Andy Scheer, Leader of the Conservative Party of Canada, IRS Tax Target!

Tags

America, American, Andrew Scheer, Conservatives, FINCEN, IRS, Taxes

So Andrew Scheer, leader of the Conservative Party of Canada, is an American citizen. I don’t know the details, but it seems his father was an American citizen and Andy is too by way of birth. He’s a form of what we call an accidental American. Many others are persons born in the U.S. while their foreign parents were working or studying there and who then moved back home. Boris Johnson is one of those, and he got nailed by the IRS.

As an American expat who relinquished his American citizenship – I arrived in Canada in 1970 and will never live in the U.S., so why keep the burden? – I am somewhat familiar with the tax laws Boris and Andrew are facing. Somewhat. I am not a wealthy person like Andrew Scheer. I say wealthy because one internet site has his personal wealth estimated at $961,000 and I’ve seen references that It may be much higher. His government pension alone has him set for life.

That is until the IRS comes calling.

Yes, the American Internal Revenue Service taxes Americans no matter where they live. You might think it’s silly and wrong, I do, but it’s the fact. Andrew Scheer is required to file income taxes annually to the IRS as well as file FINCEN reports (Formerly FBAR) to the Treasury Department of all his foreign financial accounts and balances. And let’s hope he has; because if he hasn’t, he’ll be making the news for all the wrong reasons. How insane is that? If he becomes Prime Minister, he will have to disclose his entire financial situation to the American government or face severe penalties. He may even be arrested if he crosses their border.

Pause: these American tax practices are wrong simply because American colonists revolted for flimsier reasons, a silly little stamp tax. They claimed at the time it was wrong for a power in a different land to tax its people in another, yet this is exactly what America has done since Lincoln decided traitors fleeing the country could not flee his new income tax. Moving on.

I don’t know Scheer’s salary, investments, or the details of his pension. I’ve seen numbers of $259k, and undisclosed amount in three RELPs, and $3,000k respectively, but whatever they are, he’s still potentially in a mess. I’ll address each of these as parts one, two, and three.

Part one: American persons get to deduct about USD$103.9k of foreign salary from their income. This only makes sense if the majority of your income is salary and if it’s within this modest range. Andy’s salary is roughly USD$195k , so using this deduction won’t help him. He will have to file the long form and deduct Canadian taxes paid from his taxes owed to the IRS. In Canada Andy will only pay taxes on his salary, maybe on some of these part two RELPs, and on none of his pension. Could be a clean wash and he’ll owe nothing to the IRS. Except nothing is ever a clean wash with the IRS.

Part Two point one: I don’t know anything about these RELP investments, but let’s assume the worst. First, Scheer has to include them on his annual FINCEN Form 114. Failure to do so incurs severe penalties. I don’t want to even think about what might happen to him if he’s noncompliant, but he can kiss those RELPs goodbye.

Part two point two: income earned in these RELPs is taxable in the U.S. as the tax deductions are not covered under the AmU.S.-Canada tax treaty. So Andy’s tax savings benefits in Canada are useless. Pay up Andy!

Part two point three: these RELPs are likely considered Passive Foreign Investment Companies or PFICs. I’ve never investigated the ins and outs and I don’t care to. What I’ve heard helped drive me to relinquish as I may wish to create my own corporation. Basically, and this is anecdotal from memory, Andy will have to pay 2% excise tax on the value of these investments biannually as well as pay the maximum 35% tax rate on all income, basically making the investment worse than worthless, if deemed PFICs. If not, he will merely have to add the full income of these devices to his American income.

Sigh. Not double-taxation, but clearly serving two masters inhibits one’s ability to minimize taxes and save for retirement.

Part three: pensions not registered with the IRS are likely considered PFICS as well. I don’t know these rules either, and it is possible, though not likely, the Canadian Federal Government pension plan is registered with the IRS, but in a worst-case scenario, Andy will have to include all government contributions as income, pay the 2% excise tax twice a year on the value, and 35% tax on all earnings. If the value of a government pension after 14 years in parliament is $3,000k, then basically Andy will go bankrupt to the IRS while serving our country. Oh, and he also has to include these in his FINCEN report or else.

There are other considerations too. His free living at Stornoway might be considered a tax-free benefit for a leader of the opposition, but is it under American laws? Tax, tax, tax!

