U.S. citizenship is not cheap – Blind patriotism vs. reason

Great video – should be become required viewing for the Levins of the world!

Citizenship renunciations soar under Obama – Renouncing As An Act Of Self Defense

To Be, Or Not To Be: That Is The Question: – Whether tis nobler in the mind to suffer The slings and arrows of outrageous fortune …

Accidental U.S. citizenship – does it stay with you for life?

Introductory comment added June 1, 2013.

This is an incredibly important issue for the reasons given here.

Born outside the US to #americansabroad ? Do NOT presume you are a US person – you may or may not be! isaacbrocksociety.ca/2013/05/31/we-…—
U.S. Citizen Abroad (@USCitizenAbroad) June 01, 2013

Since the Obama/Geithner/Shulman assault on U.S. citizens abroad began, I have observed people attempting U.S. tax compliance when they are NOT U.S. persons. The following post is neither fun nor all that interesting. Remember, for those unlucky to have it:

“U.S. citizenship is a problem to be solved.”

You may not need to solve it at all!

Hang in for a long read.

__________________________________________________

 

Once upon a time  people wanted to be a U.S. citizen and were proud to be a U.S. citizen. That changed in 2011 when the IRS began to “hunt” U.S. citizens in all corners of the world. This affected many people who were and are paying huge taxes in “high tax” jurisdictions and did not know that they were also required to file U.S. tax returns.  People were also introduced to Mr. FBAR. Mr. FBAR is a particularly nasty guy who had the potential to subject them to huge penalties.

And just when you thought you had seen and endured it all the U.S. enacted FATCA. With the advent of FATCA – America’s Berlin wall:

Looking for Mr. FBAR – In Search of FBAR Fullfilment and Consciousness

“FBAR  – One Small Step For Man, A Giant Step For Mankind!”

All great advances in civilization spawn new industries. FBAR has spawned “FBAR Lawyers”, “FBAR Historians” and “FBAR Scholars“. When history is written, 2011 will be remembered as the “year of the FBAR.”  In 1983 Time Magazine made a computer the “man of the year”. Perhaps for 2011, the FBAR should be regarded as the “man of the year”. In 2011, tax lawyer Phil Hodgen, recognized the importance of FBAR in an excellent post titled:

“What had God Wrought – FBAR Edition“

Mr. Hodgen explains how something that started as part of finding tax cheats in Switzerland is now impacting Ambassador Jacobson’s  “70 year old Grandma” in Canada.

All kidding aside, the FBAR  is likely to spawn a new type of  “therapist”. Yes, it will be called the “FBAR Therapist”. Read further and you will see why.

U.S. citizen employees and FBAR requirements

Yesterday I wrote a post describing why FBAR and FATCA will make U.S. born children unadoptable. After all, they carry with them U.S. tax filing and reporting obligations. The general toxicity of U.S. citizenship is such that non-U.S. citizens will NOT wish to risk financial involvement with U.S. citizens. Here is another example.

FATCA and FBAR make U.S. born children virtually unadoptable for non-U.S parents

I’ll have to admit I had not thought of this. Although it is clear that FATCA and FBAR have combined to make non-U.S. citizens reluctant to have any kind of financial relationship  with a U.S. citizen,  a new problem has surfaced. In hindsight this is perfectly obvious. A British Columbia adoption agency  is disseminating information which explains what happens if a U.S. citizen is adopted. The agency states that:

“Whether your child lives in Canada as an American citizen, or unless and until they eventually renounce their American citizenship, they must file tax returns every year (if they have income), and if they have any qualifying financial accounts must file FBARs every year.”

Tax compliance for U.S. citizens living outside the United States

The United States of America – A Nation of Forms

The meaning of U.S. citizenship

As it stands, there are a number of normal investments  prohibited to U.S. citizens living abroad. U.S.  citizens living abroad will likely find it much more  difficult to find an accountant or tax prep person to help them  with their taxes. There are at least three reasons:

 1. Paid Tax Preparer Registration Required – Effective for  the 2011 tax year, the IRS is requiring all “paid tax preparers” to register with and pay a fee to the IRS. For many this will require the taking of an exam.

(Whether this can be applied to preparers outside  the U.S. or not, it will certainly reduce the number  of  people  willing to take this on.)

 2. Professional liability – Who would  want the risk of making a mistake? I  know at least one Canadian CA who will not take American clients. Who would want the problems? In addition to  the 1040, there is the problem of the FBAR, the new 8938 form, the appropriate RRSP election form, and a  host of possible  other forms (see below).

3. Too much work for too little money – The work  is so substantial that, that I expect the minimum fee will be in the range of $1000 (for somebody who has no assets or issues). Although this I small change for some taxpayers, it is clearly too expensive for most taxpayers.

Loyalists in the American Revolution – Liberty’s Exiles

Liberty's Exiles - Maya Jasonoff

History is always written by the victors. The American Patriots were a little like George W. Bush. When it comes to the British:

“You are either with the Patriots or you are with the British”

In an earlier post I noted that not all the residents of the colonies wanted to break ties with Britain. Those who wanted to keep ties with Britain were called Loyalists. Given the persecution of American Citizens abroad, I have become interested in the lives of the Loyalists during the American Revolution.

The truth is that the Patriots were NOT an overwhelming majority. In fact, the early colonies came within one vote of agreeing to something close to the British North America Act. Would you like to have a Loyalist during the American Revolution? If you knew what they had to endure, the answer would be no.

I cam across a fascinating book (just walking around a bookstore) titled “Liberty’s Exiles” by Maya Jasanoff. I read the first chapter and was hooked. Then I came across the video of the author herself. This video is worth an hour of your life.

IRS Issues Information for U.S. Citizens or Dual Citizens Residing Outside the U.S.

"Known unknowns and unknown unknowns"

On December 3, 2011 the Globe and Mail reported that the there would be possible waiver of tax and FBAR penalties for U.S. citizens living abroad. (On December 8, 2011 the Globe continued the story.) Once again – the directive was “sit tight” – information would be released by the end of December. Well, some (and there are surely more to come) information has been released. They apply to U.S. Citizens or Dual Citizens Residing Outside The U.S.

Is this welcome news or is it merely a restatement of the law and a further warning? In the online world, one can find a pundit to support any perspective.  The third party commentary varies from the:

Possible waiver of U.S. tax and FBAR penalties for U.S. citizens residing abroad

Subject to the "unknown unknowns"

Thanks to Barrie McKenna of the Globe and Mail for this article and to his support on this important issue during this most difficult time for U.S. citizens residing in Canada and the rest of the world. Thanks also to Finance Minister Flaherty and the MPs who have supported Canada/U.S. dual citizens during this time.

On December 7, 2011 the IRS posted a Fact Sheet providing information about this issue. I have written some commentary about the Fact Sheet here.

I recently predicted that the IRS treatment of U.S. expats would become a diplomatic issue for the U.S. The December 2011 announcement by Ambassador Jacobson, concerning the IRS and U.S. expats,  suggests that this is true.