Uncle Sam Wants You So Badly That the Feeling May No Longer Be Reciprocal
Within this Reuters scare story about Americans seceding from their own country ("US taxes cost some expatriates their citizenship"!), there is a long chunk that alludes to some of the stuff I wrote about yesterday re: the IRS making life hell for those millions of citizens who do things like live abroad and marry furriners:
The United States is one of the few countries to tax their citizens on income earned while they're living abroad. And just as Americans stateside must file tax returns each April — this year, the deadline is Tuesday — an estimated 6.3 million U.S. citizens living abroad brace for what they describe as an even tougher process of reporting their income and foreign accounts to the IRS. For them, the deadline is June.
The National Taxpayer Advocate's Office, part of the IRS, released a report in December that details the difficulties of filing taxes from overseas. It cites heavy paperwork, a lack of online filing options and a dearth of local and foreign-language resources.
For those wishing to legally escape the filing requirements, the only way is to formally renounce their U.S. citizenship. Last year, IRS records show that at least 1,788 people did, and that's likely an underestimate. The IRS publishes in the Federal Register the names of those who give up their citizenship, and some who renounced say they haven't seen their name on the list yet. […]
The decision by the IRS to publish the names is referred to by lawyers as "name and shame." That's because those who renounce are seen as willing to give up their citizenship primarily for financial reasons.
Who are these shameful tax-evading billionaires? People like Peter Dunn, "a dual U.S.-Canadian citizen who has lived outside the United States since 1986," who renounced last year "because he felt American citizenship had become more of a liability than a privilege":
As an American, Dunn had to file tax returns and report all of his bank accounts — even joint accounts and his Canadian retirement fund. If he didn't, he would be breaking U.S. law and could face penalties of up to $100,000 or 50 percent of his undeclared accounts, whichever is larger. Dunn says he was tired of tracking IRS policy changes, and he had no intention of returning to the United States. Renouncing his citizenship, as he puts it, was "a no-brainer."
"If it was just me then it would be one thing," says Dunn, a part-time investor who worried that having to share information with the IRS would deter future business partners — and upset his wife, who is Canadian. "Disclosing joint accounts I hold with my wife and anyone I ever want to do business with — that's just too much. My wife's account is none of their business."
Dunn, who blogs about expatriation, takes issue with being characterized as a tax evader. He says the taxes he pays in Canada are higher than what he would pay in the United States, and he says he had always complied with the IRS before renouncing. But, Dunn says, the IRS approach to enforcing compliance is misguided. "It's making life difficult for a lot of people," he says. "It's driving us away."
And not only does this mean that foreign banks are dropping Americans "like hot potatoes," according to one source in the story, but there's a War on Women angle as well:
"American women married to non-Americans are only just now finding out that they have to disclose years and years of income and accounts," says Lucy Stensland Laederich, a leader of the women's club who lives in Bordeaux, France. […]
"When they decide to come clean and report everything," she says, "they have to go ask their husbands for all of their bank information, retirement funds, and investment accounts, everything."
Some of their husbands, Laederich says, refuse to hand over information to the IRS. That leaves the women in difficult predicaments.
"Your options are to ignore the IRS and stick your head in the sand; take your name off of all the accounts and live in a completely cash economy; divorce; or renounce U.S. citizenship," Laederich says. "We've seen all of these things happen."
Link via Amy Alkon.
