The Ugly Face Of FATCA
The Ugly Face of FACTA: Why Life for Overseas Americans Keeps Getting Harder In 2011, THE IRS Introduced the Foreign Account Compliance Act, or FACTA. Designed to “minimize tax cheats”, FACTA is making banking- and life in general- painfully difficult for millions of American expats.
Under FACTA, all 8 million or so Americans living and working overseas must report all non-US financial accounts to the US government.(1)
The ambiguities and complexities of reporting under FACTA mean that many expats, most of whom are not wealthy, spend thousands of dollars every year to ensure that they are in compliance.
However, this is just the beginning of FACTA’s ugly impact…
If a bank does not agree to comply with FACTA’s stringent reporting standards, they are subject to a 30% tax on ALL US-sourced income.
Faced with this threat, “more than 77, 000 financial institutions have agreed to pass information to the IRS.” (2)
However, rather than risk the consequences of accidental non-compliance, many banks are simply refusing to do business with Americans.
In a 2014 survey, nearly 13% of 6, 552 Americans reported being unable to open an account because of FACTA. 1 in 6 reported having at least one account in a foreign bank or brokerage house closed. (4)
5.6% of survey respondents (6, 552 total) even reported being denied a position in their company because of Facta. (5)
Rather than deal with FACTA, Americans are renouncing their US citizenship in record numbers.
In 2014, a record 3, 415 individuals gave up US citizenship. (6)
That’s 15 times more people than did in 2008. (7)
Through the end of Q3 of 2015, 3, 221 citizens have already renounced citizenship. (8)
FACTA is an unfortunate outgrowth of the United States’ policy of citizen-based taxation. Every other developed nation in the world practices residence-based taxation. In fact, Eritrea is the only other country in the world to practice citizen-based taxation. It ranks 174 out of 178 countries in the 2015 Index of Economic Freedom. (9)
Ironically, according to the 2015 Financial Secrecy Index, the US follows only Switzerland and Hong Kong as the best place in the world to hide money from other countries. (10)
Not an American? FACTA still affects you if:
-You share a joint bank account with a US spouse
-You hold a US green card
-You have a “substantial connection to the US”
And no matter your nationality, you are now required by all 77, 000 FACTA-compliant institutions to fill out a FACTA form when applying for a new bank account.
The Ugly Face of FATCA, How Its Affecting Americans Abroad – An infographic by the team at Global From Asia
Resources
- https://en.wikipedia.org/wiki/American_diaspora
- http://www.economist.com/news/leaders/21605907-americas-new-law-tax-compliance-heavy-handed-inequitable-and-hypocritical-fatcas-flaws
- https://www.democratsabroad.org/sites/default/files/Executive%20Summary%20-%20Democrats%20Abroad%202014%20FATCA%20Research%20Report_1.pdf
- https://www.democratsabroad.org/sites/default/files/Executive%20Summary%20-%20Democrats%20Abroad%202014%20FATCA%20Research%20Report_1.pdf
- https://www.democratsabroad.org/sites/default/files/Executive%20Summary%20-%20Democrats%20Abroad%202014%20FATCA%20Research%20Report_1.pdf
- http://www.wsj.com/articles/record-number-gave-up-u-s-citizenship-or-long-term-residency-1423582726
- http://www.wsj.com/articles/record-number-gave-up-u-s-citizenship-or-long-term-residency-1423582726
- http://conservativeread.com/record-number-of-americans-renounce-citizenship/
- http://www.heritage.org/index/country/eritrea
- http://www.financialsecrecyindex.com/introduction/fsi-2015-results
The situation of US persons tax resident abroad:
<b>Double Taxation</b> (county of residence + US tax via tax treaty gaps)
<b>Without Representation</b> (would never have agreed to it all)
<b>Without US Government Services</b> (that US resident US persons may enjoy)
<b>Without a Care By The US Government For One’s Well Being</b> (only about stick and compliance)
<b>With Unfathomable Compliance</b> (obligation to overlay the 74,000+ page US tax code on top of the tax code of one’s country of residence)
<b>With Excessive Compliance Cost</b> (see above – it all requires highly specialized assistance and can’t be done with TurboTax, and you don’t use that because of the potentially bankrupting penalties (that US residents do not face for their everyday accounts in the US if not done right).
<b>With Excessive Compliance Penalties.</b> (The U.S. tax rules punish accounts and investments that are foreign to the USA. The compliance penalties for not reporting accounts right could be bankrupting even if no US taxes are owed)
<b>Is TYRANNY!</b>
It may be said that such US tax and compliance required of US persons overseas is <b>unAmerican.</b> The US has forgotten/ could not be bothered about its founding principles in its tax and compliance obligations of US persons living overseas.
Any US persons living overseas caught up in this must visit the message boards of <b>The Isaac Brock Society</b>, with motto “Liberty and justice for all United States persons abroad, ” no doubt the motto was adopted as the US government rules are not about Liberty and justice for all United States persons abroad.
<b>US citizenship should be about the greatest liberty in the world.</b> Yet the truth is US persons living overseas are tremendously disadvantaged by the US government compared to nationals from all other OECD countries.
As part of the US highway funding bill, is a proposal to revoke passports for tax debts of $50,000+.
For the 8.7 million US persons living overseas, subject to FBAR and potentially FATCA 8938 penalties for account reporting they may very easily breach the $50,000 threshold even by relatively minor reporting error and even if they owe no US tax. For these people a passport is very much more vital than for US residents.
Democrats Abroad has come out against this Passport Revocation as there are ” no safeguards, no warning, no due process.” And for US persons overseas, the IRS lacks capacity to get an overseas address right so a notice gets delivered. It all sounds like the Soviet Union or North Korea.
<b>The Alliance for the Defeat of Citizenship Taxation</b> has announced a CBT lawsuit.
http://isaacbrocksociety.ca/2015/11/20/alliance-for-the-defeat-of-citizenship-taxation-adct-announces-cbt-lawsuit/
<b>Donations</b> toward this legal action may be made here, at the website for the Alliance for the Defeat of Citizenship Taxation: http://citizenshiptaxation.ca/