Posted on 06/30/2018 7:21:58 PM PDT by Zhang Fei
Admittedly, living abroad as an American has always made for a complicated tax situation.
That is because the United States is one of the only countries to tax based on citizenship, not residency.
And the U.S. government has tightened its rules in recent years to make it more difficult for Americans to evade taxes by hiding money offshore.
For Americans who reside in foreign countries, that can make it more difficult to find financial institutions who will let them open accounts.
Swanson experienced those restrictions first hand when he was denied a bank account.
“It wasn’t anything personal or even discriminatory as far as nationality,” Swanson said. “It was our own government that set up penalties for them to deal with us.”
Americans overseas often face a complex filing regimen.
Swanson received another shock when he found out he was behind on tax filing requirements he did not know about.
“It was in the tens of thousands of dollars to get caught up,” Swanson said.
He did not actually owe much in taxes because he had been living in Germany, a high-tax country, which offset what he owed to the U.S. Most of that money went to the cost of the paperwork and accounting fees.
Americans are renouncing citizenship at a steady rate, thanks to laws that were put in place earlier this decade.
In the first quarter of this year, 1,099 Americans gave up their citizenship, according to data from the Internal Revenue Service. More than 5,000 citizens living overseas gave up their U.S. passports in both 2017 and 2016.
“Americans living abroad face a number of tax complications that folks living at home probably have never heard about,” said David McKeegan, co-founder of Greenback Expat Tax Services.
(Excerpt) Read more at cnbc.com ...
Work arounds are difficult.
I had a Hong Kong bank, HSBC that closed my account because I am an American. They did not want to take the rick on me because the amount of money in the bank was so small. They told me that if I could keep a few million US dollars in their account and limit the number of transactions that they would accommodate me.
Then in 2017, China started dropping all Americans from getting Chinese banks. Now, if an American wants to be paid in China, they must do so using an American bank and wire transfer paying ENORMOUS fees, often equal one months pay to get the money.
Everyone can sit and moan and groan. However, what ever you might call this, it is a burden on American citizens.
Fundamentally, I thought that the Constitution was designed as a framework to protect the pursuit of Life Liberty and freedom. Not to restrict it with undue burdens.
Given Trump’s biz background I am surprised he has not tried to repeal FATCA.
A synopsis of the nightmare that is FATCA, if you live or work overseas and are an American citizen:
The (foreign financial institutions) FFIs in these countries are required to report all financial activities of their American clients if they cross a certain threshold amount determined by the IRS. If a taxpayer is found to be under-reporting or not reporting income and assets to the IRS for whatever reason, the taxpayer will be charged with tax evasion. With FATCA, the IRS will have access to the correct information directly from FFIs.
Damaging Effects of FATCA on Americans Living Overseas
FATCA has made filing taxes more complex and difficult for Americans living overseas. They are now required to report foreign financial assets, and comply with the many new reporting and filing rules. In addition, any FFIs whose services they use, including local banks, stock brokers, hedge funds, trusts and insurance companies, are required to report information directly to the IRS. The reporting requirements and registration will soon be mandatory and is making many FFIs reluctant to deal with Americans.
The penalties for non-compliance under FATCA rules are heavy. If an FFI does not report information to the IRS, both U.S. financial institutions and other U.S. withholding agents will withhold 30% on certain payments to them.
Taxpayers that do not report their financial assets overseas may incur heavy penalties and/or imprisonment. In attempt to avoid future tax complications many Americans living abroad have renounced their U.S. citizenship. Americans and green card holders residing overseas are not happy with the changes, which will result in a great deal of paperwork, and the need to hire a tax preparer to deal with the new changes. They also fear the disadvantages they will face when dealing with FFIs.
Foreign Banks Reluctant to Cater to Americans
Many banks in countries where FATCA is implemented are closing the accounts of Americans because of the new reporting requirements. Many Americans working abroad are losing access to overseas retirement pension plans and life insurance. Although many Americans have renounced their U.S. citizenship in order to avoid discrimination and reporting problems, for many this is not an option.
Caught between the U.S. and FFIs, Americans working overseas will need to put up with the more complex of the reporting requirements. The only choice aside from renouncing U.S. citizenship is to comply with the new tax laws.
You make a very cogent observation, gaijin!
(Nota bene: I would never renounce my U.S. citizenship.)
But the inverse situation is a greater problem for me, personally.
Two years ago, my (big-name - "When 'he' talks, people listen") U.S. broker notified me that I would have to dissolve my account within six months. That, after 20 years of very successful (and for them, extremely remunerative) business relations.
The Patriot Act, etc. were cited as reasons. Of course, the real reason was the fear of being held liable in case I turned out to be financing terrorists, dealing in drugs, laundering money, etc. - and the resultant "claw-back" which could affect individual company big-wigs.
My personal broker - whom I have known for 30 years, and with whose kids my kids used to play at the beach - had no say in the matter, just hung her head in shame.
All the other big brokerages had introduced similar policies - no more dealings with non-resident U.S. citizens.
I'm not so much mad because of my own situation (I'm not hurtin'), but think of all the retired Army sargeants and other "small fry" living on a shoe-string in, e.g., the Philippines or elsewhere who were dependent upon having a "pied-à-terre" in the old homeland, for banking purposes!
Disgraceful!
Regards,
The bigger problem is that U.S. banks and brokerages now treat non-resident U.S. citizens as pariahs. See my previous posting above.
Regards,
Bigger problem:
U.S. Banks and Brokerages Refusing to Do Business with Americans Living Abroad
Regards,
“Those who already have their’s, from living in America, are willing to live in substandard countries...those who want to earn their’s tend to head for America...”
Those laws have been in place since long before Trump.
I do not believe in governments taxing anything of its citizens that is not part of the domestic economy. Just like corporations, Americans would willingly bring foreign earnings home, if those foreign earnings were not taxed to begin with. Yes, we should a “territorial” tax regime and quit chasing after what our citizens and corporations can go and pull out of other nations economies.
Yes. We’re having some confusion, too. Mrs. VanShuyten is a naturalized US citizen. She has some foreign private and government pension and health annuities maturing, and we have questions about the whole asset/income reporting requirements, and repatriation taxes. I think we’re going to take a big US tax hit, both from the repatriation tax and regular US income tax. The foreign financial institutions don’t seem to be concerned, as their payments are lump sum, one-time, end-of-contract payments, but who knows?
I don’t doubt that but as always, Obama is shielded from any negative connections.
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