(Source: http://www.expattaxstory.us/2012/week19/ )
Tax Stories from Americans Abroad
Are you an American abroad who been impacted by new or newly-enforced US tax legislation? We want to hear from you.
May 6, 2012 - May 12, 2012
05/12/2012
Neither a tax preparer nor the US government could provide guidance on compliance
As a retired military reservist, I
was able to request assistance from the US Tax Preparer service at the
nearest base. The preparer had no idea what to do about FATCA. In order
to comply with FATCA, I was referred all the way to the Chief of Tax
Services for the Judge Advocate General Corps in my branch of the
service overseas who in turn admitted to being wholly ignorant of how to
comply, A lot of my final filing was guesswork on both our parts, It is
terribly demoralizing to try to be a good and honest US citizen and to
be unable to comply.
Something like FATCA also discourages American firms from sending executives to overseas assignments which ultimately will damage the US economy and the US reputation internationally.
Country of Residence Belgium
Voting State New York
Something like FATCA also discourages American firms from sending executives to overseas assignments which ultimately will damage the US economy and the US reputation internationally.
Country of Residence Belgium
Voting State New York
05/11/2012
tax avoidance
I left the US to work in development
overseas in the mid-70s and have lived in the US twice, 2 yr total,
since then. Those were the only years I paid taxes, for I have not paid
them when out. Nor have I filed forms for tax purposes. My wages
overseas have been low and making a connection with the US govt, tax
offices, getting forms etc. near impossible. So, rather than comply I
have ignored the rule that I should file forms even if I don't pay
taxes. The upshot is - the whole process should be simplified, and made
more accessible, if they want Americans abroad to follow the law.
Country of Residence Malawi
Voting State California
Country of Residence Malawi
Voting State California
I don't know where to begin
I moved a broad years ago to work for
an NGO. I didn't file in the USA because my income was well under the
threshold. Over the years I ne'er worries about it, but I actually
didn't understand that I was supposed to file. If I've ever had to pay
taxes in the it's very unlikely that my income was high enough. Now I
want to come clean with the IRS but I am terrified that I Will be hit
with a big tax bill that I cannot afford.
I have been refused banking services in Europe because I am an American.
I have been refused a brokerage account for my roth ira in the us because i live abroad.
Country of Residence Belgium
Voting State Oregon
I have been refused banking services in Europe because I am an American.
I have been refused a brokerage account for my roth ira in the us because i live abroad.
Country of Residence Belgium
Voting State Oregon
05/10/2012
3 tax returns in 1 year!
I left the US 25 years ago. Filing
returns in both Canada and the US was time consuming and pointless (I
hold no US accounts, own no US property, I have no US financial life).
When I immigrated to Australia I had to file Australian, Canadian (in year 1) and US returns. Despite my long disconnection with the US, I AGAIN had to prove that I was not a US tax resident. The rules for counting days (adujusting for time in international airspace and water, etc)is mind-boggling and pointless.
I do not owe US taxes. I have no financial connection with the US. I work hard for a moderate salary. I pay a lot of tax in Australia.
Why can't the US rule that people who have permanently left the US and have no US assets, need not file a full return every year?
No other OECD country burdens its citizens in such a draconian manner.
Country of Residence Australia
Voting State New York
When I immigrated to Australia I had to file Australian, Canadian (in year 1) and US returns. Despite my long disconnection with the US, I AGAIN had to prove that I was not a US tax resident. The rules for counting days (adujusting for time in international airspace and water, etc)is mind-boggling and pointless.
I do not owe US taxes. I have no financial connection with the US. I work hard for a moderate salary. I pay a lot of tax in Australia.
Why can't the US rule that people who have permanently left the US and have no US assets, need not file a full return every year?
No other OECD country burdens its citizens in such a draconian manner.
