A year ago, in Action Comics, Superman declared plans to renounce his U.S. citizenship.
"'Truth, justice, and the American way' - it's not enough anymore," the comic book superhero said, after both the Iranian and American governments criticized him for joining a peaceful anti-government protest in Tehran.
Last year, almost 1,800 people followed Superman's lead, renouncing their U.S. citizenship or handing in their Green Cards. That's a record number since the Internal Revenue Service began publishing a list of those who renounced in 1998. It's also almost eight times more than the number of citizens who renounced in 2008, and more than the total for 2007, 2008 and 2009 combined.
But not everyone's motivations are as lofty as Superman's. Many say they parted ways with America for tax reasons.
The United States is one of the only countries to tax its citizens on income earned while they're living abroad. And just as Americans stateside must file tax returns each April - this year, the deadline is Tuesday - an estimated 6.3 million U.S. citizens living abroad brace for what they describe as an even tougher process of reporting their income and foreign accounts to the IRS. For them, the deadline is June.
The National Taxpayer Advocate's Office, part of the IRS, released a report in December that details the difficulties of filing taxes from overseas. It cites heavy paperwork, a lack of online filing options and a dearth of local and foreign-language resources.
For those wishing to legally escape the filing requirements, the only way is to formally renounce their U.S. citizenship. Last year, IRS records show that at least 1,788 people did, and that's likely an underestimate. The IRS publishes in the Federal Register the names of those who give up their citizenship, and some who renounced say they haven't seen their name on the list yet.
The State Department said records it keeps differ from those published by the IRS. They indicate that renunciations have remained steady, at about 1,100 each year, said an official.
The decision by the IRS to publish the names is referred to by lawyers as "name and shame." That's because those who renounce are seen as willing to give up their citizenship primarily for financial reasons.
There's also an "exit tax" for the very rich who choose to leave. During the last 25 years, a number of millionaires and billionaires have renounced their citizenship. Among them: Ted Arison, the late founder of Carnival Cruises, and Michael Dingman, a former Ford Motor Co. director.
But those of more modest means renounce, too. They say leaving America is about more than money; it's about privacy and red tape.
LIABILITY, NOT PRIVILEGE
On April 7, 2011, Peter Dunn raised his right hand before a U.S. consular officer in Toronto and swore that he understood the consequences of giving up his U.S. citizenship. Dunn, a dual U.S.-Canadian citizen who has lived outside the United States since 1986, says he renounced because he felt American citizenship had become more of a liability than a privilege.
As an American, Dunn had to file tax returns and report all of his bank accounts - even joint accounts and his Canadian retirement fund. If he didn't, he would be breaking U.S. law and could face penalties of up to $100,000 or 50 percent of his undeclared accounts, whichever is larger. Dunn says he was tired of tracking IRS policy changes, and he had no intention of returning to the United States. Renouncing his citizenship, as he puts it, was "a no-brainer."
"If it was just me then it would be one thing," says Dunn, a part-time investor who worried that having to share information with the IRS would deter future business partners - and upset his wife, who is Canadian. "Disclosing joint accounts I hold with my wife and anyone I ever want to do business with - that's just too much. My wife's account is none of their business."
Dunn, who blogs about expatriation, takes issue with being characterized as a tax evader. He says the taxes he pays in Canada are higher than what he would pay in the United States, and he says he had always complied with the IRS before renouncing. But, Dunn says, the IRS approach to enforcing compliance is misguided. "It's making life difficult for a lot of people," he says. "It's driving us away."
OLD, NEW REGULATIONS
Dunn is referring to two filing requirements that affect Americans abroad: the Report of Foreign Bank and Financial Accounts - which has been around since 1970 but now carries penalties for noncompliance - and the Foreign Account Tax Compliance Act, passed in 2010 with the aim of reducing offshore tax evasion.
The first regulation requires all Americans, including those living abroad, with at least $10,000 in overseas bank accounts, to file a supplementary form disclosing all of their foreign accounts. That includes any accounts in which the U.S. citizen has a financial interest. That could include a joint account with a spouse or child, accounts for corporations in which the American owns more than 50 percent of the value of shares of stock, or any trust or estate that benefits the U.S. citizen.
The tax compliance act - the newer law - asks foreign financial institutions such as banks, hedge funds, and private equity funds to provide the IRS with information on U.S. clients.
The United States and five European Union countries recently announced their intent to allow institutions to report the information through their own governments, rather than directly to the IRS. Institutions that do not comply will be subject to a 30 percent withholding tax on certain U.S.-sourced payments and proceeds of property sales beginning in the 2013 tax year - for instance, dividends on investments in U.S. companies.
Some expatriates say they were unaware of the first regulation for years and even decades. In 2008, the IRS received only 218,840 such filings. American nationality law grants citizenship to almost everyone born in the United States or born abroad to American parents, regardless of how much time they've spent in the United States. Many may not even know the extent of their U.S. ties.
In 2004, the stakes for noncompliance rose. Failure to file meant potential fines and criminal charges. Americans abroad can be punished for noncompliance even if they owed no income tax - and IRS data show that most of them don't owe money.