Finally, Andy is planning on renouncing his American citizenship. Good call, but he will have to become compliant with the IRS before they will let him go. Then, any net worth over $5 million USD will be subject to a 35% exit tax. He might be there and suffer even more draining from his retirement funds. Renouncing will incur at least a USD$2300 charge from the State Department. Funny, acquiring citizenship only costs $700. Apparently the security risk of leaving America is three times that of joining.

Oh, by the way, I write for the satire magazine The Manatee, but this is not satire. This is the truth as I know all too well. A million American persons, many also Canadian citizens, live in Canada and are subject to these outrageous laws. And our (Canadian) government has done nothing to stand up to the bully. So far, the IRS has not come after private pensions. But Andy is a public figure. They have to press him. They can’t set a precedent for the rest of those to escape from this stupid net.

No wonder Andy has tried to hide his American citizenship.

 

 

Citizenship-based Taxation is Absurd

Tags

@FACTCoalition, @youngturksrec ‏, @youngturksrec ‏ idiot, American Expatriates, cbt, fatca, FBAR, idiot, IRS, obama, POTUS

A Stupid Story

Larry worked for a great company, Universal Solution Associates. He worked on the highest end projects, led his industry in quality and quantity of projects completed. He was a shining star for this industry leader.

Larry was required to submit timesheets. His time was billed, and the company needed to know how many hours he worked on each project. It was a condition of employment. Larry could have refused to submit timesheets, but he would be fired. It was also a requirement to receive overtime. The company rightly paid Larry for every hour he worked, but they would not pay undocumented overtime; because they could not bill customers for it.

Larry was happy, USA was happy, and much money was made.

One day Larry met Lucy at a café. She was eating a foreign looking dish; while he munched a cheeseburger. He asked her what she was eating, and before long, he was in love with her dishes. Lucy worked for a competitor of USA, Enriched Universal.

EU successfully recruited Larry to work for them. Larry gave his two-week notice, got thoroughly drunk at his going away party, and left on friendly terms with all his coworkers. Larry loved USA but EU offered extra benefits such as wine instead of beer, food he couldn’t pronounce that tasted awesome on Friday mornings instead of donuts, and he did not have to submit timesheets, that pain-in-the-ass, no value-add inconvenience.

Life was good for Larry. He grew to love Lucy, the new foods he couldn’t pronounce, and the freedom of working on whatever he wished to work on. But there was one problem. EU would not pay him any overtime. It did not matter if he worked thirty or eighty hours a week, his pay was always the same. Before too long, his love of Lucy waned, and he began to crave cheeseburgers and beer. He decided to return to USA.

USA was grateful to have Larry back. Their business was not the same without him. They even gave him a raise. But there was one problem.

“Larry, you have not completed your timesheets for the last year.”

“I worked for EU.”

“Because you are delinquent, we will be taking the money that would have been paid to you off your future earnings.”

“I didn’t work for USA, I worked for EU.”

“Because of the administrative burden on us, we are also imposing a fine of 50% of those earnings you didn’t submit timesheets for.”

“What are you talking about? I didn’t work for you. I had no employment contract.”

“But you did, Larry. The original contract you signed was for life, and you agreed to all of these terms.”

That’s crazy. You can’t do this.”

“We can Larry. The courts have already backed us in other cases. Lew went to work for United Kickassers and he never reported his time. We just sold his house last week.”

“His house?”

“Your house too, Larry. We’ve put a lien on it, and if you do not come clean within the year, your house is ours.”

“Everything I own is in that house. I have no retirement funds. You can’t do this. This is stupid.”

“This is the way USA works, Larry”

“Well I am leaving USA!”

“You can leave, Larry, but every competitor will garnish your wages for us.”

---

Discussion

Of course this is a stupid story. Anybody reading this can plainly see the injustice of this situation. In fact, it is completely implausible. This is not a scenario any person smarter than a grapefruit would even consider as realistic.

Yet.

Yet this is how the United States treats its citizens living outside the country. Once we leave the country, we are still obliged to fill in our timesheets (taxes, FBAR reports, and loads more paperwork) or be penalized, even though we live in, physically and under the laws of, foreign nations. All I did was replace the word country with company and tax with timesheet.

