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The IRS Crackdown on Offshore Tax Cheats Comes with a Price
Fiscal Times ^ | 07/04/2014 | John Grgurich

Posted on 07/04/2014 5:44:44 AM PDT by SeekAndFind

Edited 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 ...


TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: bankaccounts; expats; facta; irs; offshoreaccounts; taxes
Put the blame where it is due -- CONGRESS.

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 ).

1 posted on 07/04/2014 5:44:44 AM PDT by SeekAndFind
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To: SeekAndFind
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.

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.

2 posted on 07/04/2014 5:50:17 AM PDT by Alberta's Child ("What in the wide, wide world of sports is goin' on here?")
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To: SeekAndFind

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


3 posted on 07/04/2014 5:53:04 AM PDT by DisorderOnBorder (Haley Barbour gave me $15 to vote)
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To: Alberta's Child

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?


4 posted on 07/04/2014 5:53:57 AM PDT by Pearls Before Swine
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To: Alberta's Child
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.

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.

5 posted on 07/04/2014 5:59:13 AM PDT by Spirochete (GOP: Give Obama Power)
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To: Alberta's Child

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?


6 posted on 07/04/2014 6:00:52 AM PDT by beef (Who Killed Kennewick Man?)
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To: SeekAndFind

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’.


7 posted on 07/04/2014 6:02:51 AM PDT by SES1066 (Quality, Speed or Economical - Any 2 of 3 except in government - 1 at best but never #3!)
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To: beef

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.


8 posted on 07/04/2014 6:03:24 AM PDT by DaveA37
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To: SeekAndFind
The only solution for everyone, everywhere is to dismantle the IRS.
9 posted on 07/04/2014 6:05:28 AM PDT by PoloSec ( Believe the Gospel: how that Christ died for our sins, was buried and rose again)
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To: Alberta's Child
You get a credit on your U.S. tax return for the taxes you paid in the foreign country ...

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.

10 posted on 07/04/2014 6:08:47 AM PDT by SES1066 (Quality, Speed or Economical - Any 2 of 3 except in government - 1 at best but never #3!)
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To: PoloSec

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.


11 posted on 07/04/2014 6:09:34 AM PDT by SeekAndFind
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To: Pearls Before Swine
Sorry -- I thought that's what I posted there. I should have been more clear. It's worth noting that in every case I've come across, the taxpayer didn't owe a penny to the IRS because the income tax rates in the other country were always higher.

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).

12 posted on 07/04/2014 6:13:00 AM PDT by Alberta's Child ("What in the wide, wide world of sports is goin' on here?")
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To: SES1066

Why doesn’t she just give up her U.S. citizenship if she’s living back in England?


13 posted on 07/04/2014 6:14:05 AM PDT by Alberta's Child ("What in the wide, wide world of sports is goin' on here?")
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To: SES1066
My understanding is that local banking concerns are only an issue when you're dealing with a large sum of money, with brokerage accounts, or both.

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.

14 posted on 07/04/2014 6:16:18 AM PDT by Alberta's Child ("What in the wide, wide world of sports is goin' on here?")
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To: Alberta's Child
Why doesn’t she just give up her U.S. citizenship if she’s living back in England?

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?

15 posted on 07/04/2014 6:21:28 AM PDT by SES1066 (Quality, Speed or Economical - Any 2 of 3 except in government - 1 at best but never #3!)
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To: SES1066
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?

16 posted on 07/04/2014 6:27:27 AM PDT by Alberta's Child ("What in the wide, wide world of sports is goin' on here?")
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To: Alberta's Child
My understanding is that local banking concerns are only an issue when you're dealing with a large sum of money, with brokerage accounts, or both.
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.

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.

17 posted on 07/04/2014 6:29:59 AM PDT by SES1066 (Quality, Speed or Economical - Any 2 of 3 except in government - 1 at best but never #3!)
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To: Alberta's Child

“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.


18 posted on 07/04/2014 6:31:02 AM PDT by aMorePerfectUnion ( "I didn't leave the Central Oligarchy Party. It left me." - Ronaldus Maximus)
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To: SES1066
This is where the applicability of these regulations gets a little hazy for me ...

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.

19 posted on 07/04/2014 6:37:00 AM PDT by Alberta's Child ("What in the wide, wide world of sports is goin' on here?")
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To: aMorePerfectUnion
"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."

??

20 posted on 07/04/2014 6:38:53 AM PDT by Alberta's Child ("What in the wide, wide world of sports is goin' on here?")
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To: Alberta's Child
Interesting conversation we are having this Independence Day morning, isn't it?

Anyway and to the point of your query; It depends on what her motivations are, doesn't it?

