Monthly Archives: October 2011

The psychic, financial and life costs of complying with the Internal Revenue Code

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This video suggests that the compliance cost of filing taxes is $1000 per person per year. As an expat, you need to file all of the other forms. Your financial cost will be much more. But, don’t fort the stress and anxiety. What about the problem of even finding a tax professional who can do this?

In the beginning, the U.S.A. was a nation of laws. Now it is a nation of forms!

The question is simple: do you want to spend your time paying people to help you fill out forms or do you want a life?

U.S. Citizenship – It’s time for it to go!

Tax havens and the public good

Note that I do not condone violation of the law. Furthermore, U.S. expats have reason to keep their money outside the U.S. (they have to live). Hence, these thoughts are really directed to U.S. taxpayers who are resident in the U.S. and keep their money outside the U.S.

FATCA is motivated largely by an attempt to make it hard for U.S. taxpayers to keep their money in foreign countries. But, why would any U.S. resident (expats are a different issue) want to keep their money outside the United States?

There is only one answer: tax rates in other countries are less. The United States taxes corporations (at least in theory) at one of the highest rates in the world. The easiest way to end the use of the so called “tax havens” would be to lower U.S. tax rates. At lower tax rates, U.S. tax payers would have:

1. No incentive to leave their money outside the United States; and

2. Every incentive to to avoid the bureaucratic costs of keeping their money outside the U.S.

It’s simple:

The United States should just lower tax rates – let that money come home!

History has demonstrated that when tax rates are lowered, governments take in more tax revenues. But, this if of course too logical for the Levins, Obamas, and Geithners of the world to understand.

Don’t follow through with FATCA – the Berlin wall of the financial system.

Investments Effectively Prohibited To Canada U.S. Dual Citizens

“There has been a lingering question about the US tax treatment of Canadian Mutual Funds in taxable accounts.  This discussion does not apply to investments in RRSP accounts.  In early 2010, the Internal Revenue Service issued a determination that most Canadian Mutual Funds are corporations for US tax purposes, even though they are organized as trusts under Canadian law.  Because they are corporations, most Canadian Mutual Funds are Passive Foreign Investment Companies (PFIC).

A PFIC investor has burdensome US tax reporting as well as potentially confiscatory taxation.  If a PFIC provides certain required information, the tax burden can be lessened, but this is not practical for must Canadian Mutual Funds.

There are two solutions—one short-term and one permanent.  On a short-term basis you can report income on a “marked to market” basis in your US income tax return.  This means that the change in value during the year will be reported as ordinary income.  This, of course will, require additional valuation information each year, but it will avoid potential tax and interest charges that have the potential to exceed 100% of the income from the investment.

The second solution, and the one I recommend is divest your portfolio of all foreign mutual funds and invest in individual security issues.  While this may not sound like a sensible solution for the Canadian investor, but it is the price of being a U.S. taxpayer.”

Bradley Kirschner – Seattle Based CPA

Thank you Mr. Kirschner for the succinct advice! Continue reading

U.S. Expats and collateral damage – can the “end” possibly justify the means?

Collateral Damage and Rule of Law – Does The End Always Justify The Means?

“Freedom and the dignity of the individual have been more available and more assured here than in any other land on earth. The price for this freedom at times has been high, but we have never been unwilling to pay that price. … I do not believe in a fate that will fall us no matter what we do. I do believe in a fate that will fall on us if we do nothing.”

Ronald Reagan

“But a Constitution of Government once changed from Freedom, can never be restored. Liberty, once lost, is lost forever.”

John Adams Continue reading