-us-to-
evacua...](http://www.marinecorpstimes.com/news/2011/03/ap-us-to-evacuate-
americans-from-japan-031711/)

The US Marines will come get you if you're stranded in a foreign country when
shit goes wrong.

~~~
brador
In a sense, you are correct. They must have known of the option to renounce,
yet never took it, no doubt taking advantage of the laws and protections
afforded by both countries as it suited them. However, the fact that this has
happened now is shocking for many.

~~~
pyre

      > no doubt taking advantage of the laws and protections
      > afforded by both countries as it suited them.
    

It's more likely that they just wanted easier passage into the United States
for vacationing and/or visiting relatives by using their US passport than
their Canadian one.

Also, if you lived in Canada since you were 13 and committed a crime in
Canada, I doubt that you would be able to claim that you were immune due to
your US citizenship.

On the same token, I've heard that the US enforces its laws overseas if your a
US citizen. E.g. if you go to another country to have sex with a child
prostitute, you can still be charged with a crime in the US, or so I was told
on some message board (want to say slashdot.org) some years ago in a
US/foreign discussion.

~~~
Hyena
Yep. It is illegal for a US citizen to travel abroad to solicit sex with a
child. But I'm not sure the concept is so outrageous; I think most countries
illegalize certain behavior overseas, like smuggling, weapons or person
trafficking, or corrupting officials.

~~~
pyre
Ok, so this is for _specific_ things. When I came across that proclamation, it
was something to the effect of "The US enforces its laws outside its borders,
you can't escape US law" with going to Thailand to have sex with kids as the
example given. It makes more sense that it's just for specific things.

