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! http://t.co/tHNjXBdAKM

— U.S. Citizen Abroad (@USCitizenAbroad) June 1, 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.

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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. Passport specifically informs citizens about tax requirements but is silent about FBAR

In a recent post I suggested that there were two big obstacles to U.S. living abroad being in compliance with tax and reporting requirements. I identified the cost of tax and FBAR compliance as being one. I suggested that the second was the lack of clear guidelines and procedures from the IRS. This post generated a few comments. One of the most interesting was the following:

“Just Me” comment on Susan Tompor – Detroit Free Press – Some foreign accounts must be reported to IRS

FBAR Consciousness Moving Closer To Canadian Border …

is the title of a post that I wrote yesterday on the Isaac Brock site. Susan Tompor of the Detroit Free Press wrote an interesting article about how the IRS reporting rules affect ordinary folks. Not those “high rolling tax cheats”. Not those wealthy politicians. No, just ordinary people. You can find the article here. I suggest that you read it and make some comments. As an incentive to make some comments, what follows is a comment about this article from “Just Me”. Hope it provides encouragement and motivation!

Attorney, CPA, EA or Registered Tax Preparer – Your choice of dance partner

An inside perspective – Stacie Kitts, CPA:

“Choose A Tax Preparer That Has a Clue

Here it is, what all un-registered (non CPA’s, attorneys, or enrolled agent) tax preparers have been waiting for.  The specs for the competency test  that will award those who pass the title of  “Registered Tax Return Preparer.”

Wowwee doesn’t it just give you the chills….

No – well maybe that’s because CPA’s and attorneys can sign tax returns even if they don’t have a single clue what they are doing.  They get to do this without passing a test (other than the initial licensing exam which he/she could have taken a hundred years ago – so not even relevant today) or taking a single hour of tax related continuing professional education.  You know, training that would keep you up to speed on the actual tax laws that apply to tax return preparation.

So what do you think the odds are that  many of these licensed “professionals” would have a difficult time passing the new competency test?

Ya, scary jacked up regulation that leaves out a large number of people who are trusted to prepare your tax return.

Fixing the mistakes of these so called professionals is a large part of my practice.  I guess I should be grateful instead of loosing my mind over the absurdity of it all.”

http://staciesmoretaxtips.com/2011/09/07/irs-releases-specifications-for-registered-tax-return-preparer-test-doesnt-it-just-give-you-the-chills/

Gives you food for thought doesn’t it. Not all tax preparers are created equally and the one you choose better “have a clue”.

The IRS is the biggest obstacle to tax compliance for U.S. citizens living outside the United States

We need direction and guidance!

Let’s begin with an excerpt from a comment from a U.S. citizen living outside the United States.

“I have not been able to get advice from the IRS, from the IRS Tax Advocate, from my financial planner, from my government representatives, from the US Ambassador to Canada – it all goes in a circle and the easy answer – ‘get advice from a US tax accountant’. I do get my US taxes (and Canadian taxes) prepared through a cross-border CA and it is probably my mistake to not have asked the right questions in the first place, but here I am, as are many others, in trouble and also called by the US and even many in Canada, tax evader.”

What’s a poor expat to do?

U.S. citizenship has been priced out of the market

The costs of U.S. tax and reporting compliance

I have written a number of posts on the problem of compliance with U.S. tax and reporting requirements . Most people want to be and remain in compliance. My previous posts have opined that: the IRS and lawyer fear mongering coupled with  complexity have made compliance  difficult. The simple fact is that most people don’t know what to do. Taxpayers do NOT trust the IRS. Furthermore, the “not knowing what to do” is having a terrible effect on people’s lives (to the extent that they still have one). These views are echoed by the Taxpayer Advocate Report to Congress.

Interestingly, I realize that none of my posts has focused on what may be the single biggest obstacle to compliance.

It’s the cost stupid!!