Yet.

Yet because President Lincoln first created this practice in 1861, all Americans think it is legal and just. Because the Supreme Court backed these laws in 1924, our elected representatives think it is just. Modern day taxation gurus and champions go to war defending these laws and accuse those of us who don’t believe in them as tax cheaters.

What Americans cannot do with these laws is think about them logically. They cannot sit back and examine how the rest of the world taxes citizens and fights tax cheating. Americans, even though this is supposedly what makes American great, cannot find an better (at least acceptable by all) way of doing things. Americans cannot even understand that this situation is taxation without representation (we get zero American services) and is the reason colonists went to war with Britain. Only when Americans decide to move abroad — which by the way is a universal right of all people of this world — do they come to realize the absurdity of these laws.

I don’t care who you are (@POTUS, Obama, or Rand Paul) or what you believe (Left, Right, or anywhere in between, religious or secular), the bottom line is, if you think the existing citizenship taxation laws are just, then frankly, you are an idiot.

Think America. Please think!

NaPoWriMo/PAD 2016 Day 30

Tags

8854, citizen-based taxation, fatca, IRS

For today’s prompt, write a dead end poem. Of course, I was thinking in terms of the challenge, but a dead end can literally mean the end of a person’s life, a dead end road, a dead end job, dead end mortgage, and so on. Take the phrase “dead end” and apply it to a noun, and the possibilities are nearly endless (except, well, there’s the whole “dead end” finality to it, I suppose). I hope it’s fun and that the blog is alive and well today.

Dead end. An easy prompt. A dreadfully easy prompt for someone who has spent their life running into walls. While I admit most walls were of my own construction — John builds the greatest walls! — some walls were built by others. One wall in particular, the United States citizen taxation walls of laws, has been a huge road block in my life. And there was only one way to get around it, so I took it. I left the American side of me behind that wall and moved forward. Thank you presidents Lincoln and Obama for being so un-American.

Perhaps these two gentlemen will eventually be seen as two of the greatest presidents. While I am not an Obama lover for many reasons, I am not a hater. He’s a smart, reasonable man, but maybe he’s too reasonable. I’d rather he did more his first term while he had control. I wish he have made even more changes: cut government, implement true universal healthcare, and get America on a path of world participation. Instead, he’s blocked financial growth. He’s implemented FATCA which has pissed off ever foreign financial institution, over 160,000 of them. Foreign banks if my words are too big.

Why do foreign banks matter?

Because now foreign banks do not wish to do business with America. FATCA poisons the waters. If you are a medium-sized company say in Hong Kong and you need financing (all companies use financing), then you need to give your banks certain documents: business plans, financial statements, cash flow, risk analysis, etc. It is now risky for banks to deal with the US. I can envision foreign bankers telling foreign businesses to ditch the American sourcing. Sell all you want; because we want their money, but if you buy from them, no money for you. Source your expertise from China or even the hated Japanese. Just don’t source from America.

I don’t know this is happening, but I do know banks around the world are shutting American citizens like myself from basic banking services, and millions of individuals and an estimated one million small businesses are scrambling to rid themselves of their American ties. I relinquished my citizenship and this last week signed a form with my bank confirming I was no longer a risk to them. No, I didn’t get a toaster.

Corporate inversions are another form of disloyalty — in the eyes of homelanders, but to me it’s common sense. If a large corporation has operations around the world — a common example is Ireland with its 12.5% corporate tax rate — they want to be able to compete; they need to be able to compete. America’s corporate tax rate is 39%, so if company X, American,  makes a million dollars in profits and company Y, Irish, also makes a million dollars in profits, Company X nets $610,000 while company Y nets $875,000. That’s called unfair competition, and that’s why American multinationals are inverting to foreign ownership. They want to be taxed 39% on American operations and 12.5% on Irish operations. It’s only fair, right? Obviously there is room for cheating, and that needs to be controlled, but as it stands now, the US is the biggest tax cheater of the all. These troubles are its own fault, instituted by Lincoln in 1863 and reiterated by Obama in 2010.

Taxation without representation!

