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FATCA still treating US expats like criminals
| Published: | 27 Nov at 6 PM |
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For every British expat complaining about the UK taxman taking more than his due, there are literally millions of US expats wishing they’d been born somewhere else!
Some nine million Americans living overseas face an unimaginable tax nightmare every year of their professional or retirement lives. The USA is almost unique in its taxing of its overseas citizens, with Eritrea the only other world country which does so. The horrendous reality is that US expats overseas who don’t even earn anything still have to make tax returns based on rules at best interpreted as ‘unclear’.
US expats have many other words for the system, none of which are even slightly polite, as the rules for making the actual returns are so convoluted it’s impossible for a layman not to make mistakes. In addition, the numbers aren’t reported by overseas financial institutions in the way preferred by the IRS. Penalties can be and often are draconian, making it obvious the IRS sees all USA expatriates as money launderers at best or tax avoidance specialists at worst. Either way, hapless Americans living, working or retiring overseas are caught in a seemingly inescapable tax trap.
On top of all that, expats with foreign assets are forced to declare them not just to the IRS but also to the Financial Crimes Enforcement Network. As a way to hit on all US expats’ assets, the IRS views even mutual funds as ‘passive foreign investment companies’ requiring complicated disclosures, with the introduction of FATCA making the issue worse still for overseas nationals. Foreign banks are now threatened with swinging penalties for failing to disclose the financial affairs of UK citizens or Green Card holders, with the result that the majority of overseas banks have, understandably, dumped their American account holders.
Worse still, even the so-called ‘accidental Americans’ born in the States to visitors or those whose fathers were US servicemen are caught in the trap, even if they’ve never even visited the USA after they left as babes in arms. Unsurprisingly, many US expatriates as well as accidentals are now renouncing their citizenships at a prohibitive cost simply to remove the threat of FATCA and the IRS from their lives.
Those who’re waiting in vain for the USA to adopt personal taxation via residency rather than by citizenship as is common practice in the rest of the world may wait for a very long time, as its government doesn’t seem even slightly interested in righting this massive wrong. Of course, UK expats living overseas also complain about taxation by the home country, but compared to the average USA expat they’re in clover!
Some nine million Americans living overseas face an unimaginable tax nightmare every year of their professional or retirement lives. The USA is almost unique in its taxing of its overseas citizens, with Eritrea the only other world country which does so. The horrendous reality is that US expats overseas who don’t even earn anything still have to make tax returns based on rules at best interpreted as ‘unclear’.
US expats have many other words for the system, none of which are even slightly polite, as the rules for making the actual returns are so convoluted it’s impossible for a layman not to make mistakes. In addition, the numbers aren’t reported by overseas financial institutions in the way preferred by the IRS. Penalties can be and often are draconian, making it obvious the IRS sees all USA expatriates as money launderers at best or tax avoidance specialists at worst. Either way, hapless Americans living, working or retiring overseas are caught in a seemingly inescapable tax trap.
On top of all that, expats with foreign assets are forced to declare them not just to the IRS but also to the Financial Crimes Enforcement Network. As a way to hit on all US expats’ assets, the IRS views even mutual funds as ‘passive foreign investment companies’ requiring complicated disclosures, with the introduction of FATCA making the issue worse still for overseas nationals. Foreign banks are now threatened with swinging penalties for failing to disclose the financial affairs of UK citizens or Green Card holders, with the result that the majority of overseas banks have, understandably, dumped their American account holders.
Worse still, even the so-called ‘accidental Americans’ born in the States to visitors or those whose fathers were US servicemen are caught in the trap, even if they’ve never even visited the USA after they left as babes in arms. Unsurprisingly, many US expatriates as well as accidentals are now renouncing their citizenships at a prohibitive cost simply to remove the threat of FATCA and the IRS from their lives.
Those who’re waiting in vain for the USA to adopt personal taxation via residency rather than by citizenship as is common practice in the rest of the world may wait for a very long time, as its government doesn’t seem even slightly interested in righting this massive wrong. Of course, UK expats living overseas also complain about taxation by the home country, but compared to the average USA expat they’re in clover!
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