# Others not paying



## Debzinuk

I have to rant...
I am British citizen and lived in US for 20 years and became a citizen. 7 years ago returned back to UK. Last year I sold my US house. A lovely tax bill from my accountant to the Fed for $15k (been filing taxes for last 7 years). Am struggling to find the funds to pay it all.

Anyway,..I know of several US citizens that now live in UK but not paying taxes nor knew anything about it!!!! I've told them, but they choose to ignore me. So annoying when I have to pay this money and they get away with it.

Will they ever get found out and how would they....is their concern?


----------



## iota2014

Debzinuk said:


> I have to rant...
> I am British citizen and lived in US for 20 years and became a citizen. 7 years ago returned back to UK. Last year I sold my US house. A lovely tax bill from my accountant to the Fed for $15k (been filing taxes for last 7 years). Am struggling to find the funds to pay it all.
> 
> Anyway,..I know of several US citizens that now live in UK but not paying taxes nor knew anything about it!!!! I've told them, but they choose to ignore me. So annoying when I have to pay this money and they get away with it.


The US, like other countries, has limited powers of enforcement beyond its borders. Some countries have mutual tax collection agreements with the US; the UK does not. The UK, like most countries, has signed a FATCA IGA, so your bank account may well be reported to the IRS; beyond that, whether you file US taxes and pay US taxes is up to you. If you have US source income, e.g. from the sale of US property, you may not have any choice, but as far as your UK income is concerned, you have a number of options:

- comply, either fully or in part
- ignore
- renounce US citizenship

Which is best, depends on your particular circumstances.



> Will they ever get found out and how would they....is their concern?


In theory, the IRS could use the FATCA reports to identify those not filing FBARs, and bring legal action against them in a US court. In practice, the IRS doesn't seem to be bothering.


----------



## iota2014

Boris Johnson was in a somewhat similar position, by the way. While he was London Mayor, he started a dispute with the US London Embassy over their refusal to pay the Congestion Charge. Unwise, like a lot of Johnson's decisions. When he sold his London property the IRS sent him a bill (tipped off by the Ambassador? who knows  )

Johnson, in another unwise move, shared the news that he owed US taxes, on air, on US radio, and also declared on air that he was not going to pay.

Eventually, he paid and renounced.

His property was not in the US, and it seems quite likely that he would never have got the bill if he hadn't (a) annoyed the US over the Congestion Charge and (b) shot off his mouth and uttered defiance over the American airwaves.


----------



## Debzinuk

Wonder if I stop filing after paying this horrendous bill, they'll notice? Though they do have my address!!


----------



## iota2014

Debzinuk said:


> Wonder if I stop filing after paying this horrendous bill, they'll notice? Though they do have my address!!


For peace of mind, my recommendation would be to comply (to whatever extent) or renounce. You never know when laws may change in future, perhaps making the situation much worse.

Personally, I renounced. Expensive ($2350), but it solves the citizenship-based taxation problem cleanly. But it does depend on personal circumstances. Those with US assets/income might not find it the best solution.

Also, bear in mind that you would have been taxed by the US or the UK or both on the sale of the US property, even if you didn't have US citizenship. Depends what the treaty says.


----------



## Bevdeforges

Debzinuk said:


> Wonder if I stop filing after paying this horrendous bill, they'll notice? Though they do have my address!!


As iota says, it depends on lots of factors. One of the main one is if you have US assets - because those they CAN access (and simply impound) pending settlement of whatever amounts they decide are due.

The other big factor is whether you have US source income - especially anything subject to US withholding. You say you lived for 20 years in the US - that means you will probably be eligible for US Social Security benefits when you reach retirement age. Although US SS is taxable only by the UK (assuming you remain in the UK in retirement), they could very well withhold taxes from your payments if they had reason to believe that you owed taxes you had not declared/paid.

Though, on the other hand, there are lots of US taxpayers living below the radar and at the moment there does not seem to be any sort of "campaign" to find them out.
Cheers,
Bev


----------



## iota2014

iota2014 said:


> Also, bear in mind that you would have been taxed by the US or the UK or both on the sale of the US property, even if you didn't have US citizenship. Depends what the treaty says.


Here you go - Article 13.1:



> Gains derived by a resident of a Contracting State that are attributable to the alienation of real property situated in the other Contracting State may be taxed in that other State.


In English: Gains derived by a UK resident from the sale of real property situated in the US may be taxed in the US.

You should report the sale to HMRC, claiming credit for the tax paid to the US.