Representation is not a vote. Sorry, but a American vote means nothing to me because no elected official can impact my life: I drive Canadian roads, work for Canadian employers, use Canadian schools, use Canadian health care, use Canadian retirement vehicles, and pay Canadian taxes (as I should). What possible claim does the US have on my life as a US citizen when I use zero of its services? That’s the way the rest of the world thinks, it’s the way I think, and it’s the way any common sense person thinks. Just as the US taxes foreigners living and working in its borders.

The original law was drafted to stop Confederate sympathizers expatriating to Canada to avoid the new income tax act. It was the only logical tool at the time. But this is no longer  1863. Our world is computerized. We don’t need to tax citizens abroad, we can tax them as they leave, like Canada and some other countries do. We could give citizens a choice: be taxed on everything you own (with a much lower than $2 million limit) as you leave, or keep filing with reduced foreign income exclusions until you return from your temporary stay.

This is no a hard concept. It’s called fairness. But Americans are too wrapped up in their own aggrandizement to care. America is number one, and everything outside her borders sucks and should be leached because they are subhuman civilizations.  Maybe that’s not what you as an American think, but it’s how the world sees you. The US sucks in every comparative category: healthcare, education, standard of living, satisfaction, freedom, or whatever. The only thing Americans are first in is saying they are number one.

My rant’s not over, not by a long shot, but it’s time to post a poem. Another rant about, not my dead end, but the potential dead end for America of it doesn’t get its shit together. FATCA, Corporate inversions, and more recently a ubiquitous fear of trade deals. Listen to me: if you kill all free trade deals, it will send a clear message to the world that you do not want their business. This might be an eye opener to you, but the rest of the world no longer needs American know-how. And most nations are more than willing to try and fail on their own. Obama brags of his $2 trillion trade surplus. Don’t wait until that turns into a $2 trillion trade deficit before you believe me. I might no longer be a citizen, but I care about my country.

#FATCA

Today I’m filing my 8854, what the FATCA for?
Because my fellow Americans have forgotten
life, liberty, and the illusive pursuit of happiness
were intended to be inalienable.
Taxation without representation has caused previous revolts
financial slaves of the free world
you have no right to bury your heads and hide from, the oxymoron
President Obama, the thinker
The biggest tax cheat of them all
The American People

I am angry and sad, my home nation
dying in a world of progress, more intent on building walls
than living its propaganda. Freedom.
Hate cannot defend right
A bully cannot pretend might
The myopic will never be able to write, happy endings
A blinded horse is incapable of leading the way
straight roads only with shallow ditches
a future without curves.
A nation with the least common sense and the most guns
can only lead to dead ends.

Why I Am Renouncing My American Citizenship — the taxation aspect

Tags

Anderson Cooper, Bill O'Reilly, bloomberg, cbt, citizen-based taxation, Domocrats Abroad, fatca, FBAR, Forbes Magazine, income tax, IRS, New York Times, President Barack Obama, Sasquatch, VOA

This post covers the taxation of Americans abroad and why it is forcing me to renounce my citizenship. There are other reasons I am renouncing (relinquishing) — I have lived in Canada for 45 years — but they are not as front and center as the IRS. I have been battling Americans over citizen-based taxation, mostly political Facebook groups and authors and commentators of news articles on citizen-based taxation and FATCA. I try to argue that taxing us Americans living abroad is wrong. The Democrats Abroad group – a bunch of gutless bureaucrats afraid to buck the party line – shrugs me off, vocal citizens claim I should pay for the services I receive, and retired military service personnel basically call me unpatriotic. You probably already want to leave this page because I sound like an anarchist or a communist, a revolutionary who wants to live in the woods with his gun and live off deer, rabbits, and homebrew, either that or one of the wealthy tax evaders.

I am not that person. I am not wealthy, and I am as patriotic as any American. I won’t say I love the country in the same way as homelanders. Living abroad opens your eyes to the rest of the world, and America’s sores seem more visible to us living abroad. I will continue to write about American wrongs as long as I live. I will because I still hope for an American dream. The United States is the world economic and military leader, and I write to improve America, not drive it under. I want America to succeed, for if America succeeds, the world succeeds.