Country of Residence Australia
Voting State New York
Confusion and worry about reporting/ double tax
I have been filing a normal income
tax return since moving abroad, and -- as I am moving up in salary -- am
getting close to the point at which I'd be double taxed on my income. I
already pay hefty income tax in my country of residence (Norway), and
since I work for a Norwegian company, do not receive any of the
deductible benefits that many expats get (e.g. housing allowance, school
fees, etc). I find it alarming that I may soon be in a position to be
double-taxed on income when I haven't lived in the US for 8 years.
Also, I am deeply confused about how to deal with the FBAR requirement. This year is the first I've heard about it (and only know about it thanks to DA), and now I'm in doubt as to how to proceed. Do I go through the hassle of reporting and possibly set myself up for huge fines, plus having to then go through the hassle every year after, or do I just not report and cross my fingers that I won't get caught? My non-reporting of FBAR was not malicious, it was simply due to a lack of knowledge of the reporting requirements; but now with all this talk of draconian fines, etc, it hardly makes one motivated to try to comply -- especially since I'm not doing anything wrong.
Country of Residence Norway
Voting State Utah
Also, I am deeply confused about how to deal with the FBAR requirement. This year is the first I've heard about it (and only know about it thanks to DA), and now I'm in doubt as to how to proceed. Do I go through the hassle of reporting and possibly set myself up for huge fines, plus having to then go through the hassle every year after, or do I just not report and cross my fingers that I won't get caught? My non-reporting of FBAR was not malicious, it was simply due to a lack of knowledge of the reporting requirements; but now with all this talk of draconian fines, etc, it hardly makes one motivated to try to comply -- especially since I'm not doing anything wrong.
Country of Residence Norway
Voting State Utah
05/09/2012
FBAR scare
I came to Jordan in 1994 and was
employed initially an as ESL teacher at AL al-Bayt University in Mafraq,
Jordan. In 1995 I was married to a Jordanian citizen, and after our
first child was born in 1997, I left teaching and began working as a
free-lance translator. In 1996 I inherited some money from an aunt of
mine, and used the money to buy land in Jordan and build a house for our
family.
I have filed US tax returns ever since I came to Jordan, but in 2001, I began using the services of a tax preparer in the US. The tax preparer sends out a yearly "tax organizer" with questions the answers to which help him to prepare my tax returns. In the beginning I had very little in my bank accounts here (one in dinars, one in dollars), which I had opened after I married simply to facilitate day-to-day transactions. However, in around 2003, I was encouraged by my husband to bring money I had inherited from my mother, who passed away in 2000, to Jordan and invest it in land. I took his suggestion, and in 2005 we sold some land, which brought a good profit, and I deposited the proceeds in my Jordanian bank account. I told my tax preparer about the land sale on the tax organizer, but for some reason he didn't notice this, and didn't follow up on it. Trusting him as the expert in tax matters, I didn't ask him why he hadn't followed up on this, and the capital gains tax on the land sale went unpaid.
There was also, on the tax organizer, a question about whether I had foreign trusts, accounts, etc., over which I had signature authority. Reading the word "trusts" in the beginning of the question, I guess I failed to read the rest of the question carefully, and answered in the negative. In subsequent years I answered the question in the same way out of habit. Then one year, in 2008, I read the question more carefully, and answered in the affirmative, but my tax preparer didn't follow up on my response. If he had, I would have realized then that I was supposed to be filing FBAR's, which I had never heard of and knew nothing about. It was only a few years later that my tax preparer noted that I had begun answering the question in the affirmative, and told me I would need to submit the FBAR. Due the inheritance money I had brought here and, later, the proceeds from the land sale, my account had gone significantly beyond $10,000, and before I knew it, I was being required to apply to the OVDI. Doing so involved months of grueling review of all my financial affairs going back to 2003 under the supervision of my tax preparer. I paid the back taxes due on the land sale plus interest and penalties, and submitted all documents required by the OVDI program. My case is still pending.
