Why U.S. Pursues Citizens Overseas / Important if you EVER consider living outside of the USA again

[OnTheGo]

https://www.facebook.com/republicansoverseas/posts/208228726027597

http://www.icij.org/blog/2013/12/mystery-fleeing-americans

More facts, more comments by US expats affected by these laws..

 

[SusieQQQ]

Lol, some of those comments are hardly "facts" (like these laws being enacted by Obama to fund the march to socialism... Lol)

 

[OnTheGo]

Lol, some of those comments are hardly "facts" (like these laws being enacted by Obama to fund the march to socialism... Lol)

You obviously only read the comments on the FB page behind the first link.
I actually said "facts and comments" and not that any of the comments reflected facts - lol!!

Read some of the comments on that second link...they are smart people.

 

[SusieQQQ]

Sure they are. The world is full of smart people.

Bottom line is that the US system is out of line with the rest of the world. For the vast majority of the US population it doesn't make a scrap of difference as most of them will never live or earn outside the US. For those that do, it's great that people like you post things like this so people can't complain after the fact that they never knew, and if it's such a huge deal they just won't bother pursuing their DV visas all the way to getting green cards.

 

[Hexa]

For the vast majority of people who apply for DV, being allowed to live and work in USA is a huge improvement to their lives. These people aren't lucky enough to have a good paying job lined up in some other country, so for them this quirk in US taxation system is irrelevant. The small minority who are sophisticated enough to have high-paying foreign jobs are supposed to be smart enough to understand US taxes.

 

[CollingwoodRuck]

Yeah agreed, but you also spend a lot of time (and probably money) in complying with US tax laws. I think the US expats that are dumping their passports are doing so because of the unfair burden of paperwork, and the draconian approach by the US government, not the tax itself.

This can be a major (real cash) problem for people in Australia!
Most pensions (called 'super' by locals) are with private institutions - but under strict Government rules such as 9% compulsory annual contributions and no touching it until (usually) turning 60. [No exception leaving the county!]
Unlike in the usual US scheme, in Australia, annual contributions, and annual income are taxed (pretty lightly) and eventual draw down is tax-free. Furthermore, the Australian tax office allows many deductions (such as essentially tax-free dividends and 50% reductions on Capital Gain) unknown in the US
The IRS has declared such funds not to be 'Pension' schemes under the tax treaty and is taxing them with enthusiasm given its new rules. The recent Tax treaty allows sharing of tax information between the US and Australia; so hide at your own risk. Industry bodies and the Australian Treasury have made representation to the US - gone nowhere.
[Ironically, Australian Government Pensions (federal, state, and local) are not impacted.]
The killer is for US citizens who have lived in Australia and are drawing down their tax-free pension; patriotism only goes so far and you have to eat. Green card holders back in Australia approaching age 50/60 are handing them back.
Accountants are doing a great business including one who has a web site advising how to 'Avoid the Green Card Trap'.
But it is not just those nearing retirement who are impacted, any Green Card holder/US Citizen now is assessed by the IRS each year on their Australian Super Fund income - where the "income" is much higher than the Australian assessment and taxed more heavily. The sting is that, while any Australian tax is paid from the Fund itself, the Australian Government will not let funds to be withdrawn to pay US tax - so it comes out of the pocket.

It is not all gloom though; the US has an unique Visa for Australians (E-3) which has pretty good conditions. Accountants strongly recommend that Australians (holding Super Fund balances) follow this route and avoid the 'Green Card Trap'. Of course, this doesn't help US citizens!

 

[OnTheGo]

For the vast majority of people who apply for DV, being allowed to live and work in USA is a huge improvement to their lives. These people aren't lucky enough to have a good paying job lined up in some other country, so for them this quirk in US taxation system is irrelevant. The small minority who are sophisticated enough to have high-paying foreign jobs are supposed to be smart enough to understand US taxes.