----------



## iota2014

Bevdeforges said:


> Although US SS is taxable only by the UK (assuming you remain in the UK in retirement), they could very well withhold taxes from your payments if they had reason to believe that you owed taxes you had not declared/paid.
> 
> Fifteen per cent per month until the debt is paid, apparently.
> https://www.irs.gov/individuals/soc...eligible-for-the-federal-payment-levy-program


I think I see an obvious flaw in that repayment plan if the debt is very large and the debtor is very old and the benefit is very small. 

Never mind. It's the thought that counts.


----------



## Bevdeforges

iota2014 said:


> I think I see an obvious flaw in that repayment plan if the debt is very large and the debtor is very old and the benefit is very small.
> 
> Never mind. It's the thought that counts.


Nobody ever accused taxes of being "logical" - all I'm doing is pointing out the various risks one might be subject to. Plenty of folks just skate under the radar for year and never wind up settling up.
Cheers,
Bev


----------



## iota2014

Bevdeforges said:


> ... all I'm doing is pointing out the various risks one might be subject to.


Indeed. My sarcasm was aimed at the IRS, not at you. I don't doubt if they had their way they'd strip the person to the bare bones.


----------



## JustLurking

iota2014 said:


> Also, bear in mind that you would have been taxed by the US or the UK or both on the sale of the US property, even if you didn't have US citizenship. Depends what the treaty says.


Absent US citizenship, the US tax on sale of a US house by a non-resident alien would probably have been even worse thanks to FIRPTA. This taxes US real estate gains(*) made by non-resident aliens at normal US income tax rates rather than lower capital gains rates. Including AMT if applicable.

So in this case, holding US citizenship might well, for once, be a bonus. And anyone in this situation would probably want to sell US property before renouncing, rather than afterwards.

(*) Worth noting that when enacted, FIRPTA was a US unilateral tax treaty override. Only subsequently has it been adopted into most US tax treaties.


----------



## celticweb

Some of these US citizens you know may have never earned any income in the States and do not know about these rules, how could they? The internet changed this a little but where were they supposed to find out? The US does not educate their taxpayers. 

Another group may have stopped filing when they left the US because they genuinely did not know that they needed to continue to file. There is no logic to filing where you don't live so, they just carried on with their lives abroad.

For some now to enter the US tax system is a huge mistake. This is what I found out. I was one of those that didn't know but I was also an accidental American. I filed when I learned of this to do the right thing and it caused me to renounce. Filing wasn't the problem. Maintaining the filing going forward would have caused me huge hardship in a number of ways. I had a pending directorship this year that would have caused a mess.

Anyone who has been working and earning in the US would of course be filing and if you were going to sell a US property, I would expect the IRS to have a paper trial of it being sold. 

Fatca of course is changing the landscape and there may be ways for them to find out what transactions you are doing overseas now. but will anything come of it? I was a recalcitrant account holder and have yet to hear from anyone. Not out of choice. I didn't have a clue what my social security number was for the tax form and by the time i had to look it up and got all my back filing done i had completely forgotten to send the form back. I haven't heard anything yet.


----------



## iota2014

celticweb said:


> Fatca of course is changing the landscape and there may be ways for them to find out what transactions you are doing overseas now. but will anything come of it? I was a recalcitrant account holder and have yet to hear from anyone. Not out of choice. I didn't have a clue what my social security number was for the tax form and by the time i had to look it up and got all my back filing done i had completely forgotten to send the form back. I haven't heard anything yet.


Interesting.

Somewhere there must be an awful lot of FATCA data that will never be looked at by anyone.


----------



## celticweb

And I am still happily banking there too. They sent the Fatca form over a year ago, Jan 2016. and I never returned it and they never chased for it either. The notice said they "might" have to report me anyway if I didn't send it back. I thought at first this was a HMRC thing until the bank informed me of US tax resident tax rules and this insane reporting requirement. It was a complete shock to me and even today I am still shocked on how these laws have survived into 21st century. 

I also think i might have got the form because we switched to a higher interest account.


----------



## Bevdeforges

iota2014 said:


> Interesting.
> 
> Somewhere there must be an awful lot of FATCA data that will never be looked at by anyone.


Not "there must be" but rather, there IS. They collected FBAR data for a couple of decades, and apparently they only refer to it if and when there is something "odd" noted on the person's tax returns.
Cheers,
Bev


----------



## iota2014

celticweb said:


> And I am still happily banking there too. They sent the Fatca form over a year ago, Jan 2016. and I never returned it and they never chased for it either. The notice said they "might" have to report me anyway if I didn't send it back. I thought at first this was a HMRC thing until the bank informed me of US tax resident tax rules and this insane reporting requirement. It was a complete shock to me and even today I am still shocked on how these laws have survived into 21st century.
> 
> I also think i might have got the form because we switched to a higher interest account.


