# Form 8938 / FBARs



## cuerna1

Finishing up this years taxes.

Aren't form 8938 and FBARs redundant ? When would you NOT pull figures from 8938's to complete FBARs ?


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## Bevdeforges

No - the two forms are completely separate - and are filed with different offices of the government.

The 8938 is a tax form that goes in with your income tax return to the IRS.

The FBAR is a reporting form, which you send (albeit electronically) to a different agency within the Treasury Department. Don't forget, too, that the 8938 asks for specific balance information (year-end, probably - or at a point in time). The FBAR asks you for the highest balance of each account during the year. The high balance is a theoretical number, and often folks will add a few thousand or so, just to be safe. (There is no penalty for overreporting. The number you report is not used to calculate any taxes.)
Cheers,
Bev


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## BBCWatcher

Bevdeforges said:


> The high balance is a theoretical number....


No, it's a very real, fixed number. There's nothing _theoretical_ about it.

I'd put it this way: "The highest balance may require some effort to determine if the financial account statements you have don't directly report the overall account balance. However, one approach many people take is they make the best estimate they can given the incomplete information they have then add a bit extra....."


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## cuerna1

I haven't done this years FBARs yet and I can't swear to it but I believe they ask for the highest balance during the year - which is what the 8938's ask for - those I just did. The checking account was easy I just printed off the statements and searched for the highest balance. The funds account was less straight forward. For it I searched for the highest opening balance for the months of year. Thanks both for the idea of padding a little on the upside.


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## ForeignBody

cuerna1 said:


> I haven't done this years FBARs yet and I can't swear to it but I believe they ask for the highest balance during the year - which is what the 8938's ask for - those I just did. The checking account was easy I just printed off the statements and searched for the highest balance. The funds account was less straight forward. For it I searched for the highest opening balance for the months of year. Thanks both for the idea of padding a little on the upside.


You are correct. Both report the highest balance during the year. This chart may be helpful:

Comparison of Form 8938 and FBAR Requirements


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## cuerna1

ForeignBody said:


> You are correct. Both report the highest balance during the year. This chart may be helpful:
> 
> Comparison of Form 8938 and FBAR Requirements


Thanks for that chart.

It is truly out of control. And to think our founding fathers got upset over a little tax on tea. If it were up to me there would be a consumption tax - period.


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## Bevdeforges

Just remember, the FBAR filing is NOT a tax form. It is only a reporting form and by itself does not result in any taxation. The 8938 is a tax form that is submitted as part of your annual tax return and must tie out to what you reported on your 1040 and other forms included in the filing.
Cheers,
Bev


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## BBCWatcher

But Form 8938 itself does not determine any tax. It is strictly an informational return.


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## maz57

cuerna1 said:


> It is truly out of control. And to think our founding fathers got upset over a little tax on tea. If it were up to me there would be a consumption tax - period.


Yes, it is out of control. FBAR and 8938 are forms that taxpayers who live in the US do not have to file. If you have a bank account or two in the US that is considered perfectly normal. If you don't live in the US and you have those same accounts at the bank down the street from where you live you are considered to be a tax evader.

What the founding fathers fought a revolutionary war over was the right to move to another country and live their lives without interference from the old country. The Declaration of Independence says that right is "self-evident" and it is "inalienable", meaning that it is an obvious, inherent human right.

Apparently the current crop of US politicians and government officials can't read.


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## Bevdeforges

Actually, taxpayers living in the US are precisely who the FBAR and 8938 reporting requirements are directed toward. The whole purpose of the underlying laws is to find taxpayers trying to squirrel their fortunes away overseas in tax havens, for example, or in countries with low tax rates that don't talk to the US.

One thing that has been proposed, and which would make lots of sense, is to exclude the need to report bank accounts and/or investments (like assurance vie) held in the taxpayer's country of legal or tax residence. (Actually doing away with CBT would make even more sense, but that's a non-starter in the current climate.)
Cheers,
Bev


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## BBCWatcher

maz57 said:


> FBAR and 8938 are forms that taxpayers who live in the US do not have to file.


No, that's not correct. If I were to move to the United States tomorrow I'd still have a FinCEN Form 114 filing obligation. I currently don't have an IRS Form 8938 filing obligation -- I don't meet the filing threshold -- but I would if I were to move to the United States. It's more likely, not less likely that I'd have to file both forms with U.S. residence.