Due to the large bank balance I had for a period of time for the reasons mentioned above (and which has been depleted significantly since through money lost to a failed investment and living expenses – my income as a translator averages around $30,000 a year, and Jordan is expensive), the potential OVDI penalty comes to $50,000. Even if I "opt out" of the OVDI program, I face the possibility of having to pay the same amount, since the FBAR failure-to-file penalty is $10,000 a year. This seems grossly unfair to me, especially given the fact that (1) I have conscientiously filed tax returns during all my years in Jordan, (2) I have now paid all the taxes I had owed on all sources of income, including the rather insignificant amount I had received in interest on my Jordanian bank accounts, and (3) my tax preparer never informed me in simple, direct language about US tax laws applying to foreign bank accounts. My failure to file the FBAR was based solely on misunderstanding of a question, and lack of information (which I believe my tax preparer should have supplied me with when I first employed him). The US government itself, to my knowledge, never made the effort to inform its many tax-paying citizens abroad of the FBAR requirement, and it is not their fault that they haven't known about it.
When I realized I was having to apply to a program intended for frauds and tax evaders, the emotional impact was traumatic, not to mention the potential fines, which involve money I've been planning to spend on my children's college educations. I could hardly believe this was happening. I've learned a lot about US tax law in the process, but I don't believe I should have had to learn it in such a hard way, and I appreciate the efforts being made by Democrats Abroad on behalf of people in situations similar to mine.
Country of Residence Jordan
Voting State Indiana
I have filed US tax returns ever since I came to Jordan, but in 2001, I began using the services of a tax preparer in the US. The tax preparer sends out a yearly "tax organizer" with questions the answers to which help him to prepare my tax returns. In the beginning I had very little in my bank accounts here (one in dinars, one in dollars), which I had opened after I married simply to facilitate day-to-day transactions. However, in around 2003, I was encouraged by my husband to bring money I had inherited from my mother, who passed away in 2000, to Jordan and invest it in land. I took his suggestion, and in 2005 we sold some land, which brought a good profit, and I deposited the proceeds in my Jordanian bank account. I told my tax preparer about the land sale on the tax organizer, but for some reason he didn't notice this, and didn't follow up on it. Trusting him as the expert in tax matters, I didn't ask him why he hadn't followed up on this, and the capital gains tax on the land sale went unpaid.
There was also, on the tax organizer, a question about whether I had foreign trusts, accounts, etc., over which I had signature authority. Reading the word "trusts" in the beginning of the question, I guess I failed to read the rest of the question carefully, and answered in the negative. In subsequent years I answered the question in the same way out of habit. Then one year, in 2008, I read the question more carefully, and answered in the affirmative, but my tax preparer didn't follow up on my response. If he had, I would have realized then that I was supposed to be filing FBAR's, which I had never heard of and knew nothing about. It was only a few years later that my tax preparer noted that I had begun answering the question in the affirmative, and told me I would need to submit the FBAR. Due the inheritance money I had brought here and, later, the proceeds from the land sale, my account had gone significantly beyond $10,000, and before I knew it, I was being required to apply to the OVDI. Doing so involved months of grueling review of all my financial affairs going back to 2003 under the supervision of my tax preparer. I paid the back taxes due on the land sale plus interest and penalties, and submitted all documents required by the OVDI program. My case is still pending.
Due to the large bank balance I had for a period of time for the reasons mentioned above (and which has been depleted significantly since through money lost to a failed investment and living expenses – my income as a translator averages around $30,000 a year, and Jordan is expensive), the potential OVDI penalty comes to $50,000. Even if I "opt out" of the OVDI program, I face the possibility of having to pay the same amount, since the FBAR failure-to-file penalty is $10,000 a year. This seems grossly unfair to me, especially given the fact that (1) I have conscientiously filed tax returns during all my years in Jordan, (2) I have now paid all the taxes I had owed on all sources of income, including the rather insignificant amount I had received in interest on my Jordanian bank accounts, and (3) my tax preparer never informed me in simple, direct language about US tax laws applying to foreign bank accounts. My failure to file the FBAR was based solely on misunderstanding of a question, and lack of information (which I believe my tax preparer should have supplied me with when I first employed him). The US government itself, to my knowledge, never made the effort to inform its many tax-paying citizens abroad of the FBAR requirement, and it is not their fault that they haven't known about it.