It is an HMRC thing. Everyone with an "off-shore" account is subject to the reporting now, under CRS. It's the US law that crazily deems UK-resident USC accounts "off-shore", but it's UK law that implements the reporting - for FATCA, CRS, and CDOT, all in one big jumble of rules.


----------



## celticweb

iota2014 said:


> It is an HMRC thing. Everyone with an "off-shore" account is subject to the reporting now, under CRS. It's the US law that crazily deems UK-resident USC accounts "off-shore", but it's UK law that implements the reporting - for FATCA, CRS, and CDOT, all in one big jumble of rules.


Thanks Iota, I vaguely heard about this CRS thing and yes it does appear it's all related. I just felt like a second class citizen once I understood the implications of what Fatca meant especially as I have never identified as American. My whole family is British and it was just by chance I was born there. Had my parents known what was going to happen, they would have returned to the UK just to have me.


----------



## iota2014

celticweb said:


> Thanks Iota, I vaguely heard about this CRS thing and yes it does appear it's all related. I just felt like a second class citizen once I understood the implications of what Fatca meant especially as I have never identified as American. My whole family is British and it was just by chance I was born there. Had my parents known what was going to happen, they would have returned to the UK just to have me.


I see citizenship as a bureaucratic thing. A dual US/UK citizen is two citizens in one. The US is causing problems for my US citizen, and the UK is defending the interests of my UK citizen. I'm pulling for the UK.


----------



## Nononymous

Debzinuk said:


> Anyway,..I know of several US citizens that now live in UK but not paying taxes nor knew anything about it!!!! I've told them, but they choose to ignore me. So annoying when I have to pay this money and they get away with it.


If those dual citizens never lived or worked in the US, never acquired US assets or paid into social security, then there's absolutely no reason for them to become compliant. Best thing they can do is continue to pretend they know nothing about it. 

Despite FATCA, the US may never find them, and has no ability to collect anything from them. 

Your friends aren't "getting away" with anything if the US has no leverage over them.


----------



## celticweb

iota2014 said:


> I see citizenship as a bureaucratic thing. A dual US/UK citizen is two citizens in one. The US is causing problems for my US citizen, and the UK is defending the interests of my UK citizen. I'm pulling for the UK.


Iota, this is so true and I totally agree

My advise now with hindsight is that an Accidental American should not enter the US tax system, The fear and scaremongering got the better of me and some unfounded sense of doing the right thing or getting hit with penalties. Now I know all this is a lot of bark, not bite. To enter the US tax system as an accidental will have serious repercussions. The risk is much greater entering the US tax system than not.

Only enter if there is a good reason and no other alternative. hopefully laws change in a more positive way.

Sadly the OP is already in the system, this advise is not for people already in the system. those should renounce if they can, sooner rather than later.


----------



## iota2014

iota2014 said:


> It is an HMRC thing. Everyone with an "off-shore" account is subject to the reporting now, under CRS. It's the US law that crazily deems UK-resident USC accounts "off-shore", but it's UK law that implements the reporting - for FATCA, CRS, and CDOT, all in one big jumble of rules.


The advent of additional AEOI regimes (CRS, CDOT) complicates things technically for some US citizens and former citizens. Under the OECD "wider approach" due diligence, cross-border accounts are to be flagged as reportable even if the country in question has not signed up to CRS. Consequently, accounts with US indicia get scrutinized by the FATCA due diligence paths and also by the CRS due diligence paths. There are inconsistencies between FATCA and CRS due diligence paths, and there are also inconsistencies from country to country and from bank to bank, as the software is by no means standardized internationally. 

In particular, CRS due diligence doesn't seem to allow for the situation in which an account ceases to be reportable even though the accountholder's country of residence has not changed (i.e., because a USborn accountholder has renounced US citizenship). 

CRS also may complicate the legal situation, it seems to me. Before CRS, only USPs were subject to reporting under AEOI; now it's indiscriminate. Not being a lawyer, I'm only speculating here, but it does seem to me that it's now less likely that dual citizens of a country such as the UK would be able to sue their country of residence on grounds of ethnic/national-origin discrimination.


----------



## Bevdeforges

As I understand it, the OECD's CRS agreement is considerably simpler and potentially much fairer than the FATCA stuff. It calls for the automatic exchange of data on accounts held by foreign residents (without regard to nationality) to their country of residence. Given that the US doesn't give out any information about foreign account holders (and certainly not automatically), it would have been much better for the US to have signed up to the OECD agreement - however we all know that the US doesn't like to subject itself to "foreign interference" like that.

