But I think that it is wrong to present this as a taxation issue. I would be fine with paying a percentage of my income in taxes. There are some benefits to being a US citizen, like that the army will rescue you if there is a civil war ;). But the fear uncertainty and doubt that surrounds these new regulations makes it nerve racking to be a citizen. Every expat I know here has nightmares about an audit comming and having all of their assets seized. And it has happened to some of them too! And that legal risk is no longer a form of taxation, because taxes are percentual (the more you earn the more you pay), but when you end up having to pay a fine that is higher than your net worth, that's just robbery.
We used to be a free nation, but thanks to austerity the 'r' had to be removed.
This is a common myth. If you don't intend to return to the USA there are no benefits to US citizenship, only downsides. The US may or may not rescue you if there's a civil war (see the fate of people in Yemen), but if they do, they will charge you for it at military rates you almost certainly cannot afford:
See "Will the US government pay for my travel? What will it cost?" which says, essentially, that no, it won't. This is unlike other countries which DO evacuate citizens for free and DO NOT charge taxes on non-residents.
This would be irony overload.
For someone who still remembers the cold war this is almost unthinkable.
It brings up my Rocky 4 warm fuzzy
But the link you posted said "We charge you the equivalent of a full coach commercial fare on a comparable mode of transportation at the time that commercial travel ceases to be a viable option."
Where'd you get the "military rates" part?
Your link says "We charge you the equivalent of a full coach commercial fare on a comparable mode of transportation at the time that commercial travel ceases to be a viable option."
The 45 minute flight from Port Au Prince, Haiti (after the earthquake) to Santo Domingo, DR cost $841.11.
I think this is because 'full coach commercial fare' is the most expensive coach option. Very few ever purchase it, excepting those who want full flexibility to change the schedule without extra fees, or request a class upgrade if available.
Still, the original argument wasn't about total cost, it said that being evacuated was a service you get just for being a US citizen. Not the case.
Seriously? US citizenship means you can travel with a US passport, which allows visa-free travel to many, many countries: https://www.passportindex.org/byRank.php
Even if that were true, what proportion of US citizens living outside the US (the class to which my comment and the immediate parent referred) have a 'Euro passport'?
No, I spoke to counter this claim: "If you don't intend to return to the USA there are no benefits to US citizenship, only downsides."
I did not comment on the downsides. I spoke only of the benefits, which the parent comment said did not exist.
I got a 6 month visa in the UK while laid over at Heathrow in under 10 minutes. Under "Reason for your stay in the UK" I wrote "a cigarette."
I wonder where the dead set certainty that the army will save them comes from?
Do you really think that every one of the millions of American citizens who travel or live overseas each year is supposed to tell the US about their current location?
I didn't presume there was such a requirement, but I also wouldn't have been surprised if the fine print somewhere made it a selectively enforced requirement. It doesn't strike me as more or less onerous than some other actions that are currently required.
There is no "supposed to."
I think you are correct, but when an official government agency "encourages" a certain behavior, it's not too much of a stretch to presume that one is "supposed to" do it:
We encourage all U.S. citizens travelling or residing
overseas to notify the closest U.S. Embassy or Consulate of
their contact information so that, in an emergency, we can
contact them to provide important safety and security
information, or support during a crisis.
What would your guess be as to the chances that some sort of registration will be made requirement in the future?
Such a requirement is very unlikely for travelers. It's just not practical given how often plans can change. (I visited a salt mine in Austria. To my surprise we crossed into Germany during the tour. Would I need to tell the US about those 20 minutes in Germany, and when?) How much would it cost to run such a system? What happens if the system breaks - and we know the foreign tourist tracking system breaks? What are the advantages to the US?
It's more possible for permanent residency. But the US doesn't even require that of domestic citizens, despite the clear advantages there would be to know where people live. So I don't think it's going to happen any time soon. And what would be the penalty of getting it wrong?
And yes they were expecting a Saving Private Ryan moment.
generally US citizenship meant much more in the past than it means now since there are more interesting places to live (albeit in long term US might still prove as best spot... or not).
The US evacuated government staff and contractors, but abandoned anyone else.
Also the Americans I knew seemed to expect helicopters to come pick them up and all that. Saying to your citizens they need to get out and we've got a navy ship in port that you can get on if you want isn't really evacuating your citizens.
Also, a naval vessel absolutely qualifies as evacuating your citizens.
No it's not. Especially so with the civil wars in the Arab world, they didn't spring up virtually overnight and almost across the board started well away from the capital cities where most expats and embassies/consulates are.
> Give me an example of a developed military that's gone into an armed conflict to rescue citizens. The closest I can think of is the rescuing of hostages. That's not quite the same thing though and very rare.
There are a variety of examples of this by practically every developed country. In the last two decades it's been relatively common in Africa and the Middle East. The US in particular has a number of such cases which can be found in this list: https://en.wikipedia.org/wiki/Timeline_of_United_States_mili...
Hostage rescues are very rare, I agree. That's an extreme measure.
I expect the reporting requirements are a burden for small banks, especially ones competing heavily on price rather than offering a full service. I'm not American, but am a similar burden to a bank, and was strongly advised to open an account only with the country's largest bank.
Is it a failure to report income taxes at all? Or do you make so much more than $100k/year that the double taxation is killing you?
I'm just trying to figure out what, other than their already-reported income being audited, has got all of your expat friends so spooked...
Later the rules changed, and they had to file taxes. Those who didn't know about the change ended up having to pay a big fine.
Lately, a new requirement was the need to file FBAR forms for every foreign bank accound and security: https://www.irs.gov/Businesses/Small-Businesses-&-Self-Emplo...
