Accidental Americans face punitive costs to relinquish unwanted burden.
BBC journalist Russell Newlove travelled to Paris last week to document the problems faced by Americans living abroad.
FATCA and American tax policies make it more difficult for Americans abroad to use banking services and save money for their future. Many banks simply reject Americans as account holders rather than face the reporting requirements of FATCA.
Tax accountability should start at home. It's troubling to see the U.S. listed as the world's third most secretive jurisdiction. From the Economist this week:
But America, the country that has arm-twisted so many others to join the transparency revolution, is dragging its feet. It is now the third most secretive jurisdiction, behind Hong Kong and, inevitably, Switzerland (where rumours of the death of bank secrecy have been exaggerated).
America was in the vanguard in the fight against tax havens, first targeting the Swiss, then passing the Foreign Account Tax Compliance Act, or FATCA, which forces financial firms all over the world to spill the beans on their American clients. While demanding concessions from others, however, Washington has made few itself. It has, for instance, failed to engage with the OECD’s data-sharing scheme. Worse, anonymity-friendly incorporation regimes at the state level mean America is unmatched in corporate secrecy.
Listen to the plight of Accidental Americans on BBC World Service – World Business Report: “Becoming Ex-American”
When does your passport expire? Calendar the renewal date now!
If you don't know when your U.S. passport expires, you might have an unpleasant surprise before your next trip. Depending on your destination, your passport may need to be valid for another three to six months before you can get on the plane. Want to read some horror stories? CLICK HERE.
- If you're traveling in Europe, your passport needs to be valid for at least three months from departure.
- Many Asian countries require a passport that is valid for at least six months from departure.
You can find out the rules for your destination by checking the U.S. State Department's website.
So now that you're thinking about this, take a moment to calendar a date for renewing your passport. Go ahead. Peer into the future and place a reminder in your Google Calendar or iCal to get fresh passport photos and make an appointment with the U.S. consulate (required if you're renewing your child's passport abroad).
In a hurry to renew? The State Department provides information HERE. And prepare to pay more.
Why do I have to file a U.S. tax return when I don't work in the U.S.?
Twice this week, I’ve talked with Americans living abroad who’ve received bad advice from family members or U.S.-based tax professionals that they did not need to file an annual tax return with the IRS because they did not work in the United States. The U.S. taxes its citizens even if they live and work abroad.
There are different income thresholds. Basically, if you earn more than U.S. $10,500 - before your home-country tax payments - you need to file a U.S. tax return. And the threshold is even lower if you’re married or self-employed. You can find a short quiz to determine if you need to file a US tax return here.
When taking this quiz, if you’re unsure about your filing status, the website can help you find the answer. If you're married to a non-U.S. citizen, you may have difficulty qualifying for Head of Household filing status. You would need to live with a “qualifying person.” This means either a U.S. Citizen spouse or child. Many dual nationals cannot qualify as Head of Household because they did not live in the United States long enough to transmit citizenship to their children. This strikes me as terribly unfair. Children deserve support, and parents deserve equal tax treatment regardless of the nationality of their children.
The other big problem I uncovered was the FBAR. Neither person was aware of the obligation to report their “foreign” bank accounts once they met the $10,000 threshold. Find out more here.
When making decisions about your financial affairs, make sure you get advice from a qualified professional. I offer free initial consultations and would be happy to answer your questions. You can request an appointment here.
Christine Dahl is an American attorney based in The Hague who helps expats and dual nationals understand and comply with U.S. tax laws.
FATCA and automatic data exchange: Are you ready for IRS scrutiny?
On Friday, the IRS issued a bulletin strongly urging Americans with undisclosed bank accounts outside the U.S. to come into compliance through the IRS amnesty programs. According to the IRS, waiting for detection risks substantially increased civil penalties and possible criminal prosecution.
“The groundbreaking effort around automatic reporting of foreign accounts has given us a much stronger hand in fighting tax evasion,” said IRS Commissioner John Koskinen. “People with undisclosed foreign accounts should carefully consider their options and use available avenues, including the offshore program and streamlined procedures, to come back into full compliance with their tax obligations.”
Under the Foreign Account Tax Compliance Act (FATCA) and the network of intergovernmental agreements (IGAs) between the U.S. and partner jurisdictions like The Netherlands, automatic third-party account reporting began this year, making it easier for the IRS to identify unreported offshore financial accounts. The IRS stated publicly that it continues to pursue cases in all parts of the world.