What I think you meant to say is that people living outside the United States are _more likely_ to have non-U.S. financial accounts. True. But they're also more likely to have U.S. passports -- something 64% of U.S. residents do not have. Should we also be railing against the requirement to fill out a passport application? The financial reports we're talking about are free to file. U.S. passports are not.



> If you don't live in the US and you have those same accounts at the bank down the street from where you live you are considered to be a tax evader.


Oh, please.

You're a U.S. person doing business with a financial institution that does not itself report financial information to the U.S. Department of the Treasury. The U.S. Treasury requires U.S. persons -- no matter where they reside -- doing business with non-reporting (i.e. non-U.S.) institutions to file informational reports. Those informational reports provide dramatically less information than U.S. financial institutions do, as it happens.

You're not considered a tax evader. You're considered a U.S. person with a reporting obligation in particular circumstances.

Are you considered a fare dodger when the train conductor simply asks for your ticket after you board?



> What the founding fathers fought a revolutionary war over was the right to move to another country and live their lives without interference from the old country.


Correct. And you still have that option. The Founding Fathers most certainly did not believe in citizens enjoying the privileges of citizenship without also accepting the responsibilities (such as military conscription). Without interference and without benefits -- it was and is a package deal. They certainly didn't expect the British Crown to provide, for example, free military protection to the newly independent United States.

So for those who don't like the obligations, you can declare independence, too. You can terminate your citizenship. They did.


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## maz57

BBCWatcher said:


> Oh, please.
> 
> You're a U.S. person doing business with a financial institution that does not itself report financial information to the U.S. Department of the Treasury. The U.S. Treasury requires U.S. persons -- no matter where they reside -- doing business with non-reporting (i.e. non-U.S.) institutions to file informational reports. Those informational reports provide dramatically less information than U.S. financial institutions do, as it happens.
> 
> You're not considered a tax evader. You're considered a U.S. person with a reporting obligation in particular circumstances.
> 
> Are you considered a fare dodger when the train conductor simply asks for your ticket after you board?


Oh please indeed. FBAR reporting is to the Financial Crimes Enforcement Network. I'll rest my case on that point. As you like to point out yourself, words do matter.

As for your train conductor example, if he is asking to see your ticket when you aren't even on the train, then yes, it is likely he considers you to be a fare dodger.


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## maz57

Bevdeforges said:


> Actually, taxpayers living in the US are precisely who the FBAR and 8938 reporting requirements are directed toward. The whole purpose of the underlying laws is to find taxpayers trying to squirrel their fortunes away overseas in tax havens, for example, or in countries with low tax rates that don't talk to the US.


We (meaning the regulars on this forum) all know what situation is, Bev. The point I was trying to make is that US taxpayers who live in the US and who bank near where they live don't have "foreign accounts" and don't have to file anything. US taxpayers who don't live in the US who also bank near where they live have nothing but "foreign accounts" (as defined by the IRS) and are saddled with a bunch of additional reporting that US residents don't have to put up with. We all know this so this is aimed more at those who may be just tuning in.

CBT is the root cause of all this. Get rid of CBT and it all goes away.


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## Bevdeforges

maz57 said:


> CBT is the root cause of all this. Get rid of CBT and it all goes away.


But given the unlikelihood of that, the option to exclude reporting of perfectly legal accounts in one's country of residence is a fast and simple solution. (Unfortunately, also probably highly unlikely in the current political climate.)
Cheers,
Bev


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## maz57

BBCWatcher said:


> So for those who don't like the obligations, you can declare independence, too. You can terminate your citizenship. They did.


Been there, done that. That "Financial Crimes, blah, blah..." was one of the straws that sealed the deal. It was a great relief to finally be free. But that doesn't mean that I don't have the utmost respect for the US founding fathers; they were undertaking considerably more risk when they expatriated from Britain than I did when I expatriated from the US.

They were all pretty smart guys and the current crop of modern day US politicians would do well to read some of what the founders wrote and then take it to heart and think about what it is they are actually doing.

But here's the weird thing BBC. Now that I travel only on my Canadian passport, whenever I enter the US I get way more respect from US customs personnel than I ever did when I entered on my US passport. I think it's because they know they don't own me anymore.


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## maz57

Bevdeforges said:


> But given the unlikelihood of that, the option to exclude reporting of perfectly legal accounts in one's country of residence is a fast and simple solution. (Unfortunately, also probably highly unlikely in the current political climate.)
> Cheers,
> Bev


That proposal is known as the "same country exemption", right? I think that could happen with a stroke of a bureaucratic pen and not require an act of Congress. Also there are some serious proposals in front of the Senate Finance Committee, even discussions about RBT. I'm not holding my breath.

Its my opinion the US will eventually have to switch to RBT; their CBT is just too much of an outlier to fit in with the rest of the world's taxation system. This "we've got it right and the rest of the world has it wrong" just doesn't fly with other countries. Trouble is, it probably won't happen in my lifetime.


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## cuerna1

What is CBT ?

I've only been watching peripherally but there are things happening in the world that may shake things up a little. I believe Russia has come up with an alternative to US Swift transfers (and other countries are participating). 

Then there is this :

http://www.zerohedge.com/news/2015-03-19/de-dollarization-accelerates-more-washingtons-allies-defect-china-led-bank


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## maz57

cuerna1 said:


> What is CBT ?


Citizenship Based Taxation. The United States and Eritrea are the only two countries in the world that tax this way.

The short explanation is that using the excuse that they are "our" citizens, the US has found a way to tax people who don't live in the US on income not earned in the US. The practical effect of CBT is to divert a portion of the wealth of any country where a US citizen lives directly to the US Treasury. It is wrong and should be abolished.


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## cuerna1

maz57 said:


> Citizenship Based Taxation. The United States and Eritrea are the only two countries in the world that tax this way.
> 
> The short explanation is that using the excuse that they are "our" citizens, the US has found a way to tax people who don't live in the US on income not earned in the US. The practical effect of CBT is to divert a portion of the wealth of any country where a US citizen lives directly to the US Treasury. It is wrong and should be abolished.


It does irk me living this expat tax experience - but - we have Mexican bank accounts and income tax was withheld here, and I am filing for tax credit. In the end - what more does the US reap than Mexico has already ? Totally passive income.


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## BBCWatcher

Hungary also has CBT. Quite a few other countries have CBT aspects to their tax codes. Japan is one example I'm familiar with, with a "5 year rule" for inheritance and gift taxes (which are quite high with low thresholds).


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## BBCWatcher

maz57 said:


> Its my opinion the US will eventually have to switch to RBT; their CBT is just too much of an outlier to fit in with the rest of the world's taxation system.


No way. There's just no evidence supporting this view. The U.S. has had CBT for 100 years (arguably more like 150), 50 of which is in the jet age. There are also huge, growing problems with RBT in terms of lifecycle and other quirks that are putting pressure on governments, particularly in Europe. Policymakers and citizens alike are getting increasingly angry that wealthy people are engaging in agressive tax avoidance. The U.K.'s "non dom" loopholes are probably no longer politically tenable.

I think CBT v. RBT is frankly a distraction, with a lot of gray area between them. (The supposely awful, terrible U.S. CBT means only about 6% of overseas citizens owe any U.S. tax, according to the best estimates I can find.) What I think is inevitable, with either CBT or RBT, is that there will be more and more serious exit taxes. That is, if you want to terminate tax residence (C or not) and you meet a certain wealth threshold you'll have to "mark to market" to do it and pay a tax on that basis. Plus lose some of the privileges of citizenship unless and until you return to tax residence. Most people are getting sick and tired of the tax haven "residents" while most people have to pay high VAT rates and high payroll taxes, particularly in Europe. Take a look at the current tax debates in Greece and the U.K., to pick a couple examples.


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## maz57

BBCWatcher said:


> Hungary also has CBT. Quite a few other countries have CBT aspects to their tax codes. Japan is one example I'm familiar with, with a "5 year rule" for inheritance and gift taxes (which are quite high with low thresholds).


No country has CBT like the US has CBT. Even Eritrea just taxes a flat 2% of annual income (one page form) without all of the onerous reporting, life control, and form filing like the US. 

Yes, there are aspects of CBT in the tax code of some other countries, but that doesn't make it a good idea. In Hungary's case, the CBT ceases once you become a citizen or tax resident of another country. The US simply ignores the fact that a person is a citizen of, lives in, and pays taxes in some other country and instead pretends that they are a US resident.

If other countries adopted US style CBT Obama would be filing Kenyan tax returns (because his father was a Kenyan citizen). Ted Cruz (not my favorite guy) would be filing both Canadian and Cuban returns (because his mother was Canadian and his father was Cuban). That's how ridiculous the CBT concept is. The US needs to smarten up and join the rest of the world (and the 21st century).


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## Bevdeforges

One other aspect of this whole controversy (i.e. "mess") is that the US Congress has this annoying tendency to pass fiscal legislation in bits and pieces without bothering to consider either the existing legislation or the effects on those of us in situations like living abroad, etc.

Key example of this is how every few years they raise the issue again of eliminating Section 911 of the Revenue Code, which is the section that gives us the Foreign Earned Income Exclusion. The argument is always that overseas residents can always "just" take the Foreign Tax Credit to avoid double taxation. 

However, salaries for certain level "international civil servants" are often exempt from local income taxes altogether - and eliminating the FEIE for Americans working for these organizations would make it just that much more unlikely the NGOs and other organizations would hire Americans (as their salaries would normally be expected to be higher than those for the nationals of other countries who enjoy their salaries tax free). 

And, there are situations where the FTC has bizarre effects for a number of reasons.

I think there is a general consensus that the US tax code has to be comprehensibly re-done. But the likelihood of that happening in the current climate is somewhere between zero and none.
Cheers,
Bev


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## Omater

Bevdeforges said:


> One thing that has been proposed, and which would make lots of sense, is to exclude the need to report bank accounts and/or investments (like assurance vie) held in the taxpayer's country of legal or tax residence. (Actually doing away with CBT would make even more sense, but that's a non-starter in the current climate.)


That would make a load of sense, and I would imagine it would save a lot of unnecessary drama that this whole thing has created over the last few years as well.


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## Omater

I hope this isn't a redundant question, but I didn't see it if it was asked. 

I became the sole owner of a foreign corporation in 2014. In the past I only had signing authority without financial benefits and I claimed as such on my FBAR reports. Now that I am an owner with financial benefits, do I have to report it somewhere? I don't see a slot for that in the FinCEN BSAE Filing package.

Thanks!


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## Bevdeforges

Not on the FBARs. You can continue to report your corporate accounts as "signing authority with no financial interest".

However, you may have to add some forms to your US returns as the owner of "certain foreign corporations" - and that can get messy. It depends a bit on the exact type of business you own - whether it is considered a "corporation" for US purposes and some other matters.

Start here: Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations
Cheers,
Bev


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## BBCWatcher

maz57 said:


> In Hungary's case, the CBT ceases once you become a citizen or tax resident of another country.


First you failed to list Hungary, and now I think you've mischaracterized their citizenship-based tax system. Hungary's CBT does not cease upon tax residency elsewhere, but it does have the equivalent of a foreign tax credit.



> The US simply ignores the fact that a person is a citizen of, lives in, and pays taxes in some other country and instead pretends that they are a US resident.


No, you're mischaracterizing the U.S. tax system. Tax treaties (e.g. the U.S.-Italy tax treaty) occasionally factor possession of a foreign citizenship into how the U.S. tax code behaves. Foreign residence is very important for the Foreign Earned Income Exclusion and Foreign Housing Exclusion. Taxes paid elsewhere are very important for the Foreign Tax Credit.

Start with the facts, _then_ make your political arguments based on the real facts. For example, start with the fact approximately 6% of Americans living overseas owe any U.S. tax and approximately 94% don't. Then move on to the fact that elimination or reduction of taxes on that 6% would require increasing taxes on U.S. residents, probably (due to tax avoidance) to European levels. Then, finally, see if you can convince Congress to support that idea. Good luck!

If my taxes go down, which is what you're advocating -- I actually do pay U.S. income tax on non-U.S. source income while living full-time overseas -- then other individuals' taxes have to go up. So who's going to pay the taxes I wouldn't be? Somebody making $40,000 as a construction worker in Little Rock?



> If other countries adopted US style CBT Obama would be filing Kenyan tax returns (because his father was a Kenyan citizen).


No. Obama's Kenyan citizenship ended when he became an adult, under Kenyan nationality law.



> Ted Cruz (not my favorite guy) would be filing both Canadian and Cuban returns (because his mother was Canadian and his father was Cuban).


