Could I offer a comment as a retired American living abroad. It's not about a US tax liability. Period. The tax on most foreign income can be offset by use of Form 1116.
Instead, the uproar is about the 'compliance' requirements. The compliance is not new, it's the realisation of the reporting requirements that have been in place for years, but were neither evident, nor enforced before.
For example, a foreign pension isn't a pension. In the eyes of the IRS, it's a foreign trust. If it's the 'wrong' kind of foreign trust, an information Form 3520 and 3520A must be filed. If it's the 'right' kind of trust, the forms appear not to be required. The problem for those abroad is the definition of the two, and deciding if the reporting is required. Finding an understandable interpretation of the information in the Code, Treaties, or published articles is very difficult, if not impossible, for the lay person.
It will come as no surprise that a large percentage of tax returns are never seen by human eyes. They're approved by a computer. Form 8938, the new report of foreign asstes, was rushed into existence in a very short time. It has problems, one of which is it makes no sense in Part II to the average taxpayer, or professional tax advisor (See:
Form 8938 and the Requirement to Report Foreign Deferred Compensation and Foreign Pe... | Bloomberg BNA ). If you tick the wrong box (and there is no way of knowing if it's the wrong box) the computer will establish a 'fact'. If that fact is wrong, due to your tick, (it determines you should have been reporting information forms 3520 or 3520A) you're for the high jump. Why? because there are stiff penalties for not filing those forms in a timely manner.
The penalty for not filing either of the above forms is $10,000. If you have been receiving a foreign pension for 5 years, and the computer wrongly decides you should have been filing the forms, you will owe NO tax, but $100,000 in penalties.
In the country I live in, professional tax advice is expensive. It would not be uncommon this year (due to the amount of paperwork required) to have a bill of $4,000 to $5,000. (My return is approaching 50 pages, and I have nothing but pensions and bank accounts.) This is for someone who knows for certain they have NO US tax liability.
My first question to all of you is this: Do you pay $5,000 for assistance on the 'form compliance', knowing you owe NO tax and are capable of completing the TAX forms on your own? The second question is even though you really don't want to renounce your US citizenship, would you feel somewhat taken advantage of by an overly aggressive tax system?
A side note: I read an article that explained that Americans abroad no longer need tax advisors. Instead, they now need to seek 'form consultants'.
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