Taxes and the american citizen...

[nun]

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Originally Posted by rodi Interesting article going over the tax issues for folks living abroad. Wealthy Americans Queue to Give Up Their Passports - Bloomberg

The attached video clip is annoying as it again assumes that US citizens or expats with foreign accounts are "tax dodgers". Unfortunately that's what the Congress and the IRS assume too. Until the US drops taxation based on citizenship the situation won't really improve. I'd love to see that as part of tax reform.

[MichaelB]

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Originally Posted by nun The attached video clip is annoying as it again assumes that US citizens or expats with foreign accounts are "tax dodgers". Unfortunately that's what the Congress and the IRS assume too. Until the US drops taxation based on citizenship the situation won't really improve. I'd love to see that as part of tax reform.

It may be more of a media assumption than an IRS belief. That said, it is indeed far to easy to presume the worst for most people when in fact they are in full compliance, and it makes for great slogans.

Regarding your suggestion of tax reform, my preference would be for an OECD agreement to produce auditable records for all financial accounts and transactions and share them among all the governments. This is because too much economic activity is now financial and can be transacted anywhere, and this can (and is) lead to wealthy individuals simply relocating their financial assets outside of tax jurisdiction. Our approach to taxation has not kept up with our economic evolution. By itself, however, FATCA is a clumsy approach.

[bondi688]

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Originally Posted by MichaelB By itself, however, FATCA is a clumsy approach.

At this time, only a handful of countries have agreed to the IGA. Now it looks like FATCA is actually very one-sided, and had created some hard feelings around the world. While the US government requires all financial institutions around the world to provide information on US clients, the present laws and practice in the US would not allow US banks to disclose information on customers from other countries to their governments. The irony!!

Full Reciprocity Under FATCA Is a Work in Progress, IRS Official Says - Bloomberg Law

[brett]

A friend of mine recently gave up his US citizenship primarily because of the IRS issue. He had become a Canadian citizen and planned to remain in Canada.

He told me that there was an entire room full of people at the US consulate in Toronto where similar minded people were taken through The ramifications. Most of them were dual citizens who had no intention of returning to the US and who did not want to file with IRS, let alone pay any tax. He, and I assume everyone, had to obtain clearance from the IRS prior to being permitted to renounce US citizenship.

[Texas Proud]

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Originally Posted by brett A friend of mine recently gave up his US citizenship primarily because of the IRS issue. He had become a Canadian citizen and planned to remain in Canada. He told me that there was an entire room full of people at the US consulate in Toronto where similar minded people were taken through The ramifications. Most of them were dual citizens who had no intention of returning to the US and who did not want to file with IRS, let alone pay any tax. He, and I assume everyone, had to obtain clearance from the IRS prior to being permitted to renounce US citizenship.

I wonder why these people got citizenship in the first place...

[Alan]

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Originally Posted by Texas Proud I wonder why these people got citizenship in the first place...

Brett said that his friend was a Naturalized Canadian giving up his US citizenship, that I guess he had by right of birth. Many of the other folks in that room could have been in the same position.

Those of us that choose to become US Citizens I would suggest are less likely to want to give it up since it was hard earned and certainly can not be done on a whim.

[nun]

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Originally Posted by Alan Brett said that his friend was a Naturalized Canadian giving up his US citizenship, that I guess he had by right of birth. Many of the other folks in that room could have been in the same position. Those of us that choose to become US Citizens I would suggest are less likely to want to give it up since it was hard earned and certainly can not be done on a whim.

I don't agree. I can well understand that US citizens by birth see renunciation as a thing they'd never contemplate. Likewise I would never give up my UK citizenship.....or passport and I have actually turned down very good job offers that required security clearances because of that. However, I would consider giving up my US citizenship if there were practical benefits. I have little emotional connection to it and for me it was a step I took to make living in the US easier. If I move to the UK and the burden of tax filing becomes too high I might well give up the US citizenship.

