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Help, I’m on the IRS hit list (theglobeandmail.com)
284 points by DanielBMarkham on Sept 20, 2011 | hide | past | web | favorite | 219 comments



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.


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.

This is not technically correct. There are three time limits that apply:

In a normal circumstances, they have 3 years to conduct an audit.

If they suspect you've under-reported your income by 25% or more they have 6 years.

If they suspect fraud, they have unlimited time to conduct an audit. (Fraud requires intent to deceive, so it's a higher bar than just making a mistake or not understanding a rule.)


Thanks for the correction.


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.


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.


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.


Is there a set of future outcomes you would accept which would make my statement sound mostly factually accurate? Like, hypothetically, "We revisit this a year later, and it turns out the IRS has levied penalties against under 100 people for failure to declare accounts, and the overwhelming majority of them were doing something quirky with their international structuring as opposed to being regular Americans tripped up by the law."

If there is not a set of future results which makes "you should be worried about this" the wrong choice, then this conversation is boring to me.

With regards to the Japanese disaster in March, if I were to point to something I said in the immediate aftermath which was subsequently disproved by events unfolding, I would have picked my guess of severity of the tsunami and adequacy of the response efforts. (Undershot by more than quite a bit, overestimated by a little.) Fukushima Daiichi turned out quite a bit worse than I thought it would, too, on the scale from "no problems" to "worst disaster we could possibly imagine." I have to mention because I'm persnickety about this one issue: it also turned out quite a bit less worse than a lot of people were betting. ( To put a fairly easily verifiable number on it, I would have at the time guessed probable deaths at "between zero and five", and there were people who made very consequential decisions based on estimates in the millions. It's kind of funny that they get to count their predictions in the win column if I can't, right?)


The short answer is, yes, I think we could come up with a test over some period of time where either you would turn out to be right or the alarmists would. But, we'd probably have to extend it out to the beginning of 2014, due to new rules taking effect (FATCA) and the speed we could expect from the IRS. Long timetables are a lot less interesting, unfortunately.

I've done a brief amount of Googling for more information, and I can bring to the discussion a handful of links and at least one case of "regular Americans tripped up by the law", but since it's probably just you and I in this discussion at this point, I'll leave it up to you whether or not you want to pursue this anymore.

Re: the Japanese disaster, you're right, other people were making wild fearsome predictions, like the end of support for nuclear power, and clearly that hasn't happened. And, it's not a matter of win or lose or right or wrong -- I just meant to establish that betting against bad outcomes doesn't always work out in your favor (the generic "you" here). I probably should not have used that as an example though.


That's the nature of opinions, though; they're not supposed to be for your benefit, they just give you something to consider. I have a tendency to agree with the kind of people that downplay panic, simply because they seem more focused on what has happened than on the worst that might possibly happen. When "swine flu" broke out, we had the people that told us that it was deadly and dangerous, then we had the people that told us it was worth being careful but not worth being petrified.

You bring up the RIAA and I think that's a good choice of analogy for anti-alarmism -- when you're that unlucky individual who does get hit with a lawsuit, you're pretty screwed and the problem is pretty bad. However, I have known a lot of filesharers (I am in college after all), and not one actual lawsuit victim. It's not analogous to the scale of, say, a nuclear accident or $250,000 in tax penalties, but I think it's still reasonable to consider the odds of actually getting hit before freaking out.


I have a tendency to agree with the kind of people that downplay panic, simply because they seem more focused on what has happened than on the worst that might possibly happen.

But that's the problem - the worst that could possibly happen is very possible. Basically what it means is you can't go to the US, because in theory you could be met at the airport and thrown into jail. The fact that you're a little fish won't matter to the IRS. They're just filling out forms.

Of course you can take your chances, but for most people the risk of getting jailed for tax evasion outweighs any possible positive outcome from a trip to the states.

Over the last decade the US Congress turned US citizens into subjects. The only reason there isn't a great hue and cry is voters in the US don't know. The federal legal code has gotten so large and arcane even the lawyers don't know it outside their own narrow specialty.


For all intents and purposes it's the same in Canada. If you have any significant ties to Canada you pay Canadian income tax if you're a citizen.

A significant tie could be as simple as owning a motorcycle, a corporation, or still having a Canadian bank account.


Not true - I'm a Canadian expat working in the US and I've had to deal with this myself. It really comes down to this:

- Canadian residents always pay tax to Canada on all income, no matter where it is made.

- Canadian non-residents do not pay tax on international income.

- Residency is determined by:

A) How much time you have spent outside of the country. If you have spent the majority of the year (6 months + 1 day) outside the country, you can claim non-residency. If you have spent the majority of the year in Canada, fat chance.

B) "Significant ties" to Canada. This seems draconian, but is actually not really. You can have a driver's license, space in a storage unit, or bank accounts and still easily make the claim of non-residency. Hell, I have a friend who owns a rental property in Toronto and still makes it.