When I realized I was having to apply to a program intended for frauds and tax evaders, the emotional impact was traumatic, not to mention the potential fines, which involve money I've been planning to spend on my children's college educations. I could hardly believe this was happening. I've learned a lot about US tax law in the process, but I don't believe I should have had to learn it in such a hard way, and I appreciate the efforts being made by Democrats Abroad on behalf of people in situations similar to mine.
Country of Residence Jordan
Voting State Indiana
Burdensome, confiscatory, undemocratic and abysmal for US influence and reputation abroad
No story per se, just a list of facts, in no particular order, that are increasingly burdensome, confiscatory and undemocratic:
1. My US bank refuses to send mail to an overseas address and I cannot bank on line.
2. Tax returns + Fatca + Fbar are increasingly complex, difficult to understand and time-consuming obligations to fulfill. There's something really wrong when you are forced to use a tax preparer and pay the professional *more* than your tax liability to be able to file the paperwork.
3. My local bank warns that it may well throw me out; they are neither equipped to produce the types of documents the US demands nor do they want to have to face the costs, risks, intervention and violation of other clients' privacy simply because of American clients. Their interest and ROI are in getting rid of US clients. As such, I may no longer be able to function here at all.
4. The bilateral tax treaty does not offer protection from double taxation any more. We are directly, or indirectly (via the marginal rate), doubly taxed in many respects. In addition, the IRS' unilateral decision in 2008 to no longer recognize social taxes as taxes, thus eligible for tax credits, means we bear an increasingly huge burden (which has increased 50% in 5 years).
The treaty never considered any tax that did not have a US equivalent. And these are multiplying as all countries scurry to seek out extra tax revenue with which to lower their deficit.
Moreover, we can’t take advantage of any savings and retirement planning options here that have a (meager) tax advantage, because the US does not consider these equivalent to anything on the US side; thus any fiscal advantage derived here is rendered moot (and often leads to a net cost) once US taxes are considered. And we cannot take advantage of any type of retirement savings plans on the US side either (IRA, Keogh) as our earned income is foreign.
Which means we can’t prepare for our retirement years (state run pensions being notably insufficient!). Forecast this 10 or 20 years out, you've got a huge population that may well end up in their "golden years" unable to take care of themselves and a burden to their countries of residence.
And let's not forget that since 2007, US citizens abroad who have passive income in the US are taxed at a higher marginal rate (that includes their supposedly excluded foreign earned income) than US residents. This is undemocratic, particularly as we do not use any state provided services.
5. On the personal front, couples cannot run their lives normally. To avoid complex issues regarding taxation, FBAR and Fatca, couples keep all their assets separate. This causes interpersonal tensions as well as hampers sound family financial planning and management.
6. US nationals are prevented from being active players and positive US representatives in their country of residence. Indeed, why would any of us volunteer to hold board positions in any type of organization if, in doing so, we would be forced to include the organization's bank accounts in our Fatca or Fbar forms? And what local organization, that otherwise has nothing to do with the IRS or the US, would want that?
7. There is a pervasive and increasingly palpable ambiance that suggests we are all guilty, and the burden of advance proof that we are not is increasingly hard to bear. Whatever happened to "no taxation without representation" and "all equal under the law"? None of this applies now. Going after multimillionaire tax evaders, I’m all for it. But the US and the IRS are treating anyone with any ties abroad as such. The chap in Brazil’s letter on this website is a poignant example of what many face, and it’s heartbreaking.