Income up to $95,100 isn't taxed under a rule called the Foreign Earned Income Exclusion. In 2009, the income cap was $91,400, and 88 percent of all taxpayers claiming the foreign earned income exclusion owed nothing. Since 2008, the IRS has offered several voluntary-disclosure grace periods during which expatriates can file back taxes without facing criminal charges - but with the possibility of incurring penalties.
Marylouise Serrato, head of American Citizens Abroad, a nonprofit organization based in Geneva, says that many members feel scared about reporting requirements they did not know existed. Their disenchantment, she says, is pushing some to renounce.
"Americans abroad are terrified. We've had people pay tens of thousands of dollars in fines. We've had people … pay huge amounts of back taxes," she says. "Up to this point, we never heard of anyone renouncing, or if they did, they didn't talk about it," says Serrato, who says her group does not advocate renunciation.
"Now," she says, "we're seeing a lot of people speak openly about it and come to us for information."
Congress is taking note. "While I fully support measures that reduce fraud and address offshore havens, the U.S. should not have policies that place undue burdens on legitimate Americans abroad," says Representative Carolyn Maloney, D-N.Y., and the chair of the Congressional Americans Abroad Caucus. Maloney says she has taken the matter to the Department of the Treasury, which oversees the IRS.
'TOO EXPENSIVE TO KEEP'
Lawyers report that banking is a big reason why people renounce. "I hear about banking problems again and again and again," says Phil Hodgen, an attorney who has been helping Americans expatriate since 2008. The new reporting rules, he says, pose "a huge administrative burden. It's made Americans too expensive to keep."
Francisca N. Mordi, vice president and senior tax counsel at the American Bankers Association, says she has received a number of calls from Americans in Europe complaining about banks closing their accounts. "They're going to drop Americans like hot potatoes," Mordi says. "The foreign banks are upset enough about the regulations that they're saying they just won't keep American customers, and it's giving (Americans living abroad) a lot of sleepless nights."
Taxpayer complaints sometimes make their way to Nina Olson, the U.S. taxpayer advocate for the IRS, who addressed some of the international tax issues in a December report.
"The complexity of international tax law, combined with the administrative burden placed on these taxpayers, creates an environment where taxpayers who are trying their best to comply simply cannot," the report reads. "For some, this means paying more U.S. tax than is legally required, while others may be subject to steep civil and criminal penalties. For some U.S. taxpayers abroad, the tax requirements are so confusing and the compliance burden so great that they give up their U.S. citizenship."
In the same report, the IRS responded to the criticism, stating that the penalties for failing to report foreign accounts issued in its guidelines are maximums, not set amounts. It said the agency will not fine filers if the lapse is due to a "reasonable cause." The IRS also acknowledged the need for more public awareness, and it detailed its efforts to inform Americans overseas through fact sheets, a telephone help line and Twitter.
The IRS did not respond to requests for comment.
WOMEN IN A TOUGH SPOT
Around the world, American women's clubs - known for promoting American culture overseas through Fourth of July celebrations and Thanksgiving dinners - are growing empathetic toward those who renounce.
The American Women's Club in Dusseldorf, for instance, now links to renunciation information on its Website. The Federation of American Women's Clubs Overseas has opposed new IRS rules, in part because the rules were pushing members to give up their citizenship. "The candidates are not tax-evaders or un-patriots," reads the organization's last annual report.
In Europe, American women say they feel pressure to renounce even from their husbands.
"American women married to non-Americans are only just now finding out that they have to disclose years and years of income and accounts," says Lucy Stensland Laederich, a leader of the women's club who lives in Bordeaux, France.
Laederich has been acting as the group's liaison with politicians and bureaucrats in Washington, D.C., and plans to attend a meeting to discuss expatriate tax issues with Maloney and Treasury Department officials on Tuesday.
"When they decide to come clean and report everything," she says, "they have to go ask their husbands for all of their bank information, retirement funds, and investment accounts, everything."
Some of their husbands, Laederich says, refuse to hand over information to the IRS. That leaves the women in difficult predicaments.
"Your options are to ignore the IRS and stick your head in the sand; take your name off of all the accounts and live in a completely cash economy; divorce; or renounce U.S. citizenship," Laederich says. "We've seen all of these things happen."
DIVORCE OR DISCLOSE
Genette Eysselinck, a friend of Laederich's, renounced early this year. Her husband, a European Union civil servant, saw no good reason to share his account information with the IRS, she says. And after considering all her options, Eysselinck decided that renouncing was the best path.
"It created a lot of tensions around here," she says. "Divorce seemed a little extreme, so I asked myself, 'What am I gaining as an American?' And the cons outweighed the pros."
Eysselinck was born in Fort Bragg, North Carolina, and says she grew up on military bases all over the world. Her father, she says, was an Air Force pilot. Eysselinck has lived abroad for decades and no longer has any close connections in the United States.
