# US Tax law petition



## amphitecna

Hello all,

Don't know if this has crossed your collective radar yet but there is an ongoing petition to get movement on changing some tax laws that pertain to us. The link:


https://petitions.whitehouse.gov/pe...gov&utm_medium=shorturl&utm_campaign=shorturl

Sorry if this is a repeat post.....

Happy New year to you all!


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## Bevdeforges

Thanks for posting this. This is fairly recent, and I'm not sure exactly who is proposing this.

The US expat groups seem to have given up on changing the tax law as a lost cause. (Then again, there are many tax attorneys who are members of said US expat groups, so I've always been suspect of the claim.)

Historically speaking, the issue gets little or no attention because most Congresscritters have no idea that they even have constituents abroad. And in the current climate, the image of "expatriates" as all being corporate transfers on lavish expense accounts plays against us.

But if they can get the signatures to make some progress on this issue, super!
Cheers,
Bev


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## BBCWatcher

Considering that there's general consensus among both major U.S. political parties on this question in favor of the status quo (in favor of citizenship-based taxation), and considering there's enormous pressure to increase U.S. federal government revenues, I am not expecting significant changes any time soon. (And the petition is mistaken in a basic fact: the IRS is collecting lots of money from expatriate Americans. The IRS didn't pay a $104 million reward to Alex jones, the former UBS banker, for nothing.)

In my view such lobbying efforts would be more likely to succeed if they focused on making tax obligations simpler -- something tax accountants may not want. For example, overseas Americans might be able to win an increase in the number of expatriates not required to file -- those residing in high tax countries that have tax and Social Security treaties and which share data with the U.S., for example. Perhaps allow such Americans to send the IRS a copy of their non-U.S. tax filing in lieu of a separate U.S. filing.

But a general move to residence-based taxation? I don't see it happening, especially because there have been a few recent steps in the other direction (e.g. Australia).


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## amphitecna

I agree with both your points. However, do congresspeople actually have consituents overseas? I feel like we're in a taxation without representation situtaion. In any case, near as I can tell, so there is no real impoetus for the US to make any changes in our favor. 

But, for me, any little step is good, and if we can get some sort of awareness raised, who knows. Heck, if Joe Biden succeeds with the gun control measures he's working on, anything is possible!

I didn't write the petition, but do agree simplifying would be a more viable avenue- especially getting the invasiveness out...in particular really hate that FBAR form, I feel like I'm standing naked on some super-model reality show, and that the judges are using my reflection in a funhouse mirrors to scrutinize me. I strongly suspect I'm not alone there either. Plus I have no idea how I can save for retirement, or open a college fund for my kids should I ever start working again, given that, as I understand it, any IRA-esque fund gets simply nailed by the IRS.

I personally don't have the background knowledge or time to write a better petition, so I'm happy to sign and spread this one.


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## BBCWatcher

Yes, U.S. citizens living abroad are eligible to vote in federal elections (House, Senate, and President) wherever they last had U.S. residence. That extends to U.S. citizens born abroad. If those children have never had U.S. residence then I think they're eligible to vote at the last U.S. residence of their U.S. citizen-parent(s). I would have to double check that little detail, though.

There's a combined federal voter registration form and absentee ballot for Americans overseas -- it's available on the Web -- so it's rather easy for American adults living overseas to exercise their voting rights. Americans living overseas also can support candidates financially, and both major parties hold fundraisers in cities with large American expatriate communities. In 2012 Mitt Romney personally appeared at his fundraising events in London and in Israel. (Romney raised a lot of money there. The cost to have one dinner with Romney in London was reportedly £50,000 per head -- way more than most Americans earn in total income per year.)

For what it's worth I think there are a couple FBAR problems that could be solved relatively easily and without much political controversy. One is that the FBAR and FATCA reporting is overlapping: it should be one report, with one set of standards, and via the IRS, not via a separate piece of mail to another Post Office box at Treasury. The second problem is that FBAR requires reporting accounts for which you receive a 1099, i.e. the accounts held at foreign subsidiaries of U.S. institutions such as Citibank. That's silly -- if I'm getting a 1099 so is the IRS. FATCA doesn't have that burden, and neither should any new consolidated report.