- In any case, the whole process is much easier and less burdensome than the American equivalent. The first year you believe you qualify as a non-resident, you file a form with the CRA (Canadian equivalent of IRS) with your blank tax return (stating all income is international). Once you do that, you no longer have to do it ever again. I do not have to get my non-residency status constantly recertified.

It's all pretty simple. At the end of the day, if you live in Canada you pay tax on money you make - anywhere - and if you live outside of it you're basically just off the hook.


One of the things I miss about the US, here in Italy, is that people care a bit more about the rules, and obeying them, or changing them. Yeah, you probably won't get caught, but that's ultimately not the point. The point is that it's a bad rule.


I had a friend who lived in Florence for several years before email. Once he was expected a letter from home and it didn't come and didn't come, so he decided to shadow his mailman to see what was going on. Turns out the mailman did as much of his route as he felt like, and then emptied the rest of the mailbag into the Arno at quittin' time.


here in Italy is that people care a bit more about the rules, and obeying them, or changing them

Wait.. what? Not American nor Italian here, but I've been to Italy and judging from the driving there isn't a great amount of care shown for the road rules anyway.

Also, http://en.wikipedia.org/wiki/Silvio_Berlusconi


I omitted a comma, and I think you didn't parse my phrase correctly. People are generally more rule-abiding in the US than in Italy, with plenty of positive and negative exceptions in both places. Once you start picking and choosing which rules are sensible, and which ones you can 'get away with', I think it's detrimental to society.


Once you start picking and choosing which rules are sensible, and which ones you can 'get away with', I think it's detrimental to society

I can agree with that entirely.


Detrimental to society at all costs, sure. But beneficial in a moral sense.

Blindly following a rule isn't what you should strive for.


Yes, Italians are some dangerous drivers. Much more so than French, swiss. Roughly on par with Andorrans.


Hehe. Tis similar in Ireland. My partner moved over from England and took a while for him to adapt to things not fulling linking up and the state not always enforcing rules (e.g. avoding paying car tax is much easier in Ireland than UK, etc.).


Heh, if you think rule bending is bad in Italy, you sure don't want to live in Greece. That's how it got in the mess it is today.


You're right, it used to be only the big accounts -- before 2008. Post-2008, that's not the case anymore. They have become very, very active since then on all earning levels.


It applies to accounts of $10,000 or more (I don't know if you consider that "big"). But note that's "in aggregate" not a per-account amount.

From the IRS FAQ:

Q. Who must file an FBAR?

A. Any United States person who has a financial interest in or signature authority or other authority over any financial account in a foreign country, if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year.


I'm not sure how you could consider $10k big, especially in aggregate. That's probably less than six months' savings for a family.


Ten grand in cash? Wikipedia says the median household income in the U.S. (in 2005, though I can't imagine it's sky-rocketed since then) was about $44k (that's 1 wage earner, family of 3 (or so)). So $10k every six months would be nearly half their income. They'd be living at $22k/year (before taxes), which is nearly poverty level for a family of 3. Even if you consider middle-middle class, $70-$100k, that's still 20-25% of their income.

But that's the United States. Maybe wages are awesome in Canada?

"Sources": https://secure.wikimedia.org/wikipedia/en/wiki/Household_inc... https://secure.wikimedia.org/wikipedia/en/wiki/Poverty_in_th...


10k aggregate isn't nearly as much as it sounds like - especially for an established adult family or household.

Consider that this could be accumulated savings over time and various accounts. Also consider things like employer-sponsored retirement accounts that someone may have had with an American company that they have simply forgotten about. (That happens FAR more than people realize/ would expect)

The point is it's a bad rule. Making the line 10k is guaranteed to pick people soldily 'middle class' and not just "rich" people.


> Making the line 10k is guaranteed to pick people soldily 'middle class' and not just "rich" people.

Yup. If one has a hundred grand or more in fairly liquid assets, yeah, I can see the argument for having them check to make sure all the Is are dotted. (Though even there, with life-long savings, inheritance, etc, it's within reach for "normal" people.) For less than a year's middle class expenses, probably not so much.


The point is it's a bad rule. Making the line 10k is guaranteed to pick people soldily 'middle class' and not just "rich" people.

You seem to imply that a good policy would be to screw the wealthy people and let those of moderate means flout the law. I don't think it's healthy to have a different set of laws depending on a person's income.


Would you advocate no cutoff at all, then?


The parent was talking about $10K total, enough to carry them through e.g. six months of unemployment. Saving $20K/year is indeed a lot, but $2K/year for five years is very reasonable (~4.5%) and gets you to $10K.


Yes, sorry, I realized now my post wasn't clear. I meant "savings to live off of for six months," not "amount you [most people] would save up in six months." $10k wouldn't be a lot for a family for six months, but it'd be a start.


Ah, yes, that does make a lot more sense. And I definitely agree that $10k is more the size of a rainy-day fund than a "here is my pile of tax evasion money" stash.