Then again, I'm not sure anyone is going to be taking the US all that seriously if something doesn't change over there in the coming months and years.
Cheers,
Bev


----------



## iota2014

Bevdeforges said:


> As I understand it, the OECD's CRS agreement is considerably simpler and potentially much fairer than the FATCA stuff. It calls for the automatic exchange of data on accounts held by foreign residents (without regard to nationality) to their country of residence. Given that the US doesn't give out any information about foreign account holders (and certainly not automatically), it would have been much better for the US to have signed up to the OECD agreement - however we all know that the US doesn't like to subject itself to "foreign interference" like that.


I agree CRS is potentially much fairer than FATCA, and certainly more open to revision where necessary. Unfortunately, CRS and FATCA both share a feature which to me seems quite dubious when it comes to fairness/justice: for innocent non-tax-evading residents, both reporting regimes are enforced by businesses (FIs), as part of a customer contract, rather than by government law enforcement agencies. This means the accountholder's legal rights are not protected, or even considered.

The other meta-problem arises from the fact that the two different regimes are implemented together, simply to save costs for banks. If FATCA and CRS wrre implemented separately, it might be more trouble for the banks but former US citizens with US birthplace would not trigger any flags or raise any suspicions under CRS, and could prove their innocence under FATCA with a CLN. An expensive way to have to prove one's innocence, but at least it was clear-cut, and once the self-certification was in, the account was free of suspicion. Under CRS+FATCA, the account may always remain under suspicion.



> Then again, I'm not sure anyone is going to be taking the US all that seriously if something doesn't change over there in the coming months and years.


The banks will. The banks will stick with the money (is my prediction), and the money so far shows no signs of being bothered by America's ongoing deterioration


----------



## iota2014

I said:


> If FATCA and CRS wrre implemented separately, it might be more trouble for the banks but former US citizens with US birthplace would not trigger any flags or raise any suspicions under CRS, and could prove their innocence under FATCA with a CLN. An expensive way to have to prove one's innocence, but at least it was clear-cut, and once the self-certification was in, the account was free of suspicion. Under CRS+FATCA, the account may always remain under suspicion.


Correction: The UK implementation of AEOI (covering FATCA, DAC/CRS, and - I think - CDOT) does not work that way, according to HMRC's internal manual (https://www.gov.uk/hmrc-internal-manuals/international-exchange-of-information/ieim403120). At least for new accounts, there's no requirement for the FI to obtain place of birth. (Though it might nevertheless be required by the FI's own policy.)

So in theory a USborn former US citizen opening a new savings account with, say, a building society, can show identification that doesn't give place of birth, answer "no" to the Question, and not even have to produce a CLN. See IEIM403120 and IEIM403140 (https://www.gov.uk/hmrc-internal-manuals/international-exchange-of-information/ieim403140)

Which means, if I'm reading it correctly, that UK law does _not_ discriminate against those born in the US. 

But in practical terms, it does depend on the FI's own approach to due diligence. It seems likely that all the so-called Big Five, who of course are all in permanent bondage to the dollar, might insist on seeing a passport.


----------



## Bevdeforges

Don't know if this is the case in the UK, but in many countries, birthplace is a part of your formal identity. The standard is usually full name, date of birth and place of birth - on the theory that in any given town, it's fairly unlikely that there would have been two people born on the same day given the same name. It's not a sinister plot or anything - just a way to handle identification without having to resort to chipping everyone at birth.
Cheers,
Bev


----------



## iota2014

Bevdeforges said:


> Don't know if this is the case in the UK, but in many countries, birthplace is a part of your formal identity.


That's not the case in the UK. That's what's been bothering me for the past two years - the fact (as I thought) that UK law was requiring FIs to obtain place of birth purely in order to hunt down suspected US citizens.

For me it's all about the deal. HMG makes it clear in the UK passport that it doesn't undertake to protect dual citizens from demands made by their other country of citizenship, and to me, that's the right stance for HMG to take. I accept the deal, on the understanding that it works both ways: the UK _will_ protect my rights as a UK citizen.

The IGA seemed to violate that, by requiring FIs to obtain place of birth and treat those born in the US as suspects. Discrimination on the basis of national origin.

Now, it seems I misunderstood. 

I'm happy.


----------



## iota2014

For UK residents trying to figure out what the law requires (as distinct from what FIs demand): STEP has produced a very helpful handbook:

http://www.step.org/sites/default/files/Policy/HMRC_International_Exchange_of_Information_Manual.pdf

Trying to find this stuff on the HMRC website can quickly cause one to lose the will to live, so this indexed searchable document is very useful indeed.


----------