I've got a much longer list of simplifications, but bear in mind that it's unlikely any ideas would get very far unless they're revenue neutral or revenue boosting. To pick an example, the AMT is a burden for many people but it's an extra burden for many expats who often have complicated tax reporting. (The AMT effectively doubles whatever complexity you have.) I'd much rather abolish the AMT and replace it with a "Buffet Rule." But wealthy individuals hate that idea because it'd catch more of them -- what else is new? -- so it hasn't happened.


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## Bevdeforges

BBCWatcher said:


> Yes, U.S. citizens living abroad are eligible to vote in federal elections (House, Senate, and President) wherever they last had U.S. residence. That extends to U.S. citizens born abroad. If those children have never had U.S. residence then I think they're eligible to vote at the last U.S. residence of their U.S. citizen-parent(s). I would have to double check that little detail, though.


It depends on the state involved whether or not the "accidental Americans" (i.e. those born overseas with one US parent) can vote from the address their parents do (or could) use. Some states allow it, others don't. (No one thought about this when the initial voting from overseas law was passed back in about 1975 or so.)

Somewhere on the IRS website you can find the stats for how much $$ the IRS collected from each state, with a line for "International" or something like that. The number looks huge, but as a percentage of what they collect in total, it's less than 0.1% - possibly only around 0.01%. Still, there is this image of "expats" living the high life on company expense accounts, and no recognition of the idea that most of us are just working stiffs.

Actually, what would help quite a bit would be if they would drop the "penalties" for filing MFS (married, filing separately) at least for those of us married to NRA's. Or just allow those of us married to NRA's to file as though we were single. 

Or just drop the FBAR and FATCA nonsense altogether, at least for those who are clearly resident overseas, with every legitimate reason to hold standard sorts of "foreign" accounts and investments.

I'm not in favor of sending the IRS anything about my filings with the French fisc, though, because here we are assessed tax on a household basis (i.e. joint filing) and I will not disclose anything about my husband's finances to the IRS as long as he has no filing obligation with them. I fully acknowledge that I will owe US tax on my IRA when I start making withdrawals, and I'm happy to pay that (since that was the deal when I first set up the IRA), but the taxes I owe to the French government is between me and the fisc.
Cheers,
Bev


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## maz57

While it would be nice to see some progress on this issue, I don't have any illusions that anything useful will happen in my lifetime. I believe the only thing that will bring movement on citizenship-based taxation is if a few other countries start doing the same and they begin to fight the US over who gets to tax who. (Go Australia! Begin to hammer your citizens who happen to live in the US!) Really, the concept of taxing based on one's passport is just plain ridiculous--if other countries started it would be exposed for the stupidity it is.

As far as FBAR goes, a good start would be to raise the threshold to something more reasonable, like say $250,000. In fact, it would be an even better start to eliminate it altogether. How much revenue is the IRS likely to get on an unreported $10,000 account? In actual fact, from the IRS perspective, the only useful FBAR is an unfiled FBAR. Tax evaders don't file FBARs on their hidden accounts; if they did, they wouldn't be tax evaders! The name of the game is penalties. That's where the money is. 

When you start with a stupid concept (citizenship-based taxation) everything that follows winds up being cascading stupidity. Obama has made a science of demonizing certain segments of the population. Taxing the rich plays well with his constituency; so does going after offshore tax evaders. Neither results in significant tax revenue. Even according to the IRS's own figures, the amount of revenue generated by this latest focus on offshore is a drop in the bucket compared to the gaping annual deficit. 

I doubt this petition will get to 25,000 signatures, but if it does I guarantee it will result in no action. As we are reminded every day when we watch the news out of the US, the US government is stuck on stupid. The paranoid in me imagines the IRS will monitor this petition and flag the signatories for closer scrutiny. After all, anyone who is concerned about this issue must be a tax evader, right?

The other thing that might bring movement on this issue is a massive spike in numbers of people renouncing/relinquishing their US citizenship. It will take a few years for the numbers to become apparent, but when it is becoming increasingly more difficult to live a normal life overseas that spike will occur. It will look good on Obama's resume.


