American Expats Take Note: Uncle Sam Wants Your Money

[Markham]

From the BBC:

 

 

 

 

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.

 

Bridget, 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.

Edited September 28, 2013 by Markham

[jpbago]

  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.

I think that this is the main reason for the IRS requests. If the Philippines did this, they would have caught Napoles, her cohorts, and the hundreds before her long ago. Recently, Switzerland has disclosed their foreign clients. Other tax havens have been requested to disclose their clients. Canada asks if you have more than $100,000 offshore. I imagine many other countries are interested in what their citizens have offshore and how did they get it. Much of the drug money is kept in cash as they have no place to put it.

[Tukaram (Tim)]

But using this lady as an example - she has not lived in the US for over 30 years.  She should not be filing US taxes.  She owes nothing.  It is ridiculous to think she does.

[earthdome]

 

  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.

I think that this is the main reason for the IRS requests. If the Philippines did this, they would have caught Napoles, her cohorts, and the hundreds before her long ago. Recently, Switzerland has disclosed their foreign clients. Other tax havens have been requested to disclose their clients. Canada asks if you have more than $100,000 offshore. I imagine many other countries are interested in what their citizens have offshore and how did they get it. Much of the drug money is kept in cash as they have no place to put it.

 

 

Just because someone uses government to steal money from other people doesn't mean the US Fed Gov should stick its nose in my financial business. Sorry, but most governments treat you as if they own you and your money.

[MikeB]

If the Philippines did this, they would have caught Napoles, her cohorts, and the hundreds before her long ago.

I disagree, she (and others) easily circumvented every safeguard and check and balance in the PDAF and Malampayan Fund process, she would have done the same with any agency. The system is only as good as the people managing it. If not for her co-conspirators aka "whistleblowers" going to the newspaper she may never have been caught. 

[Mike S]

But using this lady as an example - she has not lived in the US for over 30 years.  She should not be filing US taxes.  She owes nothing.  It is ridiculous to think she does.

 

If the Philippines did this, they would have caught Napoles, her cohorts, and the hundreds before her long ago.

 

His point I believe is "If the Philippines did this"  not that she would be filing US taxes ..... here in the Phils it is illegal to look into a persons bank account unless you are suspected of a crime (or you know someone in the bank who will do it for you anyway ... :mocking: )

 

Difference in the US is you are suspected of a crime before being charged ..... personally I could give a fat rats pa-toot if they want to check my bank account ..... but come on at least make it a reasonable amount not $10,000 in any one month for ALL your accounts with in the year before it has to be reported .... I used to have to juggle 4 accounts each month to make sure I was abiding by the regs .... now I just get my retirement and turn it into cash ..... if i want to save some under my mattress so be it ..... it doesn't have to be reported ..... 

 

Oh and just as a side note not all the banks in Switzerland have complied with the US wishes some are still holding out ..... after all the good ol' USA is still the policeman for the world and I'm sure will soon get it's way .... if it doesn't go bankrupt before .... :unsure:

:cheersty:

[earthdome]

Difference in the US is you are suspected of a crime before being charged ..... personally I could give a fat rats pa-toot if they want to check my bank account ..... but come on at least make it a reasonable amount not $10,000 in any one month for ALL your accounts with in the year before it has to be reported .... I used to have to juggle 4 accounts each month to make sure I was abiding by the regs .... now I just get my retirement and turn it into cash ..... if i want to save some under my mattress so be it ..... it doesn't have to be reported ..... 

 

Problem is that anyone regardless of whether they are involved in criminal activity can come into the cross hairs of government. Here is just one example, there are many more.

 

Taken: Federal Lawsuit in Michigan Challenges Forfeiture Abuse

Feds Seize Family Grocery Store’s Entire Bank Account

 

http://ij.org/michigan-civil-forfeiture-release-9-25-2013

[jpbago]

 

If the Philippines did this, they would have caught Napoles, her cohorts, and the hundreds before her long ago.

I disagree, she (and others) easily circumvented every safeguard and check and balance in the PDAF and Malampayan Fund process, she would have done the same with any agency. The system is only as good as the people managing it. If not for her co-conspirators aka "whistleblowers" going to the newspaper she may never have been caught.

 

 

Yes, after posting that, I recalled that the Napoles have been charged with tax evasion of some 60 million p. For a number of years they claimed no income yet made multiple purchases of houses and cars. Then one or both never filed income tax returns for 3 or 4 years. None of this showed up until now.

The tax man can be ruthless. In Canada, some lives have been ruined by the claims of the taxman and then dropped at the last minute. They operate with immunity at your expense. But it was the tax man that got Al Capone!  Even when I am innocent, I shudder when I get a brown envelope from the tax man.

[Thomas]

 

  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.

I think that this is the main reason for the IRS requests. If the Philippines did this, they would have caught Napoles, her cohorts, and the hundreds before her long ago. Recently, Switzerland has disclosed their foreign clients. Other tax havens have been requested to disclose their clients. Canada asks if you have more than $100,000 offshore. I imagine many other countries are interested in what their citizens have offshore and how did they get it. Much of the drug money is kept in cash as they have no place to put it.

Swedish tax are generaly thought being among the worst in the world, but concerning Swedes living permanently abroad the Swedish tax rules are BETTER.

/NOT tax depending of citizenship

/ONLY taxed in Sweden if the income is from there (as e g retirement pay)

as long as the connection ("living") in Sweden is small enough. (E g time visiting there in a year within max limit, no minor aged kids living there, no company there...)

 

(But I will keep my connection to Sweden to high to be let off filing tax papers in Sweden, because I will let my Swedish company own the equipment/licenses I will use in RP to keep owner control even if I don't get owner majority in the RP company.)

[Tukaram (Tim)]

 

But using this lady as an example - she has not lived in the US for over 30 years.  She should not be filing US taxes.  She owes nothing.  It is ridiculous to think she does.

 

 

 

If the Philippines did this, they would have caught Napoles, her cohorts, and the hundreds before her long ago.

 

His point I believe is "If the Philippines did this"  not that she would be filing US taxes ..... here in the Phils it is illegal to look into a persons bank account unless you are suspected of a crime (or you know someone in the bank who will do it for you anyway ... :mocking: )

 

Difference in the US is you are suspected of a crime before being charged ..... personally I could give a fat rats pa-toot if they want to check my bank account ..... but come on at least make it a reasonable amount not $10,000 in any one month for ALL your accounts with in the year before it has to be reported .... I used to have to juggle 4 accounts each month to make sure I was abiding by the regs .... now I just get my retirement and turn it into cash ..... if i want to save some under my mattress so be it ..... it doesn't have to be reported ..... 

 

Oh and just as a side note not all the banks in Switzerland have complied with the US wishes some are still holding out ..... after all the good ol' USA is still the policeman for the world and I'm sure will soon get it's way .... if it doesn't go bankrupt before .... :unsure:

:cheersty:

 

 

Yes, but I was replying to the article, not jpbago's comment.  In the article the lady as the example has lived out of the US for over 30 years yet is expected to pay US taxes on money NOT made in the US.  It is absurd.  She is not living in the US, not making money in the US, not using the US "safety net", so she should not even be filing US tax forms!   :tiphat: