# Starting a LTD company and FATCA



## pl130

Hi everyone, first post on this forum, so here it goes I've been offered onshore work with an engineering company in the UK. Only catch is that they want me to start my own LTD company and work for them as a contractor. Annual income would be in the £50,000 before taxes and expenses. Contract would likely last about 12 - 18 months. I'm also aware I need to start becoming compliant with the IRS, etc. I relocated to the UK on a Polish passport almost 5 years ago from the states. I hold dual citizenship, having been born in Poland and naturalized in the states. I understand I'll have to be sorting paperwork out with the IRS, as I've just learned that as Americans your effectively taxed to death wherever you go. I never would have expected this from a country that preaches Liberty and Justice for all. Anyway, I'm having to setup a company bank account for my LTD company and they ask about a dual nationality status. I guess I shouldn't leave this blank, as they, may eventually find out, but what if they end up closing the account, due to my citizenship, as I've heard similar things happen to other Americans. I'm also debating whether to even take this job. Sorry for my ramblings and any help would be greatly appreciated.


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## Nononymous

Two options:

1. Report your dual citizenship on the bank account application, which will flag you for FATCA reporting, and become compliant on your US taxes and FBAR reporting and all that good stuff, for the rest of your life. (Once compliant, you have the option of renouncing your US citizenship.)

2. You do not have a US place of birth, and you have Polish citizenship. Does the US have any record of your being in Britain? Does Britain have any reason to believe that you're also American? If not, you can take a (probably quite small) risk and conduct your business as a Polish national and pretend that the whole US citizenship thing was just a strange dream...

The stories of Americans being booted from their bank accounts seem most prevalent in Switzerland. I'm sure your bank would be right pissed if you lied to them and they found out they had a US citizen on their hands, but I expect they don't get to keep your money if they close your account.


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## pl130

Yea, it appears I'll be going with your option 2. I know this won't mean anything, but it doesn't say anything about the FATCA or any reporting to the US in the T&C's of of the bank which I'm leafing through right now. The bank is called Cater Allan, by the way.


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## Nononymous

Nothing wrong with lying and sticking it to the man, provided you don't get caught.


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## pl130

Nononymous said:


> Nothing wrong with lying and sticking it to the man, provided you don't get caught.


Thats the key thing, what do you do or not do, to not get caught. Im afraid the IRS might somehow gain access to my personal UK bank account. Im not someone who is rich or anywhere close to it; so why put such a burden on people who already have enough on their plates, just by living abroad. Seems farsical that a country that preaches agianst double taxation is guilty of it themselves. If it weren't for my parents living in the states, I would easily ditch the passport.


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## Nononymous

You are preaching to the converted around here. But the reality is, these laws exist. What folks do is figure out if or how much they want to comply with them.

If you have nothing indicating you to be a US citizen (or "US person") such as a US birthplace or US mailing address, there is nothing to suggest to your bank in the UK that you are anything other than a Polish citizen. They must ask, but they likely won't work too hard to check the answer, unless you're depositing many, many millions.

And when you say "the IRS might somehow gain access to my bank account" you are really only talking about information. They cannot freeze the account, or withdraw money from it, or any such thing. (Unless of course you are a major international tax criminal against whom lengthy legal proceedings have been undertaken.) Your bank might close the account to protect itself if it discovers that you lied, but beyond that, probably not much happens. 

Do some reading. There are good reasons to become compliant, particularly if you plan on travelling back to the US to visit family. You are legally obliged to enter the US on a US passport if you are a US citizen, though this is loosely enforced (and with a non-US birthplace you are at less risk of detection should you use your Polish passport). When you renew the US passport, you supply your current address and social security number (though no evidence really that the IRS has the resources to follow up on this information to check the tax compliance of US citizens living abroad). So with the travel back it's not as easy to remain completely off the radar. But while you decide what to do, fooling your British bank shouldn't be too difficult.