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## Bevdeforges

The FBAR isn't really that much of a much compared to what other countries ask for. In France, we have to declare all foreign (i.e. non French) bank accounts (though we don't have to provide a balance) and all foreign "life insurance" contracts (by which they mean investment plans). 

It's all part of the OECD program to break up the fiscal havens where people can stash their ill gotten gains without fear of being reported to the tax authorities where they're living.

Basically, I see no problem with declaring your foreign bank accounts, if only to show that you've declared all your interest income to your home tax authority.

Now, the US thing about taxing based on nationality regardless of residence is the real issue here. But I don't think even mass renunciations is going to budge the US Congress on this issue. With the $450 fee for a renunciation, that's just more money in the Treasury's pocket.

Personally, I think some sort of mass "civil disobedience" thing would be more effective. The IRS has only 3 overseas offices: London, Paris and one in China. Seems to me that they can only audit the most egregious cases with such limited staffing outside the US.
Cheers,
Bev


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## maz57

@ Bev. In Canada all residents (citizen or not) are required to declare all income including foreign income if the cost of the investment is over C$100,000. If foreign tax has been paid that can be claimed as a foreign tax credit against overall taxes owed. Anything below the threshold is unreportable as far as I can tell. Notice how this eliminates all the miscellaneous fluff that the FBAR is so picky about? Why would Canada Revenue Agency even care if one has checking account back in India or the UK? Seems like a fair enough system to me; you pay tax based on what you make (worldwide) and where you live. Forget about citizenship; not relevant. This is all taken care of on your tax return-no sending stuff to some other bureaucracy with some other form. Seems so sensible. So yeah, delete the FBAR if you aren't a US resident and bump the threshold if you are. 

The problem I have with the US citizenship-based system is that for non-residents these are not "foreign accounts". They are very ordinary accounts held by very ordinary people in the country they live in and pay taxes to. There is a big difference between accounts held in our country of residence vs. accounts held elsewhere. These are already reported and taxed in our country of residence. Why should we be required to report them to what to us is a foreign power? The US is basically attempting to steal the wealth of our country and thinks it"s OK to do so because the US is "special". In order to prevent the complete breakdown of international relations, this gross violation is papered over with various exclusions and credits that we all know about. Because of differences in taxation methods and rates, double taxation often occurs in spite of these "patches". The result is ever increasing complication and often confusing and conflicting rules.

As far as mass civil disobedience is concerned, we effectively have that already although it is unintentional. If you look at the estimated numbers of US citizens living abroad and compare that with the number of FBARs and tax returns actually filed, the vast majority of foreign resident US citizens either don't know or don't care about their US filing responsibilities. If I knew a year and a half ago what I know now I'm not sure I would have tried to "do the right thing" either. If all these people filed what they are supposed to the system would be log jammed even more that it is right now. How many nil balance owing tax returns does the IRS want to get anyway?

Out of the estimated 7 million US expats worldwide, about 1 million live in Canada, more than in any other single country. (No one knows for sure, least of all the US government.) Why is there no IRS office in Canada? They say they want compliance but they make it virtually impossible. I think the US is a country out of control run by idiots. Unfortunately they are idiots who still think the US is "exceptional". This desire to control everything everywhere will ultimately result in total loss of control. Let's hope they don't decide to send in the drones!


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## BBCWatcher

They're not "very ordinary accounts." They're accounts valued at over $10,000 (FBAR). Most people live paycheck to paycheck (or worse), and, at the time the legislation was written, $10,000 was a big balance. It also happens to be the same threshold that U.S. banks have for reporting "large" transactions.

The IRS doesn't have an office in Canada because one can drive to/from Canada -- it's very close to the U.S. London, Paris, and China are less close, so if you're going to have funding for three offices then you'd put them not in Canada. The reason the IRS doesn't have more than three offices outside the U.S. is because Congress -- more specifically, the Republican Party -- doesn't want to fund the IRS adequately because a well-funded IRS would better enforce the tax laws and collect more money from more of their benefactors.

Every government funds things not everyone likes -- let's not even go there. It's irrelevant. (Canadian maple syrup subsidies?)