I believe that the reason many US citizen expats contemplate giving up US citizenship is not to avoid US tax, but to avoid the complexity, fear and potential for IRS fines associated with their tax returns. If you want to have a pension or invest any money it's complicated as a US expat.

[meierlde]

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Originally Posted by Texas Proud I wonder why these people got citizenship in the first place...

There are a number of accidental citizens where their mother happend to be in the US when they were born, but feel no attachment to the US, in particular from Canada, if you are in that category renouncing ones us citizenship only makes sense. Of course I sometimes wonder if you never go to the US what could the US really do to you if you just ignored the IRS (and made sure you had no money in the US)

[marko]

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Originally Posted by meierlde There are a number of accidental citizens where their mother happend to be in the US when they were born, ...

Then again, a lot of moms do this deliberately....more to come likely.

[nun]

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Originally Posted by marko Then again, a lot of moms do this deliberately....more to come likely.

But those aren't "accidental US citizens". The problems arise when someone is unaware of their US citizenship and the unique taxation rules the US applies.

[Alan]

I can't see a breakdown of at-birth citizens against naturalized citizens who give up their citizenship. I think those that do are more likely to be wealthy.

Why give up U.S. citizenship? « Bankrate, Inc.

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Approximately 1,780 expatriates renounced their U.S. citizenship in 2011, up from 235 in 2008. Why? Money, honey. Bloomberg reports that rich Americans are giving up their nationality in higher numbers since the crackdown by the Internal Revenue Service on tax evaders who try to hide their money offshore.

[Major Tom]

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Originally Posted by Alan Those of us that choose to become US Citizens I would suggest are less likely to want to give it up since it was hard earned and certainly can not be done on a whim.

That makes sense. If a person wanted to work and stay in the US mainly for financial reasons, they could do that as a resident alien - no need for citizenship. I applied for my citizenship because I realized that if push came to shove and I were ever forced to choose an alliance to just one country, I would have chosen the US. Even though British citizens are allowed dual citizenship, that realization prompted me to "make good" with the country that I had fallen in love with. It's a bit like a marriage really - if you've lived with a gal for a while and know that you would never want to be forcibly parted from her, why not do the decent thing and marry her?

I grew up and lived in the UK until I was 22. I am now 49 and still feel very English, but as much as I like visiting the UK, the US is my home. There are things about the culture here that I will never fully identify with but if I'm being honest, there are some facets to the British culture that aren't my cuppa tea either

I became a citizen for one reason - love of this country and although divorces do indeed happen, at this point it would take an awful lot to make me want to renounce my citizenship.

[nun]

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Originally Posted by Major Tom That makes sense. If a person wanted to work and stay in the US mainly for financial reasons, they could do that as a resident alien - no need for citizenship.

I took US citizenship after I'd been an H1-B and then a permanent resident for 10 years. I wanted to vote and at the time Sen. Simpson was making noises about restricting SS for non-citizens so I thought I would take US citizenship to protect that. Only after I started to investigate the possibility of retiring back to the UK did I fully understand the tax implications. Knowing what I do now, I would stay as a permanent resident and unless there are family and immigration considerations I usually advise people not to take US citizenship if there is a possibility that they might live outside the US again.

When I came to the US I had no understanding of US tax and made no plans for my UK assets.....luckily those were essentially zero as I left straight after college and brought my entire $3k net worth with me in travelers checks. Now that I understand more of the financial implications of being a US expat renouncing US citizenship is definitely an option.

[Alan]

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Originally Posted by Major Tom That makes sense. If a person wanted to work and stay in the US mainly for financial reasons, they could do that as a resident alien - no need for citizenship. I applied for my citizenship because I realized that if push came to shove and I were ever forced to choose an alliance to just one country, I would have chosen the US. Even though British citizens are allowed dual citizenship, that realization prompted me to "make good" with the country that I had fallen in love with. It's a bit like a marriage really - if you've lived with a gal for a while and know that you would never want to be forcibly parted from her, why not do the decent thing and marry her? I grew up and lived in the UK until I was 22. I am now 49 and still feel very English, but as much as I like visiting the UK, the US is my home. There are things about the culture here that I will never fully identify with but if I'm being honest, there are some facets to the British culture that aren't my cuppa tea either I became a citizen for one reason - love of this country and although divorces do indeed happen, at this point it would take an awful lot to make me want to renounce my citizenship.

