Warning for U.S. Citizens

[Dockhead]

Originally Posted by Wotname

Amazing thread, gobsmacking really, especially about USA expats having to file tax documentation yearly even if they don't need to pay US tax.

And U.S. nationals, including dual nationals, must use a U.S. passport to enter and leave the United States - WTF.

Land of the free, I hear it everywhere but I'm not seeing it in action - what eyeopening arrangements!

To be fair, I think most countries require you to use THEIR passports, coming and going, if you have more than one. I don't actually find that so unreasonable.


But the tax filings required of U.S. expats who don't pay any tax, are even worse than you think. These filings are extremely complex, much more so than what Americans living at home file. My own U.S. tax return runs to something like 250 pages and I won't tell you how much it costs for me to have prepared


You CAN'T owe U.S. taxes, as a salary-earning expat without U.S. source income, unless you BOTH (1) earn more than $108 700 AND (2) live in a country with lower tax rates than the U.S. So only a small percentage of the 7 million or however many U.S. expats do actually pay taxes, nevertheless all 7 million have to file returns which may run into hundreds of pages.



You own a company abroad? Even a 10% share? Or you're just an officer or director of a foreign company? File a 5471 for each foreign company you have anything to do with, and present detailed financials. No big deal, you might think -- we prepare P&L's and balance sheets anyway, right, just attach them? Wrong. The IRS demands these financials to be presented in U.S. GAAP, which is a different accounting system from what is used in the rest of the world. Your accountants have to do what is called a "translation", which is a recreation of the financials from zero into a different accounting language. PWC charge me more to do this for my bloody 5471's than it costs to do the financials in the first place in IFRS. Neglect this and welcome to a $10 000 penalty per occurence, which can be increased to $50 000 even for a single occurence, if it continues.



Do you have signature authority for a foreign company's bank account? File a FBAR. Forget to do this, forget just one bank account -- $10 000/$50 000 per occurence.



Note that none of this has anything to do with U.S. taxes -- foreign companies don't pay U.S. taxes just because they have a foreign owner or officer or director, and signature authority on a foreign company bank account has zero tax implications. They just want to know.



And FBAR requires us to file information about every single foreign bank account or financial account we have, with maximum value during the year, etc.


It can run to hundreds of pages, even for a U.S. citizen who pays no U.S. taxes

Thousands of Americans burn (figuratively) their U.S. passports every year, and a recent survey showed that fully 25% of long term U.S. expats are "planning to" or "seriously considering" renouncing their U.S. citizenship. Some may be surprised to learn that only 2% or so do this in order to pay less tax. The most common stated reason is to get out from under all these filing requirements.

[Jammer]

Originally Posted by Wotname

Land of the free, I hear it everywhere but I'm not seeing it in action - what eyeopening arrangements!

It's the Land of the Free and the Right to Arm Bears. Please, get it right.

[Jammer]

Originally Posted by Dockhead

Thousands of Americans burn (figuratively) their U.S. passports every year, and a recent survey showed that fully 25% of long term U.S. expats are "planning to" or "seriously considering" renouncing their U.S. citizenship. Some may be surprised to learn that only 2% or so do this in order to pay less tax. The most common stated reason is to get out from under all these filing requirements.

I don't have the statistics, but experience would lead me to conclude that most expats considering renouncing their USA citizenship have had dual citizenship since birth and have stronger ties to the other country.


The USA, like many nations in the Americas but unlike practices on other continents, confers citizenship upon anyone born on U.S. soil regardless of the nationality of their parents.

[Wotname]

Originally Posted by garyfdl

If you knew anything about our history, particularly as it relates to colonial period under British rule, and our Constitution, then maybe you'd understand.

Haha.... that little hiccup was over tax arrangements too if I learnt my history right.

Sounds like time for reset!

[El Pinguino]

I would have thought that a passport would be cancelled to stop someone leaving the country rather than getting back in.

My father was never employed in Australia and was never part of the PAYE thingo.
As a result he always needed tax clearance - ie taxes paid up to date - before leaving the country.
Once when leaving with my mother his taxes weren't paid up to date - maybe halfway through a tax year or something.
Only allowed out because my sister and I were being left behind as security. It was good to know one had a purpose for being.
That was back when the international terminal in Melbourne was a Nissen hut fitted out with trestle tables.

[garyfdl]

Originally Posted by Wotname

Haha.... that little hiccup was over tax arrangements too if I learnt my history right.

Indirectly? Perhaps. But the larger issue was representation, or rather the lack thereof, i.e. not having a say in the decisions that would directly effect the (at the time) British citizens living in the colonies.

[requiem]

Originally Posted by garyfdl

Indirectly? Perhaps. But the larger issue was representation, or rather the lack thereof, i.e. not having a say in the decisions that would directly effect the (at the time) British citizens living in the colonies.

Perhaps. I've also heard it was more due to what we might today call real estate developers (or at least ultra-wealthy landowners) who were tired of Parliament telling them to stop taking Indian land, because it kept sparking conflicts that then required stationing more troops in the colonies to deal with those conflicts, and Great Britain would have preferred to use them for the ongoing wars with France. (And not trade with the enemy either.)

[Pelagic]

Originally Posted by Wotname

And U.S. nationals, including dual nationals, must use a U.S. passport to enter and leave the United States - WTF.