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## maz57

@ BBC. I can assure you that in my case they are very ordinary. They don't even have balances in excess of $10,000 but in aggregate they push me into FBAR territory. A number of them have a $0 balance which I have dutifully (and gleefully) reported for years. In fact if I open up a few more $0 balance accounts and get the number up to 25 I can skip reporting any of them according to the FBAR instructions. How useful will that be to them? And as far as the local car club and the local strata council that I used to be the treasurer of it's, of course, absolutely essential that these all be reported on my FBAR. And, surprise, I don't pay tax on any of that because, well, it's not my money.

The Canadian government knows all about 'em and of course I pay taxes on the meager interest. (Let's see....$10,000X1% = about $100 per annum-lol.) Clearly something that the omnipotent US government needs to know about. The financial future of the country depends on it! 

You're right $10,000 was a lot in 1970. Now it won't even get you a decent used car. Hardly a matter of national security. Besides, what possible use is the collection of financial minutia to the IRS? All it does clog their system with useless information that makes it less likely they will discover a real criminal tax evader.

When it comes to deciding where to locate IRS field offices logic tells me it would make the most sense to locate them where the most customers are. But we've already seen that logic has nothing to do with the formulation of US government policy.

I didn't know about the maple syrup subsidy; I'll take that up with my MP. That's just plain wrong. But still not as wrong as citizenship-based taxation.


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## BBCWatcher

No, with all due respect you wouldn't put one of your three IRS offices in Canada. Many of the customers are businesses, not individuals, for one thing. Canada is in much the same time zone, and phone calls are cheap (and within the same country code). U.S. knowledgable tax accounting services are plentiful in Canada, not so much in, say, China. You can drive from Toronto to, say, Buffalo -- there's an IRS office there -- and many people already do just that to catch airline flights. The major populated parts of Canada are closer to IRS offices than many rural parts of the U.S. itself. Canada's GDP is much smaller than the U.K.'s, France's, or China's. London and Paris are much bigger global financial centers than Toronto.

Sure, it would be lovely to have an IRS office in Canada. But does Canada rank among the Top 3? Should the IRS close Paris to open Toronto? Objectively, sorry, no.

Again, most people have either one or zero bank accounts -- Wal-Mart is the "bank" for millions of Americans -- and most people do not ever see a balance of $10,000 in that account in their lifetimes. That's just fact. (The median U.S. household income is about $50,000 per year.) You (and I) are not ordinary. Let's just consider ourselves lucky because we are.

Now, we both might really like not having to report $10,001 worth of non-U.S. accounts. Politically that desire, at least expressed in that form, is very unlikely to go anywhere. I'm just being pragmatic, and I think I'm right. But might it be possible, for example, to combine FATCA and FBAR in a single report to the IRS? Yes, that might be possible. Might it be possible to index the threshold to inflation? Yes, maybe. Might it be possible to reset the maximum penalties to a percentage of the unreported accounts, so that less wealthy taxpayers aren't harmed as much? Possible (though wealthier individuals would hate it, but it would be better public policy).

But one has to be realistic, I think. EVERYBODY complains about taxes -- that's not a surprise to anyone in Congress. If you're thoughtful, reasonable, and at least revenue-neutral in your recommendations then maybe you'll get an audience. Otherwise, nothing is going to change.

By the way, I don't think Australia is going to cause a collapse in citizen-based taxation. Quite the opposite: I think the developed economies' are going to cooperate ever more closely in tax collection. There's way too much financial incentive to do otherwise.


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## Bevdeforges

You're preaching to the choir here. I think that the US policy of taxation by nationality is probably one of the better examples of "unintended consequences" going. 

The problem with the FBAR regulations is that it applies as soon as the sum total of your "overseas" accounts reaches $10,000 - not only those accounts with that as a minimum balance. But the list of foreign accounts I have to report to France doesn't appear to have any threshold - I just list them all and send them in with my tax declaration. (Then again, at least I can e-file my French declaration. Something I can't do with my US tax returns because the IRS doesn't want to "compete with free enterprise" and the paid tax filing services.)
Cheers,
Bev


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