Unfortunately ditching the passport - renouncing US citizenship - requires five years' tax compliance and a fair bit of paperwork. Which is why a lot of dual citizens choose to ignore it and fly under the radar.


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## Nononymous

FYI, the irony in all of this is that it's pretty rare for US expats to actually owe the US any money - you wouldn't be "taxed to death wherever you go". There are treaties to prevent double taxation, exemptions for income earned abroad, etc. It's just a crapload of paperwork for everyone involved.

Really quite pointless but them be the laws.


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## BBCWatcher

There's zero U.S. tax owed on £50,000 of annual earned income if you're living outside the U.S. That's via the U.S. Foreign Earned Income Tax Credit. You might even perhaps do better than zero, i.e. qualify for a negative U.S. tax rate by taking the U.S. Foreign Tax Credit instead. A negative tax rate in this case means you'd "bank" tax credits that can be used to offset future U.S. tax liabilities up to 10 years into the future.

Considering that the _worst_ you can do is zero U.S. tax, and that you might even do better than zero, why wouldn't you comply with U.S. tax and financial reporting requirements? I'm always amazed with people who suggest bending or breaking rules when there's not even any personal benefit at stake. It's just weird.

That isn't at all like "taxed to death," is it?


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## diharv

BBCWatcher said:


> There's zero U.S. tax owed on £50,000 of annual earned income if you're living outside the U.S. That's via the U.S. Foreign Earned Income Tax Credit. You might even perhaps do better than zero, i.e. qualify for a negative U.S. tax rate by taking the U.S. Foreign Tax Credit instead. A negative tax rate in this case means you'd "bank" tax credits that can be used to offset future U.S. tax liabilities up to 10 years into the future.
> 
> Considering that the _worst_ you can do is zero U.S. tax, and that you might even do better than zero, why wouldn't you comply with U.S. tax and financial reporting requirements? I'm always amazed with people who suggest bending or breaking rules when there's not even any personal benefit at stake. It's just weird.
> 
> That isn't at all like "taxed to death," is it?


The personal benefit at stake is the result of choice whether or not to forever become a slave to the man with onerous filing requirements,fantastically outrageous compliance industry fees , endless threats etc. If you have a choice, don't open that pandora's box. You'll regret it if you do .


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## BBCWatcher

Yes, and possession of U.S. citizenship is also clearly a choice. Every citizenship comes with certain rights, privileges, and obligations. You're welcome to choose, at least within certain bounds.

Please also note that the "onerous" penalty for not filing a tax return in any/every year when zero U.S. tax is genuinely owed is...zero. There is no penalty in such circumstances. FBAR forms are many things, but nobody rational would describe them as onerous.

Hyperbole is simply not helpful.


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## DavidMcKeegan

BBCWatcher is correct.... the odds of you facing any dual taxation are slim to none.

Also, with the new Streamlined program in place, there really has never been a better time to get back on track. You can file simply the last three years of returns (and six years of FBAR's if you have more than 10K in foreign accounts) and be considered up to date on your US taxes. 

As such, if you ever have any desire to work back in the US, etc....I would strongly recommend getting caught up on your US taxes. Even if you don't plan to ever work there, I would still get caught up so as to limit the potential risk (albeit small) of getting "caught" by the IRS and facing those negative consequences.

In the end the choice is yours, but I would certainly file and be done with it.

Good luck!


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## Nononymous

BBCWatcher said:


> Yes, and possession of U.S. citizenship is also clearly a choice. Every citizenship comes with certain rights, privileges, and obligations. You're welcome to choose, at least within certain bounds.


Well that's really the heart of the issue. For a lot of people, it wasn't a choice. It was something bequeathed to them, which they can't easily get rid of. And if they're not interested in exercising the rights and privileges, then they likely aren't too keen on the obligations.

Compliance is a choice, and there are good arguments for either option.

If you travel to the US a great deal, plan to return, have family and (possibly eventually via inheritance) assets in the US, then there are compelling reasons for compliance. (Particularly if you can bank some tax credits for later use.)