If you would like information about how to come into tax compliance and whether you qualify for the penalty waiver program, you can request a free, confidential consultation with U.S. Tax Attorney Christine Dahl by clicking HERE. Ms. Dahl maintains a private law practice in The Hague helping expat Americans understand and comply with U.S. financial regulations.
U.S. proposes $2,350 fee to document relinquishment of American nationality
Flooded with requests from former US citizens for protection against the onerous reporting requirements of FATCA, the US State Department will propose tomorrow to begin charging a fee of $2,350 to issue a certificate that the former citizen relinquished American nationality. The State Department already charges this exorbitant fee when an individual renounces citizenship.
U.S. law spells out the differences between renunciation (taking an oath before a US diplomatic or consular officer) and relinquishment (performing specific actions with the intention of relinquishing American nationality). Read more HERE. Relinquishment of American nationality takes place when an individual becomes naturalised in another country, serves in a foreign military service, or takes an oath upon entry into certain types of employment with a foreign government. [8 USC § 1481(a)].
Presently, the U.S. charges a fee only for services in connection with renunciation. If the new rule is approved, as of 9 November, the State Department will begin to charge for all consular services related to obtaining a certificate of loss of nationality. The proposed rule will be published tomorrow (8 September 2015) in the US Federal Register.
Obtaining a Certificate of Loss of Nationality does not provide guaranteed protection from the Internal Revenue Service. In comments to the IRS, the American Bar Association's Section of Taxation shows how the current tax laws can be interpreted to measure loss of citizenship from the date the State Department issues the Certificate of Loss of Nationality - even if the "relinquishing act" took place decades earlier. Read more HERE.
Seminar: Get your FATCA & FBAR questions answered!
Please join us in Rotterdam (17 September) and The Hague (24 September) to learn more about the latest developments in the U.S. Internal Revenue Service’s hunt for Americans abroad.
Photo by Scott Olson/Getty Images News / Getty Images
- Find out what you can do to protect your financial assets and build wealth while living abroad.
- What do FATCA and FBAR mean for you?
- How will your savings and investments be taxed in The Netherlands?
- What U.S. tax obligations follow U.S. citizens and Green Card holders living abroad?
- What strategies are available for tax-efficient inheritance and retirement planning?
Presented by International Financial Advisor Clare Summerfield of Elliot Lloyd Wealth Management, U.S. Attorney Christine Dahl of TaxHelp for US Expats, and Wim Bull, DK Accountants & Advisors
Dates and Locations
- Thursday, 17 September 2015, at 19.00 at the American School of Rotterdam
- Thursday, 24 September 2015, at 17.00 at the World Trade Centre, The Hague
More information and registration available here: http://www.elliotlloyd.com/seminars
ALERT: FBAR due date changes for 2016 to 15 April!
President Obama on Friday (31-July-15) signed into law a short-term highway funding program that contains some important changes to the due dates of various tax forms, including three which are relevant to expats: Form 3520, Form 3520-A, and FBAR. The 2016 FBAR is now due on 15 April with a maximum six-month extension until 15 October.
The new deadlines are:
(9) The due date of Form 3520–A, Annual Information Return of a Foreign Trust with a United States Owner, shall be the 15th day of the 3d month after the close of the trust's taxable year, and the maximum extension shall be a 6-month period beginning on such day.
(10) The due date of Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, for calendar year filers shall be April 15 with a maximum extension for a 6-month period ending on October 15.
(11) The due date of FinCEN Report 114 (relating to Report of Foreign Bank and Financial Accounts) shall be April 15 with a maximum extension for a 6-month period ending on October 15 and with provision for an extension under rules similar to the rules in Treas. Reg. section 1.6081–5. For any taxpayer required to file such Form for the first time, any penalty for failure to timely request for, or file, an extension, may be waived by the Secretary.
Read more about the rest of the bill here.
"accidental" citizens
A question came in today about FATCA and whether someone who holds a US passport but never lived or worked in the US needs to file a tax return. The answer is yes, assuming the income threshold is met. It's important to keep in mind that filing a tax return is an obligation separate from and in addition to reporting on foreign bank accounts.
Even if you've never even visited the U.S., if you hold citizenship through one of your parents, you may need to file a U.S. tax return and tell the U.S. about your bank accounts and other financial assets.
I'm happy to help you ask the right questions and figure out how the laws apply to you. Give me a call. You can find my contact information here.