Yes, possibly. Canada could have also drafted Cruz into its military. Cruz of course has the option to terminate any citizenship(s) he wishes. You're arguing he ought to be able to enjoy only the privileges associated with a citizenship without incurring its obligations. I completely disagree.



> That's how ridiculous the CBT concept is.


Is a military draft "ridiculous"? Lithuania just reintroduced its draft.

There are obligations associated with _every_ citizenship. If I don't like particular obligations, I'm free to terminate the citizenship with those obligations I object to.


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## maz57

BBCWatcher said:


> First you failed to list Hungary, and now I think you've mischaracterized their citizenship-based tax system. Hungary's CBT does not cease upon tax residency elsewhere, but it does have the equivalent of a foreign tax credit.


I don't know why we're getting sidetracked on Hungary, but straight from Wikipedia: Hungary does not tax the foreign income of its non-resident citizens if (1) they have another citizenship, or (2) they live in a country which has a tax treaty with Hungary. Presumably the treaty terms matter. Wiki classifies the Hungary system as residential based. They may have it wrong, but probably not.


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## maz57

BBCWatcher said:


> No. Obama's Kenyan citizenship ended when he became an adult, under Kenyan nationality law.
> 
> Yes, possibly. Canada could have also drafted Cruz into its military. Cruz of course has the option to terminate any citizenship(s) he wishes. You're arguing he ought to be able to enjoy only the privileges associated with a citizenship without incurring its obligations. I completely disagree.


Thanks for the heads-up re: Obama's Kenyan citizenship. Maybe the US should consider such a change to its citizenship law. (I.e. opt-in at the age of majority instead of the present opt-out.) It would save accidentals a lot of trouble.

Cruz renounced his Canadian citizenship even though it wasn't causing him any problems because he figured it was bad for his political career. It cost him $100 plus a stamp. There is a process for reinstating it should he ever change his mind. Canada doesn't have a draft; no risk there for Cruz. Those 2 guys were just a couple of examples offered up to illustrate the point.

You believe that taxing non-resident citizens even though there is no connection to the country of that citizenship is justified and is a good idea. I believe its a bad idea and I'm in good company because virtually every country on the planet thinks exactly the same.


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## BBCWatcher

maz57 said:


> You believe that taxing non-resident citizens even though there is no connection to the country of that citizenship is justified and is a good idea.


Ah, but there _is_ a connection: the rights and privileges associated with that citizenship, even as an option value. Don't want the connection? Simple: terminate the citizenship. (Don't want a platinum credit card, and don't want to pay its annual fee? Cancel the card.)

Yes, I believe in taxing relatively high (and higher) income citizens on their worldwide income who live in comparatively low tax jurisdictions, after allowing a quite large income exclusion, who choose to maintain their citizenship. Said another way, yes, I believe in a progressive income tax with lifecycle and intergenerational awareness. And, moreover, I choose to pay according to this political philosophy.

I notice you've not answered my question: which U.S. residents pay higher taxes if your recommendation is adopted, and which taxes would be raised? If I get to stop paying, who starts (or pays more)?



> I believe its a bad idea and I'm in good company because virtually every country on the planet thinks exactly the same.


Only 19 countries currently recognize same-sex marriages (17 fully). I think the whole rest of the world is wrong. What do you think?


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## maz57

BBCWatcher said:


> Only 19 countries currently recognize same-sex marriages (17 fully). I think the whole rest of the world is wrong. What do you think?


What do you know, that's something we agree on. I'm happy to report that Canada is one of those countries!


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## maz57

BBCWatcher said:


> I notice you've not answered my question: which U.S. residents pay higher taxes if your recommendation is adopted, and which taxes would be raised? If I get to stop paying, who starts (or pays more)?


Using the figures from your #27 post, if only 6% of expat filers owe any tax, that works out to 420,000 payers. (7 million expatsX6%) Compare that to the number of US resident payers (say 100 million?) and it looks like it wouldn't take that much of an increase. I think US CBT is more "its the principal of the thing" than actual revenue raised.

By the way, did you notice the IRS has relaxed the FATCA reporting rules for foreign financial institutions? They are no longer required to report at all if it is a nil return (i.e. no US taxable persons to report). Now if the IRS would just offer the same courtesy to expats with nil returns (and save the IRS a bunch of useless paperwork as well).


