24 ms·

Help, I’m on the IRS hit list

284 points by DanielBMarkham 15y ago

Vivtek 15y ago
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!
- _delirium 15y ago
  Overseas U.S. citizens can vote in federal-level elections, including for Senator/Representative of the location they last lived in the US.
  - msbarnett 15y ago
    This presumes that all overseas citizens ever lived in the US, which isn't the case.
    - _delirium 15y ago
      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 http://www.fvap.gov/reference/nvr-res.html
- ams6110 15y ago
  GE did pay fair taxes. They did what the law allowed them to do. Would you not?
  - Estragon 15y ago
    And what do you think would happen to a politician who tried to change the laws which allowed them to get away with that?
rickdangerous1 15y ago
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.
- peteretep 15y ago
  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!"
  - sp332 15y ago
    Universal healthcare isn't free. Maybe it's not a bad deal, but it costs a lot of money.
    - adaml_623 15y ago
      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.
      - sp332 15y ago
        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.
        michaeldhopkins 15y ago
        Price controls and price control problems follow. This is known.
        sp332 15y ago
        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.
parfe 15y ago
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 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-multiple-platoons-are-headed-to-egypt-2011-2 http://www.businessinsider.com/senior-us-marine-says-multipl... http://www.marinecorpstimes.com/news/2011/03/ap-us-to-evacuate-americans-from-japan-031711/ 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.
- joelhaasnoot 15y ago
  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.
- Game_Ender 15y ago
  > 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.
  - parfe 15y ago
    According to the article they reneged on tax obligations while keeping their American citizenship. It's one or the other.
    - unreal37 15y ago
      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?
noonespecial 15y ago
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.
- bd_at_rivenhill 15y ago
  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.
- Hyena 15y ago
  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.
  - yoyar 15y ago
    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?
    - Hyena 15y ago
      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....
      - 15y ago
patio11 15y ago
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.
- david927 15y ago
  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.
  - Hyena 15y ago
    Evidence?
  - ams6110 15y ago
    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.
    - 15y ago
deleted 15y ago
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deleted 15y ago
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matthewcford 15y ago
I'm in this exact same position, having left the US when I was one/two years old. With dual UK/US citizenship, all my bank accounts are in the UK (having lived in the UK for the last 13 years). I was not aware of the FBAR filings requirements and with a potential fine of $200K+ for not filing I'm in a bit of a pickle. I have been in touch with a few accountants, and it seems that the penalties are quite real, but hopefully they will take into account your total earnings when calculating the fine. But there is a chance they won't and if this is the case and I get landed with a massive fine, I'm not sure what I'll do. Even renouncing citizenship, still leaves you liable for the fines.
viraptor 15y ago
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?
- daniel_solano 15y ago
  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.
  - viraptor 15y ago
    The article discusses the guy who has both citizenships - that's why I mentioned this case specifically.
  - vitalysh 15y ago
    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.
    - hvs 15y ago
      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).
daniel_solano 15y ago
> 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
cheez 15y ago
So the solution is don't be a US citizen. Jesus Christ, what insanity.
- kokey 15y ago
  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.
  - cheez 15y ago
    Nice in theory...
- micah63 15y ago
  That doesn't work either, even if you get rid of your american citizenship, they still come after you for the past years.
  - cheez 15y ago
    I meant to begin with. I've been toying with the idea myself but wow...
  - timcederman 15y ago
    And for 10 years after renouncing.
mark_l_watson 15y ago
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?
- Duff 15y ago
  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.
DanielBMarkham 15y ago
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.
- Hyena 15y ago
  Stand up for ex-pats how, exactly? They owe taxes, that's all.
  - 15y ago
gopi 15y ago
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.
- kmt 15y ago
  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.html http://www.taxesforexpats.com/expat-tax-advice/green-card.ht...). Do you have a reference for your claim?
  - gst 15y ago
    Green card holders have to report on their accounts. I know this because I am one.
  - sp_ 15y ago
    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.
- gst 15y ago
  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.
  - gopi 15y ago
    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!
DirtyCalvinist 15y ago
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.
- jellicle 15y ago
  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.
jedberg 15y ago
> 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.
- msbarnett 15y ago
  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.
  - Locke1689 15y ago
    So why not just renounce your US citizenship?
    - msbarnett 15y ago
      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).
      - deleted 15y ago
        [deleted]
  - jedberg 15y ago
matrix 15y ago
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.
mbeattie 15y ago
Here's some advice: If you are an American citizen, file your tax return. Easy as that.
- jarek 15y ago
  And, apparently, if you don't know if you're a U.S. citizen, check.
azulum 15y ago
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/ 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
- JoshTriplett 15y ago
  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.
jellicle 15y ago
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.
- braindead_in 15y ago
  "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.
  - bzbarsky 15y ago
    One can be a US citizen without ever having been in the US. See http://en.wikipedia.org/wiki/United_States_nationality_law#Through_birth_abroad_to_United_States_citizens http://en.wikipedia.org/wiki/United_States_nationality_law#T...
    - georgieporgie 15y ago
      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.
      - tikhonj 15y ago
        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.
monkeyking 15y ago
China also taxes on world-wide income.
stevep98 15y ago
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 http://www.irs.gov/newsroom/article/0,,id=210027,00.html
- stevep98 15y ago
  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 http://www.irs.gov/newsroom/article/0,,id=234900,00.html
deleted 15y ago
[deleted]

284 points by DanielBMarkham 15y ago

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!