I have a large American flag folded in a cedar chest. It covered my grandfather’s coffin.  My dad served in the 50’s but there was no action at the time. An ancestor fought in the Civil War for a Wisconsin outfit. The details are now lost. My uncle Cope walked into Luxembourg at age 16, out of Inchon Reservoir, earned a Silver Star, and served in the Special Forces during the Vietnam War to put my cousins through college. Cope wouldn’t talk of his experiences, but he had a way of relating the horrors he’d been through, the losses. I have thought much about America’s military engagement. I criticize it when it’s wrong, but I remember the parts that should be remembered every November 11^th.

American taxes hurts me, my family, my brothers, my American friends, all 7.6 million of us living abroad, our unnumbered extended families, our businesses, our hard-earned retirement assets. This is not inconvenience. An extra forty hours of work a year to do taxes may not seem much to you, but when the cheapest advice you can find is $400 to prepare a null return, and more like $2,000 to file a more complicated return, it starts affecting livelihood. Starts.

The next set of issues comes from FBAR compliance. This is the  list of all my financial accounts I have signing authority over, including joint accounts, children’s savings and education funding accounts, insurance cash value, retirement savings plans (RRSPs and private pensions), plus the non-profit organization I volunteer for.  Other people have signing authority in businesses where multiple people own it, and they have to submit this account information to the IRS. There are published stories of people being denied employment because they don’t want to allow them signing authorities and subject their business not only to IRS invasion but possible IRS tax hassles. I have to supply all of this account information and the highest value in each for the year.  If I omit an account or make a mistake, I am subject to a $10,000 penalty and 50% of the account’s value. The internet is full of people confused about this requirement and it is obvious people are making mistakes. I may have made mistakes. There are no guidelines. There is no assistance. It is risky for us, very risky.

I get a foreign income exclusion of $95,000. I don’t make that much, so yeah, I will never pay taxes. Except there are a few gotchas. One is the sale of a private residence. The sale of my home is not taxed in Canada, but it could be by the United States. Again, my home is not worth that much and I am not at risk. However, we are looking at buying a multi-unit building for our retirement, say a three unit building that will supplement our meagre retirement savings. Such a building increases the risk of taxation dramatically. It is viable under Canadian tax law, but not under American auspices. I cannot deduct mortgage interest from my taxes because it is not inside the United States, so while you deride me for evading the tax man, the tax man imposes impossible restrictions on me. Many Americans living in big cities around the world are facing financial ruin because of this. They are average wage earners who bought homes and watched the prices soar over the decades. They’ve lived in them all their lives and watched the values skyrocket. Stories abound of people living in million dollar or multi-million dollar homes they had bought for a hundred thousand back in the early 70’s. These are house-poor people with huge property tax bills and with no other retirement savings, yet if they sell, a big chunk will be lost to the IRS. And it won’t be at the favored American capital gains rates as those only apply to Americans living at home but at a whopping 39.9%.

I cannot easily invest in mutual funds. Foreign mutual funds are treated as passive foreign investment companies. I do not get the 15% tax rate Americans but the 39.9% rate with a gazillion forms and the likelihood of paying over 50% tax. A cannot buy American mutual funds from abroad. I am a Canadian citizen but I cannot invest in mutual funds as my neighbors can or as you can.

Canada has some investment instruments not covered by treaty. A college education savings plan and a tax-free investment account. These are fully taxed in America and my tax deductions here are not recognized by the IRS. I am a Canadian citizen but I cannot save for my children’s education nor my own retirement as other Canadians can.

The impacts on businesses abroad are more severe. A mom & pop shop might pay a couple thousand to pay an accountant at year end to do their foreign return, but stories are emerging of business owners paying an additional $10,000 to prepare their IRS returns. On top of that, they are required to pay Social Security and Obamacare taxes, even though neither they nor any of their employees will ever qualify for such services. Business is competitive. If I have an expense my competitor does not have, then I am at a serious disadvantage. Many of these estimated one million businesses are now re-organizing. They are being transferred to foreign spouses and other family members. It’s easy to do: simply fold and restart under a new name. The problem is some business owners are both American and the ones that do re-organize, the American is left with no assets.

This is a lot to ask of an American. It is too much, and this is why we are renouncing. I have never owed America taxes and I likely never will, but I cannot invest, I cannot plan my retirement as my neighbor can, as you can, because America won’t let me.

