What Lessons Can Be Learned from the Sad Stories of “IRS Compliant” Australians Shaun and Mary?

cross-posted from Brock

by Stephen J. Kish

Karen, on her fixthetaxtreaty.org blog, just posted the sad stories of Australians Shaun and Mary, who did their best to be tax compliant with a foreign country (United States) and then ended the relationship by renunciation of U.S. tax citizenship.

The emotional and financial damage done to these Australians was a direct result of their decision to enter or maintain tax compliance, to the best of their ability, with a foreign state.

We have heard similar stories before, but are there any lessons to learned regarding, for example, whether citizens-permanent residents of countries outside the U.S should ever enter into “IRS tax compliance”?

If Shaun and Mary could go back in time, would they still have entered into the IRS tax system? Is $50k plus emotional distress (post-traumatic stress; stress exceeding that of chemotherapy) a reasonable tradeoff for the renunciation of, divorce from, US tax-citizenship?

What would they now recommend Australians to do in the same situation?

For those persons abroad who do want to become IRS compliant, how could they ever find a trustworthy tax compliance expert? Can tax compliance persons purporting to be cross-border experts be taken to task for their incorrect advice? Does this ever happen?

Is it really possible for any human living outside the U.S. to become IRS tax compliant?

Is it ever ethical (e.g., in this post) to advise the unknowing of their tax “obligations” to a foreign state and by doing so cause them harm?

USCitizenAbroad comments: “It is painfully obvious that Shaun would have been far better if he had NEVER entered the U.S. tax system. This is hindsight. He could never have understood where this was going…” and “…this story is a sad sad reminder that those who have been most hurt by the predatory and immoral practice of U.S. “place of birth taxation” are the ones who tried hardest to comply…”

Karen says: “…the majority of the people profiled on the Our Stories page have already renounced/relinquished. Those that haven’t yet renounced likely will, eventually.* From all the people I’ve spoken to here – including some who are not comfortable sharing their story (even anonymously) – the ones who suffered the most were the ones who tried hardest to comply…”

Shaun’s Story:

I have lived solely in Australia for 3 decades. I kept my US Citizenship thinking that there was no drawback from doing so. I was told I had to continue to file US Tax returns and I would just send the US based CPA my Australian Tax Return & they would send me a huge document saying “No Tax Due” & I would sign it. It was incomprehensible to me how the Australian Tax return was converted to the IRS Tax return. I just thought I would never owe anything due to the tax paid in Australia.

This went on for many years until one year the USA Accountant said I had a huge Tax bill. I couldn’t understand this as all of my US Returns never owed a cent, but it seems that they had been preparing my returns incorrectly and all my deductions in Australia were not deductions in the USA. This was the start of my long intense problem that lasted from for several years

I was never told by the USA CPA that my Self-Managed Superannuation account here in Australia was not considered by the IRS as SUPER, it was considered a Foreign Trust and hence had been reported incorrectly; so all of my Super Savings here & interest income in it was treated by the USA as STRAIGHT INCOME and taxed as such going back 8 years. I lost all the benefit of my Super Savings. Then because the US CPA didn’t fill out the single page Foreign Trust Form the IRS Penalised me 30% of the total amount of my Super Balance. I had hired very good tax lawyers in the USA to handle all my dealings with the IRS & instead of getting me a fair result they were predatory in their billing & let things drag on & on.

The other large issue was all of the money I gave to Charities in Australia over the 8 years were not allowed my US Tax returns because “They were not recognised as USA Approved Charities”. This is another issue that the US CPA never advised me about. So between losing my SUPER & my Charitable deductions I owed a huge sum to the IRS, then add on USA Tax Lawyers & Australian Tax Lawyers fees.

I was so distraught ( I was also being treated for a blood cancer at this time ) I decided to give up my USA Citizenship & all the hassles that entailed. The day I had to give that final statement I was in tears at the counter at the US consulate in Sydney, I felt I had been betrayed & abused by the US. Then I had to file the final IRS form 8854 which again looks at all your assets as Capital Gains at the value the day you gave up your citizenship.

This whole situation was like having a second full time job, the lawyers who were supposed to help & protect you become part of the problem. If I could have chosen between Chemotherapy & dealing with this legal situation, I would have chosen Chemotherapy because at least you would know when the end would happen & the worst thing would be that you could die. With the legal matters months turn to years & I felt totally helpless that it would be resolved before I died.

I made one mistake & was willing to take responsibility for that & I did but all the above things I mentioned were so unfair that I couldn’t cope with it.

So I feel a huge responsibility to help publicise this situation so that other people don’t suffer as I had to for nearly 5 years. Australia is supposed to be the USAs’ best friend; how can best friends treat each other like this?

– Shaun”

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See the Glee at Renouncing U.S. Citizenship

See and hear the glee of this British woman living in Switzerland at renouncing American citizenship.