What they're talking about is aggregate, so lets say you have 2K in your chequing, 5K in your trading account, and if you have more than 3K in an RRSP you have to file an FBAR.

The FBAR isn't the big deal for wage earners, the big deal is the failure to file.


As a student you can have more than this, it's around ~6K pounds, which if you take into account a student loan plus some help from parents/savings, going over this limit is a reality.

The key point here is AT ANY TIME so even if the amount is just passing though (i.e to pay for uni fees) you are in breach, which I just found out a few weeks ago, and the fines for not filing a FBAR are insane.


Hell, I had more than twice that when I was a broke-ass sophomore in college. This seems to apply to all but the homeless.


No way. Most people live paycheck to paycheck. 50% of Americans are unable to raise $2,000 within 30 days.


Yes, and that is disturbing. But I still wouldn't say savings for six months of ordinary middle-class life is a big amount.


I tend to agree, but then I'm a well-paid IT guy.

90% of the population probably doesn't have $10k of assets. So while $10k isn't alot of money, it is out of the ordinary, especially if you are able to store it out of the country.


Huh. I guess I'm getting out of touch.


How the fucking hell did you have that?


Sorry to see your post downvoted. I'm guessing you, like me initially, may be having trouble reconciling "broke-ass student" with "20k in savings." I'm guessing the savings were earmarked and locked up for future tuition payments.


Correct, the plan was for that money to get me through the rest of my tuition. I got it by doing several years of labor before even considering starting.


Shit, I feel lucky...


Are there statistics to back that up? The date you list makes me very suspicious that you got this statement from a politically motivated news source. The real truth is that the IRS is a huge bureaucracy with a more or less static funding source, and there's very little the executive branch can do to rapidly change its methods or priorities.


Evidence?


Agreed - given how US government is cracking down on expats, it simply makes sense to file your taxes every year, especially when most expats end up owing nothing. Here are more reasons to do it: http://www.taxesforexpats.com/expat-tax-advice/why-file.html


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.


It's Iron Curtain 2.0: you're allowed to leave, but your money isn't. They fixed the bug where you had to shoot people who were trying to physically leave, but they still get the economic benefits.


> 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.


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)?


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...), 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.


You can renounce US citizenship at anytime if you have another citizenship, just don't expect to ever be allowed in the United States.

edit: Canada requires another citizenship, the US does not allowing one to be stateless.

http://travel.state.gov/law/citizenship/citizenship_776.html


"Unfortunately, the rules for money fill books. If you're an American, you're probably unknowingly violating a list of federal laws as long as your arm."

fixed that for you.

(To be fair, I believe this is true in most if not all industrialized nations; I enjoy being a US citizen and while I do have problems with some of the laws, the overall package is such that I'd rather continue being a US citizen than the alternatives. Still, if you have income from anything other than a regular job, you need an accountant.)


The problem is simply that without the curtain, it becomes possible to use this as part of an evasion strategy. When "Americans abroad" consisted almost entirely of the military and the millonares, the complexity of the system mattered much less.


According to you, exactly who owns the money? Does the US gov't own a person's income or does the person who earning it?


Does this question have anything to do with overseas-account tax evasion specifically, or is it just a general anti-tax jab? If you're against all taxation, then of course you wouldn't be against tax evasion either. But if you believe taxation is legitimate, then a concern for tax evasion also follows. (Whether this is a good way of dealing with tax evasion, where the pros outweigh the cons, is another question, but separate from the simplistic anti-tax slogan framing it as whether "the US gov't own[s] a person's income".)


If you want to dig deeper in my personal beliefs then I would tell you that I believe that the initiation of the use of force is wrong. And that this principle is universally applicable. You may or may not agree but if you do then you cannot also logically find that taxation is legitimate.

Also, I think it is a valuable mental exercise to ask someone who in fact owns the fruits of their labor. If you spend some time thinking about the implications you may find that the possible answers are not so "simple" as you may at first think.

On the other hand, some find that the question produces a fair amount of anxiety and so they may resort to verbal devices designed to diminish the value of the question, rather than trying to answer it.


Your US citizenship binds you the US Citizenship licensing agreement, that includes prior claims on your income. Next you'll be telling me Apple is stealing from all those developers....


Considering that many people were "born into" that 'licensing agreement', and considering the penalties for leaving that 'agreement', I would say the contract is practically the definition of unconscionable.


you seem to be incapable of grasping the concept of questioning whether laws are just or unjust.

and yeah, every fetus about to be born in the us signs a licensing agreement around the third trimester. it's entirely comparable to being a licensed apple developer.


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.


Everyone ought to see a privacy interest in this sort of thing.

The IRS does this, not because these folks have appreciable tax liability, but because they want a compliance environment that exposes anyone who _might_. There is nothing really new in this, the government requires extraordinary disclosures of everyone so it can verify their tax compliance. (The health law included provisions further extending reporting to monitor compliance of those we do business with, but I think the resulting fuss got these rolled back.)

