Category Archives: Renunciation

Relinquished US citizenship in the 1970s? Are you still a U.S. “Tax Slave”?

The above tweet references a comment at the Isaac Brock Society.

Returning to the purpose of this post:

The question asked by Stephen Kish is how should Caroline be advised. Mr. Reed proposes two interpretations of S. 877A which he calls the “literal approach” and the “common sense” approach. One problem of reading articles written by the tax compliance community is, that by focusing on the theoretical, they minimize the “real life” consequences to the people they advise. So, what are the “real life consequences?” The “literal approach” results in the destruction of your life. The common sense approach means that you still have a life. (Which do you think is the better approach?)

Here is why.

Rather than frame the issue as “the literal approach” vs. the “common sense approach”, the issue should be framed as:

Approach 1 – Your Life Is Over: Under this “literal” interpretation of S. 877A, you poor dumb former American will have to turn your life savings over to the IRS (and pay the adviser to help you do this) because you did not go out and obtain a CLN. It doesn’t matter that a CLN was not required by law. It doesn’t matter that you didn’t know what one was. It doesn’t matter that the U.S. Government was threatening you with the loss of your U.S.citizenship if you became Canadian. It doesn’t matter that in some cases the U.S. was denying entry to the USA to those who had become Canadians. What matters is ONLY that this is what the statute says NOW!!!!!!! So, you better step right up and turn your life savings over to the IRS.

Approach 2 – It’s Your LIfe! Why don’t you keep it!: Let some “common sense” prevail. You were one of the smart ones. Because you relinquished U.S. citizenship – according to the clear laws of the USA in the 1970s – you are not affected by this new law. The only people affected by this new law are the “dumb bunnies” who decided it was a good idea to be a U.S. citizen AND were U.S. citizens when this law took effect on June 16, 2008. I don’t think you should draw attention to yourself. You might want to document the circumstances that led to your becoming a Canadian citizen in 1978. When documenting those circumstances, you probably should make it clear that you were intending to relinquish U.S. citizenship. But, either way you have to sleep. So, you might as well – Sleep well!. There is no good reason to turn your assets over to the IRS and pay your adviser to help you do it.

A fair reading of the legal commentary on this issue appears to be:

One group of lawyers (including the three who commented on this article) do NOT believe that the “literal” (or as Michael Miller says, the “absurd”) approach is correct.

A second group of lawyers thinks that the “literal” approach MIGHT be correct. But, they aren’t really sure. Even though they are not sure, for reasons known only to them, they usher clients into turning their assets over to the IRS. Hmmmm, …

Given the existing commentary and lack of certainty (on the part of those who recognize the “literal approach”), what I can’t understand is:

1. How any adviser could possibly advise a client that the “literal” approach is correct (turn your assets over to the IRS). Yet, we know that a very large number of people are being advised to do just that. (Note that, since June 16, 2008 a CLN is most certainly required lose U.S. tax subjectness. But NOT before.)

2. How any client, given the existence of conflicting views, could possibly allow themselves to be guided into accepting that they should turn their assets over to the IRS. (Actually I know the answer. It’s because there is ONLY one certainty in life. If you turn over all your assets to the IRS, then you will never have tax problems again. But, you won’t have a life either and then you will have a different set of tax problems.)

This reality notwithstanding:

There is/are a large number of people who clearly relinquished U.S. citizenship many years before the current laws, who have allowed themselves to be guided into the “literal appraoch” – turning their assets over to the IRS.

Conclusion: The result that you get will be determined by your choice of adviser. Think about it!

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Exactly why does the US Government hate #Americansabroad so much? (Homelanders too)

Once upon at time, there appeared a comment that was so good that it deserved a post of its own (from Russell) …

Good points that highlight, yet again, the absurdity and detachment of the U.S. political system from 9 million of their citizens now living in an ever globalized and ever more competitive world. The U.S. political class and presidential candidates disinterest in this ever-growing and important group of citizens only speaks to the total stupidity, general ignorance, global unawareness, profound provincialism and confirms a totally dysfunctional and archaic system that is today the United States. A country that attacks and harms its diaspora and through its laws has succeeded in turning its own citizens into international pariahs with international banks, in international business partnerships, in marriage and in the general perception outside of the U.S.

I recently met with three start-ups at a fair in Germany, two from the UK and one from Sweden. In my work as a headhunter they were hiring me to find them some talented people for their growing and successful startups. In all three cases, and each in separate meetings with me, the startups told me that they did not want any Americans or Europeans with U.S. Green cards or passports. They were all wisely warned by their banks and financial advisors not to bring any U.S. Persons into their business. Two of them knew the reasons and the risk that any American presence would bring to the business. The other one learned the hard way. They had an American investor who got them into his FATCA mess, reporting his holdings and his American tax consultant demanding the business’s bank details and the personal details of the owners. They returned his investment, threw him out and agreed never again to get involved with any U.S. persons in their business. This is now widely known and even if FATCA and all of the other reporting requirements for Americans would be eliminated, the damage is already done. The perception out there is to avoid hiring any Americans and also avoiding their investments. They are too much trouble and their government is an intrusive bully that thinks it can control the entire world. That spirit is so foreign to the young brilliant startup minds out there today. The U.S. has become a has-been and definitely not seen as a cool place anymore.

