IRS

'We can no longer afford to be American citizens'

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A time for choosing

Well, you could always move to Canada, right? Think again. The Foreign Account Tax Compliance Act (FATCA) comes more fully into effect this year, and as The Globe and Mail's Barrie McKenna explains, "FATCA will force the hand of many Americans in Canada, making them choose between compliance or giving up their U.S. citizenship." Here's why:

For the roughly one million Americans and dual citizens living in Canada, it is going to be a lot trickier to avoid the long arm of the IRS. Financial institutions will begin collecting citizenship information along with the social insurance numbers of customers with accounts worth more than $50,000.

Expatriates with assets of more than $200,000 will have to disclose details of their holding every year or face steep penalties. […]

Many people caught in the trap have sought legal advice. Others have hired accountants to help them file years of back taxes, taking advantage of new rules that waive penalties for late filers who owe little or nothing to the IRS. Others are taking the more radical step of renouncing their U.S. citizenship.

They're coming to get you

Cal Thomas found one such American expatriate, who has lived in Hong Kong for the last quarter century and has come to the conclusion that he could no longer "afford to be an American." Excerpt:

Seven years ago, Sam left a major investment banking firm based in the U.S. to join another international bank. The law required that his 14 years of pension savings become current income and taxed it at a rate of 35 percent. He says he could not roll over the account due to a "quirk" in the law. Hong Kong citizens are taxed at a rate of only 15 percent.

Another consideration, he says, was the refusal by Hong Kong banks to allow him to open a securities account. The reason? "None wanted to deal with onerous U.S. reporting requirements. My own bank could not even open an account for me to invest in local securities."

Thanks, FATCA!

"I had paid over $1 million in U.S. taxes but didn't receive any benefits, nor did my wife and kids. (She maintains her U.S. citizenship.) As I saw the massive U.S. deficit continue to climb, it became clear that the government would likely raise taxes further. I finally decided to expatriate. … A dozen of my friends who have lived over 10 years in Asia have done the same. We can no longer afford to be American citizens."

Gig's up, Leo

Well, at least no one is contemplating having the IRS check your tax returns at the airport, right? Well….

Speaking at an international tax conference in Tel Aviv last week, Ifat Ginsburg of the law firm Ginsburg & Co. Advocates said that "we're going to see more and more people who are going to renounce their U.S. citizenship" to avoid expected tax hikes and closer scrutiny of their overseas accounts by the Internal Revenue Service.

"I also think the IRS will be much more sophisticated," Ginsburg said during a discussion of future tax trends. "When you come back to the U.S., you'll have to sign [at the airport] that you filed your U.S. tax returns."

I've written a bunch of stuff on FATCA; start here. All links via Marvin Van Horn's excellent FATCA_Fallout Twitter feed.

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  1. Wow. Fuck this shit. Unless the next one or two cycles can bring a militant Congress composed of at-least-semi-decent Republicans, let’s just fucking secede, dudes.

    1. ‘At least semi decent Republicans.’

      I know plenty of good, decent Republicans in my daily life who are legitimately in favor of liberty and limited government. None of those people run for office.

      The people who run for office are control freaks and sociopaths. There are about 5 people currently in congress who aren’t horrible human beings, so I don’t have much faith in semi-decent Republican politicians.

      1. The people who run for office are control freaks and sociopaths. There are about 5 people currently in congress who aren’t horrible human beings, so I don’t have much faith in semi-decent Republican politicians.

        …and most of them just got kicked off their committees, too.

      2. Cluestick: 99 out of 100 people who run for any office are control freaks and sociopaths.

  2. The next step will be to tax foreign nationals directly. After all, the Pax Americana costs money.

    1. They are already taxing them through currency debasement.

      If you are a foreign national and you need oil, you have to have dollars to pay for it with.

      And those dollars all lose their purchasing power when Helicopter Ben runs the printing presses to buy more of the U.S. Debt.

      The shit will hit the fan when the Saudis announce they’ll accept Euros or Yuan or Gold in payment for oil. I imagine it will be like watching a car downshift from 6th gear to 1st while traveling at 75mph.

      1. Which is why we need to start imposing the tax right away. Besides, it’s fairer to steal money from most people and give it to the people who vote correctly or fund election campaigns.

  3. “making them choose between compliance or giving up their U.S. citizenship”

    I’m a Marine combat Veteran and all that Patriotic stuff – but at this point, I would drop my citizenship like a hot potato to avoid the IRS.