On the one hand, no one is in favor of tax evasion.

On the other, at some point we might ask whether these disclosures threaten our liberties. Even if the IRS never abuses the information, the requirements set a precedent of government review adopted by other entities large and small. For example, you simply would not believe the intrusion powers of agencies enforcing child protection laws, or the flimsiness of the basis they require to use those powers.

I expect the good sense of the electorate to protect us from real abuses, but I'm beginning to wonder where these disclosure requirements will end, and what their unintended effects might be.


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


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.


The law is that if you're a US citizen, you pay income tax, period. As I understand it, it's income no matter where it is earned. There are some loop holes, you can get out of paying it up to some amount (I think it's in the $90k range) if you claim it as living expenses or something and then the foreign banks and businesses may not report your income to the US but that doesn't oblige you not to pay it. You have to file the return to show that you own nothing and claim the deductions to make that so, and that may well be the case. If you don't file and they can determine your income then can't it be taxed at whatever the rate is for your income? Moreover, there are penalties for not filing, such that it's in your best interest to actually file.


@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.


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


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


You're right, apparently I did not understand the issue.


I understand the issue perfectly well, thanks; particularly, I understand that it should hardly motivate histrionics.


What they owe is tax returns reporting zero income. The fact that they didn't file these on time causes them to owe penalties, that may now be crippling. All for not reporting 'ZERO' every year.


Break a law, pay the price. Pretty simple. I knew you should check your tax status while living abroad when I was 16. I find it hard to believe that this is something people living abroad shouldn't know.


You committed a felony every day last week. Have you paid the price?

You protest that no you didn't? Oh, you did. You may not know what the felony is, but I assure you that in this country there is no way you got through an entire week without being felonious, probably multiple times a day.

Sixteenth century platitudes about breaking the law and paying the price need to be updated for a 21st century reality in which a careful reading of the law reveals that there is very nearly a law against everything, and the only thing holding society together is that we don't pay the price.


The problem, I believe, is that politicians use the laws as messages instead of as legislation. When there's media outrage about some subject or the other, the response of the clever politician is to reply with a new law that "helps" for the issue at hand. Once the crisis has passed, we are left for a ad-hoc law that doesn't make much sense anymore. And we end up paying fines or going to prison for some old telegram.

What would be good is more succinct Penal Codes, and to make it much harder to add laws in response to isolated events.


Robert Heinlein had a novel, I forget which, where the legislature was bicameral, but in a different way than the current American one. In his legislature, the first house was responsible for passing legislation (but required a supermajority to do so, IIRC). The second house was responsible for repealing legislation, needing only a simple majority.


"The Moon is a Harsh Mistress"


Come on, you can't say something like that without giving a single example....


And I can assure you that he has not committed a felony every day last week. You clearly don't understand the difference between regulatory infractions, misdemeanors, and felonies. A felony is a serious crime punishable by more than a year in prison.

A careful reading of the law will reveal that there is not, in fact, very nearly a law against everything.

Please take your trolling back to Reddit where it belongs.


That's fine, I understand that. But you should consider that the gov't now has thousands and thousands of laws to choose from and should they decide one day to come after you I'm sure you have broken some of those as well, most probably unwittingly. If they want to they'll come after you one day and you'll have to submit I suppose, because you've broken some arbitrary law, but I'm sure you won't mind because you seem quite happy to obey your masters, no matter, because it's the LAW! Continue on lapdog; I'm done with you and I have better things to do.


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.


The U.S. isn't alone; Israel also taxes income on a worldwide basis.


"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.


One can be a US citizen without ever having been in the US. See http://en.wikipedia.org/wiki/United_States_nationality_law#T...


Being granted US citizenship when born abroad to an American parent is an enormous benefit.

If you don't want the citizenship, all you have to do is renounce it.


The article seems to imply that renouncing citizenship isn't that easy; particularly, they will still want you to pay back taxes.

I imagine that if you were born abroad you might not realize that you ever need to submit any tax documents to the US, and then I'm pretty sure they will want to collect money before allowing you to renounce.


Renouncing citizenship is not unilateral in the US, unlike some countries. The US state department has to agree to it. And you have to realize that you have to do it, of course.

I agree that the law is there for a good reason, obviously. but it can lead to people having US citizenship without even realizing they have it.


I imagine they're referring to the fact that a person born to parents with U.S. citizenship is also a U.S. citizen, whether they ask to be or not, and whether they were born abroad or not.


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.


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

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


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.


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?


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.


> 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


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.


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!"


That was me:-)

I was amazed at how far and wide that tweet was spread.

https://twitter.com/#!/davidnwelton/status/99849223884906496


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


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.


Hmmm.. "We interrupt this surgery to bring you the following important messages from our sponsors.."


