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Americans permanently overseas......

Old 27th Sep 2013, 20:49
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Americans permanently overseas......

....nota bene.

The number of Americans giving up their citizenship has rocketed this year - partly, it's thought, because of a new tax law that is frustrating many expats.Goodbye, US passport.

That's not a concept that Americans contemplate lightly. But it's one that many of them seem to be considering - and acting on.

The number of expatriates renouncing their US citizenship surged in the second quarter of 2013, compared with the same period the year before - 1,131 cases to 189 in 2012. It's still a small proportion of the estimated six million Americans abroad, but it's a significant rise.

The list is compiled by the Federal Register and while no reasons are given, the big looming factor seems to be tax.

A new law called the Foreign Accounts Tax Compliance Act (Fatca) will, from 1 July next year, require all financial institutions around the world to report directly to the US Internal Revenue Service (IRS) all the assets and incomes of any US citizens with $50,000 (£31,000) on their books. The US could withhold 30% of dividends and interest payments due to the banks that don't comply.

It's an attempt by the US authorities to recover an estimated $100bn a year in unpaid taxes on US citizens' assets overseas. Unlike other countries, Americans are taxed not only as residents of the US but also as citizens, wherever they live.

Suddenly, some expats are waking up in a cold sweat. They have always had to file tax returns and disclose foreign accounts on a form called the FBAR, although in practice many didn't. But now Fatca means they have to be more rigorous or face huge fines, in the knowledge that the US authorities could know a lot more than they have in the past.

Many would say the IRS is only trying to get what it is owed, but critics say that in trying to track down the wealthy tax-dodgers, ordinary people are being dragged into an expensive and time-consuming form-filling nightmare. And for some, it's become too much.

Genevieve Besser American in Germany, who asked the BBC not to use her real name, gave up her US citizenship in 2011, 32 years after leaving for a new life in Scandinavia.
"This has nothing to do with avoiding taxes. I was never in danger of having to pay taxes in the US since I pay more here. The issue for me was that it was becoming harder and harder to follow the tax code and comply. It was difficult already but when I knew Fatca was coming, I thought, 'Do I want to go through with it anymore?'"

She felt threatened even if she did everything to fulfil her responsibilities, she says. A simple loyalty card at the local grocery store caused her anxiety when she realised it was linked to a bank account she never knew she had.

It became so complicated to do her tax return that she turned to professionals, at an annual cost of nearly $2,000 (£1,250), with the prospect of Fatca raising the price to $5,000. Also, fewer tax lawyers were taking on American clients, she says, and some banks were even turning away American money.

"In the end, I sleep better now knowing that I no longer have to worry about the US requirements. I will never be able to live or own property in the US but I can visit and that's enough for me."
Bridget, who runs an editing and translation company, says her strong emotional bond with the US has been frayed.

"I've enjoyed being an American even though I haven't lived there since I was young. I identified with America so I felt angry that I had to get to this point where it wasn't viable to keep my citizenship anymore.

"When you're an American living in America, it's one thing but when you live abroad in another country, in certain ways that feeling becomes even stronger because you realise that things that you think are individual characteristics are actually national ones so you identify even more strongly with your nationality.

"I used to always introduce myself as American but not now, although I will always be American in my heart even though I won't carry the passport. I will still celebrate Thanksgiving and 4 July."

She says the tax issue is the biggest topic of conversation among the expat Americans she knows. And tax lawyers in the US who deal with people living abroad say it has become a huge issue.

"I'm all for people paying their taxes, but it's very expensive to follow the letter of the law," says David Kuenzi, founder of Thun Financial Advisors, which specialises in helping Americans abroad with tax issues.
"Some people are spending $4,000-$5,000 a year to do their tax return only to find out they don't owe anything to the US."

Fatca has only created a little additional reporting for individuals, says Kuenzi, but it has generated a fear that the IRS will have full knowledge of people's assets. So reporting suddenly has to be assiduous, accurate and complete for every passport-holding American.

"You have very wealthy people hiding their assets and not paying their taxes and that's an outrage. Something should be done about it, but this reaction has created a terrible imposition on every American living abroad and it's way over the top," he says.

Foreign banks do not seem happy about it either, and Senator Rand Paul, a libertarian Republican, has introduced a bill seeking to remove aspects of the law related to data-sharing.

But the US Treasury is standing firmly behind the new law. In a statement on its website, Robert Stack, deputy assistant secretary for international tax affairs, rebuts certain "myths".

"Fatca provisions impose no new obligations on US citizens living abroad... US taxpayers, including US citizens living abroad, are required to comply with US tax laws," he says​.