My discussion is nowhere near complete as I could easily write 400 pages on this subject. I have only scratched the surface of our troubles, my troubles, but I think I have made it clear there is cause for concern and risk to my financial well being. With the mis-strike of a pen, I could rack up a $10,000 penalty and a $50,000 fine for omitting a retirement savings account. I don’t have that kind of money, and I am very afraid of the potential consequences.

Citizenship does not come with a price tag. You cannot buy it or sell it. America is asking us to pay for our citizenship far above and beyond what Americans living at home have to pay. It is wrong to suggest I owe America my taxes. I live in Canada, and I owe the nation I live in my taxes. The constitution of the United States gives me the freedom to live abroad. The International Bill Of Rights gives me the freedom to leave a country. Double-taxing me impinges on this freedom. It is hardly patriotic to deny someone a constitutional right

Services. The United States provides me exactly zero services. SS, SSI, Medicaid, Obamacare, highways, schools, defense, evacuation services, etc. You name it, I don’t get it. I’ve been thrown the argument that I should help pay for the aircraft carriers that defend my waters. No, that is not an individual service. That is an agreement between Canada and the United States. The US patrols waters, but Canada lets them into the arctic to operate NORAD, or whatever it’s called today. And Canada capitulates. We may not have aircraft carriers, but our soldiers go places American soldiers cannot go. Kosovo. Crete. And many other United Nations operations. Places where American soldiers would be shot. Don’t give me that cute aircraft carrier argument, it doesn’t hold water. I already pay dearly for that with my astronomical Canadian taxes.

And no embassy is going to save me. Did they rescue Americans in Yemen or Nepal? No. They give warnings to leave. And if they ever did rescue someone, that person would be charged for the services. Rescue is not a gratuitous, tax-paid service. The embassy argument also holds no water.

It is obvious to me that I have to renounce my citizenship. I don’t want to but I have to. Living under these laws is neither living as a Canadian nor as an American but as a mutated hybrid with two heads, four left feet, a humped back, and no heart. My livelihood and my family’s livelihood takes precedence over any benefits I may derive from the thing. I am American whether I like it or not, and I do want to help make it a better place. But I don’t need my citizenship to do that. My pen knows no boundaries.

A New World Order’s Tax System

Tags

cbt, Expat, expatriate, fatca, FBAR, IRS, RBT, tax fraud

Let’s redesign world taxes.

People leave their own country and live in other countries, purely for economic gain. Lifestyles, safety, health care, opportunity, or whatever else does not count. These reasons are un-American. Who in their right mind would emigrate to some frigid Scandinavian country simply to eat cold-water fish and enjoy free healthcare and an excess of well-endowed, blonde women? And given today’s sexual leanings, I don’t think I am being sexually biased.

Money drives the American Government’s treatment of its expatriates, people like me who have lived abroad for decades. It only cares about my money, not me. But I am not going to rant about that, not today. I simply going to propose a re-designation of world taxation policies, an alignment of all countries’ tax policies with America’s policies. If it is good for one, then it must be good for all, right-winged religious fundamentalism excepted. I will not be overly specific but will make assumptions as follows

Assumptions: All country tax rates, policies, and deductions are the same unless otherwise noted, but countries do not recognize other countries deductions (And IRA is not recognized in Canada nor is an equivalent RRSP recognized in America). All countries allow a foreign tax credit (can deduct taxes paid as a deduction in another country) and a foreign income exclusion.

I want to illustrate a couple of things. First, I want to show how silly policies can be (and of course already are for me), and second, I want to then consider what might happen if rates and policies differ, which they do in the real world, how such policies could affect America’s pocket books. Remember, this is all about the almighty greenback.

The real world. I feel like I live in a bad dream. I hope you end up feeling the same as I do. This is the reality of expatriates.

Case A: Doug the Canuck moves to Texas. He and the company that imported him have filed all his paperwork and is legally entitled to work in America, despite all the nasty gun-toting looks he gets when he wears his Team Canada t-shirts. He earns a nice salary, and he pays his taxes. Three months later, he has to file another tax return with Canada. He cannot use any of his American deductions, so he is in danger of paying extra tax to Canada. But there is a salvation: his first $100,000 earned abroad in salary is considered tax free. He is saved.

