Wednesday, May 20, 2015

Keeping the IRS happy grew ever more time-consuming and costly, until it became intolerable

LARS was born in the United States to Swedish parents
writes The Economist.
Last year he renounced his American citizenship. Not because he hates America, but because he hates dealing with the Internal Revenue Service (IRS). Lars (not his real name) has not lived in the land of his birth since the mid-1990s. Yet each year the IRS would require him to fill out a 65-page tax return, foreign-account declarations and an extra 30-page form because he was a director of a company (in Europe). By contrast, the paperwork in the Nordic country where he lives is just 12 pages. He was sad to give up his passport, he says, but keeping the IRS happy grew ever more time-consuming and costly, until it became intolerable.

… Filing requirements have grown stricter since 2008. The “tipping point”, says Ms Serrato, was the Foreign Account Tax Compliance Act (FATCA) of 2010, which will take effect next year. This imposes an array of new reporting obligations, especially on foreign financial institutions that serve Americans. The sheer hassle of dealing with all this is prompting more Americans to renounce their citizenship. In 2012 around 900 gave up their passports or green cards. Twice as many did so in the first half of 2013 alone.
Among the most prominent dual nationals hounded by the IRS into renouncing their passports — with disgust — is London mayor and possible future PM Boris Johnson.

From Warren (NJ), Alec Walton testifies that the
stories you described about how Americans living abroad have been affected by the penalties and the changes in American tax laws only scratched the surface (“Overtaxed and over there”, October 12th). I am a dual Swiss-American citizen and most members of my family have been “kindly asked” to close their Swiss bank accounts. Swiss-Americans are doubly punished because they are assumed to be “guilty”. Swiss bankers are terrified of making any mistakes and getting sued again by the American justice system.

They are erring on the safe side and purging all potentially “dangerous” clients. Congress is sacrificing international Americans to catch a few thieves. They have thrown the baby out with the bathwater. There are no votes in this issue, alas, so it will only get worse for us.
Related: A massive breach of the Fourth Amendment —  The vast majority of those renouncing citizenship are middle-class Americans, living overseas, fully compliant with their U.S. tax obligations