8. Americans abroad used to be powerful emissaries for the US, who were respected, appreciated and able to carry US values proudly. We are now pariahs others (individuals and institutions) look on at best warily, whom are best not dealt with because it leaves the door open to complications, costs and intrusion. And we are pariahs also for our own government and institutions, being treated differently by our own banking institutions, looked on as guilty right off the bat by our government, tax authority and often by US residents for whom expatriation is akin to an act of treason.
All of this - and more! - is terribly sad. It is not the sign of a strong country, but the behavior of a weak one. It has direct effects on the US economy, foreign policy, overseas representation, credibility, image and respect worldwide.
Country of Residence France
Voting State New York
1. My US bank refuses to send mail to an overseas address and I cannot bank on line.
2. Tax returns + Fatca + Fbar are increasingly complex, difficult to understand and time-consuming obligations to fulfill. There's something really wrong when you are forced to use a tax preparer and pay the professional *more* than your tax liability to be able to file the paperwork.
3. My local bank warns that it may well throw me out; they are neither equipped to produce the types of documents the US demands nor do they want to have to face the costs, risks, intervention and violation of other clients' privacy simply because of American clients. Their interest and ROI are in getting rid of US clients. As such, I may no longer be able to function here at all.
4. The bilateral tax treaty does not offer protection from double taxation any more. We are directly, or indirectly (via the marginal rate), doubly taxed in many respects. In addition, the IRS' unilateral decision in 2008 to no longer recognize social taxes as taxes, thus eligible for tax credits, means we bear an increasingly huge burden (which has increased 50% in 5 years).
The treaty never considered any tax that did not have a US equivalent. And these are multiplying as all countries scurry to seek out extra tax revenue with which to lower their deficit.
Moreover, we can’t take advantage of any savings and retirement planning options here that have a (meager) tax advantage, because the US does not consider these equivalent to anything on the US side; thus any fiscal advantage derived here is rendered moot (and often leads to a net cost) once US taxes are considered. And we cannot take advantage of any type of retirement savings plans on the US side either (IRA, Keogh) as our earned income is foreign.
Which means we can’t prepare for our retirement years (state run pensions being notably insufficient!). Forecast this 10 or 20 years out, you've got a huge population that may well end up in their "golden years" unable to take care of themselves and a burden to their countries of residence.
And let's not forget that since 2007, US citizens abroad who have passive income in the US are taxed at a higher marginal rate (that includes their supposedly excluded foreign earned income) than US residents. This is undemocratic, particularly as we do not use any state provided services.
5. On the personal front, couples cannot run their lives normally. To avoid complex issues regarding taxation, FBAR and Fatca, couples keep all their assets separate. This causes interpersonal tensions as well as hampers sound family financial planning and management.
6. US nationals are prevented from being active players and positive US representatives in their country of residence. Indeed, why would any of us volunteer to hold board positions in any type of organization if, in doing so, we would be forced to include the organization's bank accounts in our Fatca or Fbar forms? And what local organization, that otherwise has nothing to do with the IRS or the US, would want that?
7. There is a pervasive and increasingly palpable ambiance that suggests we are all guilty, and the burden of advance proof that we are not is increasingly hard to bear. Whatever happened to "no taxation without representation" and "all equal under the law"? None of this applies now. Going after multimillionaire tax evaders, I’m all for it. But the US and the IRS are treating anyone with any ties abroad as such. The chap in Brazil’s letter on this website is a poignant example of what many face, and it’s heartbreaking.
8. Americans abroad used to be powerful emissaries for the US, who were respected, appreciated and able to carry US values proudly. We are now pariahs others (individuals and institutions) look on at best warily, whom are best not dealt with because it leaves the door open to complications, costs and intrusion. And we are pariahs also for our own government and institutions, being treated differently by our own banking institutions, looked on as guilty right off the bat by our government, tax authority and often by US residents for whom expatriation is akin to an act of treason.