The world has moved on and the U.S. politicians and presidential candidates still haven’t realized that the world has changed since their anachronistic citizenship based tax system dating from the Civil War. Truly, a nation of idiots.

I wonder what Russell really thinks.

Q. Who are the #Americansabroad “forced” to renounce US citizenship A. Those who are tax compliant

The above tweet references the following comment on the RenounceUSCitizenship blog that is worth a “stand alone” post:

I renounce June 8. I have not lived in the US at all since 1992. I did know about the ludicrous requirement to keep filing taxes annually and did so. Last year when I moved to France (from Australia), my “non-US person” husband and I opened a joint bank account. I did consider leaving my name off (to stop having to file fbars), but why should the one fact that I happen to be a US citizen dictate simple, everyday, choices like that? So we opened a joint acount. About a week later, the bank called us in–we didn’t know why. Our account representative (yes, a REAL person – in France people are still treated as humans – not as consumers with numbers and no faces) explained that because I had indicated on my application that I had been born in the US, I had to sign a form required by the US. This was the first I had ever heard of FBAR. Being called in and having to sign the form made me feel as if I had been raped by Uncle Sam! Only me–my husband was not a “US person” so no problem with him. That’s when I started really looking into it. And really thinking. Since 1992, when I started filing, things have just gotten so ridiculousy complex, and I can no longer suffer the intrusion on my time, health and freedom. Yes, I am forced to renounce because I happen to live overseas. For me, I had always seen the hypocrisy of the US–I remember in the 70s when I was in high school in the US reading things in the newspaper that the US did, and recognizing that what ‘we’ were doing was so often the exact things that ‘we’ criticized the Soviets for. doing, I could go on. I find that it is the US citizens who are worldly, can think deeply and widely to see various sides of issues (not just “You’re either with us or you’re against us!”) and are HONEST (i.e, file US taxes once they find out it is a responsibility to do so) who are the ones to renounce. Sadly for the US, we are exactly the type of people needed to make a country great in this globalizing world.

Part 1 – Congressional and administrative barriers to exercising the right of expatriation – the relinquishment fee

The election of Barack Obama ushered in the era of “Change you can believe in”. For Americans abroad it is has resulted in the need to relinquish U.S. citizenship. Although the U.S. Supreme Court has ruled that there is a constitutional right to relinquish U.S. citizenship and the 1868 “Right to Expatriate” statute is still on the books, the United States continues to impose barriers to relinquishing U.S. citizenship.

This will be a series of post designed to explain the administration (think Obama administration) and Congressional barriers (think laws) to relinquishing U.S. citizenship.

 

There are at least three categories of barriers. To be specific there are:

  1. Financial – Barriers imposed by the cost of relinquishing U.S. citizenship
  2. Mental – Barriers imposed by a requirement that that the potential renunciant “understand what he/she is renouncing”
  3. Physical – Barriers imposed by the requirement that the renunciation take place outside the United States and at a U.S. Consulate

Each of these barriers is deserving of a separate post.

Today, we will begin considering the financial barriers to renouncing U.S. citizenship.

To put it simply, it is far from “free” to relinquish the citizenship of the “Land of the Free”.

Although the administrative fee to relinquish U.S. citizenship is on only one (and for many the smallest) component of relinquishing U.S. citizenship, it imposes a barrier for many. The current fee for relinquishing U.S. citizenship is $2350 USD. As Robert Wood has discussed, the United States has the highest relinquishment of citizenship fee in the world. (Check out the comments to his article.) It is reasonable to conclude that the purpose of the fee is to discourage people from exercising their right to expatriate. It is clear, that many people Americans abroad have difficulty affording that fee. See this recent Facebook discussion at Keith Redmond’s American Expatriates group. It’s clear that many families are beginning to include “U.S. citizenship renunciation” in the family budget.

Renunciation Fund – “Put a little love in your heart” – A possible humanitarian gesture …

Next – tax compliance fees and the relinquishment of U.S. citizenship.

 

 

 

 

 

 

 

#FATCA @AFNCWOODWARD @onenewsnowcom Interview @KRed65 “Tax ‘hammer’ takes toll on Americans abroad”

Please find below the radio interview and the print interview with Keith Redmond, an American overseas advocate based in Paris, France, and Chris Woodward of OneNewsNow. The anchor introduction (not included in attached audio) says, “We read and hear about Americans renouncing their citizenship because of tax purposes, but AFN’s Chris Woodward reports there is more to the story.”

 

PRINT INTERVIEW: http://www.onenewsnow.com/culture/2015/11/09/tax-hammer-takes-toll-on-americans-abroad

 

RADIO INTERVIEW: http://picosong.com/6rbG/

 

Cook v. Tait 29: “Citizenship-based taxation” or “Taxation-based citizenship” – From @IsaacBrockSoc

1. Citizenship-based taxation?

The above tweet references the following comment which is certainly “food for thought”.