It is not about high paid jobs necessarily - the FACTA and FBAR laws affect millions of ordinary US expats around the world, in a multitude of ways. I agree that many people will not be affected...for as long as they stay in the US for good! But even examples like the one by CollingwoodRuck (see post above me) illustrate the importance of being aware of tax traps, as a result of the silly citizenship based tax laws in the US.

This can be a major (real cash) problem for people in Australia!
Most pensions (called 'super' by locals) are with private institutions - but under strict Government rules such as 9% compulsory annual contributions and no touching it until (usually) turning 60. [No exception leaving the county!]
Unlike in the usual US scheme, in Australia, annual contributions, and annual income are taxed (pretty lightly) and eventual draw down is tax-free. Furthermore, the Australian tax office allows many deductions (such as essentially tax-free dividends and 50% reductions on Capital Gain) unknown in the US
The IRS has declared such funds not to be 'Pension' schemes under the tax treaty and is taxing them with enthusiasm given its new rules. The recent Tax treaty allows sharing of tax information between the US and Australia; so hide at your own risk. Industry bodies and the Australian Treasury have made representation to the US - gone nowhere.
[Ironically, Australian Government Pensions (federal, state, and local) are not impacted.]
The killer is for US citizens who have lived in Australia and are drawing down their tax-free pension; patriotism only goes so far and you have to eat. Green card holders back in Australia approaching age 50/60 are handing them back.
Accountants are doing a great business including one who has a web site advising how to 'Avoid the Green Card Trap'.
But it is not just those nearing retirement who are impacted, any Green Card holder/US Citizen now is assessed by the IRS each year on their Australian Super Fund income - where the "income" is much higher than the Australian assessment and taxed more heavily. The sting is that, while any Australian tax is paid from the Fund itself, the Australian Government will not let funds to be withdrawn to pay US tax - so it comes out of the pocket.

It is not all gloom though; the US has an unique Visa for Australians (E-3) which has pretty good conditions. Accountants strongly recommend that Australians (holding Super Fund balances) follow this route and avoid the 'Green Card Trap'. Of course, this doesn't help US citizens!

Thank you for your value contribution! Very good point on the super ... I am an Australian citizen, so another thing to consider. My wife and I are really tossing things up...and it is such a hard decision to make - we would LOVE to get our US green card and move to the US, however we feel the horrendous US tax laws would make it a one way avenue, as any future plans of splitting our time between the two countries, or living elsewhere inbetween or even moving back to AUS would be severely punished.

No surprise that US trade is increasingly suffering for the lack of US ambassadors in the form of US expats not willing or able to set up businesses overseas...as even their banks in their overseas location are no longer wanting to keep them as customers (for being US tax residents, due to the FACTA laws!).

 

[SusieQQQ]

As I said, it's all about trade offs. I don't really understand why an Australian would feel the need to get a green card. For me the tax would be a hassle but I'd rather have that than the very real possibility of becoming another crime statistic in my home country.

 

[CollingwoodRuck]

Strongly suggest that you - personally - get real advice specific to you own situation.
I think that the US Consulates have lists of Accountants that are 'certified' to work on US tax issues.
And your personal situation may be that you can cover the cost (and cash-flow) of annual IRS bills on your Super income calculated in American terms.
The real issue for any Australian is when you enter the drawdown mode of Australian Super; you certainly do not want to have any IRS obligations then. So you also need that Accountant to consider the exit tax when (or if) you hand back the Green Card.


As an amusing aside, there is a running joke with Collins Street Accountants that the increase in numbers of OC this year (remembering that majority of OC are Australians) is the result of the IRS lobbing for help in paying off the US Deficit!

 

[OnTheGo]

as an amusing aside, there is a running joke with collins street accountants that the increase in numbers of oc this year (remembering that majority of oc are australians) is the result of the irs lobbing for help in paying off the us deficit!

lol !

 

[OnTheGo]

I don't really understand why an Australian would feel the need to get a green card.

Multiple reasons. For us, it would be a sense of life adventure! We love change, it makes us feel alive!
Most people we know...are not like that! They don't like change, they don't do well with change, they don't adopt change.
They simply don't change, they don't advance. We are not like that.