_delirium 15y ago
Overseas U.S. citizens can vote in federal-level elections, including for Senator/Representative of the location they last lived in the US.
- msbarnett 15y ago
  This presumes that all overseas citizens ever lived in the US, which isn't the case.
  - _delirium 15y ago
    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 http://www.fvap.gov/reference/nvr-res.html
ams6110 15y ago
GE did pay fair taxes. They did what the law allowed them to do. Would you not?
- Estragon 15y ago
  And what do you think would happen to a politician who tried to change the laws which allowed them to get away with that?

rickdangerous1 15y ago

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.

peteretep 15y ago
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!"
- sp332 15y ago
  Universal healthcare isn't free. Maybe it's not a bad deal, but it costs a lot of money.
  - adaml_623 15y ago
    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.
    - sp332 15y ago
      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.
      - michaeldhopkins 15y ago
        Price controls and price control problems follow. This is known.
        sp332 15y ago
        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.

parfe 15y ago

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 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-multiple-platoons-are-headed-to-egypt-2011-2 http://www.businessinsider.com/senior-us-marine-says-multipl... http://www.marinecorpstimes.com/news/2011/03/ap-us-to-evacuate-americans-from-japan-031711/ 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.

joelhaasnoot 15y ago
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.
Game_Ender 15y ago
> 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.
- parfe 15y ago
  According to the article they reneged on tax obligations while keeping their American citizenship. It's one or the other.
  - unreal37 15y ago
    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?

noonespecial 15y ago

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.

bd_at_rivenhill 15y ago
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.
Hyena 15y ago
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.
- yoyar 15y ago
  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?
  - Hyena 15y ago
    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....
    - 15y ago

patio11 15y ago

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.

david927 15y ago
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.
- Hyena 15y ago
  Evidence?
- ams6110 15y ago
  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.
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matthewcford 15y ago

I'm in this exact same position, having left the US when I was one/two years old. With dual UK/US citizenship, all my bank accounts are in the UK (having lived in the UK for the last 13 years). I was not aware of the FBAR filings requirements and with a potential fine of $200K+ for not filing I'm in a bit of a pickle. I have been in touch with a few accountants, and it seems that the penalties are quite real, but hopefully they will take into account your total earnings when calculating the fine. But there is a chance they won't and if this is the case and I get landed with a massive fine, I'm not sure what I'll do. Even renouncing citizenship, still leaves you liable for the fines.

viraptor 15y ago

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?

daniel_solano 15y ago
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.
- viraptor 15y ago
  The article discusses the guy who has both citizenships - that's why I mentioned this case specifically.
- vitalysh 15y ago
  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.
  - hvs 15y ago
    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).

daniel_solano 15y ago

> 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

cheez 15y ago

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

kokey 15y ago
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.
- cheez 15y ago
  Nice in theory...
micah63 15y ago
That doesn't work either, even if you get rid of your american citizenship, they still come after you for the past years.
- cheez 15y ago
  I meant to begin with. I've been toying with the idea myself but wow...
- timcederman 15y ago
  And for 10 years after renouncing.

mark_l_watson 15y ago

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?

Duff 15y ago
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.

DanielBMarkham 15y ago

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.

Hyena 15y ago
Stand up for ex-pats how, exactly? They owe taxes, that's all.
- 15y ago

gopi 15y ago

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.

kmt 15y ago
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.html http://www.taxesforexpats.com/expat-tax-advice/green-card.ht...). Do you have a reference for your claim?
- gst 15y ago
  Green card holders have to report on their accounts. I know this because I am one.
- sp_ 15y ago
  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.
gst 15y ago
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.
- gopi 15y ago
  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!

DirtyCalvinist 15y ago

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.

jellicle 15y ago
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.

jedberg 15y ago

> 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.

msbarnett 15y ago
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.
- Locke1689 15y ago
  So why not just renounce your US citizenship?
  - msbarnett 15y ago
    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).
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- jedberg 15y ago

matrix 15y ago

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.

mbeattie 15y ago

Here's some advice: If you are an American citizen, file your tax return. Easy as that.

jarek 15y ago
And, apparently, if you don't know if you're a U.S. citizen, check.

azulum 15y ago

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/ 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

JoshTriplett 15y ago
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.

jellicle 15y ago

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.

braindead_in 15y ago
"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.
- bzbarsky 15y ago
  One can be a US citizen without ever having been in the US. See http://en.wikipedia.org/wiki/United_States_nationality_law#Through_birth_abroad_to_United_States_citizens http://en.wikipedia.org/wiki/United_States_nationality_law#T...
  - georgieporgie 15y ago
    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.
    - tikhonj 15y ago
      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.

monkeyking 15y ago

China also taxes on world-wide income.

stevep98 15y ago

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 http://www.irs.gov/newsroom/article/0,,id=210027,00.html

stevep98 15y ago
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 http://www.irs.gov/newsroom/article/0,,id=234900,00.html

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