"Did... did you stitch up my appendectomy incision in the shape of a Nike swoosh?"


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


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).


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


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


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.


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.


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.


semantics everyone knows what they mean. Call it public health system if you want. The idea is you are not charged per visit or per service rendered.

And a vast amount of people in countries with public health systems aren't paying a cent considering they don't pay taxes for various reasons. You can't get healthcare like this in the US you pay or get nothing.


> [...] in the US you pay or get nothing.

Things certainly aren't perfect, but it irks me when everyone thinks they are an expert in US affairs. It may not be universal but there absolutely is free (or very cheap) health care available in the US. There are all kinds of programs for the old, young and poor. Otherwise, just about any job will offer health care. Sure, there are people that fall through the cracks and that's a huge problem.


> Otherwise, just about any job will offer health care.

Many do, but it's no longer the case that "just about any job" does. 59% of Americans have some sort of employer-based coverage, and that includes people who get it through their spouses or parents. Small businesses in particular are rapidly dropping coverage (according to this random article, only 1/3 of small businesses in Wisconsin offer any, down from 50% a decade ago: http://www.jsonline.com/business/124753109.html).


Self-employed individuals also qualify as "small businesses", so I'm not sure if that statistic reflects existing businesses dropping health coverage or new, often 1-person businesses popping into existence without setting up health coverage.


Interestingly enough, the US government spends about the same per capita on providing free healthcare as the UK government does - but to only something like only 2/5 of the US population.


You are right there are options that are free. Community health clinics and such. But those things are such basic health services it doesn't cover nearly enough to compare to what a public health system covers.


It may not be universal but there absolutely is free (or very cheap) health care available in the US.

Where might I find this free/very cheap health care?


Walk into a hospital and demonstrate that you have no money, free clinics, teaching hospitals, Medicaid, finding a kind-hearted doctor that will work for free or for whatever you can afford.

Maybe of more concern for people on HN is starting a business and having some minor medical history that is deemed a pre-existing condition and thus being rejected for insurance. In that case, go to http://www.healthcare.gov/ [1] and you'll find a very reasonably priced plan. Depending on the state, you can find premiums well under $200/month, $20 doctor visits, $10 prescriptions with the deductible waived for most services. That's nothing for most people with the earning-power of the average HN visitor.

EDIT: [1]: Just looked for Michigan and aged 25-29, with a pre-existing condition, premiums are $127.44/month.


Thanks for the link--I hadn't seen that before. The last time I looked around for health care for myself (many years ago) I don't recall seeing plan prices that low.


It's free for the people who couldn't afford it otherwise.

Which is a great deal that many of us who pay for it are happy to contribute to.


That's fine, but I'm worried what would happen when the health care industry realizes they can charge whatever they want, and the government will tax people to pay the bill.


Price controls and price control problems follow. This is known.


Unfortunatley we already have enough price control to be feeling the bite of price control problems. For instance, the ratio of what a general practitioner can charge in fees to what a surgical specialist can charge is set by the government. Its also set by a formula cooked up by a sociologist using the labor theory of value, for heaven's sake.

And we do have production quotas for prescription drugs, issued by the FDA. Drug companies can set whatever prices they want but they can't change their production in response to market prices - producing more of drugs that have shown an unexpected demands.

In many ways the current US healthcare system is the worst of both worlds.


Exactly, which means that market forces are pretty much destroyed. When the government decides by fiat how much things should cost, there's no incentive to make a better product. It's just a race to the bottom. Not to mention regulatory capture etc.


Market forces can't be /destroyed/. Market forces just /are/. These forces don't always lead to market efficiency (which is called market failure), which I think is what you're thinking of.

Most often, market intervention leads to unexpected consequences, as people have a great deal of trouble predicting the effects of market forces.

The government deciding by fiat how much something should cost is more likely to lead to removal of consumer surplus, rather than a race to the bottom, if the government maintains competition amongst its suppliers. If you know you're competing on product quality at a certain price point - rather than on price - you'll likely be motivated to produce the best product possible at a price point that maintains normal profit. That's what I think anyway, but as I've already said, it's remarkably difficult to predict how market forces will play out.

I do note, however, that most of the developed world gets significantly better health outcomes for significantly less outlay than the US. This suggests massive market failure in the US health market.

This may be because while the US market is in theory a free market, in practice, it's anything but - it's an oligopoly with absolutely massive barriers to entry and no end of government interference.

Hopefully something for you to consider!


That's not the case though.

Universal healthcare is a safety-net, to make sure everyone gets a basic standard of care.

It doesn't preclude premium offering which include "a better product".

Here (Australia) we have a public health system, but you can also buy private health insurance which gets you into things like private hospitals (nicer rooms, etc).


I didn't really say that. The hard problem with price controls is difficulty producing the right amounts of goods to meet demands because of regulation needed to mandate supply of less profitable goods. It becomes very complex when so many different products are involved, and because of insufficient resources it's not possible mandate overproduction of every good.


