Skip to comments.The IRS Crackdown on Offshore Tax Cheats Comes with a Price
Posted on 07/04/2014 5:44:44 AM PDT by SeekAndFindEdited on 07/04/2014 6:04:08 AM PDT by Admin Moderator. [history]
If you're an American, July 4 likely holds some significance for you, even if that's only getting the day off from work, having a beer, and watching some fireworks. But if you're an American living overseas, July 1 may come to hold an even greater significance — the day the Internal Revenue Service's new overseas tax-collection rules took effect.
(Excerpt) Read more at thefiscaltimes.com ...
We really ought to follow the rest of the world and make taxation a TERRITORIAL system, i.e., you get taxed in the country where you earned your income.
As it stands now, the IRS follows you wherever you live.
This isn't the principle by which this (used to be) Great nation was founded.
Happy 4th of July to all ( or what's left of it ).
I believe that's exactly how the U.S. tax code works right now. You get taxed in the country where you earned your income, but you still have to file a U.S. tax return. You get a credit on your U.S. tax return for the taxes you paid in the foreign country, so you only pay the difference (if any) between what is owed to the IRS and what you've already paid in the other tax jurisdiction.
It would be much simpler to just tariff foreign goods than to tax everyone’s income
It worked for our Founding Fathers...they sure didn’t envision this Globalist nonsense on July 4, 1776
Not completely true. You are filing a full US return. While you do get a credit for taxes paid, and an overseas living exemtpion, (around 100K), you are still responsible to the IRS for differences where US taxes are higher. Further, you have onerous reporting requirements for any overseas assets, if you can now find a bank or brokerage that will take you as a US citizen.
It’s really stealth capital controls, IMHO, even if you dress it up pretty and call it fraud prevention.
If the US went to a territorial income system, like almost every country in the world, there would be no need for all of this. And, the heavy penalties and involved reporting on overseas accounts smacks of totalitarian regimes of the past. What are we supposed to do—sew diamonds in our clothing?
But you still pay the IRS, even if they're splitting the difference. It' because the IRS claims ownership of you and your wages, regardless of where on the planet you may be.
When German citizens work in the US, they do not have to file a German tax return. The US banks where they have accounts do not have to report to the German government. Our tax system is an economic Berlin wall, designed to punish Americans who dare to attempt an escape. How are we any better than the east bloc was?
As a seasonal tax preparer this act is a travesty to me. I have an elderly client who immigrated from England in the 1970s and married another former Brit here and both became US Citizens. When he died 2 years ago, she went to visit family in England and while there fell and broke her hip. Now she is living with her family there and the FATCA for her is a NIGHTMARE!
As a US Citizen, none of the British banks want anything to do with her so everything has to be channeled through her family. She had reasonable retirement income and Social Security but just the effort to comply with these regulations is punishing her. I have had to recommend to her that she give up her citizenship since it is unlikely for her to return to independent living back here in the U.S. of A.
This breaks her heart as she feels like her effort to become an American has now made her a criminal to nameless, faceless bureaucrats who have nothing but forms upon forms ‘upon penalty of law’.
The IRS is looking for tax cheats? They don’t have far to look as many of the employees at the IRS are cheating on their own taxes, not to mention the gubmint officials......... Leave the little guys alone and go for the big fish.
True only if there is a tax treaty between the two governments and then the deducted amount is still subject to limitations in actual use. Add to this the severe actual consequences of being unable to use local banking due to IRS regulatory burdens upon those institutions and you end up with real disincentives.
RE: The only solution for everyone, everywhere is to dismantle the IRS.
As I said in my first post above — CONGRESS has to pass a law.
This has not happened EVEN with a Republican President AND a Republican controlled House and Senate.
The irony is that the U.S. system is set up in a way that many people who work outside their country of citizenship actually have an incentive to work here in the U.S. (since they don't have to file returns in their own countries).
Why doesn’t she just give up her U.S. citizenship if she’s living back in England?
I also wonder if a U.S. citizen who conducts business with a foreign bank using only the currency of that nation has the same problem.
If you recall that is what I have recommended to her ...
I have had to recommend to her that she give up her citizenship since it is unlikely for her to return to independent living back here in the U.S. of A.
However to answer your question more closely, she made a choice 20+ years ago to become a U.S. Citizen and she does not want to GIVE THAT UP! I like that in a person, don't YOU?
It depends on what her motivations are, doesn't it?
I knew someone in a similar situation who retired and moved back to their country of origin without giving up their U.S. citizenship (the motivation for the relocation had nothing to do with taxation). They came back after about a year and a half because they felt their Medicare plan (i.e., taxpayer-funded in the U.S. was much better than what they would get in their home country.
Do you think I like THAT in a person?
The problem is that the 'local banking concerns' have a reporting obligation to a foreign tax authority, the IRS, regardless of the size of the depositor. It is a regulatory burden to them and unless they are already setup to handle it, they take the easier path of rejecting the account. As for deposits in local currency, it is the depositor, who is required to identify themselves by citizenship when opening the account, that is the problem. Sure, one can claim local address but almost every nation makes it a crime to hide national status.
“I think it safer to say Mormons are not mainstream Christians. Belief in the Trinity is not a condition for salvation and scriptural support for the Trinity is not as strong as many assume it to be.”
If the aggregate amount of offshore accounts equals 10k or more, you must report, regardless of currency. Only physical property is exempt from reporting, if not part of a financial account.
If I am a citizen of the U.S. and I work in a foreign country (say, Austria), I can see why the foreign bank would have a different set of rules for me as a foreign citizen. However, if I am a citizen of the U.S. and I am also a citizen of Austria, I'm not sure what difference it makes to the Austrian government or an Austrian bank if I report to them that I'm an Austrian citizen and just leave it at that. Would it be a crime in Austria to "hide national status" in that case if I also happen to hold citizenship in another country where the Austrian government has no jurisdiction?
Having been through this myself, I can see exactly why foreign banks operate the way they do. In my case I was dealing with this long before the FATCA was implemented, so I'm not sure I understand why this has become an issue right now.
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