If you don't travel (much) to the US, don't have a US birthplace on your non-US passport, have no plans to live or work in the US, then you may have an easy time staying off the radar. In which case it doesn't strike me as weird to not want to sign up for a lifetime's paperwork obligations. (Particularly when the tax penalty for owing zero is still zero - what's the rush?)

Indeed, the deals for becoming compliant are getting better and better. They're getting better at such a rate that I might be inclined to wait a bit longer and see how much better they are next year (it sounds a bit like buying a MacBook). I almost get the sense that someone oe'r yonder border is waking up to what a perverse mess this is.


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## maz57

BBC failed to mention that although its likely the O.P. would owe no US tax, his financial options would be severely limited by the clash of the US tax code with the tax code of just about any non-US country of residence. Just for a simple example, the purchase of a local mutual fund would trigger a reporting nightmare due to the PFIC rules. Depending on the complexity of the O.P.'s financial affairs, expensive professional help might be necessary or become necessary in the future. (This amounts to a tax on US citizens even though no actual tax is owed.)

Although the filing of FBAR is rudimentary, one has to be willing to sign up with the "Financial Crimes Enforcement Network". If one is OK with that, then I suppose lifelong obedience to a foreign government will probably be OK too. Really, its necessary to give up ones self respect to become "compliant".

The US might have been a bastion of freedom and liberty once upon a time, but those days are long gone. That Polish birthplace is gold. If I found myself in the O.P.'s situation, I would bury that US passport in a dresser drawer and never let it see the light of day again. Or march off to the nearest US consulate, spend the $450.00 to renounce, blow off the whole 5 years of returns and Form 8854, and be done with the whole sorry mess for good.


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## BBCWatcher

Most if not all of these observations are what could be fairly described as psychological concerns. If you want to feel offended practically every government on our planet can offend. (The _name_ of the department where your FBAR is sent bothers you? Seriously?)

But whether your reasons are tangible or not, renunciation of a particular citizenship is an option, and I would defend reasonable access to that option for legally competent adults. Alternatively, keep your citizenship and work within the democratic processes and institutions to promote changes that you favor, another right I would defend. The U.S. is an example of a country that offers both of these paths. Not all countries do.

It's a club, more or less. If you want to be a member of the club in good standing, and enjoy its privileges (and there are many), follow the rules and pay your dues (if you even have any). If you don't, no problem, exit the club. And if you think the club ought to change its rules, make your case to its leaders and vote in club elections. This seems like a very fair arrangement.


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## maz57

BBCWatcher said:


> Most if not all of these observations are what could be fairly described as psychological concerns. If you want to feel offended practically every government on our planet can offend. (The _name_ of the department where your FBAR is sent bothers you? Seriously?)


Agree wholeheartedly, BBC. Governments mean bureaucracy and bureaucracies start with annoying and quickly move into offensive. The US government is particularly offensive because the default assumption regarding its expats is that they are criminals. Why else would all the extra reporting be required. Such reporting is not required of homelanders; why should innocent expats be targeted?

I forgot to mention that being the owner or principal of a foreign company greatly complicates a US tax return. A simple Form 2555 to reduce taxable income to zero will no longer do the trick. I've some friends who are business owners; their US returns can be accurately described as "form nightmares".


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## Nononymous

My Monday morning moral outrage rant, just for fun:

The thing that makes the US situation unique, and somewhat horrid, is this:

You can either (1) be born in the US and move to Canada as a small child, or (2) one of your parents can be born in the US and have moved to Canada as a child. You grow up in Canada as a Canadian citizen. (Or any other country, but I use Canada as a prominent example.)

You discover as an adult that the US considers you a citizen, and that you are obliged to identify yourself to them and file tax returns. You likely won't owe money, but you may or may not have other issues due to the complexity of your financial and business affairs. In addition to the paperwork, you may see this is as a loss of privacy to a foreign government to which you have no connection, nor feel you owe any allegiance.