Many people didn't know about the new requirement, and they had to pay big fines.
What will be the next new requirement that startles people who don't have any contact with the country? No one knows. That is the risk, the uncertainty that there might be a requirement that you don't even know about...
When I found out about the new rules and then remembered the bank account (10 years later!) I realized I was probably not in compliance. That's one thing that spooks people: $2000 in a bank account you forgot about can lead to disproportionate fines. I had to do a lot of paperwork to get into compliance, and because I had to transfer the money I actually lost a lot in a poor exchange rate (due to various constraints).
Although since that seems to be what a lot of EU governments are calling "austerity", perhaps we have had it.
Tell that to the departments that are getting $1.1T less over an 8 year period.
Between the sequestration and the lack of budget increases, the US has been going through a period of federal austerity.
Of course, expecting fiscal responsibility from a government is a fool's errand. Screaming like a stuck pig and running around yelling "AUSTERITY! AUSTERITY!" if one even breathes a threat to feed them less, and then blaming everything bad that ever happens again on the AUSTERITY is exactly what I'd expect from them. What on Earth will they actually do when something bad happens?
See also: Every departmental budget ever, public or private (non-unioned employees expect a small annual raise as well)
We always had a surplus at the end of the year and the boss would tell us to spend it on anything and everything because if we didn't, there would be less money in funding the next year.
The amount of waste was incredible and it made me angry. It's why I went into the private sector/started my own company.
You also almost could never get fired. We had so many bad employees that basically sat to get a paycheck and take up space. If you are really lazy, it's great.
Because of this game that is played, it's very difficult to tell if a department 'ran out of money' or just spent it to meet next year's budget.
There's tons of waste in any large organization. In my experience, private companies have more waste (resources and personnel) then public organizations as they have much less oversight.
The point being, it's scare tactics. I filed a complaint with the https://www.irs.gov/Advocate and they are well aware of the issue. They have brought it up repeatedly in their report to Congress. The IRS's response is an FU and it shows how toothless the Advocate's office is. You can see their report on international issues here https://www.irs.gov/pub/tas/2011_arc_internationalmsps.pdf, The reporting requirements section is close to the bottom.
I work for the IRS and we'd love to get this squared away. Please contact me at firstname.lastname@example.org and we can resolve this immediately.
Every time a US Customs agent asks me if I will ever be interested in becoming a citizen I laugh and tell them about situations like this.
When I was young I dreamed of moving to the US, now it is a huge joke because of all the paperwork and FACTA's "Hotel California" implications. Now I will never apply to be a US citizen. Especially because I would have addditional paperwork until I die.
BTW, this even affects Canadians and Canadian legal entities as we're all forced to declare we are not US Persons even if it is obvious we are not.
FACTA is an overreach of power and the IRS should do a better job pushing back against laws like this. The US was once known as "the place to do business" (at least in the Americas) but now it appears to be just a gigantic bureaucracy.
I think it is good people are renouncing their citizenship... Perhaps it is the only way to let the government know how bad the system is.
The OECD is adopting CRS which is a wider-reaching version of FACTA. 51 countries are adopting it in September 2017. Another 34 (including Hong Kong, Switzerland, Singapore, and the United Arab Emirates) will adopt it a year later, in 2018.
I have (some) hope that what we're seeing now is the teething pains and they'll go away in a few years. But (as a fellow expat) I agree it is not a great time right now :(
I thought you only had to file FATCA for bank accounts that had more than $10,000 USD in them at some point in the past year. Not a few hundred. Are you sure about that? (if so, oh sh*t)
FBAR is more insidious for the individual because any US taxpayer (not just citizens) is required to file an FBAR and $10,000 is a stupidly low number. Worse even if the money overseas isn't yours (in the case you have say signature authority over an account because of power of attorney) you still have to file. Even worse once one account tops $10,000 you have to report all of them even if they have zero balance. It's also not clear what constitutes an account. Example does a PayPal account count ?
The only conclusion I can come up with is that FBAR is basically there to make it easy for the Feds to do a Martha Stewart and get you for lying, because proving tax evasion is a bit hard.
(Disclaimer: Not an accountant. Consult an accountant for tax related advice)
Oh, and the worth is calculated as the maximum value during the year. So if you get a contract filled for $10 000 and someone wires you the money, even if you imediately pay the rent and therefore have no money in the account, you still have to report the account.
Taxpayers with a total value of specified foreign financial assets below a certain threshold do not have to file Form 8938
You must file Form 8938 if:
1. You are a specified individual.
2. You have an interest in specified foreign financial assets required to be reported.
3. The aggregate value of your specified foreign financial assets is more than the reporting thresholds that applies to you:
If you are a taxpayer living abroad you must file if:
You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year
For once, the IRS pages on this topic seems pretty clear.
The IRS rules concerning FBAR are here: https://www.irs.gov/Businesses/Small-Businesses-&-Self-Emplo...
And the pertinent text from that page:
"Who Must File an FBAR
United States persons are required to file an FBAR if:
1. the United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported."
FATCA is a new burden on foreign financial institutions that requires them to report to the US government on US citizens who have accounts at their institutions. It's meant banks in several countries have refused services to US citizens and closed their accounts.
A United States person is defined as:
"United States person includes U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States."
(There are exemptions for very specific circumstances)
A lot of United States persons living overseas are unaware that they need to file, and a lot of permanent residents or H-1Bs in the US are unaware that they also need to file if they still have assets held overseas. They have ramped enforcement up over the last few years so a lot of people are out of compliance and don't realize it. Thankfully at least at the
It means that your fate is not decided by the law, but by arbitrary decisions of random officials. It is the opposite of rule of law.