Re: AU ... it has become a very expensive place to live. You need $500k to $1Mio to buy a place (or $500 to $1000 per week in rent) in any AU city and everything from grocery to utilities is often double to triple of EU or US prices.

We are actually both dual EU/AU citizens and have lived in multiple countries already. Living in the US would be half the distance to travel to visit family based in the EU. From Australia, it takes 24 hours on planes each way - so you only get to see family every two years.

I can think of many more reasons why living in the US would be a great prospect, unfortunately there are many 'hidden' surprises that we have only been learning about recently. So we are still in two minds, while keeping our options open.

 

[OnTheGo]

http://www.thenewamerican.com/usnew...new-u-s-tax-regime-is-devastating-experts-say

YES:

Beyond repealing FATCA, numerous experts and analysts who spoke with The New American said the real solution is to stop taxing Americans living abroad — period. Instead, critics of the current system say the U.S. government should adopt residence-based taxation, along with a drastically simplified tax code that can be understood by everyday Americans. The alternative — continuing on the current path — will lead only to more pain, suffering, economic harm, privacy violations, ballooning compliance costs, citizenship renunciations, trade deficits, and other major problems.

http://money.cnn.com/2013/10/30/news/us-expat-tax/

Bob Simison, who has lived in Australia for nearly a decade, said he was spending 40 hours a year to prepare his returns -- even though his income wasn't high enough to owe anything to Uncle Sam.

Then the IRS sent him a bill for thousands of dollars in unpaid taxes.
Simison believed the IRS had made a mistake, but was unable to find an accountant in Australia with the knowledge to help. So he contacted the agency himself. Simison said the process was "atrocious" -- and he was given conflicting instructions, and then an even larger bill, before the dispute was resolved a year later with help from a U.S. senator.

"The tax law makes it very unattractive for Americans [or greencard holders] to go [back] abroad."

Raymond Tilly It is like the "Hotel California" because "You can check out anytime you like... but you can never leave"!

Megeve Mike Beaudet Just received from my bank in France a request to answer questions regarding my nationality (if I was a US Citizen) "mandatory" to reply (at the request of the US) ....with threat to close my account if I did not comply ! Nothing to hide as I have always declared to IRS and Treasury. LOL....

Marcio Vasconcellos Pinheiro My friends I regret deeply having acquired US citizenship. I used to be proud of it. It became a trap.

(ref: https://www.facebook.com/americancitizensabroad

 

[OnTheGo]

[h=1]A letter to America from the son of an American[/h]November 5, 2013 by Ellen Wallace
Source: http://genevalunch.com/2013/11/05/l...003801108144_93148_124012324440625#f344f73e64

Some people talk to me about wanting to emigrate to America. Once they find out what it means to be a US taxpayer, most reconsider though. If they were to work in the US for a few years, then decide to move back home, they would still be US taxpayers until they renounce their Green Card, and this might include a prohibitively expensive Exit Tax.

Congress decreed in 2010 that every bank in the world must report to the IRS, or face consequences (FATCA). Imagine if France decreed that every American bank must report to the French tax service, or be shut out of the European market. America would take that as an act of war!

Every year I have to fill out IRS forms and a treasury form (FBAR) that threatens me with a minimum penalty of 10’000$ if I make a mistake. Being American or associated with one is now so bad, that most of my American friends are either renouncing, or moving back. Some people in my situation, but who never knew about having to file taxes to one of their parent’s home countries are being treated like criminals, and fear arrest if they ever visit America. A European friend even cancelled her wedding to an American once she discovered the tax consequences for her and her family. I, and many others, feel betrayed by America.

What should I do? Leave my friends and family and go live in the US? Quietly surrender and file taxes to two countries for the rest of my life, with my bank sending all my private account data to a foreign country? Or accept that America was a part of my father’s life, but not of mine, and renounce my US citizenship.

With the exception of backward dictatorships, no other country forces this kind of decision on their citizens. America needs to wake up and take steps to save what is left of her diaspora before it’s too late.