So to comply with US law, it's either deal with paperwork for the rest of your days, or renounce the citizenship at a cost of $450 plus a significant amount of tax paperwork. Neither of those are good options. 

It's a situation that tends to make such people rather angry. There's no good outcome for them - unwanted hassle and stress either way. Folks falling into case 1 (US birthplace) need to be more careful if they travel to the US, which is sometimes hard to avoid depending on your choice of career; case 2 (US parent) makes it substantially easier to hide.

Either way, deliberately violating US law is a morally defensible choice for many of us. (To reference an analogy two posts above: you've been made a member of a club that you don't want to be a member of, and it's not easy to leave the club officially. So why not simply ignore the club.)


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## boat

*right on!*



diharv said:


> The personal benefit at stake is the result of choice whether or not to forever become a slave to the man with onerous filing requirements,fantastically outrageous compliance industry fees , endless threats etc. If you have a choice, don't open that pandora's box. You'll regret it if you do .


That Post is so right on the mark! I just filed into the new streamline. The total number of.pages filed? Over 300. That is 300 pages of information I was compelled (under threat of purgery) to provide to a government agency I Dont fully trust. All to tell them I Dont owe them anything.

Much more than just my earnings. What days was I in the US and what days were business and the address of my employer and on and on. Information is power. 

Meanwhile when I pay my taxes in New Zealand. My total number of pages of information to file? Three per year and one is a cover sheet with nothing but my name and mailing address. It costs me more to file my US return than my NZ return. That does not seem right to me.


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## Bevdeforges

300 pages seems an awful lot to have had to file if you don't in the end owe anything. Apparently you have a rather complex financial situation. But I still wonder if perhaps you filed more than was necessary.
Cheers,
Bev


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## boat

Bevdeforges said:


> 300 pages seems an awful lot to have had to file if you don't in the end owe anything. Apparently you have a rather complex financial situation. But I still wonder if perhaps you filed more than was necessary.
> Cheers,
> Bev


Yes it seemed like a lot of pages to me also. Let's count down some of the pages of my streamline application. First I am filing jointly but FBARs Dont file jointly. That seems to be individual. So I have six bank accounts and my wife has eight. That was six years each of FBAR at 20 pages each. 6 x 2 X 20 and we already have a stack of paper on the desk. Then my CPA needs a two page POA for each year. 2 x 2 x 6. Printed, signed, scanned, attached, sent. 

Now we can get to the accrual returns that were something like 40 pages each. Two years of FEIE and one year of tax credit.And my 4k a year from book royalties that was another three pages per year times three. 3 x 40.

And how much paper to get this all processed? Three reams and seven printer cartrages. And time? A full month to realize I was on the hook even though I was already paying my tax load in the NZ, research options, pick a CPA, fire a'CPA, pick a new CPA, ditch my second moron CPA find a third to turn everything over to. Two more weeks for her to get that pile of paperwork together me to find as many errors that I could and her to make corrections, send back to me to be printed, put in a big enevelope , passed to a crew member flying to the US to take to the mail. Service to be sent return recite requested. 

How about my long distance phone bill that month? Over seven hundred bucks in data and roaming charges. Highest balance of the year on six accounts back in NZ? Thattook a lot of time on hold with my bank. The computers are not set up for such a search. 

How about lost revenue? I could of put out another book with the effort this Streamline took. Times that by 300 million citizens and we are begining to talk about real loss of a countrys performance.

And the stress? When I see people write in about lost sleep I know they are not kidding. 

And like the previous post said, that was just this year. Now we are in yet another system for life and can Look forward to doing a scaled down version of this process next year. That also means we have a NZ chance of being audited and a US chance of being audited.

Does any of this sound over the top onerouis for a ma and pa working class middle income ex pats? It sure seems like a burden to me.

And as as long as I am in a rant, yes the name of the FBAR filing I find extreamly insulting. Especially when I see the news about who the real international criminals seem to be. 

Now what can we all do about this situation? Not much I'm afraid. I can put out a rant on an obscure webpage to vent a little. This has helped. Thank you all for listening and I will let you all know how the process goes.