For some reason, Canada has recently adopted that same policy

I am British born, Canadian immigrant, non resident for 30 years .

I have always traveled on my UK passport to Canada in the past, but just before Covid when booking flight to Vancouver, I was informed that I needed to enter with a valid Cdn passport..

As it had just expired, delays ran into Covid, so never went

No idea why this law is being enforced, but probably Tax related

[garyfdl]

Originally Posted by requiem

Perhaps. I've also heard it was more due to what we might today call real estate developers (or at least ultra-wealthy landowners) who were tired of Parliament telling them to stop taking Indian land, because it kept sparking conflicts that then required stationing more troops in the colonies to deal with those conflicts, and Great Britain would have preferred to use them for the ongoing wars with France. (And not trade with the enemy either.)

That's and 'angle' I haven't heard before. But it's similar to my understanding that the taxation Britain imposed prior to the Revolution was to cover and recoup the costs incurred for the French and Indian Wars from about a 10 year period starting in 1754.

[skipmac]

Originally Posted by goboatingnow

My passport was stolen in France. The border police rang Dublin immigration , put him on they said. How’s things , fine say I. He asked me to hand the phone back “ that’s fine just ask him to ask for “ jack “
at Dublin immigration

Ps always pay your taxes. I need my state pension

Loved immigration at the Dublin airport. Every other country, even coming back to the USA the officers invariably look at me like I'm some sort of international criminal, ask me sternly where I've been, where I'm going, the purpose of my visit, how long I will stay, the rest of the usual questions then decide that I might not be an immediate threat and, reluctantly, allow me in.

Dublin they quickly checked my passport then smiled broadly, gave me a hearty welcome to Ireland and seemed genuinely happy to see me there. Ireland might be the friendliest country in the world.

[valhalla360]

Originally Posted by Dockhead

1. Stop taxing people based on citizenship.

Warning thread drift....

So if they stop taxing you, why should your country of citizenship provide services to you at all if you aren't willing to help pay for them.

They already give a large reduction to account for the fact you may get less service but it costs money to maintain embassies, consulates, passport services etc...

I can agree some of the reporting/filing rules can and should be simplified but I have no problem with taxing.

[valhalla360]

Originally Posted by Dockhead

1040 wants your HOME ADDRESS, and allows the use of a PO box ONLY if the post office doesn't deliver to your home. 1040 doesn't say "mailing address", it says "HOME ADDRESS".

You clearly are unaware of what we are discussing. It's not a PO Box.

I suggest looking up the details for St. Brendan's Isles. They have a lot of info and they are well established for setting up an official domicile (they even have a section on expats). They are far from the only service of this type.

[valhalla360]

Originally Posted by Jammer

I don't have the statistics, but experience would lead me to conclude that most expats considering renouncing their USA citizenship have had dual citizenship since birth and have stronger ties to the other country.


The USA, like many nations in the Americas but unlike practices on other continents, confers citizenship upon anyone born on U.S. soil regardless of the nationality of their parents.

2,070 people renounced citizenship in 2019.

Lots of people talk and grumble but a vanishingly small percentage actually do anything about it.

And as you suggest, most have long since left the USA and haven't been paying any taxes for a very long time, so we aren't "losing productive workers".

Again, not that the reporting rules shouldn't be simplified but it's not driving a mass exodus.

[valhalla360]

Originally Posted by skipmac

Loved immigration at the Dublin airport. Every other country, even coming back to the USA the officers invariably look at me like I'm some sort of international criminal, ask me sternly where I've been, where I'm going, the purpose of my visit, how long I will stay, the rest of the usual questions then decide that I might not be an immediate threat and, reluctantly, allow me in.

Dublin they quickly checked my passport then smiled broadly, gave me a hearty welcome to Ireland and seemed genuinely happy to see me there. Ireland might be the friendliest country in the world.

I like the Ireland approach where you go thru customs & immigration before leaving, so you are effectively a domestic flight when you land and can get out of the airport quickly.

But never had an issue coming back into the states. Usually joke around a bit when I offer to get my laptop out so I can pull up the spreadsheet with countries visited.

[Dockhead]

Originally Posted by valhalla360

Warning thread drift....

So if they stop taxing you, why should your country of citizenship provide services to you at all if you aren't willing to help pay for them.

I am all for paying your own way, so no disagreement there. I am fundametnally against freeloading. But one more time -- very few U.S. expats pay any tax at all. You have to BOTH earn more than $108 700 AND live in a country with lower taxes than ours, before you pay tax.


The entire world does not tax based on citizenship -- it taxes based on SOURCE of income. What's wrong with that? A U.S. citizen with interests of any kind in the U.S. will have some kind of U.S. source income, will pay property taxes on any property there, will pay according to connection. What is the point of setting up this monstrosity of a system with this incredibly burdensome filing which doesn't collect any revenue? This is just bureaucratic metastasis.

Originally Posted by valhalla360

They already give a large reduction to account for the fact you may get less service but it costs money to maintain embassies, consulates, passport services etc...

I can agree some of the reporting/filing rules can and should be simplified but I have no problem with taxing.

Passport services are already pay as you go, as they should be.


Embassies and consulates don't exist because of U.S. expats with no ties to the U.S. Consular services are pay as you go.


The whole rest of the world is fine with taxing based on source of income.