I know her and you do not so you can only guess and I know (in this specific case!) She was proud and happy living here in the US, she lost her husband and went to visit her old family in England, she fell and broke her hip and has become an invalid at an advanced age. Does that sound like a deliberate plan to you?

She would be very happy to retain her US Citizenship but through a new and complex governmental reporting requirement, she now has to give up a treasured status. She is what some would call 'collateral damage' in that she is an innocent bystander that the IRS & Congress steamroller runs over to get to the 'Swiss bank accounts' of the wealthy.

21 posted on 07/04/2014 6:42:00 AM PDT by SES1066 (Quality, Speed or Economical - Any 2 of 3 except in government - 1 at best but never #3!)
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To: Pearls Before Swine
It’s really stealth capital controls, IMHO, even if you dress it up pretty and call it fraud prevention.

If we were serious about fraud prevention, we'd eliminate the IRS, the wellspring of fraudulent activity in the United States.

I mean, their IT department is a fraud. The Director, john Koskinen, is a fraud.

Their support people are frauds. They can't even read or interpret their own documentation, and their tax software is junk.

22 posted on 07/04/2014 6:46:18 AM PDT by kiryandil (turning Americans into felons, one obnoxious drunk at a time (Zero Tolerance!!!))
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To: Alberta's Child
The big problem is precisely that Americans who want to open a simple, personal checking account in local currency cannot do so.

IRS has made doing so prohibitively expensive for any reputable foreign bank with FATCA. Such banks simply cannot afford to do business with Americans unless the balances are in seven figures.

23 posted on 07/04/2014 6:56:50 AM PDT by RBroadfoot
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To: Alberta's Child
This is where the applicability of these regulations gets a little hazy for me ...

One, dual citizenship works to 'disguise' you to the local bank but you would end up fully liable should the IRS discover this and you failed to report such an account. The term tax cheat can have strong legal implications.

Two, yes, some of these taxpayer reporting requirements are not new but the annual forms and regulations are as well as the required foreign institution reporting. For the foreign institutions, these reporting requirements are a real intrusion and burden that they can avoid by not taking the depositors.

From a pertinent IRS Document;
Under FATCA, to avoid being withheld upon, foreign financial institutions (FFIs) may register with the IRS and agree to report to the IRS certain information about their U.S. accounts, including accounts of certain foreign entities with substantial U.S. owners
FFIs that enter into an agreement with the IRS to report on their account holders may be required to withhold 30% on certain payments to foreign payees if such payees do not comply with FATCA
,/i>

24 posted on 07/04/2014 7:00:43 AM PDT by SES1066 (Quality, Speed or Economical - Any 2 of 3 except in government - 1 at best but never #3!)
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To: Alberta's Child

RE: I should have been more clear. It’s worth noting that in every case I’ve come across, the taxpayer didn’t owe a penny to the IRS because the income tax rates in the other country were always higher.

Try working in these countries (or territories):

Singapore, Hongkong, Switzerland, Czech Republic, Malaysia, Saudi Arabia, Qatar and the United Arab Emirates.

A lot of American expats do.


25 posted on 07/04/2014 7:03:14 AM PDT by SeekAndFind
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To: Alberta's Child

I’ve spent about ten years abroad as an expatriate and have some experience in this. It used to be, back before globalization, that reputable foreign banks were responsible to their domestic regulatory authorities. It was easy to open an account because the domestic regulatory authorities were mainly interested in collecting domestic taxes.

With FATCA and globalization, the IRS has made virtually all reputable foreign banks subject to US law. If a foreign bank does not fully comply with the US FATCA with respect to its US customers, it is subject to a 30% withholding tax on all overseas payments. The regulatory burden makes doing business with US citizens prohibitively expensive.

http://www.bloomberg.com/news/2014-06-30/offshore-tax-crackdown-opens-with-30-penalties-for-banks.html


26 posted on 07/04/2014 7:08:03 AM PDT by RBroadfoot
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To: SES1066
She had reasonable retirement income and Social Security but just the effort to comply with these regulations is punishing her.

The people at the IRS are lying, incompetent criminals who can't interpret their own documentation, nor do they have computer software that actually works.

These regulations are just a big fat middle finger to the peasants who don't have "people" to take care of this stuff for them.

That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. -- The Founding Fathers

27 posted on 07/04/2014 7:08:23 AM PDT by kiryandil (turning Americans into felons, one obnoxious drunk at a time (Zero Tolerance!!!))
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To: SeekAndFind

Just for the h*ll of it, once on a trip to the Cayman Islands, I looked into opening an account at one of the banks. They really didn’t want my money, to much hassle for anything less than 7 figures.


28 posted on 07/04/2014 7:08:51 AM PDT by razorback-bert (Due to the high price of ammo, no warning shot will be fired.)
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To: Alberta's Child

Wrong thread!