Yes, there are problems with socialized medicine. But there's problems with US style medicine too. Theorists can argue forever about this, but it's pretty empirically clear that the US system sucks, and costs a lot of money. The other systems suck less, and cost less. Which would you prefer?


I didn't say anything about US medicine, especially whether it has price problems and whether it could or does have price control problems. I only gave a specific answer to what happens when there is inelastic demand because of a government that can also regulate the suppliers. I see how "this is known" might be taken the wrong way, but all I meant by it was that the OP didn't need to wonder...it's found in any standard microecon textbook.

I would like to think we could talk about cause and effect in isolation here without making everything a grand political statement.


And Saudi Arabia


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.


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.


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!


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


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


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


GE did pay fair taxes. They did what the law allowed them to do. Would you not?


And what do you think would happen to a politician who tried to change the laws which allowed them to get away with that?


> 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.


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.


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. :)


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.


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.


> I haven't lived in any state for more than 6 months

What do the grey nomads do? Here in Australia, you can specify an electorate where you are deemed to "live", even though you don't spend any time there. It ensures everyone can vote.


So why not just renounce your US citizenship?


I'm not claiming that citizenship isn't without its uses, merely that it's taxation without representation in the most literal sense, contrary to the OP's claim. I can easily take work from US clients, as a citizen.

(Also as I understand it you quite literally need the state department to consent to your renouncing, and if they feel you have significant earnings potential in the future, they will refuse consent on the grounds that you are trying to avoid future taxes).


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

Agreed, though I think that 80k needs to be bumped up. As near as I can tell, it was made 80k in 2003, and the US dollar has changed quite a lot since then.


I believe it's 91k now.


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?


One interesting case is Michael Gogulski who renounced his US citizenship and is now a stateless person. See http://www.nostate.com/1227/press-release/ , excerpted below:

"Gogulski, 36, renounced his citizenship on 8 December 2008 at the American embassy in Bratislava, surrendering his US passport and culminating a two-week process and months of personal preparations. He currently awaits a Certificate of Loss of Nationality of the United States confirming his loss of American citizenship. As Gogulski has no other citizenship, he is now a stateless person.

'I was disgusted to be associated through citizenship with the most dangerous gang of criminals in the world, the United States government....'

Gogulski says that when he receives the Certificate of Loss of Nationality he will apply to the Slovak Interior Ministry for a Travel Document – similar to a passport – under the 1954 Convention on the Status of Stateless Persons, which Slovakia signed in 2000. He says that he has no plans to leave Bratislava until then, and that he recognizes that his life without citizenship will be more difficult, especially with respect to travel...."

[1] 1954 Convention - "(Article 29) Upon request, Contracting States shall issue travel and identity documents to stateless persons within their territory." - https://secure.wikimedia.org/wikipedia/en/wiki/Convention_Re...

[2] CLN - https://secure.wikimedia.org/wikipedia/en/wiki/Certificate_o...

[3] CLN Form - http://www.state.gov/documents/organization/81609.pdf

[4] He recieved the mentioned travel document. See http://www.nostate.com/1614/back-in-the-village-again/


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.


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.


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).


The article discusses the guy who has both citizenships - that's why I mentioned this case specifically.


There is no answer for a general "some country," each country has its own laws.

In the US, you need to meet with the State Department (possibly through an embassy) which takes care of the legal aspects of renouncing your citizenship. The second part is filling out all of the forms and paying all of taxes required by the IRS (which is not insignificant). It is not cheap to renounce your citizenship (unless you don't really have anything).


The laws of a country may say you can never stop being a citizen of that country, but it is of course only binding in that country. The issue in the article was that you may be unable to visit the US if you decide to just ignore this law. If you don't have any desire to do so, then I don't see why you can't ignore it. I doubt they'll get the Interpol on your case...


I've never understood why extradition treaties don't kick in here. I know when my parents set up their swiss bank account they were repeatedly told "Don't do anything illegal" by the representative, and were informed that any income from the account would be reported to Canada.


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


Perhaps they should give people the option to take on someone's US citizenship that they want to renounce, if they pay their outstanding taxes for them. The US gains people who pay, and lose those that don't.


Nice in theory...


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


And for 10 years after renouncing.


I meant to begin with. I've been toying with the idea myself but wow...


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.


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...). Do you have a reference for your claim?


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.


Green card holders have to report on their accounts. I know this because I am one.


I received my Green Card only some months ago, but the requirements that you have to report on your accounts is pretty obvious, once you check what things you have to do.


Every US tax resident has to file FBAR irrespective of the visa or citizenship. This includes Green Card holders as well as temporary work visa holders (h1b, L1) and also even foreign students in US!


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


I agree with the concept of moving towards a flatter and simpler tax structure. The problem with any new tax proposed as a replacement for another tax: far too often the new tax gets passed, and repealing the old tax conveniently gets forgotten. And when the issue comes up, suddenly a pile of programs people supposedly care about couldn't possibly survive without the new revenue.