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## Bevdeforges

maz57 said:


> Using the figures from your #27 post, if only 6% of expat filers owe any tax, that works out to 420,000 payers. (7 million expatsX6%) Compare that to the number of US resident payers (say 100 million?) and it looks like it wouldn't take that much of an increase. I think US CBT is more "its the principal of the thing" than actual revenue raised.


The other problem with the analogy is, how much ongoing expense do non-resident US citizens generate for the US government anyhow? And lately they are charging US citizens overseas for any and all services rendered by whatever agencies there are for them - even the "costs" of processing a renunciation form! I just don't see that non-residents being exempted from taxation would do much to "raise the taxes" of those left behind. Heck, by the end of this year, there won't be any overseas IRS offices left. And although there is a US Social Security presence at the Paris consulate (for how much longer?) they just tell you to use the website to file for benefits, report changes of information or do most anything else you might need to do.
Cheers,
Bev


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## cuerna1

Bevdeforges said:


> I just don't see that non-residents being exempted from taxation would do much to "raise the taxes" of those left behind.


I started to write a reply to the contrary but then I started searching for facts and came across this site :

Government Tax and Revenue Chart: United States 2005-2020 - Federal State Local Data

I can't image how tax revenues can be projected to increase in the near future.


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## BBCWatcher

Bevdeforges said:


> I just don't see that non-residents being exempted from taxation would do much to "raise the taxes" of those left behind.


Then you don't have much imagination, Bev. 

You're both ignoring what anybody who's looked at this issue seriously understands. Eliminating the U.S. tax liability of the highest income (in low tax jurisdictions) 6% opens up a _giant_ tax avoidance strategy. The direct tax loss is substantial, and the subsequent exploitation of tax non-residence is even bigger.

This isn't just a theoretical problem. In Europe this is a huge problem. Go read up on the tax avoidance problems in Greece and the United Kingdom. Go read what J.K. Rowling says about the subject. This is a very real, very live issue, with real dollars involved.

You're both not answering the question, and it's an entirely fair, reasonable question that anybody advocating what you're advocating must answer. If I (and my fellow six percenters) don't pay, who does? Who among U.S. residents are you going to raise taxes on? Who pays additionally to compensate for the massive "tax flight" as the wealthiest Americans literally get on the next planes (private jets, often) to tax havens to establish tax residences of convenience, blowing a gigantic hole in U.S. tax revenues?

Making tax filing less complicated is a great idea -- for everyone! Eliminating tax obligations would mean less complexity, but it wouldn't actually raise any revenue, so that's not going to work. Increasing the IRS's funding and keeping Intuit away from Congressional influence would be two important steps. For example, the IRS is quite prepared to pre-fill in most Americans' tax returns, but Congress (thanks to Intuit) doesn't want that.

An "IRS Form 1040XP" would help. Enhancing tax treaty treatment such that U.S. citizens living in comparatively high income tax jurisdictions (subject to annual IRS review and listing -- there's that IRS funding again) could choose to skip U.S. tax filings (or file a one pager) and be assumed at zero U.S. tax owed if they've fully complied with foreign tax filings for a full year on worldwide income -- that would also be something worth exploring, to pick another example. The Foreign Earned Income and Foreign Housing Exclusions could be changed into a single, simpler Income Exclusion for Foreign Residents (IEFR) in a revenue-neutral way -- maybe allowing up to $85K on earned income and up to $20K on passive; something like that is probably revenue-neutral. I think the PFIC rules ought to be made more black and white, something a better funded IRS can help do. (Did I mention IRS funding?) Lots of options.

By the way, are either one of you members of the Six Percent Club like me, meaning you owe U.S. income tax on non-U.S. source income while residing full-time outside the United States?


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## BBCWatcher

Since nobody seems to be answering my question "who else pays?" I ran some very rough "back of the envelope" calculations. If you make the big assumption that I represent the average individual within the Six Percent Club, and if you eliminated all U.S. tax liability for that Club, then the _direct_ revenue loss to the U.S. Treasury would be on the order of $5 billion per year. That seems quite low, though, so I'm probably well below average within that Club, but let's go with that figure.