She spent her final months as an American collecting paperwork and filing tax returns from the past five years, even though she says she owed nothing. Her last act as a citizen was to swear before an American flag that she renounced all ties with the United States. She called the process "gut wrenching."
"I grew up in a military family where patriotic feeling was very strong" Eysselinck says. "I'm amazed at how terrible I felt renouncing. But it was the only way to get them off my back. It's very distressing and time consuming to keep up with all the paperwork. But if it's this bad when I'm 64, how bad will it be when I'm 74?"
I've known about this for quite a while, IRS strong arming foreign banks, repressive tax reporting issues, it's growing worse by the day. The government is desperate for every dollar it can get, capital controls in force and tightening too. The article is correct, just try to open up a foreign bank account, most don't want anything to do with US citizens, the reporting issues are tough to follow. Anyone who is smart, moves some of his money out of the US dollar, the capital controls in a free nation make this very difficult. Some Canadian banks will still open accounts for US citizens, that window may close shortly especially if the US continues along this path. I do pay my fair share of taxes, expect the same of everyone, but man alive, the crap that you have to go through to stay compliant, it makes me wonder what's next. I'm tired tonight, my articulation may be amiss, the IRS need to know where every penny is throughout the world, the idea of heavy handed capital controls worries me.
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11:15 PM
Apr 18th, 2012
Fformula88 Member
Posts: 7891 From: Buffalo, NY Registered: Mar 2000
I dunno... on the other side, all these Americans living abroad are the first to want the US to step in and save their buts when the country they are living in is attacked, has a natural disaster, if they are taken hostage, etc etc. Just because they are abroad doesn't mean they don't expect the US government to provide them protections. Since they are US Citizens, the US probably should provide some sort of protections.
So if they are still under protection, maybe they should still contribute in taxes.
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08:32 AM
Formula88 Member
Posts: 53788 From: Raleigh NC Registered: Jan 2001
I dunno... on the other side, all these Americans living abroad are the first to want the US to step in and save their buts when the country they are living in is attacked, has a natural disaster, if they are taken hostage, etc etc.
Where did you find data on that? Do they actually demand American help before the non-Americans in the disaster area?
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09:41 AM
jaskispyder Member
Posts: 21510 From: Northern MI Registered: Jun 2002
But but why are "regular" Americans complaining about taxes? I thought Obama was the friend of the working man. I thought it would be those evil Billionaires who would move to Monte Carlo with their "ill gotten gains".
Hmmm, MAYBE, Obama is NOT the Messiah. Perish the thought.
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06:24 PM
avengador1 Member
Posts: 35467 From: Orlando, Florida Registered: Oct 2001
Having been in both places, having worked in both places, having had "other interests" in both places,, The IRS (a private Puerto Rico corporation),,,, will tell me 2 damn things----jack, and sheet....and jack is from Tennessee and comes in bottles....
I really-really dont care who that offends...we are right back to 1776 where some men must stand up, fight off the king, and estashbish a land of freedom.....
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07:53 PM
Boondawg Member
Posts: 38235 From: Displaced Alaskan Registered: Jun 2003
I really-really dont care who that offends...we are right back to 1776 where some men must stand up, fight off the king, and estashbish a land of freedom.....
I keep hearing people say that, but I have seen little action. I'm guessing it just hasn't actually reached that point, despite the claims that it has, by those that say that, but then don't actually do what they claim is their [right[/i], nay, their DUTY to do. Including me. Maybe it lies in the wording?:
When in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them underabsolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security. — Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States.
*Despotism is a form of government in which a single entity rules with absolute power. That entity may be an individual, as in an autocracy, or it may be a group, as in an oligarchy. The word despotism means to "rule in the fashion of a despot" and does not necessarily require a singular "despot", an individual.
I'm sure there's smarter men done already thought on this some.
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08:46 PM
MidEngineManiac Member
Posts: 29566 From: Some unacceptable view Registered: Feb 2007
The real problem we have is that we keep voting in those that keep screwing us. If we changed our politicians often enough the next ones would get the idea and not carry on the shenanigans.
X2.. we live in the greatest country in the world. Although I am not happy about paying taxes, its a lot higher in most other countries with less freedoms. But hey, cut off your nose to spite your faces. Awesome thing to behold, such stupidity.
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09:39 PM
dennis_6 Member
Posts: 7196 From: between here and there Registered: Aug 2001
The real problem we have is that we keep voting in those that keep screwing us. If we changed our politicians often enough the next ones would get the idea and not carry on the shenanigans.
Too late..
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09:40 PM
NEPTUNE Member
Posts: 10199 From: Ticlaw FL, and some other places. Registered: Aug 2001
The real problem we have is that we keep voting in those that keep screwing us. If we changed our politicians often enough the next ones would get the idea and not carry on the shenanigans.
The problem is you keep living in fear of them, and you are afraid of them....like the (my friends) southerns like to say...if ya dont like it, leave it...well, I did......and dont get me wrong, if the crap hits the rotoarry oscilator, I will be right there beside my US friends side in a cockpit, I just aint gonna play games with private banks under color of law...