A small change in vocabulary may be helpful. In point of fact, the US primarily practices RBT. More than 99.9% of tax returns are filed on by US residents. Within the US, the US tax net applies to RESIDENTS, both citizens and aliens and without distinction. It is meaningless to talk of taxing resident citizens based on citizenship when non-citizens are taxed on precisely the same basis. It is like saying we only tax people with blue eyes, but all people with eyes must pay the same tax. Within the US, it is meaningless to talk of CBT, since citizens and non-citizen residents are taxed on exactly the same basis.

The ONLY instance where the US practices CBT is in respect of NON-residents. That is a tiny fraction – fewer than a million filed returns from “compliant” non-resident citizens. With 7.6 million citizens outside the US and fewer than a million filed returns, one can only conclude that FATCA + CBT of non-residents has created is a situation of MILLIONS of US citizens hiding from the US government (7.6 million expats or duals can’t ALL be earning less than $2,500 per year…). The queue of renunciants is of course only the tip of the iceberg since almost all non-resident citizens are unquestionably non-compliant and simply live off the (US) grid and have ever done so.

Viewed in that light, the case for finding CBT to be discriminatory would seem to be a whole lot more evident since it ONLY applies to non-residents. A theoretical US resident who somehow renounced US citizenship would still be liable for precisely the same tax the next day as the day before. Citizenship is only a meaningful criterion for eligibility for taxation OUTSIDE the US; it is completely irrelevant within it. I’m sure someone who knows this better than I can check, but I’d be surprised if the domestic US tax return even asked if you are a citizen: why should they care?

2. If NOT “citizenship-based taxation”, then perhaps “taxation-based citizenship”?

The above tweet references the beginning of the discussion on whether the essence of U.S. citizenship really is just taxation. Remember that in 2004 the United States legislated a new kind of U.S. citizenship – that is the “U.S. Tax Citizen”.

Does the U.S. practice “citizenship-based taxation” or is it just “taxation-based citizenship”?

Bubblebustin suggests an answer.

We’ve had it all wrong! Unlike the rest of the world, the US practices taxation-based citizenship.

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Bubblebustin: “Taxation-based citizenship”. Wow! Why haven’t we noticed that before? Well done! Actually, this very morning I woke up with the realization that those expat Americans who are quoted in articles or surveys as being perfectly happy and willing to pay their U.S. taxes from “overseas” because “they’re American and they owe it” are actually filing and paying their U.S. taxes *in order to keep their American citizenship*. That is, indeed “taxation-based citizenship” …. which is about as un-American as it gets!

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Echoing MuzzledNoMore, great phrase you coined @Bubblebustin, re;
“… “Taxation-based citizenship”..”

Got to get that into common usage! Very insightful and useful turn of phrase.
Thanks!

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Leave it to you, dear bubblebustin, one among others of the most creative here, to come up with this descriptive term — CBT turned on its head.

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Taxation-Based Citizenship — TBC

Best one yet, Bubblebustin. It expresses perfectly the mindset of the U.S. government and those shadowy figures behind the U.S. government. Americans at home and abroad are nothing but tax fodder (some are both tax and cannon fodder). And they all thought they were being “loved” for their devotion to flag and country.

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Thanks everybody, but can we make the argument that Taxation-Based Citizenship is correct? I’ve struggled with the term CBT for quite some time and always thought there’s a better, less incriminating way to frame the issue. This all ties into the Human Rights Complaint that I’m actually just reading through now, which is very inspiring in terms of freedom, equality.

I think the argument here would be whether one can still enjoy US citizenship regardless of their personal tax situation. Can someone be denied certain benefits of US citizenship if they aren’t tax compliant?

Language matters. It’s important that we be clear in how we describe the taxation of U.S. citizens abroad.

“… living life as an American is all about living in fear, ALL THE FUCKING TIME!! Fear of the government…”

Americans who self-identify as expats as opposed to citizens of other countries seem to believe that the solution to their problems related to the USA lies in Washington DC. But DC is the source of the problem, and its functional purpose is to serve Homelanders not expats.

A lot of the 8.5 trillion so-called Americans abroad do not self-identify as Americans but as citizens of their country of residence. Hence, they are not lobbying Congress or the POTUS, because these branches of government represent not the expat but the Homelander.

This post ushers in one of the most interesting discussions among non-U.S. residents who are deemed to be U.S. citizens. Truly fascinating. This discussion should be sent to Washington, DC (let’ pretend that they care).

U.S. residents do NOT experience the United States (and the world) the way non-U.S. residents experience it. We have just passed the 4th of July.

The above tweet references a comment from the Facebook discussion that should be required reading for all. Many of those trying to navigate the new FATCA and FBAR world often wonder whether they are “really American”. Does this really apply to them? I have often jokingly (or maybe not) suggested that:

 

“If you are terrified of the U.S. Government then you are truly American”.

Consider the following comment from the Facebook discussion.

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