The Devil is in the Details When it Comes to the U.S. Exit Tax

reposted from isaac brock society
 

A very   interesting discussionabout the Exit Tax has been taking place at Brock this week. In particular, the comment below from USCitizenAbroad highlights some of the major differences between the U.S. Exit Tax and the more benign Departure Tax that occurs in Canada and Australia. It cannot be overstated how punitive and destructive the U.S. Exit Tax is and anyone contemplating renouncing, should be certain to be familiar with all aspects of it; do a preliminary set of returns and an accurate accounting of all assets including pensions. While anyone can renounce at a Consulate before filing tax and information returns, anyone who is close to being “covered” should get counselling before taking such a step.

******

USCitizenAbroad says says:

@Watcher makes the point that:

As you see, then, the devil is very much in the detail. These latter two things have no analog in the Canadian exit tax. So… the US is not the only country to have an exit tax, but the exit tax it does have is one of the worst. And very likely the actual worst.

Continue reading

Accidental American “I Live Hell. I Had to Give up my dual Nationality. (i.e., Renounce my U.S Citizenship)”

original article in French HERE

reposted from Anmerican Expatriates Facebook Group

ACCIDENTAL AMERICAN’: I LIVE HELL. I HAD TO GIVE UP MY DUAL NATIONALITY (I.E. RENOUNCE MY US CITIZENSHIP)

Keith Redmond says:

Thank you Fabien Lehagre or making sure this injustice stays in the press! The homeland US press refused to report on it. I know Caroline and her story is one of millions where the US government is ruining the lives of people outside the US.

English translation below.

carolinec Caroline, 37, was born in the U.S. of French parents and lived there for two years. Franco-American, her dual nationality was unfavorable to her when she discovered that she had to pay taxes there. The U.S. is one of the only countries in the world to base the taxpayer’s status on nationality and not on place of residence. Stuck in a legal imbroglio, it tries desperately to regularize its situation.

Caroline says:

I was born in 1979 in Los Angeles. My parents were French, but they were expatriates in the United States for professional reasons.

All my life, I had dual French-American nationality. Even though I only lived for the first two years of my life on the other side of the Atlantic, I always found it amusing to have this double status. I was the only one of my siblings to have this peculiarity.

I remember returning to the United States when I was seven, then in 2008 with my husband. Always with my French passport since I never redone my American identity papers.

A legacy blocked because of “my clue of americanity”

Since July 2014, France and Switzerland have undertaken to disclose the tax data of their US residents. For the moment, this device is not reciprocal. As a lawyer, I had heard about the Fatca (Foreign Account Tax Compliance Act), a law to combat tax evasion, but I never thought I would be directly involved.

I have always paid my taxes in France, and since I have never really lived on American soil, why should I have had to pay taxes in the United States? I was wrong. In reality, the United States is one of the only countries in the world to base the taxpayer’s status on nationality and not on place of residence.

I understood it in September 2014, a few months after the death of my father. The succession had to be settled. I thought there would be no worry, but I received a letter from my father’s bank, BNP-Paribas, to point out that I had a “clue of americanity” because of my place Of birth. So I was concerned about the famous Fatca law.
Continue reading

“All Roads Lead To Renunciation” – #FATCA Same Country Exemption Edition

cross-posted from isaacbrocksociety.ca
by USCitizenAbroad

You can read it at the Americans Citizens Abroad site.

Highlights include:

 

In denying the request for SCE, the Treasury Department’s final FATCA regulations focused solely on the risk of US tax avoidance. “The Treasury Department and the IRS have also decided that the risk of U.S. tax avoidance by a U.S. taxpayer holding an account with an FFI exists regardless of whether the U.S. taxpayer holds an account in his or her foreign country of residence or another foreign country.”  The regulations say nothing about the problem of lock-out.  They fix only on the unquantified and un-weighted risk that what must be a  relatively small population of US taxpayers residing in a foreign country and banking at their local bank might evade US tax.  The regulations do not say whether, and, if so, to what extent, Treasury Department took into consideration the widely-admitted fact that FATCA continues to put the community of 8 million Americans overseas at risk of lock-out from access to financial accounts needed for the management of basic living expenses (paying bills, paying rent, receiving paychecks).