LaTasha Coates was lucky. She quickly got an appointment in Switzerland and soon after received her CLN.

That is very different than Canada where it may be a year to get an appointment (if a Consulate will even respond to a request for an appointment) followed by another long delay in receiving the CLN.

Or, you can do what Stephen did and travel to Iceland or another country to renounce. That increases the cost but it makes a very nice vacation.

FEBRUARY 13 2017 UPDATE ON CANADIAN FATCA IGA LEGISLATION LAWSUIT IN CANADA FEDERAL COURT: Government response to request for details on FATCA accounts turned over to IRS and CRA

Still expecting that the Constitutional-Charter trial will take place in 2017. Date however, still uncertain and will depend on how Motions are decided by the Court.

— The Government lawyers have now asked the Court, by way of a formal motion, to compel the Plaintiffs to provide certain additional documents and our lawyers will be resisting the motion. Will keep you updated on how this is resolved.

— See the (amended) Claims of the Plaintiffs and the now published as affidavit last response of Government to the Claims.

Note the changes (underlined) from original response on page 137 (14) in which Government denies Constitutional violations and now argues that “To determine whether any Charter rights or constitutional principles, written or unwritten, have been infringed unjustifiably by such alleged enforcement requires a factual matrix where the US has actually attempted to recover, in Canada, taxes or charges against a particular individual residing in Canada.”

Note also that Government has now DELETED on page 139 (16) its previous statement: “Furthermore, the defendants deny that there exists a principle of fundamental justice that foreign tax debts are not enforceable in Canada.”

— See the many questions asked by Plaintiffs to Government detailing the type etc. of FATCA information provided by Canada to United States and by U.S. to Canada, response of Government, and Objections raised by Government to Plaintiffs’ question.

I was particularly interested in knowing details on the bank account information that flowed from Canadian accounts in U.S. to Canada as part of the so-called “reciprocal” FATCA agreement — a key justification, in addition to promise of economic sanction for non-compliance, for Canada to “agree” to the FATCA IGA.

Government response to the request for information on the reciprocal bank data are: “On the advice of counsel. I am unable to answer” with the attached objection: “The Defendants object to Q. #4 and refuse to answer it because doing so may require disclosing sensitive information or potentially injurious information as those terms are defined in s. 38 of the Canada Evidence Act, R.S.C. 1985, c. C-5.”

[Also, I wanted to know: "...how many of the persons associated with those accounts had already been reported by the United States to Canada for tax purposes...? See the answer in link to this question...]

Still seeking Exit tax witness. Supporter suggests (and I agree) that anyone who took measures to reduce asset worth to avoid exit tax would be considered…

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Mr. Trudeau Goes to Washington

Prime Minister Trudeau is off to meet President Trump on Monday. Would love to be a fly on the wall for that meeting! (Actually mosquito would be better-”If you think you are too small to make a difference, try sleeping with a mosquito.”-Dalai Lama)


It would be great if Trudeau would stop the flip Flops and stand up for Canadians.


Finance Minister Bill Morneau is also in Washington. So, I suggested Trudeau tell him to renegotiate the IGA

Nigel Green Launches Campaign to Repeal Obama-Era FATCA Law

Trump must show his mettle and reverse a fatally flawed, misguided law

NEWS PROVIDED BY
Campaign to Repeal FATCA
Feb 07, 2017, 10:26 ET

Excerpts:

WASHINGTON, Feb. 7, 2017 /PRNewswire-USNewswire/ — Nigel Green, founder and CEO of deVere Group, one of the world’s largest independent financial organizations, has launched a Washington, DC-based lobbying and media campaign to repeal the Foreign Account Tax Compliance Act, or FATCA.

With Obama in the White House doing away with FATCA was virtually impossible, despite repeal bills introduced by Sen. Rand Paul (R-KY) and Rep. Mark Meadows (R-NC). “FATCA is a textbook example of a bad law that doesn’t achieve its stated purpose but does manage to unleash a host of unanticipated destructive consequences,” states Sen. Paul.

As his co-leader of the Campaign to Repeal FATCA, Green has turned to former U.S. diplomat and longtime Senate leadership staffer Jim Jatras of the media and government relations firm Global Strategic Communications Group (GSCG). Jatras, a leading authority on FATCA, edits the online publication www.RepealFATCA.com, which is dedicated to getting rid of what he calls “the worst law most Americans have never heard of.

On Green’s initiative, Jatras is assembling a team of experienced DC professionals to push the repeal effort over the top. “Nigel’s deciding to step up to the plate is just tremendous,” says Jatras. “Billions of dollars have been wasted worldwide complying with FATCA, billions of words have been written complaining about it. Now it’s time for action. When that tax bill gets to President Trump’s desk, we want FATCA repeal in it.”

For more information on FATCA and the Campaign to Repeal FATCA, contact GSCG, below.

RepealFatca.com

Twitter @RepealFatca