"Individuals that have used offshore accounts to evade tax obligations may rightly fear that Fatca will identify their illicit activities. Yet a decision to renounce US citizenship would not relieve these individuals of prior US tax obligations."

Those who have joined the ex-American club, or are thinking about it, say this is not about tax evasion.

Victoria Ferauge, 47, is married to a Frenchman and has lived abroad for nearly 20 years, primarily in France. If her adopted country finally agrees to Fatca then she wonders what the implications will be.

"Are my bank accounts going to be closed? Is my husband going to be forced to take my name off the accounts?"

Ferauge is unemployed and recovering from breast cancer so she doesn't have any income. She has paid nearly $1,000 to accountants this year but will have to get more expensive help next year.

With strong ties to the Pacific Northwest, and two parents to visit there, the Seattle-born 47-year-old would rather not renounce her citizenship.
"I don't know any Americans abroad who aren't thinking about giving it up but what I say to myself is that I will fight as long and as hard as I can.
"And it's only when I've exhausted all options that I will make that appointment with the US embassy."
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Old 27th Sep 2013, 21:19
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OFSO,

This is news how ?

Those of us fortunate enough to live outside the US always knew about the ways of the US and their worldwide money grabbing tax laws. God knows why anyone would want to willingly become a US citizen.

Comes as no surprise they're getting stricter, the US politicians need to pay for all the bailouts somehow !

Last edited by mixture; 27th Sep 2013 at 21:19.
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Old 27th Sep 2013, 21:26
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I guess one could keep one's money in the Cayman Islands, from what I understand, the banks there report to no one.

Now illegal earnings, from drug trafficking and the such, the Fed can go after them. But if a US citizen has lived out of the country full time for, say three years, to hell with the IRS.

Didn't we fight a war about this sort of thing about 237 years ago? The IRS is out of control.

I don't know if I would give up my citizenship. But, just in case, how hard is it to get an Irish citizenship?
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Old 27th Sep 2013, 21:45
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how hard is it to get an Irish citizenship ?

Funny you should ask. I was at a gathering with some gentlemen of Irish nationality last week, and upon my divulging that in 1806 my family lived in Dublin, they all urged me to send off for an Irish Passport right away. Apart from the fact that my family tree does NOT qualify me for Irish nationality, I found it quite touching that they all wanted me to be Irish.

Of course Con, you might consider travelling to Ireland, removing all your clothes, wrapping yourself in a gigantic nappy/diaper, lying down at the side of the road and waiting, because:

Deserted infants

Every deserted infant first found in Ireland will, unless the contrary is proved, (that is, the parents of the child come forward and clarify that the child is not Irish) be considered to have been born in Ireland.

Last edited by OFSO; 27th Sep 2013 at 21:50.
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Old 27th Sep 2013, 21:53
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It's a worry for those of us contemplating leaving the States for other shores.

The tax implications, as I contemplate the move myself, are daunting. As I will be relying on US government pensions, Social Security and my military retirement, I can't just not comply with the requirement to complete the newly mandated expatriate tax forms.

I hope to beat the system by moving capital into my wife's account, out of the reaches of Uncle Sam. US tax-grabbing, I predict, will promote a huge outflow of capital from the US.

The bullying of foreign banks to comply won't win any friends either.
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Old 27th Sep 2013, 22:02
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Spike Milligan adopted an Irish passport when he was disenfranchised by Britain - he had been born in India and had served in the British Army during the War (but he had allegedly refused to swear an oath of allegiance).
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Old 27th Sep 2013, 22:02
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The bullying of foreign banks to comply won't win any friends either.
Assuming you seriously think you've got any friends given that everyone outside the US knows about the bullying methods you guys like to employ when you don't get your way.

For example, I know people who work in the financial sector in Europe. These days, if a potential new client calls them up and asks to open an account and the prospect has any ties (however remote) to the US, these people will just say no. Its simply too much hassle for them to take on the new client, and they know all too well that the US related bureaucracy will only get worse, not better.

Last edited by mixture; 27th Sep 2013 at 22:05.
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Old 27th Sep 2013, 22:05
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they know all too well that the US will only get worse, not better.
Alas, it's the Democrats who are breeding.
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Old 27th Sep 2013, 22:11
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As I understand it, there are major tax implications if you do renounce citizenship too. I seem to remember that if the US government decide you're doing it for tax reasons, they can seize any assets in America and refuse to let you return, even for short visits.