Before then, http://www.reuters.com/article/us-usa-taxes-foreign-idUSTRE7... reports that after 26 months of work, and at one time with a likely penalty of $172,000, the final penalty was $25,000 total. Does that count as "come across"?
Even without paying the fine, http://www.thelocal.se/20120306/39522 reports "while Pamela may no longer be facing a seven-figure penalty, she's already racked up a bill of $40,000 in accountants' and lawyers' fees." Most of the cases I've heard of (the Reuters piece includes more) are of people who paid penalties under the voluntary disclosure program or had to spend a lot on accountant fees to get things straightened out.
And there's still the stress of worrying if a minor mistake out of ignorance when I send the information to my accountant might still end up with huge penalties in the future.
What happens if someone with no plans to visit the US and no income from the US that could be garnished says "So - come and get it if you want it"?
But notice how they've been working on new rules like FATCA that go after the citizen's bank, assuming the bank does any sort of business in the US?
For all I know, in 10 years the IRS will force the bank to extract penalties directly from someone's account.
the irs got the french gov to freeze all his assets claiming he was giving up citizenship to evade taxes.
But it makes the problem even bigger, because there is a push to go cashless (like fines if you pay cash over a certain amount - starting around 10k euro) and it's working - Sweden has 40% less currency in circulation than 10 years ago.
So, yeah, there are qualified tax advisors who can help but it's painful.
I've had to fix my taxes every year that i had paid Ernest & young to prepare them for me. had i trusted them blindly as most people do, I'd be subject to a couple $20k fines. of course, those depends on you being big/of interest enough to be bothered by the irs. but i like to have clean books and not count on luck.
As an american who has lived overseas, I totally agree with you about FBARs, it's beyond unreasonable.
But where is the austerity?
The reason the fines are so high is to catch criminals & tax evaders.
If you have a couple of hundred in the bank you don't have a filing requirement anyway.
Have a look at this evacuation application:
Here's the key wording:
"3. I understand that:
(a) I will be billed for the cost of my/our transportation no greater than the amount of a full-fare economy flight, or comparable alternate transportation, to the designated destination(s) that would have been charged immediately prior to the events giving rise to the evacuation.
(b) My obligation to repay my loan will not be considered paid in full until it clears through the account of the Treasurer of the United States. (c) Until I have paid my loan in full, I and all listed U.S. citizen family members will only be eligible for a limited validity U.S. passport.
(d) If my loan is in default, I and all listed U.S. citizen family members will not be eligible for a limited validity U.S. passports.
(e) My loan will be subject to interest, penalties, and other charges for late payment as directed by law and regulation.
(f) I will be liable to pay any costs for collection."
If you're interested in reading the State Department Budget:
You'll notice that US Citizens Services is self-funded from fees collected from Americans using their services. I'm not saying that's wrong or right, but by comparison, the Social Security Administration doesn't charge fees for services.
The US is the ONLY country besides Eritrea that taxes non-resident Americans. Interestingly, Eritrea's tax warrants "investigation" by Swiss authorities: http://www.swissinfo.ch/eng/controversial-levy_swiss-prosecu...
And from the British: http://www.theguardian.com/global-development/2015/jun/09/er...
Yet, the US does the exact same thing.
Here's an economist article discussing the situation in more detail: http://www.economist.com/news/leaders/21605907-americas-new-...
In the Facebook group Citizenship Taxation, FATCA and Citizenship Based taxation are the key topics. There are countless stories of double taxation (despite normalization agreements, as those agreements don't cover certain taxes like French Social Charges.)
My primary complaint about Citizenship Based Taxation is that Americans abroad have no representation. You register to vote in your "state of residence" -- so while you can just pick a state at random if you want, the fact is that we do not have representation because the representatives from a state represent residents of that state. It is illegal to register to vote in a state in which you aren't resident. To register to vote as an overseas American, you effectively have to commit fraud.
There's also the related issue of "Accidental Americans" -- these are Americans who became Americans by virtue of birth to American parents even if they have never set foot in the US. Many of them don't even realize that they are Americans -- however, they have FULL tax liability to the United States on all their income for their entire life. When they open overseas bank accounts, banks often discover they are a "US Person" and thus their accounts are subject to either not being opened or subject to seizure by the US treasury department for failing to report the account per FATCA. Violations start at $10,000 per incident. Here's an article about those penalties: http://money.cnn.com/2015/04/01/pf/taxes/irs-penalties/
My opposition to Hillary Clinton and Bernie Sanders is based exclusively on their support for FATCA (Bernie voted for it) and Citizenship Based Taxation. Clinton was the one who introduced the $450 citizenship renunciation fee (now raised to $2300.) Democrats Abroad is on record opposing Rand Paul's repeated bills to repeal FATCA. They also oppose the lawsuit challenging both FATCA and the constitutionality of citizenship based taxation.
I know this was a long rant, but this issue is one I face continually and it has harmed a large number of people for minimal benefit.
The myth that American citizenship has "value" to an overseas American is just that.. a myth.
Things like this and the Flint water scandal make me want to never work in the US, even if it's just a year. Dealing with your tax authorities? No thank you.
I get letters like that, too, also addressed to Japan but bearing a conspicuous bald eagle. An American citizen is a resident of the last state one had legal residence in for voting purposes even if one has no particular intent to return to it. One's friendly local State Department employee will happily confirm this:
For voting purposes, your state of legal residence is generally the state wherein you resided immediately before leaving the United States, even if you no longer own or rent property or intend to return there in the future. Twenty-four states and the District of Columbia specifically allow U.S. citizens who have never resided in the United States to register where a parent would be eligible to vote.