    1. Right. I hope they lose a couple billion in revenue off this.

    2. You clearly don’t understand the concept of American exceptionalism, Drake. No matter what we do, we are still exceptional. The magical power of American citizenship grants us special abilities which guarantee that, no matter what we do, we will always be better than those goddamn foreigners.

  4. Hey US gov, all those roads and bridges in Hong Kong, you didn’t built that.

  5. So we’ve reached a point where the top of society is trying to get rid of their American citizenship and at the bottom we have people desperately trying to obtain it. I’m not sure what this means, but if this tide keeps building it seems like we may end up with popular demand doing away with expatriation altogether.

    1. Other countries are going to be less and less willing to do our government’s thug work for them when it comes to expatriates. If you have a successful career overseas, why would you even want to come back to the USA anymore?

    2. What it means is that we have an unsustainable system. We are in the process of becoming a Third World crapocracy.

    3. It is not just the “top of society” which is renouncing. I renounced when I learned that banks were denying me financial services simply because I was a US citizen. I couldn’t risk my mortgage being cancelled.

      It makes sense for people who wish to live in America to be US citizens. Yet, any American who wishes to work in another country is best off renouncing their US citizenship.

      Popular demand will only harm America more if it prevents Americans from emigrating.

  6. I remember when we used to make fun of Latin American countries for having all their rich people move to Miami. Never thought we’d become just like them. We’re now a banana republic without the bananas.

    1. Now our rich people are moving to Panama, Chile, and Honduras.

      1. FWIW I hear you can live like a king in Costa Rica for a relatively small amount of money compared to the US.

  7. 237 years ago, some Englishmen gave up their British citizenship for similar reasons.

    1. Ironic that the IRS doesn’t understand that we are a country made by people who gave up their citizenship.

      1. Please. That was, like 100 years ago and stuff.

        -Ezra Klein, currency debasement fan.

  8. FATCA is a form of stealth capital controls. Capital controls are usually associated with failing kleptocratic/authoritarian societies.

    Draw your own conclusions.

    1. Ding Ding! Capital controls are a fiscal must-have for every banana republic. Commissar Obozo has ways of making you pay!

    2. Three things are required for any expat:

      1) A stellar expy atty (I cannot stress this enough).

      2) An outstanding accountant who knows FATCA backwards, forwards, slantways, and sideways. (There are legal means to mitigate exposure. I invested in a lot of medical equipment before the medical device tax hit.)

      3) Either a job that is high in demand or the expat is filthy rich. Your host country can make life much easier for you, even with how hostile the USA is to people who wish to leave.

  9. As the daughter of an expat, I was taught one simple thing about how customs at your home country should treat you: they should say “welcome home,” and nothing else. Of course, this isn’t what happens at all, including to my dad, and it’s not what happened to me either when I lived abroad, though I thought to myself every time I was asked “why” I was reentering the US, “You should say, ‘Welcome home,’ and nothing else.” What could be further in the opposite direction than getting the IRS involved as well?

    1. Agreed. The proper response when asked “what was the purpose of your trip?” is “none of your fucking business.”

      1. practically speaking, anyone know what happens if you do that? As appealing as that sounds, spending hours getting questioned doesn’t.

        1. I’ve said “because I feel like it” before (and it actually was true), but they sure don’t like that. I’ve also spent hours getting questioned and having the car searched because I was with a soft-spoken, perpetually nervous friend who was obviously suspicious because she wasn’t answering the ICE asshole clearly enough. It’s always seemed like a crapshoot.

      2. “what was the purpose of your trip?”

        “traveling.”

        1. what was the purpose of your trip?

          To make government employees feel like emasculated shitheels when confronting a free man.

          1. ‘The traveling is superfluous to my intentions. I’m really here to convince you to get a real job. One that gives back more than it takes.’

  10. Living overseas (Brazil) for less than a year so far, I’m torn. I’m probably somewhere between middle and upper middle class at this point so I don’t have worry about Uncle Sam expropriating anything… yet. The company I work for also made me a shareholder so they could avoid all the shitty Brazilian labor laws which has the extreme upside of me not having to pay taxes here as dividends aren’t taxed in Brazil.

    I pray to the god Zeus that by the time I decide to go back to the US where things are relatively good in terms of living standards, I won’t have to hesitate on making a decision because of the IRS’s probing fingers.

  11. I can’t afford to be Canadian either anymore – and I live here!

    There’s has to be a way to build a country without liberals getting in the way to mess things up.