Speaking as someone who has seen a pile of new taxes go by and old ones rarely leave. Here in Oregon, we finally enacted a pile of protections against the continuous ballot measures demanding new taxes, such as a cap on how much property taxes could go up per year (no more than inflation), as well as a requirement for a 50% turnout in an election to pass a tax (no more special-election surprise taxes). It also helps that Oregon requires a balanced budget, which means that when the economy goes down, the local governments have to (gasp) spend less (and plead for money, which they usually do) rather than spending more and later demanding money to pay debt.


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.


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.


> the best solution i have seen proffered is the fairtax http://www.fairtax.org/ (which has, sadly, been hitched to the tea-party horse

It's too unfortunate that the Tea Party has become associated (rightfully) with people who have no real goal besides screaming a lot about healthcare insurance.

The original ideas, which I would credit Ron Paul with starting, are still valid.

On the fair tax though, I believe Ron Paul does not support it.


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


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


Here's some advice:

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

Easy as that.


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


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.marinecorpstimes.com/news/2011/03/ap-us-to-evacua...

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


I think you're being a bit misleading there: if you live in Canada or the UK you'll get the protection and support of their consulates and government whilst abroad, and you won't have to pay taxes on your earnings (if you're a genuine expat, rather than short-term travel).

I used to work in the Middle East in a western compound, and this was a huge bug-bear between the US citizens and the EU/Canadian ones. Under the US's system you could leave the US as a baby, never take advantage of any of the services provided by the US, and still be expected to pay taxes on your foreign earnings in perpetuity.


As it clearly says in the third last paragraph linked article, they won't "let" you do this if you owe taxes.

Indeed the page you linked confirms this in the bottom section entitled "Expatriation After June 16, 2008" that renouncing your citizenship at the present date will make you immediately liable to pay "income tax on the net unrealized gain in your property as if the property had been sold for its fair market value" if you earn more than $145k, are worth more than $2mil, or -most importantly- you have failed to pay the IRS in any of the 5 previous years. So it's not a solution for these American-born-Canadians that were not aware until now that they were required to pay tax in the US.


>So it's not a solution for these American-born-Canadians that were not aware until now that they were required to pay tax in the US.

They knew. I know! and I've never been out of the US for longer than two weeks! It's not some secret or trap the IRS has set. What they are complaining about now is that the IRS is finally trying to collect.


Actually, many of them don't. I have a friend who is a dual US/UK citizen born in the UK who had never lived or worked in the states until she decided to get a summer job there in 20s; she was informed of the requirement to file back tax returns when she submitted her W4.

It makes absolutely no sense for the US to try to lay any claim to her earnings or expect her to file tax returns for any period of time before that.


How did this person become a US Citizen if born in the UK? She got citizenship to work a summer job?


Her father was a US citizen, simple as that. He left the US during college and settled permanently in the UK. Her mother is English.


Microsoft's Windows is stable, I tell you! I've never once had a crash! All those BSODs that people complain about are their own damn fault!


I know, right? It says right on page 673 of the manual not to click that button twice without at least six intervening seconds - and it's even in bold!

More seriously: yes, what they are complaining about is that the IRS is finally trying to collect. So one could claim that "they are complaining because the law is finally being enforced", and be technically correct. The important point here though is that the law (as with many American laws) is somewhat nonsensical, and therefore relies on the enforcers to use their own best judgement (cringe) and not do anything brain-dead and/or clearly outside the spirit of the law (which was meant to keep then-millionairs, now-billionairs from leaving the country to escape back taxes).

Additionally. In general, you can hardly expect the finest citizen to have an understanding of the law even approaching what one might reasonably call "adequate". Aside from the bloated body of legislation passed by Congress (where previous laws are often modified by lines like "replacing the word 'as' of section 4, subparagraph 3, with the word 'of'), one must also contend with case law (i.e. precedents set by courts - harder to understand and arguably more important), regulations (have more of a direct impact on individuals, are thankfully somewhat easier to comprehend, but there are /way/ more), and the occasional executive order (500-word sentences, anybody?). And that's just at the national level - state and local governing bodies are their own legal morass. And, of course, if you leave the country, you get to deal with extradition treaties and, quite likely, whatever treaties are most relevant to your "crime" - and therefore the relevant regulations (on both sides) etc.

So, when Americans complain about enforcement of laws, it's because the laws were never actually meant to be enforced. And it's a symptom of a broken legal system, but one that is unlikely to be fixed in the near future. So we beat on, boats against the current, borne back ceaselessly into the past.

(Yes, I just stuck that last part in because I felt I needed a profound closer.)


While you are technically correct, the idea of needing the US military support while "abroad" in Canada is pretty funny. What are they going to do, call in an air strike if attacked by a puffin?