In reference to briandear's comment "It is illegal to register to vote in a state in which you aren't resident", that simply isn't correct.
However, I don't know what happens with Americans who were born overseas and are citizens because their parents were citizens, but who have never been resident in the US. Ahh, https://www.fvap.gov/citizen-voter/reside gives details.
But, once registered, you can vote as an absentee indefinitely from wherever you came from.
I'm not sure how it works in other situations, but I know that a few of my friends who joined the military moved to Texas and New Hampshire, as the military treats you as a resident of the state in which you enter service for tax purposes.
None of that is right. You cannot pick a state at random. The representatives are also there to support the overseas voters and citizens. And you do not need to be a physical resident in the state in order to register to vote overseas in the state. Moveover, registering as an overseas voter is not effectively committing fraud.
So I disagree with you. briandear was wrong on all points relevant to the snippet I quoted. Otherwise, I think your first two lines make the same points I made.
> Citizens residing outside the U.S. may not arbitrarily choose which State to declare as their legal voting residence without meeting the State's residency requirement. The following are basic guidelines to follow in determining voting residency:
> * Your "legal State of residence" for voting purposes is the address where you last resided immediately prior to your departure from the U.S. This residence remains valid even though the citizen may no longer own property or have other ties to their last State residence and their intent to return to that State may be uncertain.
> * Voting in an election for Federal offices only may not be used as the sole basis to determine residency for the purposes of imposing State and local taxes. If you claim a particular State as your residence and have other ties with that State in addition to voting, then you may be liable for State and local taxation, depending upon that particular State law. Consult your legal counsel for specific questions or situations.
The qualifier "for voting purposes" is why there's no fraud.
In any case, your complaint was about the lack of representation in Congress for overseas citizens, excepting by those who fraudulently declare residency in the state. The Uniformed and Overseas Citizens Absentee Voting Act says the state must allow overseas voters to vote in federal elections, and therefore do have representation, and without resorting to fraudulent means.
I went digging for more information and it seems that he now is potentially supportive of residence based taxation instead of citizen based taxation.
From reddit.com/r/expats4sanders, http://www.democratsabroad.org/our_candidates
There are many different scenarios which the law as it currently stands do not adequately cover for.
* Parent gains US citizenship through immigration. Parent inherits from grandparents.
* Person gains US citizenship through immigration. Person inherits from parents foreign bank accounts.
* Based on my understanding, US now has a claim on monies which have at no point entered the US, nor have been derived from US related activities.
* This is crazy.
I'm totally fine with paying taxes on income derived from being in the US but to have to pay US taxes on income derived elsewhere is just insane overreach.
In most countries when you inherit it's the estate that is taxed and generally the estate is taxed in country of domicile of the estate rather than citizenship of the recipient.
In your scenario the estate would would be taxed by the country of domicile, and then the remaining money transferred to you. If you were a US person then you would be taxed on any interest or capital gains from that point onwards.
That said this kind of thing is generally fairly complex (determining country of domicile for example is not obvious) so generally you would involve an accountant or tax professional.
The point being that the US has no business trying to tax income generated from funds that has never entered the country. Residence based taxation (like the rest of the world) would address this immediately.
(The non-domiciled rule in the UK being one notable exception)
A large part of the process is a motivational interview.
It's different for different countries in the EU.
I am thinking about living in Europe too.. but it has been difficult to decide.
Thanks and cheers.
Further, these tax treaties differ from country to country and don't always offer the same protections. Here, read the 42 page US/France tax treaty (https://www.irs.gov/pub/irs-trty/france.pdf) and try to figure out how you'd be impacted if you were living in France.
We expats don't just have to hire accountants to do our taxes, we often have to hire international tax lawyers, EVEN IF WE DON'T EARN ENOUGH TO PAY US TAXES!
Studies have repeatedly shown that the majority of expats are abroad to find a job, to teach, to volunteer, or for love. We're taxi drivers, waiters, English teachers, farmers, computer programmers, and so on. We're normal people who are being massively screwed by rhetoric in the US.
Yup. Same goes for normal people who move the other way. The anti-foreign(er) consensus in the US political system/debate is almost as bad as the "tough on crime" madness.
And of course that's reflected in what people think. I remember being in a discussion after an interesting EE380 session (so not exactly bottom of the pile) and one of the guys started ranting about the evils of H1Bs driving down wages. I mentioned I was on an H1B and that what he said was illegal. He asked me how much I made, I asked him to guess. He mentioned a number. I said "multiply by at least 3". He kind of shut up after that...
The problem is that some companies break the law by playing around with job descriptions and job duties. There are people who aren't against immigration but who are against the H1B visas.
And of course the knee-jerk reaction is to make the laws even more draconian than they already are, when a significant portion of the problems are caused by the very draconian nature of the current laws (and non-enforcement against companies that flout them).
> The United States has entered into agreements, called Totalization Agreements, with several nations for the purpose of avoiding double taxation of income with respect to social security taxes. These agreements must be taken into account when determining whether any alien is subject to the U.S. Social Security/Medicare tax, or whether any U.S. citizen or resident alien is subject to the social security taxes of a foreign country.
You'll notice that's a much smaller list of counties.
(When I went to the local Swedish tax office to request a copy of the declaration that I needed to include in my US tax forms, to say I was covered under the Totalization Agreement, they didn't know at first what I was talking about. Asking for the form also must have triggered something, because a month or so later I got a phone call from the Swedish tax office asking for why I needed that information, and asking for a copy of my most recent US tax forms.)