All of this - and more! - is terribly sad. It is not the sign of a strong country, but the behavior of a weak one. It has direct effects on the US economy, foreign policy, overseas representation, credibility, image and respect worldwide.
Country of Residence France
Voting State New York
American housewife in Germany
I only recently learned of my
requirement to file an FBAR--I've lived abroad ever since I graduated
from college and been a stay-at-home mom for the past 8 years. I haven't
filed a US tax return since then, though I filed faithfully while I
still worked. According to my understanding, which is admittedly still a
little shaky, if I were to come forward and file FBARs on my husband's
account, for which I have a debit card and internet access, we could
potentially face enormous fines for non-filing, especially since a few
years ago we briefly had a huge balance because we sold our house and
bought our new one. While we're comfortable, we definitely aren't rich
and this could possibly force us to sell our home and uproot our family.
I just don't see how this is in proportion to the "crime" of not
knowing I had to file that I have access to my non-US husband's checking
account. None of the money in the account was even earned by me, I just
use it to buy groceries and clothes for the kids, etc. He has now
removed me from the account, which leaves me and my small children in a
vulnerable position without immediate access to money if anything should
ever happen to him, or if our marriage should ever fall apart.
I'm completely furious about the whole thing and though I am and always have been a convinced Democrat, this single issue could turn me into a swing voter. That is, if either party cares enough to put it in their platform and do something about it.
Country of Residence Germany
Voting State Ohio
I'm completely furious about the whole thing and though I am and always have been a convinced Democrat, this single issue could turn me into a swing voter. That is, if either party cares enough to put it in their platform and do something about it.
Country of Residence Germany
Voting State Ohio
05/08/2012
Couldn't sleep for weeks
I found out about and filed the FBAR
forms. All of my taxable income had already been declared in my tax
returns, I just never knew about the FBAR. Neither did my IRS licensed
tax preparer. I also read about the "amnesty" as well, which would
allow me to file the FBAR for only 25% of my assets. Wonderful. This is
insane. No taxes due, no undeclared income, and I am at risk to lose my
home and my life savings?
Country of Residence Japan
Voting State California
Country of Residence Japan
Voting State California
A Sickening Tax Policy
Last year my husband and I learned about the demand that we file US taxes and report our accounts that we have in Canada, our country of residence for decades. It was an immense upheaval in our lives since I was trying to retire, I was 72 years old and the year before had again been operated for cancer. The results of the surgery and radiation caused complications which are serious and can be life-threatening - lymphedema and frequent cellulitis attacks. Getting a lot of rest and keeping stress at a minimum are crucial. After reading in the media the awful demands and threats posed in regard to the US tax and FBAR filing my stress level went way up with the result that the frequency of attacks increased. I felt so upset and sad that this was happening at my old age. We so carefully had saved a little money to make retirement somewhat easier. We now had to spend lots of time working on reporting and going to a tax accountant (a US taxes specialist), time I had looked forward to spending with my children and grandchildren in a relaxed manner so I could get healthier. Instead I kept on getting sicker. What also was so upsetting is the fact that we had to spend so much money on paying the accountant.We have lived carefully and paid our taxes as we are supposed to in Canada. I have children and grandchildren in the United States and have always felt very much at home when visiting and presumed that one of these days I again would live in the US. It seems so sad that people in our age group with a comfortable income are being punished for being US citizens when super-wealthy Americans resident both in the US and abroad are getting away with hardly paying taxes. For this reporting I would think that the system would be well enough thought out that Americans who live in countries as Canada where the taxes are high and are in a middle income bracket would be spared from having to report in such a complicated manner. On top of that, it seems that each year new forms are thought up which make life even more complicated. I would think that the US government is capable of being fair to its citizens. I know of no other country that inflicts these draconian tax-reporting measures on their citizens who live abroad.
Country of Residence Canada
Voting State Connecticut
I've filed a FBAR since 1995 (every year for 20 years).
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