The problem of foreign financial account lock-out exists, and it has been proven that the FATCA rules are one of the root causes.  The Congressional Americans Abroad Caucus, the National Taxpayer Advocate, and ACA, as well as other overseas organizations, have testified to the existence of the problem and have asked for redress by the adoption of SCE.  ACA believes that Treasury Department either missed the point or failed reasonably to balance the considerations.

 

No, the administration of Barack Obama did NOT miss the point. The point is a simple one:
Continue reading

Be careful what you “fix for”! A Holiday Gift: What to do about the unfiled #FBAR

cross posted from Be careful what you “fix for”! A Holiday Gift: What to do about the unfiled #FBAR

UPDATED WEDNESDAY JANUARY 4, 2017

Part 6 – Getting help with “fixing your compliance problem”:
“The smaller the step taken, the bigger the result”

 
Some tax professionals:

- believe that compliance problems should presumptively be solved ONLY through prescribed IRS procedures including: “Streamlined (domestic or offshore)”,”OVDP”
“Delinquent information returns” and; “Delinquent FBAR submission procedures”; AND THEREFORE

- rightly or wrongly (and it depends on the facts) find it difficult to deal with the Title 31 FBAR problem without considering one or more Title 26 tax problems.

In many cases they will frame the issue as:

Should you use OVDP (the answer is almost always NO) or should you use Streamlined (the answer is usually maybe). But, to use either OVDP or Streamlined is to NOT solve the Title 31 FBAR problem without compounding the number of problems (by introducing Title 26 tax issues). Are you eligible to use the “Delinquent FBAR submission procedures?”

The threshold consideration is whether all income associated with the “foreign accounts”, that should have been reported on the tax returns was properly reported.

OVDP and Streamlined ALWAYS assume more than one problem …

Since OVDP and Streamlined deny the possibility of solving the Title 31 FBAR problem on its own, some advisers escalate one simple Title 31 FBAR problem into several problems.

OVDP, Streamlined the “Delinquent FBAR Filing Procedures” are NOT not found in either the Internal Revenue Code (Title 26) or the Bank Secrecy At (Title 31). Therefore, they are NOT the law and are NOT legally required. They may or may not be advisable courses of action.
(This is where your adviser can assist you in making a rational decision.)

Obeying the law (“doing the right thing”) requires two things.

Thou shalt:

1. File FBARs (Title 31)

2. File your tax returns (Title 26)

What could be wrong with fixing “compliance problems” by “obeying the law”?

Isn’t to “obey the law”, to “do the right thing”?

There are people who fix their “compliance problems” by simply “filing their tax returns and/or amended tax returns” without using OVDP or Streamlined. In do doing, they are simply “obeying the law”. You will find many “internet warnings” against filing tax returns outside of the OVDP or Streamlined (“quiet disclosures“). Are these warnings justified?

Is it really “the wrong thing” to try to “do the right thing”
(obey the law)?

The answer depends on the facts. I will address the question of “quiet disclosures” in a separate post.

“The total weight of problems is equal to the square of the number of problems!”

You will compound your problems by allowing your problems to escalate.
That’s how the two people described above, who started with one simple problem, found themselves in the messes they are in today.

Conclusion: consider whether you can deal with minor/unintentional FBAR violations as a “stand alone single problem”.
There may be no need to escalate that one single problem into a multi-dimensional full blown tax problem!

Remember: In most cases, “the smaller the step taken, the bigger the result for you!”

John Richardson
Continue reading

Tax residency vs. physical presence: The four questions you must ask before making a country your home

cross posted from citizenshipsolutions

An introduction to “tax residency” …

Most people equate residency with physical presence. They assume that where you are physically presence determines where you live. They further assume that where you live is where you pay your taxes. Conclusion: The country where you live is the country where you must be “tax resident”. Not necessarily!

There is no necessary correlation between where one lives and where one is a “tax resident”. In fact, “residency for tax purposes” may be only minimally related to “residency for immigration (where you live) purposes”. It is possible for people to live in only one country and be a tax resident of multiple countries. The most obvious example is “U.S. citizens residing outside the United States”.

The concept of “tax residency” is fundamental to all systems of taxation. The fundamental question, at the root of all tax systems is:

“what kind of connection to a country is required to assume tax jurisdiction over an “individual”, over “property” or over an “entity”?”

Continue reading