> 1. Consular officers must confirm that the potential renunciant fully understands the consequences of renunciation, including losing the right to reside in the United States without documentation as an alien.
> 2. Consular officers must verify that the renunciant is a US citizen and they must conduct a minimum of two intensive interviews with the potential renunciant.
> 3. Consular officers must review at least three consular systems before administering the oath of renunciation.
> 4. The final approval of the loss of nationality must be done within the Directorate of Overseas Citizens Services in Washington, D.C. After that, the case is returned to the Consular officer overseas for final delivery of the Certificate of Loss of Nationality to the renunciant.
"Intense"? http://hodgen.com/renunciation-interviews-intense/ gives a report from an interviewee:
> Also, despite what the State Department says, I did not have “two intensive interviews”, unless two interviews at a window open to view of all waiting in the Passport Section at the London Embassy count. These were to make sure, first, that everything was correct on the (many) forms I had sent in, and, second, that I understood the seriousness of the step I was taking and finally to swear/affirm my renunciation. I thought it was all rather less intensive than it should have been, considering the seriousness with which I had approached it.
The official estimate, reported at https://www.rt.com/usa/183972-fee-renounce-us-citizenship/ , is that:
> the State Department notice gives an estimate of a consular officer’s time at $135 an hour working for 20 hours.
> “The questions are minimal and I didn’t spend more than 15 minutes at the window either time. It’s not intensive. They ask you: ‘Are you aware of the ramifications of your actions?’ And ‘Are you doing this of your own accord?” she said.
Finally from http://worthly.com/news/cost-renouncing-u-s-citizenship/ I learn:
> Prior to 2010 it was free to renounce U.S. citizenship, but in July of that year a $450 was established.
"To recap, if upon giving up US citizenship you own assets with unrealized gains of less than $626,000, you will not owe exit tax, no matter how wealthy you are. If you are required to pay tax it's less tax than you would have paid if you'd stayed in the U.S. and sold the assets. Plus, if any asset you pay exit tax on continues to rise in value post-renunication, all those additional gains are yours." 
heres a source (number 2)
Also from what I remember you are still required to file and pay taxes for five years after you renounce your citizenship...
(That is certainly not counting the thousands of dollars to get to the point where I was eligible for naturalization.)
Like a lot of people we use a joint bank account. My salary, and anything else goes in there.
A couple of years ago I sold my flat in central London, and had 400K (600K USD) in there at various points. I have no idea how to bring my wife into compliance, as if I do, she will be expected to hand over 25% of the maximum balance of this account for every year it was undeclared to a maximum of 5 years. I.E. 125% of the maximum balance!
She remains unaware, and I don't file for her. We'd risk losing our house (brought with the proceeds of the previous sale), if I attempt to fix this. I live in absolute dread of the IRS, and what they may do to our happy family.
Yes, this is one person's story. Personally, if you can, I'd get in touch with a tax solicitor and get a real professional opinion on your options, including how to insulate your assets in the case of any idiocy by the US.
One thing to keep in mind is that as stupid and horrible these laws are, they aren't meant for us. They're meant for real, actual tax cheats, and FINCEN has more interest in them than someone who's been ignorant and is now trying to make it right.
I'm pretty sure child pornography laws weren't meant for teenagers sending nude snaps to each other, either.
According to this: http://time.com/money/2803550/income-taxes-on-home-sale/
If you lived in your previous home for at least 2 years, then you'd take it's original sale price plus closing/brokerage/etc costs as your "basis". Then take your later sale price subtracting those same costs. You get a $250,000 credit on profits.
So to me (a complete layman who's maybe not very good at taxes), that means if I buy a house for $200,000 plus 5% closing costs, my original expenses were $210,000. I later sell it for $450,000 minus 5% closing costs. That's $427,500. I've made $217,500 for holding onto the asset for two years. I should probably play the lottery. ;-)
Because I'm under the $250,000 single filing credit ($500,000 for joint filing couples, but I'm not sure how that'd work in your case since you're not a US citizen), I don't owe anything.
Say I did really well and made $400,000 in pure profit though (selling my $210,000 in the neighborhood of $600,000+).
You still get the credit so your taxable profit is $150,000 (assuming the joint filing credit wouldn't apply). That's taxed as capital gains. Not income. Which is a regressive tax. The highest rate is 20%. That'd be a $30,000 tax bill.
This all assumes you even put her on the title for the old property. If you didn't, then the sale doesn't mean anything necessarily. That she had access to the money through a joint banking account after the sale might complicate things?
In general I've found the IRS to be very helpful. They're not interested in prosecution (IME). They just want their due. And they're pretty flexible in making that happen.
Once upon a time I owed $15,000 in taxes from previous contract work, and hadn't filed in a few years because I was scared of the consequences. That's about the worst move. By not filing I racked up something like $1,000 in non-filing penalties each year as well as paying 10% interest on the amount owed.
When I finally did get my act together and contact them they waived further penalties, suspended the interest on the amount owed and set me up with a $300 a month payment plan.
There are a lot of horror stories out there. And bad things do happen to good people. But I'd like to imagine that most cases work out more like mine.
If I were in your position, I'd make it a priority to talk to a tax attorney, being sure they don't have a reporting obligation. It probably won't cost more than a few hundred dollars just to get some advice. Then I'd get a second opinion. Once I had some confidence I had a grip on the situation and how it was likely to play out, I'd talk to the IRS on my own, get on a payment plan if necessary, and put it behind me.
I'm not sure it applies in your situation, but stateside, simply avoiding filing properly is about the worst thing you can do. It doesn't just go away on it's own. That only makes it worse (interest and penalties).
