The agony of U.S. citizenship for U.S. citizens living outside the U.S.

U.S. citizens cry out in agony! But, the U.S. government “Silence is Deafening

The cries are getting louder and louder! Inside the U.S. only Taxpayer Advocate seems to be listening. Outside the United States, American Citizens Abroad continues to soldier on. In Canada, the home of (probably) the largest number of U.S. citizens (many of who are also Canadian citizens) the Government of Canada is listening. Finance Minister, Jim Flaherty, has been consistent in his position that FATCA is intrusive and unnecessary and the Canada will not collect FBAR penalties. He has been consistent with the sentiments expressed in his public letter of September 16, 2011. U.S. citizens in Canada are in a far better position than U.S. citizens in other countries. Furthermore, Mr. Flaherty has been responsive to citizen’s concerns, recognizing that Canadians are desperate for help. The evidence is building.  The IRS Jihad against U.S. citizens abroad is intentional murder.  Many U.S. citizens are  renouncing U.S. citizenship to protect themselves from the U.S. government. Take the above poll which is from a previous post describing how renunciations of U.S. citizenship are soaring under Obama. Consider the following wisdom from a U.S. citizen living in France.

Homeland Americans do not love their “Domestic Abroad” and routinely characterize them as “traitorous Benedict Arnold’s.”  Now these citizens abroad are in a complete panic now that they are aware of the U.S. tax and reporting requirements.  They are facing the same compliance issues as U.S. immigrants and they are now encountering discrimination in their host countries (loss of local banking services, for example, or limited retirement investment opportunities or even being cut out of business deal by non-US partners) as a result of FATCA.

Many of them cannot easily return to the U.S. – if they did they would have to close their businesses or leave their jobs, get divorces from their foreign spouses and, in some cases, leave their minor children behind in the host country.  Contrary to popular belief in the homeland, the vast majority of these people are not millionaires and run a real risk of arriving back home in the U.S. with limited assets, if not in a state of outright penury. On the other hand, they can no longer continue to reside in their host countries as U.S. citizens where they risk paying double taxes (U.S. taxes in addition to host country taxes) and must pay the increasing cost of compliance (international tax specialists to file the 1040 and a whole host of other forms demanded of overseas citizens who have built lives abroad and are permanent residents of their host countries).  Even Nina Olsen, the IRS Taxpayer Advocate in the U.S., said in her 2011 report:

The complexity of international tax law, combined with the administrative burden placed
on these taxpayers, creates an environment where taxpayers who are trying their best to
comply simply cannot. For some, this means paying more U.S. tax than is legally required,
while others may be subject to steep civil and criminal penalties. For some U.S taxpayers
abroad, the tax requirements are so confusing and the compliance burden so great that they give up their U.S. citizenship.And that sums up quite nicely what is, in fact, happening.  Those who are in the know and can afford it are mostly “complaining and complying” while those who cannot are renouncing U.S. citizenship. 2011 was a banner year for renunciations of U.S. citizenship.  2012 will be worse (see this and this excellent analysis over at Overseas Exile.)

In addition to the current Government of Canada, the Official Opposition of Canada (NDP) is taking the IRS assault on Canadian citizens very seriously. Individual MPs have made an effort to respond and educate.  Individual MPs have organized public meetings.  Interestingly, the newest NDP MP, Craig Scott is a law professor/human rights lawyer. Furthermore, he attended a public meeting about FATCA. He would be a great addition to the cause. Interestingly there has been very little support from the Liberal Party of Canada. Here is a letter from Bob Rae.  Although the Green Party of Canada has only one seat in the House of Commons, their leader Elizabeth May (who was born in the U.S.) has expressed her support for Canadians.

As the FATCA implementation date comes closer and as we find ourselves in tax season, many U.S. citizens (whose only crime is to live outside the United States) are living in a state of desperation and agony. Some samples:

This man gives the word “prescient” real world application:

Why can’t anything be done about this? Why won’t the U.S. listen?

In closing, some “psychotherapy for U.S. citizens living outside the United States” – the Widsom of Moe Levine:

We are living in interesting times.

4 thoughts on “The agony of U.S. citizenship for U.S. citizens living outside the U.S.