You don't think these US citizens in Canada ever vacation elsewhere? Did you see Canada deploying troops to Egypt during their revolution to evacuate Canadian citizens?

Canada issued a travel warning. America deployed Marines. Which passport would you wave around if you were stuck in Cairo?


Of course this is circular reasoning. It's precisely because America deploys Marines everywhere that Americans NEED to be rescued. Their country's actions make them targets.


If you were visiting another country and ended up in the middle of a civil war, you would probably want Marines to extract you even if you were from a country that doesn't 'make you a target.'

In general, Americans have been seen as targets for a long time (even when foreign relations were good) because they were seen as 'rich foreigners.' My grandpa would even say that when going back to Poland to visit family, there were a lot of people that were just looking for hand-outs that assumed he was rich because he was an American (he was not wealthy by any stretch of the imagination).


If I were stuck in Cairo I would just drive to the airport by myself, where my country has organized flights to extract the citizens. No problem at all. If you live in a neutral country that does not attack other countries for fun, people around the world are quite friendly to you.

And even the sitation in Cairo wasn't as bad as reported in the media (at least according to what I've heard from the people who've been stuck there).


LOL. You know what the riots in Cairo were about, right?


Unless I'm mistaken, it had nothing to do with the US. Why did it send in Marines?



> Which passport would you wave around if you were stuck in Cairo?

The Canadian one, obviously. For the same reasons as numerous Americans sew Canadian flag patches to their backpacks when traveling in foreign countries.


What do you think that ratio of American citizens from the USA to American citizens from Canada was in Cairo? I'd venture that the Americans vacationing from the US out-numbered those from Canada. Just sayin' that the number of dual-citizens living in Canada that require US marines to evacuate them during serious situations in another country is probably so small that the funding for it is a rounding error.


From what I hear from Americans abroad, it's an easier life to suggest that they're Canadian : Less hostility.


I dislike this advice. The best way to show that Americans aren't dicks is to say you're American (if asked) and don't be a dick. I've made a few friends abroad who weren't going to talk to me at first because of the stereotypes about Americans.


But in the GP's case ("Which passport would you wave around if you were stuck in Cairo?") you're not really out to make friends, just survive.


> Which passport would you wave around if you were stuck in Cairo?

If I had dual citizenship with Canada and the US? I would be waving around the Canadian passport and making sure that anyone searching me never found my US passport.

Being a US Citizen is a HUGE liability when you are in various unstable parts of the world where there is a huge hatred for the United States, right or not.


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.


  > 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.


>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

Now you've been told on this message board.

Mann Act http://en.wikipedia.org/wiki/Mann_Act

Protect Act of 2003 http://travel.state.gov/travel/cis_pa_tw/cis/cis_1467.html

http://en.wikipedia.org/wiki/PROTECT_Act_of_2003


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.


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.


FWIW, entering the U.S. for a vacation with a Canadian passport is trivial. (Unless you're the wrong colour or on the wrong kind of a secret list - but I imagine those troubles would apply to U.S. citizens as well.)


What exactly are the laws and protections afforded by a U.S. citizenship for a Canadian citizen? If they're common and useful, maybe more of us should get on that.


Zero.


> I suppose I could renounce, too – but they won’t let you do that until you’ve filed your back tax returns.

According to the article that is impossible.


According to the article they reneged on tax obligations while keeping their American citizenship. It's one or the other.


According to the article, she left the US when she was 11 and has never lived in the US since. And now the US government wants a significant amount of all the money she has ever earned through adulthood. Is that fair?


She failed to file tax returns. Likely she never owed any money. How is the IRS supposed to know she falls below the collection limits if she never filed?


Dear Mr/Ms Parfe,

Please provide definitive proof that you are not a pederast by no later than thursday of this week.

Please provide the requested material so that we can resolve this matter as quickly as possible.

Thank You.

Ima Cog, Undersecretary of Legal Enchainment.


Hmm... how does the IRS know people file fraudulent claims?


Other countries give consular support to non resident citizens without ridiculous tax laws. Citizens don't get military support so I don't understand that point.


>Citizens don't get military support so I don't understand that point.

Except when they do.

http://www.marinecorpstimes.com/news/2011/03/ap-us-to-evacua...

http://www.businessinsider.com/senior-us-marine-says-multipl...


Other countries do evacuations like that using military or civilian transports without needing crazy taxation laws.


The Canadian government advises you to go to a British consulate if a Canadian one can't be reached while abroad. I think it's the only benefit of having the queen on our money left.


Canada might be left our nuclear submarines in the national equivalent of a will:

http://en.wikipedia.org/wiki/Letters_of_last_resort

Whether you would want them is another question!


To be fair, it's pretty standard for smaller nations to collaborate and share resources with allied larger nations when it comes to embassy matters.


Won't they come get you and then charge you for the privilege? Plus this only works ofcourse if you've registered and told them the precise location of your house to the embassy.




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