    We can find inspiration in Calvin’s ‘GROSS’ or something.

    1. I’m willing to board a ship for Freehold.

          1. Yes….one of my guilty pleasures. Good story…needs an editor though.

    2. I thought after the last election, the Liberals weren’t in the way, just the New Dictators.

  12. “There’s has to be a way to build a country without liberals getting in the way to mess things up.”

    Until we teach our children at an early age the concept of self ownership the problem will continue.
    Oh yeah, and learn to recognize sociopaths and treat them like the scum they are instead of voting for them.

  13. so basically the USG has patented the term “citizen of the United States”, and anyone who wants to claim the term has to pay licensing fees?

  14. This has been upsetting me for quite some time. I’ve been in Korea for two years and plan on staying for two more…and I have steadfastly refused to pay US taxes. I pay Korean taxes (Inhabitants Tax for my apartment? WTF does that even mean?!) and that’s enough for me.

    From what I’ve gathered from the expat community, the US/Korean trade agreement(s) exempts us ESL teachers from US taxes, but I don’t know what that’s worth.

    Pretty much I’m just assuming that I’m too small a fish to fry. But as The Eye of The State encroaches farther from its rightful boundaries, my concern grows accordingly.

    1. Dude,

      I know a woman who ekes out a living on $12,000 a year as a nanny. No husband, rents a basement apartment in her pastor’s house.

      The IRS went after her for failing to file her taxes properly. And I mean really went after her. Despite the fact that under the EIC rules she was supposed to get more money than she had erroneously asked for.

      Nobody is small enough for the computers to ignore.

      1. Damn your anecdotal shiv to my plan!

        I’m still only 25. My parents are well-enough off. Off the radar for a few years could easily be translated into “Living in the ‘rents basement being a slacker unwilling to work for a living and being the eternal child Team Establishment wishes me to be.”

        As long as I can teach them the “Never say anything to anyone with authority” rule.

        I’m secretly very concerned. But I refuse to pay taxes for a nation I don’t support and don’t earn Dollar One in.

        Fuck those fucks.

        1. Dude, if I didn’t have kids and a divorce settlement pinning me down, I’d be right there with you

          1. Dude (to use the parlance of your posts),

            Living in SoKo as a young, single (well, non-married) man is pretty sweet. It’s a wholly unprecedented standard of life for someone of my age. With my apartment that’s paid for by my employer (while realizing that it’s just a hidden cost to me), it’s quite fabulous. And I love my job. And I’m good at it.

            But fuck if I’m not worried about the Feds.

            1. Also, Korea has to be about a billion times better than Evansville… (my parents both grew up there).

  15. “When you come back to the U.S., you’ll have to sign [at the airport] that you filed your U.S. tax returns.”

    AH HA! AH HA HA HA! This asshole is implying they will not force you to do that before you leave or just do a tax ground check before you leave.

    Ron Paul wasn’t joking when he said the fences they build will be used not to keep other people out, to keep us in.

  16. The choice before the IRS is *not* between collecting 15% or 35% in taxes on expats, the choice is between collecting 15% or nothing at all.

  17. This story of the Cost of U.S. Citizenship is a FATCA story of unintended consequences, or collateral damage in that other drone war. FATCA is the Worst legislation that most Americans know nothing about, however Reason readers are more familiar than most Americans, or at least I would hope so.

    There are a lot of Shills (FATCAnatics, I call them) out there working as IRS co-enablers marketing the message of why all Foreign financial Institutions (FFIs) and governments must comply with FATCA. Why this is great for the world liberal democracy. I could send you to endless links of their pablum. Sadly, it is the opposite of what it is advertised to be.

    Individual and even institutional rights are being waived in this pursuit around the globe. You don’t have to be a Libertarian to be against this BAD legislation. I hope more will pay attention to something they know little about.

    FATCA is morphing into a Global automatic tax data exchange network promoted by the OECD and the FATCA Compliance Complex, the new profiteers in this so called War on offshore tax evasion.(Woote) Their global vision, or GATCA you wish, creates a GATCAwellian world that a few years ago, I would have never imagined could exist.

    If you want a good read and education, google this: Interview: James Jatras, Lawyer and Anti-FATCA Lobbyist by George Prior.

    Join the resistance to this misguided and Draconian legislation. Spread the word, as the U.S, Media is mostly ignoring the subject.

  18. Please sign this petition to help us repeal this crazy FATCA mess!
    http://petitions.moveon.org/sign/repeal-fatca

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