But you know, I'm just some random guy on the internet. Figure out if tax attorneys have a reporting obligation and talk to one maybe? Good luck!
As she didn't file, she didn't know that you need to file an FBAR annually for each foreign account. And the penalties for not doing so are those mentioned above 25% of the balance a year for 5 years.
and there are plenty who do file who don't know to file an fbar too.
If the money was in an account with the US citizen's name on it for any amount of time, such that the sum of all accounts with the citizen's name was over $10,000, all accounts must be reported.
It may be no surprise that FATCA and FBAR present several consitutitional issues. Chief among them are the following:
-As the IRS can unilaterally sign unauthorized pseudo-treaties with foreign governments, the Senate’s role in ratifying treaties is bypassed
-Fourth amendment: Private financial data is collected indiscriminately
-Eighth Amendment prohibiting cruel and unusual punishment, as well as excessive fines, may be leveraged when compliance is not perfect, and without Rule of Law provisions to ensure any protection for the accused.
(My recapitulation of points in  )
Thankfully, several large scale legal challenges on exactly these grounds are now underway- by Sen Rand Paul and 6 other expats  , and perhaps even more promisingly, by super lawyer Jim Bopp (who took down Mc-Cain Feingold ).
You can also donate a small amount to support the latter case: https://fatcalegalaction.com/contribute/
Thanks for reading, lets not give up hope, and remain fired up to the correctness of this cause because, in the words of Bopp - “The U.S. Constitution protects every citizen’s liberty and freedom, while FATCA undermines both,”
We deserve better!
An American living in Paris
2. The fourth amendment doesn't apply to data you're legally compelled to surrender to the government. By your logic, every form 1040 that's ever been filed is a fourth amendment violation.
3. The eighth amendment has almost never been used in a constitutional case involving excessive fines. When it has, the court has primarily used it to prevent pseudo-fines that aren't really called fines in order to skirt the eighth amendment.
Sure, FATCA might be annoying, but a legal challenge has almost nothing going for it. Don't get your hopes up.
No one running for any office cares one bit about Americans overseas.
It's very easy to get support for 'sticking it to those tax dodgers overseas' and very hard to get people to care about the tax situation of people they don't know and feel they can't relate to.
I bet they are wondering how to stay motivated on this one. Well a minor update to the legal system should fix the problem:
Welcome to Congress, we have now designated you a "US Congress Person" for filing purposes.
Being or having been a Members of Congress will require you to file all forms that could be requested of any "US Person".
In cases like FATCA you will also be required to disclose all accounts in your country of residence to meet our test of equivalence for "US Persons" abroad. Banks in the US will now be required to follow all procedures for FATCA for the special case of "US Congress Persons" or face 30% penalties. If Banks are unable to establish whether account holders are "US Congress Persons" they shall pay 30% penalties on all US sourced income.
The penalties for failure to file any form as a "US Congress Person" shall be no less than the highest established for other "US Persons".
Being convicted of some crimes and failures to file may limit your time in office but does not change your status and obligations as a "US Congress Person". If (Ex-)Congresspeople would like to renounce their citizenship they will automatically face the maximum 10 years of continued filing with the IRS as provided by the current regulations. "US Congress Person" like "US Person" can not be renounced separately.
Children of US Congress Persons shall inherit all filing birthrights of being a "US Congress Person".
(edit- fix mis-attribution of renunciation/IRS filing issue to FATCA)
FATCA is utterly bonkers though.
Taxes aren't a payment for services rendered.
If your girlfriend doesn't believe herself to be an American she should renounce citizenship. But you are asking to have her cake and eat it too.
As you can read in this thread, it costs over $2,000 to file renunciation, and your taxes need to be in order. Resolving the tax situation in this case sounds quite expensive. Oh, and I think you have to pay taxes for up to 10 years after renunciation, and you can't renounce until you're 18 years old.
Suppose you were born in the US while your British parents were finishing up a college education. You left the US when you were 6 months old. You've not back to the US, you have no US relatives, you don't know anything about US taxes, or Selective Service requirements, or other obligations of US citizens, and have no plans to even visit the US. Then at the age of 40 you realize that you are under US law. You want to renounce citizenship, but learn you'll need to pay $150K in penalties, even though you've been paying UK taxes all your life and would never have needed to pay US taxes had you filed. You only have $50K in savings.
What do you do, and how do you think you would feel?
As long as you maintain a passport and citizenship, how do they not have such a right?
In January, I got a tax refund from the British government, since I'd been paying tax on my income at a rate that expected me to earn that amount for the whole year. Claiming that was the first tax return I'd ever completed, i.e. the first time my taxes weren't correct automatically.
My only remaining "asset" in the UK is my student loan, and some money in an account to make the payments. I do not expect to communicate with the British tax office ever again.
This situation is typical of most countries.
If you ask what moral legitimacy it has, then the answer is none - they have no right.
The UK embeds the cost of consular protection and embassy services into the renewal cost of a passport - approximately £15 in 2010, probably more now. It's an insurance payment that most people will never use, so it doesn't need to cost very much per person.
Citizens of a number of countries can enter the US without a visa. They don't also have to fill out tax returns in the US.
This is certainly not limited to western countries, to underscore your point. Even India evacuated its citizens from Yemen, while the US did not. 
On that note, India also organized the largest-ever civilian airlift to evacuate tens of thousands of citizens from Kuwait during the Iraq invasion (1990). 
Additionally, if she has dual citizenship, she would get it for free from the UK anyway even if she lives in Spain.