29 posted on 07/04/2014 7:17:04 AM PDT by aMorePerfectUnion ( "I didn't leave the Central Oligarchy Party. It left me." - Ronaldus Maximus)
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To: SES1066
She should consider herself fortunate that she has that kind of flexibility, eh? Though I don't have much sympathy for people who become U.S. citizens without renouncing the citizenship of their country of origin (I'm wondering how your client managed this back in the 1970s).

On the flip side ... if she ever wants to come back and live in the U.S., she'd be well served to migrate here through Mexico and enter the U.S. on a freight train with no papers, no identification, etc. She'll enjoy much more freedom here in the U.S. that way.

No sarcasm here, either.

30 posted on 07/04/2014 7:21:52 AM PDT by Alberta's Child ("What in the wide, wide world of sports is goin' on here?")
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To: aMorePerfectUnion

LOL. I wondered if that was the case.


31 posted on 07/04/2014 7:23:59 AM PDT by Alberta's Child ("What in the wide, wide world of sports is goin' on here?")
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To: Alberta's Child
Though I don't have much sympathy for people who become U.S. citizens without renouncing the citizenship of their country of origin (I'm wondering how your client managed this back in the 1970s).

I never said that she was dual citizenship, you assumed that. She DID give up her UK citizenship and is a visa visitor in England. Now she has to jump through whatever hoops she must if she decides to follow my advice to give up her singular US Citizenship.

32 posted on 07/04/2014 7:30:52 AM PDT by SES1066 (Quality, Speed or Economical - Any 2 of 3 except in government - 1 at best but never #3!)
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To: SeekAndFind

Got a letter from IRS last week with a 5 page double sided
questionaire asking me to describe my job for a former
employer

Called a Section 7206 Summons

Checked with my accountant and called up my former boss

Is a fishing exposition to see if 1099 I worked on is
legitamate or owe back payroll taxes

Sent it back in - blank...........


33 posted on 07/04/2014 7:32:08 AM PDT by njslim (T)
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To: njslim

Tell them that your previous forms were in your computer but the hard disk crashed and the disk has been recycled.


34 posted on 07/04/2014 7:35:13 AM PDT by SeekAndFind
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To: beef
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?

And please note the silence of the Republican Party (save for Rand Paul) on this issue. They apparently approve of the concept that a citizen and his future earnings are state property.

35 posted on 07/04/2014 7:37:37 AM PDT by Mr. Jeeves ([CTRL-GALT-DELETE])
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To: SeekAndFind

Computer crashed in January 2013 had to buy new one

See it does work.......


36 posted on 07/04/2014 7:39:34 AM PDT by njslim (T)
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To: Mr. Jeeves
“And please note the silence of the Republican Party (save for Rand Paul) on this issue.”

This sort of demonization serves the left’s lust for power and money. Unfortunately, they are able to co opt misguided feeling of patriotism from many on the right. Including many on this forum.

37 posted on 07/04/2014 8:18:12 AM PDT by beef (Who Killed Kennewick Man?)
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To: beef

I believe we have the lucky distinction of being the only cpuntry in the worldto file taxes no matter where we are. Next time I leave the country I am landing in Tijuana, changing my name to Gomez and sneaking back in.


38 posted on 07/04/2014 9:16:23 AM PDT by Organic Panic
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To: beef

If they don’t want to be demonized, they had better start acting like Americans instead of K-Street puppets. FATCA wouldn’t have gone into effect without Republican indifference, if not outright support.


39 posted on 07/04/2014 10:09:58 AM PDT by Mr. Jeeves ([CTRL-GALT-DELETE])
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To: Alberta's Child
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.

I don't think that's what SeekAndFind meant.

In a territorial system, there would be no "pay the difference". I would only pay US taxes for income earned in the US. If I work the year in Germany, I only pay German taxes, and zero US taxes, and while I might be required to file a US return, I would only need to list as gross income what I earned in the US (zero).

40 posted on 07/04/2014 10:15:01 AM PDT by PapaBear3625 (You don't notice it's a police state until the police come for you.)
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To: RBroadfoot
From Bloomberg article: Under Fatca, U.S. banks and other companies making certain cross-border payments -- such as interest and dividends -- to foreign financial institutions must withhold a 30 percent tax if the recipient isn’t providing information about its U.S. account holders.

I would imagine that there might be small local banks overseas which would be glad to accept accounts from US expats, and in exchange would be happy to not be part of the cross border payment system. Anybody wanting to wire money from a US bank would have to wire it to an account at a participating bank down the street, withdraw the cash, and walk it down the street.

41 posted on 07/04/2014 10:23:16 AM PDT by PapaBear3625 (You don't notice it's a police state until the police come for you.)
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