The _second order_ revenue loss would be a significant multiple of that figure as wealthy Americans race to establish foreign tax residences of convenience. Conservatively you could assume triple the direct loss, but that's really just an opening bid. There's ample evidence from Europe and elsewhere this is a very big revenue loss.

Then you'd have some third order effects in terms of diminished economic activity, as more activity is artificially pushed out to tax havens. (Wealthy people spending their money there instead of in, say, Manhattan or Beverly Hills or Miami.) Monaco and Palermo are both lovely places on the Mediterranean, and both end in "o," but the former is a tax residence of convenience for much of Europe's wealthiest while the latter struggles to fund trash collection. It's even harder to calculate the third order loss, but it'd probably be at least as big as the second order losses, even with low estimates of multiplier effects.

Add those very rough numbers together and you get to $35 billion per year, but that's really just an opening bid. At $35 billion you've got to raise the taxes on every man, woman, and child physically present in the United States by about $110 if you want to recover from that loss -- that'd be one way to do it. Or, if you don't like raising taxes on children and nursing home residents (as examples) with no income, you have to raise taxes on many other people more than $110 each....

....Or the U.S. government can keep levying rather modest income taxes on people like me and my fellow Six Percent Club members.

I appreciate your support for (slightly) improving my standard of living at the expense of U.S. residents, but this is a really tough tax exemption argument you're trying to win.


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## Bevdeforges

No, the issue isn't loss of revenue, but rather your contention that if non-residents don't pay "their share" they are somehow forcing residents to pay more. What we're saying is that non-residents don't generate much (if any) of the cost of governance back in the Homeland and thus they're piggybacking off us (or at least those of us who pay taxes to the US).

We don't benefit from roads or public transport back there. They're withdrawing the meagre tax return support there was outside the US, so that cost goes away. And, at least according to the consulates, we're now paying fees to "cover" those consular services we do use (passports, renunciation, notary services) and for other "citizen services" we are now referred back to websites to transact our business.

Just think of the savings if the IRS (for one) just dropped the CBT and could devote their attention to tax dodgers resident in the US! It could very well pay for itself in a very short time.
Cheers,
Bev
PS BTW, I doubt there are all that many of our members who are part of the 6% Club - though if there are, I'm happy for you all.


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## BBCWatcher

The issue really is loss of revenue -- there's no escaping it. I'm amazed at the grand effort to evade this simple question here. If the Six Percent Club reduces to the Zero Percent Club, then taxes on U.S. residents must increase by many tens of billions per year (safe magnitude assumption and generalization) to account for the loss of revenue. Government needs funds to operate -- it's that simple.

Do you really think this revenue loss question isn't going to come up in any Congressional debate if one were to occur? The Congressional Budget Office (CBO) will score hypothetical tax changes.

So, who's going to pay more? It's a simple question, and it must have an answer. The math is real. Go on, make your best argument for increasing taxes on X to eliminate taxes on the Six Percent Club, where X is your choice of cohorts among U.S. residents. What's that winning argument? For example, what's the winning argument for zeroing out the U.S. taxes of $250K+ U.S. citizen mercenaries while increasing taxes on $40K U.S. soldiers serving in the same foreign country? That's what'd happen with this proposed tax change. (Or do you want to exempt U.S. government workers living overseas from all U.S. taxation? Who else is going to pay for that additional revenue loss?)

Since when is a tax system a fee-for-service system? Newsflash: it isn't! Never has been, never should be. A progressive income tax system is not at all about "mine for me, yours for you" transactionalism. If you're born as a Down Syndrome orphan, you're most likely going to need more government services than you'll ever be able to pay for in strict cost accounting terms, services that (hopefully) those who are more fortunate in life pay. But that's entirely correct and proper. It's called a civil society, and I believe in it. Even so, U.S. citizens living overseas do, in fact, benefit from U.S. government services, starting with consular services and protection. They also benefit in lifecycle and intergenerational terms, and those count, too. But for those that feel they don't benefit, no problem, there's a straightforward exit door available. (That's a perfect test for that "no benefit" assertion, isn't it? If they don't get any benefits from the U.S. government, even on an option basis, then what's the harm in terminating that citizenship rather than, if a member of the 6% Club, paying to maintain membership?)

This is a very simple question, and...OK, nobody wants to answer it. Well, somebody is going to have to do better than that and come up with a winning answer to the question "who pays?"


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