People with British passports also have 90-day visa free access under the Visa waiver program. Unless she intends to move there, there aren't really any benefits to being a US citizen, and certainly nothing that can justify extra-territorial taxation. She gets no services from the US government.
But if she chooses to retain her citizenship then she's incurring a potential cost to the US, which surely it's reasonable for her to contribute to.
Why is she still a citizen? The article says she's in the process of renouncing. Not done already probably because:
• She might one day need to spend time with family or elderly relatives, even if she'd prefer to stay abroad.
• The USA does not allow you to give up your citizenship for tax reasons. She's probably screwed herself here by talking to the BBC, so I suspect she doesn't know that (edit: wrong, I missed the part in the article where it says Jane is a pseudonym). If they think you relinquished your citizenship to avoid taxes they can simply levy taxes on you anyway.
• Giving up citizenship is itself an expensive process and can trigger an "exit tax" that assumes you liquidated every asset you own on the day of renouncement, including things like a home. This exit tax can itself make giving up US citizenship financially infeasible.
• It costs $2350 and can take months.
In short, the entire US FATCA system is designed to screw over expats as hard as possible. It's very hard to get out and isn't at all justifiable under any moral or ethical code I'm aware of. The only reason the US can enforce it at all is the primacy of New York in the financial system and the incredibly aggressive Congress.
I think your argument is a post hoc justification.
Plus, "access to US consulate services" makes no sense. Many if not most Americans living overseas pay no taxes to the US. The complaint is the hassle and expense of filing the paperwork, and the likelihood or at least worry about exorbitant fines.
Finally, who do you think uses those services more - American tourists and business people, or those who live in the country?
Elsewhere leoedin points out that 'The UK embeds the cost of consular protection and embassy services into the renewal cost of a passport - approximately £15 in 2010'. That sounds like it's more equitable, and it shows that consulate services are not expensive. I pay 20x that amount for my accountant to deal with my US taxes, and would gladly play a flat $100 "I live or travel overseas" fee instead.
I am still failing to see what rights, if any, they actually get out of this arrangement. The right to vote ... except that the only issue that concerns them is the treatment of expats, and expat votes are spread around all districts meaning they are essentially ignorable. Not worth anything.
Ostensibly, the fees were raised as a reaction to Eduardo Saverin's expatriation for tax avoidance purposes.
Congress is to blame for plenty, but not this.
The embassies is also for people just traveling/visiting and not living permanently abroad.
My wife has those! guess what we don't pay a dime because we are citizens of... the rest of the world.
This does not solve the other problems with FATCA, but it should eliminate at least one practical and very real annoyance for Americans living in the EU.
 Technically, the directive is to be transposed by September 18, 2016 at the latest, but some member states may be dragging their feet.
For FATCA, the IRS says "FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts." https://www.irs.gov/Businesses/Corporations/Foreign-Account-...
In other words, FATCA treats all Americans overseas as a priori criminals -- the form is being filled out to "target non-compliance."
Her accountant cleared it up in a few days, apparently someone at the IRS had made a mistake about Canadian Tax Law and reported the problem to the CRA which didn't verify it. It was a scary couple of weeks until we got the letter from the IRS which said the taxes were fine but included a warning about not letting this happen again.
I'd have renounced just for that bullshit.
He has successfully evaded both the US and UK tax authorities to the tune of half a billion or so, he tells me.
The guy gives crazy amounts to philanthropic causes instead. He doesn't want his hard earned wealth pissed away by clueless bureaucrats.
So. Anyone who tells you fatca has been a success is full of it. It penalises "normal" people, and the evaders keep on evading. Uruguay is where they've all now got citizenship.
Details please, or it didn't happen.
Just for your own information: tax avoidance is legal and expected. Tax evasion is criminal and can result in prison. The distinction is that tax evasion is when you misrepresent the facts in your tax filings.
Yeh, but guess he likes driving on roads and making use of many of the other public services taxes pay for
 Random person on Hacker News personally "knows" a billionaire.
 Billionaire renounced U.S. citizenship without having to realize any significant capitals gains.
 Billionaire doesn't own a car. He just spends his time touring Africa, solving AIDS or malaria like Bono or Bill Gates.
 Billionaire has a secret lair, from which he dresses up in a costume and fights crime by night.
I could be making some of these up. I started to have serious doubts right at , and completely got off the train by .
As much as we like or dislike it, as a matter of fact we all use common goods and services provided by the government. For better or worse.
Use of public resources does not obligate you to pay taxes. The enforcers with guns obligate you to pay taxes. If you can escape the enforcers, you can escape the taxation. And that guy escaped the enforcers.
Also, you may want to take a closer look at the ownership and maintenance of communication networks, power grids, and hospital systems. Many of the so-called "public utilities" in the US are actually for-profit corporations that sometimes have to answer to a government regulator if a customer complains loudly enough. In fact, the only federally owned power grid company that I am aware of within the US is the Tennessee Valley Authority (though plenty of hydroelectric dams elsewhere are also federally owned), and it still buys 10% of the power that it sells from privately owned sources. It should also be noted that the TVA is not supported by taxes, but actually turns a profit.
As tax dollars are also spent on such meritorious projects as the Tuskegee Syphilis Experiment, the Vietnam War, the War on Drugs, the War on Terror, the F-35 joint strike fighter, domestic surveillance networks, eminent domain abuse, civil forfeiture abuse, forced insurance schemes, chronic fiscal mismanagement, and countless others that an unfortunate minority of voters may consistently object to, I suppose that someone who avoids or evades paying taxes will have to replicate those things on his own as well.