This is one reason some people I've met who lived in America on green cards didn't want to get American citizenship. In many respects these days, it's a liability.
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Old 27th Sep 2013, 22:20
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Many years ago I told family and friends that if King george bush was re elected potus, I was leaving the U.S. He was, and I did. I moved to Australia. I make 150k per year and am provided with a house (whirlpool bath, 3 bedrooms, pool, etc
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Old 27th Sep 2013, 22:24
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Remember knowing someone years ago who renounced their US citizenship because they had a Scandanavian parents and a US parent , they were born in the US.

Their European country didn't like people holding second passports and they grew up in Europe and had no intention of living in the US.

What was interesting was that as following divorce one parent lived in US and one in Europe then when visiting the US they received lots of attention. Time and again they were questioned as to why they gave up US citizenship.............response of because I wanted to seemed to puzzle US immigration.
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Old 27th Sep 2013, 22:26
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As I understand it, there are major tax implications if you do renounce citizenship too. I seem to remember that if the US government decide you're doing it for tax reasons, they can seize any assets in America and refuse to let you return, even for short visits.
You would be rather silly to hold onto assets in US if you intended to do this in the first place.

Dispose of assets over a period of time and move money then do it.
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Old 27th Sep 2013, 22:33
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The requirement by the US government that all trust, accountancy and finance companies that have business with the US must be Fatca compliant, has made paperwork sometimes more troublesome than it was up to now. Having said that, a simple tick box selection will enable any company to determine whether the name of a client should be forwarded to the IRS., Mr Stack is correct and so long as one has filed a 1040 in good faith and for all of the years one has been absent as a resident but still as a citizen, there is little likelihood of a problem although non relishes an IRS audit. The IRS has for a long time accepted as almost gospel, tax returns filed using certain computer programmes, TurboTax springs to mind, that are quite capable of the job. There's the rub though. US citizens who left their country years ago have not been filing returns. They fully knew the laws of the US in that respect. It's a clearly understood responsibility of citizenship. This will trip many tax evaders and is as artful a government dodge as many that have been used by some of my close American friends who live in Switzerland or who live in Britain and sail very close to the wind in terms of reciprocating treaty double taxation where, for example, all income that derives advantage from a US double treaty rate should only do so if it is declared to the other treaty country in full.
Commiserations perhaps but no sympathy when the tiger turns.
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Old 27th Sep 2013, 22:39
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If I remember correctly, there are only four countries on the planet which expect citizens to file tax returns and pay tax when they don't live there. And I believe America is the only one in the developed world.
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Old 27th Sep 2013, 22:44
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And I believe America is the only one in the developed world.
Has this been proven ?

Not the taxes bit, the other bit......
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Old 27th Sep 2013, 22:51
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Has this been proven ?
Its a known fact the US has taxed nonresident citizens for as long as anyone can remember.

If Wikipedia is to be believed the only other country is Eritrea.
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Old 27th Sep 2013, 22:58
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The US presumes that you will always live within a tax jurisdiction. The principal behind the US double tax treaty system ensures that the US ex pat will, if paying tax elsewhere, always have the tax revenue rate tilted in favour of that country.
If a nation wishes to make its citizens order their tax affairs so that there is a matter of record with their homeland, whose to gain say that? Those US citizens who live abroad and have complied with the law of their land, filing every year, have nothing much to worry about. Those who have broken the law do! It matters not one whit that the Brits, for example, have a more laissez faire attitude to international tax than do the Yanks. Heavens to Betsy, there are plenty in the halls of power in England who'd like to see the same base line for taxation based on citizenship. Give Red Ed a term in office and the new British Residence and Domicile Laws will come off statute to be replaced with, if not by British Citizenship then certainly European Citizenship once Clegg leaves the UK and returns to his Dutch roots or his Spanish adoption.
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Old 27th Sep 2013, 23:02
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Originally Posted by cavortingcheetah View Post
If a nation wishes to make its citizens order their tax affairs so that there is a matter of record with their homeland, whose to gain say that?
No-one. But it does make US citizenship a liability.

The British government know we'd all renounce British citizenship rather than pay them tax, so they won't do it. Plus, the EU probably wouldn't let them.
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Old 27th Sep 2013, 23:10
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This is one reason some people I've met who lived in America on green cards didn't want to get American citizenship. In many respects these days, it's a liability.
I'd be interested to know if there was any difference. Perhaps not, since the tax on thippence a week doesn't amount to very much.
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Old 27th Sep 2013, 23:14
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I'd be interested to know if there was any difference.
A quick Googoo reveals the following statement from the IRS

A green card holder is considered to be a resident of the U.S. for U.S. income tax purposes and is therefore subject to U.S. taxes on worldwide income.
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