Nice summary and sentiments. I was older when we left (32) and still have strong family ties and love of the old country as well the new. Since the UK and US have a tax treaty in place then it is essentially tax neutral, and it is only the aggravation of having to deal with the tax code that is a problem. (I don't have tax shelters to hide income from the IRS or HMRC).

TurboTax doesn't deal with Tax Treaties but the TT Community Forum has good info for the many of us living in the USA and receiving UK private and state pensions, and explain which forms to fill in for reporting of such.

We may decide to become resident of both countries in future so we can summer-bird (?) to the UK for 5 months each year, and that will involve some more complexity in filing in each country, but so be it. (That will actually mean 3 tax returns each year as Louisiana taxes me on my pension from my previous company there even though I don't live there).

[nun]

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Originally Posted by Alan I can't see a breakdown of at-birth citizens against naturalized citizens who give up their citizenship. I think those that do are more likely to be wealthy. Why give up U.S. citizenship? « Bankrate, Inc.

I have no understanding of the numbers either, and you'd think that the wealthy wouldn't want to advertise their reasons for renouncing, but on the expat forums I've encountered a growing frustration and fear from regular US expats about their tax returns. They want to be US tax compliant, but the rules make it almost impossible for them to do that without employing expensive tax professionals. The IRS has offered various programs for them to become compliant, but that does nothing to help them with the complexity of future returns. Those with no assets in the US often wonder why they are bothering and renunciation becomes an option.

[Alan]

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Originally Posted by nun I have no understanding of the numbers either, and you'd think that the wealthy wouldn't want to advertise their reasons for renouncing, but on the expat forums I've encountered a growing frustration and fear from regular US expats about their tax returns. They want to be US tax compliant, but the rules make it almost impossible for them to do that without employing expensive tax professionals. The IRS has offered various programs for them to become compliant, but that does nothing to help them with the complexity of future returns. Those with no assets in the US often wonder why they are bothering and renunciation becomes an option.

I can understand folks who have repatriated to another country, and believing that they will never go back to the US to live, who consider doing so, but I could never bring myself to burn that bridge just to avoid the IRS. That's why I was hoping to see some sort of breakdown of the numbers.

I was watching Millionaire while on a treadmill the other week and one of the questions was "What is longer than the combined works of William Shakespeare?". Of the choices given, the answer was the IRS tax code at over 5 million words long - and that is also 7 times longer than the Bible.

According to Wiki, Eritrea is the only country other than the USA that taxes its citizens even when they don't reside there, but they pay a lower tax rate than residents.

[Texas Proud]

One point is that not all US citizens give up their citizenship even if they never have plans to return, nor do they file tax returns...

Not sure how to spell his name and do not want to look it up... but the terrorist Awlaki (who was recently killed with a drone) was a US citizen... but I do not think the IRS was getting his tax return...



But, seriously... if you do not have any financial ties to the US, what are they going to do if you do not file If you do have financial ties, then you might have more taxes withheld when payments are made to you than the taxes due... IIRC, there is a withholding requirement if you are not a citizen....

[haha]

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Originally Posted by meierlde Of course I sometimes wonder if you never go to the US what could the US really do to you if you just ignored the IRS (and made sure you had no money in the US)

Drone strike? Thallium coated pin stick on a crowded subway?

Ha

[meierlde]

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Originally Posted by marko Then again, a lot of moms do this deliberately....more to come likely.

I suspect there are far fewer of these from Canada than from the Latin America.

[Alan]

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Originally Posted by Texas Proud One point is that not all US citizens give up their citizenship even if they never have plans to return, nor do they file tax returns...

Which is why I was disappointed not to find a breakdown of folks doing this. The Bloomsberg article above said the big increase was to do with Americans wanting to protect their offshore tax havens, but no hard data.