  1. markpinetree

    I am trapped. Lived and worked in the USA thirty years. Never invested one cent of American earned money in a foreign country. During this thirty years I never had to file Income Tax in my country of origin. Now an old man I came back to my country of origin. My nighmare started. I have to file Income Tax in two countries. I pay Social Security Self-employment Tax in the two countries. I have to pay US taxes on earnings that are not taxed where I am. But what is worse are the forms,,, forms and mora forms… even if I don´t have to pay taxes. And much worse, the fear. I never knew about FBARs. I did the best I could when I found out by chance. Now I can´t sleep at night not knowing what may happen. I have consulted five+ US CPAs and 2 US Lawyers, spending more than 5000 dollars. Still I don´t know what may come my way. This is now affecting my health. I used to love the USA. It was a good Country for me. I am grateful that when 25 years old I decided to move there. My whole family has dual citizenship. My two married daughters and a son live in the USA. I am retired in the USA and I have savings and tax shelter in the USA. I am trapped. If I could I would renounce my US citizenship. I can´t go through this every year. Perhaps I should go back to the USA and retire. I don´t know what to do. I keep hoping that things will change and that I would be able to live where I am now and have some quality of life in my remaining years. But I am afraid. My belief in the fairness of the USA is shaken. I can´t believe this is happening to me in the end of my life.

  2. FullTurtle

    @markpinetree: I know your distress. I can’t believe this is happening either. Like you, I stumbled onto the information about FBARs & FATCA by pure accident a couple months ago. And like you, I feel utterly, completely trapped. I had absolutely NO idea I was required to file US income tax returns (I left the US at 16 yrs old)… even though I have never worked in the US. and would not have owed them a dime of income tax even when I was working. Sadly for me, I’m not a dual citizen (yet). I’m retired now too, and my back is against the wall.
    I have read (and continue to read) everything I can possibly find on this horrific issue, searching for a “way out”. After countless days spent scouring the internet for every shred of information and also loosing countless hours of sleep, I’ve come to the conclusion that I must take the necessary steps to renounce my US citizenship. I’ve lived in my “country of residence” for 44 years, and although I’ve known for a long time now that I could never move back to the States (I can’t afford to be “elderly” in the US, considering the astronomical cost of medical care); it is a surprisingly difficult thing for me to hack off that “birthmark” of US citizenship. I have family heritage dating back to the 2nd boat to arrive at Plymouth Rock! I have ancestors who fought at Gettysburg and were pioneers in the “wilds” of Iowa. Still other ancestors were involved in the wild dash from St. Louis to claim free homestead rights in the “wild west” of Kansas. My grandfather fought for the US in WWI, and my father (a Marine) in WWII. Most of my family live in the States. This is a very tough thing to turn your back on.
    Renouncing is the ONLY way out for me, the ONLY way to get out from under the current US insanity. I honestly think (hope? dream?) that the US will turn things around someday and that things actually WILL get better… but I don’t see that happening in my remaining lifetime. Like you, I can’t continue to pay the high CPA costs to annually file these ridiculous forms. I have to get out.
    So, I have started the process. I’ve done my “due diligence” and have had my legal consultation. I will now pay (one time only) the massive legal and accounting fees in order to file my 5 years worth of back taxes (proving I owe nothing), my 6 years of FBARs, and the other 2 forms outlining my entire retirement savings (with hopefully very few if any penalties… I’m NOT going into the OVDP)… whatever is necessary to get to the point where I am “allowed” to renounce my US citizenship.

    1. renounceuscitizenship Post author

      Didn’t Ambassador Jacobson say he wouldn’t go after those 70 year old grandmas? What about calling him up and holding him to it!

      Actually, you are right. Retaining U.S. citizenship is not an option unless you have a whack of cash and think it should be spent on the “cross border professionals”.

      Given what you have said in other places, your compliance fees should not be too much. So, be careful.

      U.S. citizenship has the characteristics of owning a boat. The two best days are:

      1. The day you get it (if you are an immigrant).

      2. The day you get rid of it (if you live outside the U.S.)

      Calm down, your decision has been made!

      Here’s hoping for your happiness …


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