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## maz57

Well, seeing everybody is in rant mode, here's mine:

Why doesn't the "Financial Crimes Enforcement Network" forget about the benign checking and savings accounts of far-flung US expats and do something useful, like go after the criminal banksters who came within a whisker of tanking the entire world economy. Those guys committed serious financial crimes.

To date not a single one of those people has ever been indicted, let alone seen the inside of a jail. It was our money (i.e. taxpayers collectively around the world) who paid to clean up the mess those con men created.

I know it'll never happen; the little fish continue to be netted and canned while the really big fish just find another ocean to swim in. It just seems so stupid. My former country is circling the bowl.


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## Bevdeforges

It still sounds like a lot of pages to me. Have never known anyone to require 20 pages to file an FBAR with only 6 to 8 accounts. (You generally can get 3 or 4 accounts per page, grouped by the category of the account - and I think there are only 4 of those.)

I admit that the whole filing from overseas is a royal PITA - but I also think that some CPAs are really feeding on the frenzy being generated by all the publicity in some corners. Given how little chance there is to get the appropriate change in the laws, I'd almost like to see them go after some of the unethical CPAs and other tax advisors running up big bills milking this thing. A tax form filed to show that you owe nothing should NOT be all that expensive to prepare unless you have "exotic" investments designed to evade taxes.
Cheers,
Bev


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## BBCWatcher

Moreover, non-resident alien spouses, even those participating in a joint tax filing with a U.S. person (through a Section 6013 election), are not required to file FBARs.


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## BBCWatcher

Nononymous said:


> You can either (1) be born in the US and move to Canada as a small child, or (2) one of your parents can be born in the US and have moved to Canada as a child.


Option (2) is not generally applicable in U.S. citizenship law (dating back many years now) unless by "child" you mean "elder teenager." In that particular scenario the U.S. parent must have spent a minimum period of time as a U.S. resident, and some of that time must have been after the age of 14.


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## Nononymous

Indeed. Forgot that bit. It's currently five years total, two of which must be past age 14. (Prior to 1986 it was ten total, five past 14.)


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## BBCWatcher

There are also paternity acknowledgment requirements if the U.S. citizen-parent in question is the father.

As a practical matter the U.S. doesn't treat children born overseas to a qualifying U.S. citizen-parent as citizens unless the parent documents his/her child's U.S. citizenship (or the child him/herself does if possible). In the case of fathers that's a requirement for citizenship itself anyway. (Yes, perhaps that's a double standard, but so is biology.) The exception would be if there's some extraordinary reason why the United States government would investigate the citizenship status of such a child, and the most common example would be a U.S. deportation proceeding. Otherwise those "latent" Americans remain latent if they wish.

Many, many countries have citizenship laws that operate this way. To pick an example, as a _legal_ matter there are probably tens of millions of Italian citizens living in the United States alone. The vast majority of them have not filed for recognition of that legal fact -- and very technically they are breaking Italian law by not reporting their marriages, changes of address, and such -- but they could. Especially since August 15, 1992, it's practically impossible to lose Italian citizenship as a legal matter if at least one of your parents was an Italian citizen (or recognizable as an Italian citizen).

In most cases a citizenship only becomes operable -- with its rights, responsibilities, and privileges -- when both parties (the grantor and the grantee) document that status. The U.S. happens to have a very simple Fourteenth Amendment citizenship provision (birthright citizenship) that makes things very cut and dried for children born in the U.S. -- such citizenships are practically "auto documented" -- but I wouldn't over-extend that common scenario to children born elsewhere. I haven't seen any evidence that the U.S. government is doing much of anything to add latent Americans to its citizenship roster, as it were.

The U.S. isn't the only country with birthright citizenship by the way. Many countries have such laws, Canada included. And taxes (or at least financial reporting) are not the only responsibilities that sometimes accompany citizenship. Military conscription is another example. Yes, you could be born in some country in the Americas (for example) and be subject to a future military draft.


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