If you tie an ethical obligation for paying taxes to anything a government does, you necessarily imply that withholding payment is an ethical means of protest against anything you object to the government doing, in proportion to the amount it spends on doing that thing. That strays dangerously far from the realpolitik situation, where your government will take its pound of flesh from you, whether you like what it does with it afterward or not.
The heart of the matter is that anyone or anything with an obscene amount of money has to eventually deal with London and New York, and the latter connection provides the access point by which the US IRS can bully and browbeat international banks into complying with any arbitrary and capricious rule that the US cares to institute, with the threat of losing an extortionate portion of any quantity of their money that passes through New York.
Many Americans suffer from the common delusion that life should, in some way, be fair, despite all available evidence to the contrary. This fuels all sorts of irrational outrage and bad behavior. In this case, expatriates are left to wonder "why is the US government spending so much effort on screwing me over for no reason?"
> and the evaders keep on evading
Can't imagine how hard a billionaire worked.
This. As a someone who leans libertarian, folks give me the "you must be greedy" look when I mention that I have an issue with income taxation. Not at all - like your friend, I'm rather selective about where I donate my money - to causes that matter to me. I'm a generous person and consider the coercion of the state to be neither altruistic nor efficient.
Regardless what your "hardship" story maybe, it would have been harder if everyone acted the way you do now.
I agree government make mistakes, but that isn't an argument for getting rid of government, that's an argument for getting rid of mistakes.
So you are saying you want higher business tax? Or a flat tax rate... How does the mechanism of tax relate to your view of coercion though? Isn't it coercion regardless the rate?
I'd really hate it if my own country would force all the banks in the world to report back to the "mothership" and hence track my every move around the world for what? The IRS? Sure there are also other implications such as total control over the movements of a citizen. Can see why people renounce their citizenship. This isn't freedom any more.
Thought experiment: think about how the article would have felt had it been titled: "Why American immigrants are giving up their passports". I think it would have felt different, and I wonder whether an American reader might have felt slightly insulted by that change.
I'd be interested to know whether other languages/cultures draw that same subtle distinction between "immigrants" and "expats", or whether it's just some vestigial remnant of the UK's colonial past.
Immigrant: person who's moved to a new country indefinitely
Expat: person who's moved to a different country temporarily
Also a 2nd definition from my personal experience
Expat: a person sent temporarily to another country by their company. Usually they are in $300k+ a year job and their company pays their relocation expenses and their rent.
As someone who has lived abroad for 8 years of my own choice, in other words I don't fit that 2nd definition of "expat", it was an eye opener how the 1% lives because there are entire industries set up to cater to them. Before I lived abroad I never saw that but living abroad all the English magazines target those type 2 expats and are full of ads for services far far beyond anything I could possibly afford. Example: ads for apartments starting at $6k a month to $20k a month plus. So, suddenly I was acutely aware of just how big a different there is.
The term for anyone working outside of their home country is 'migrant worker'. Some migrant workers are called expats. These tend to be rich, at least on a global scale.
Many foreigners come to the US as seasonal farm workers. Almost no one refers to them as, say, "Mexican expats", even though by your definition that's exactly what they are.
While on the other hand, Madonna is one of many Americans who are called "expat" but live overseas and have no plans (or at least no definite plans) to return. There's a long list at https://en.wikipedia.org/wiki/Category:American_expatriates_... if you want to see more.
That said, "expat" is the wrong term for someone who renounced his original citizenship. I guess they should be called "pats" now.
The same is true in Europe. The places in town where North Africans, or Iraq, or Ethiopia live are often called "immigrant communities", not "expat communities." Even when the population has no plans to return, or are even native born.
While on the other hand there are many British people who retire and live the expat life overseas where it's warm and cheap, and don't plan to return to the UK. Or Arthur C. Clark, a British expat in Sri Lanka who had no plans to leave. The Sri Lankan government created the category of resident guest status in 1975 so he could stay.
This strongly suggests that 1) your understanding isn't correct, and 2) there is a social class distinction between "immigrant" and "expat".
Additionally, the term 'immigrant' is much more ambiguous than 'expat'. An American expat is clearly an American citizen living abroad. An American immigrant could either be an American citizen who moved permanently abroad, or a non-American who permanently moved to the United States.
If a US citizen goes to Saudi Arabia for 5 years to work in the oil industry and earn a lot of money, then is that an expat or an immigrant?
If a Mexican citizen goes to the US for 5 years to work as a farm laborer and earn a lot of money, then is that an expat or an immigrant?
If a Cuban left for Miami when Castro came to power, is that an immigrant or an expat? Even after 50 years? For example, quoting http://news.yahoo.com/cuba-expats-america-weigh-return-islan... :
> Cuban expatriates in America, including many who risked their lives to escape the communist island, are torn about whether to return after Havana and Washington formally reestablish ties next year. ... The surprise move, which clears the way for bilateral trade and normal diplomatic relations, also offers unexpected new options for Cuban-American exiles, who once believed that choosing one of the two countries meant forever closing the option of living in the other. ...
That would imply that someone can be an expat without believing there's a chance of returning.
> And in 1959, as generations of Cuban expatriates began to settle in Miami following the Cuban Revolution, both the city’s Cuban community and the sandwich thrived.
How do you get generations of expatriates?
My thought is that we don't like Castro, so we focus on how the Cubans "left their home country", so call them expats. While with Haitians, who don't get the same treatment as Cubans, we focus on that they came to the US, and call them immigrants.
Migrant: someone not from here, living not where they were born.
I think you're over thinking it. To Somalians they're just somali expats.
We would like to have them as clients but AFAICT fatca compliance would cost us a non trivial amount of money for the few (but relatively wealthy) potential clients