Case B: Bob the Canuck has lived in California his whole life. He became a citizen in 1969, but he is still a Canadian citizen. He has done well with his business, and his portfolio currently sits at $10,000,000 American dollars held in a variety of investments, largely dividend generating shares. Canada does not recognize his charitable and political donations or a certain state investment tax credits he jumped all over (without obtaining Canadian tax advice – good luck finding south of the 49^th). He ends up paying Canada several thousand dollars of extra tax.

The issues:

1. Both people have to file two tax returns. That’s two complex sets of laws, and advice for their Canadian return is virtually unavailable in Texas or California. If they make mistakes, there are penalties they may have to pay. And if they can find a professional Canadian tax preparer, it will likely cost them many times what they normally pay for their American tax preparation.
2. While not a lot of taxes leave the country, some money does. If say it’s $1,000 a head, that’s $800,000,000 leaving the country — 800k Canadian citizens live in America and pay American taxes. That’s capital that cannot be put to work in America. If we add up all of the foreign nationals, there are over 40 million, times a $1,000 outflow equals $40,000,000,000, or forty billion dollars, of exiting capital.
3. But wait, it’s not so bad. America has seven million expatriates. That’s an estimated $1,000 inflow per head or 7,000,000,000, a seven billion dollar inflow. America will only lose $33,000,000,000, 33 billion dollars, in capital to foreign countries. That’s annually, by the way.
4. In reality, rates differ. I do not have the numbers – they usually depend on many variables. It is generally considered that foreign tax rates are higher than America’s which is one of the things political pundits brag about as a reason for America being the greatest country in the world. Higher foreign tax rates increase the money going out and decrease the money coming in. Instead of $1,000 each way, maybe it’s closer to $1,500 out and $500 in per head. That thirty three billion dollar deficit suddenly grows to fifty six and a half billion dollars leaving the country, that’s $37,500,000,000.
5. Retiring residents will be hit extra hard. America’s tax rates on investments is the best in the world. Canada would clean up on a person living off their investments, especially. Social security income does not trigger a foreign income exclusion. Many retired people live on marginal incomes. Take extra tax from them, and you have more people on food stamps and other social assistance programs.
6. Forty million Americans’ lives will be invaded by foreign countries. Some of those countries may even finance human rights abuse or other forms of global instability – read terrorism, Bubba! Your lost American capital is going to finance Jihading your ass into the back of your pickup.
7. Forty million Americans will be burdened by extra tax preparation, a need for extra tax knowledge, and face a losing game. They will live under constant stress and health care expenses will rise, drug dependency will rise. They can never minimize their tax burdens like a “normal” citizen can. How can you be a true American if you cannot minimize your taxes?
8. All countries will have to hire extra government tax workers. Goodbye low unemployment.
9. The cost of extra tax processing (for the $1,000 a head income) will likely exceed any revenues collected — a pointless exercise for all.
10. Tax preparation businesses will explode: “Your One Hundred And Fifty Country Tax Expert!”

I am just getting started with this nonsense. What country, besides Canada, would ever trust its citizens to report their foreign taxes correctly? There is no means to check on Wing Wang’s American bank transactions from Beijing, not overtly anyway. So what will foreign countries do? They will force all American financial institutions to report their citizens’ bank accounts to them, that’s any account they have signing authority on. It will include all personal, joint, volunteer, and corporate accounts with the person’s name on it. If Doug is promoted to Treasurer of his large corporation, then that corporation’s bank information becomes available to Canada. And if any expatriate from any country anywhere in the world not only lies (fraud) but makes a mistake, they will be severely fined and penalized. Their names will be plastered all over police station or border crossing walls, and will be blacklisted from flying, crossing borders, and may face prison time.

I love telling stories. This would be unbelievable fiction, yet it’s half true. It’s only half true because only America is stupid enough to do this. It will become true once the rest of the world catches on to America’s lead. Come on China, you can take even more of America’s resources. Mexico? You have eleven million legals here. Soon you may double or triple that. Start taxing them. You’ll pay off your debts in no time. And Canada? Canada bows to its knees and once again abstains from pissing off Big Brother. Come on, America says it is okay, so get on the band wagon. Start stealing what’s left of America’s capital.

Let’s make the obvious conclusions. This is a stupid system. Nobody in their right mind would even consider such a system. We don’t know the cost of implementing it, but the benefits have to be marginal at best. Yet this is how America treats its expatriates. This is why, when my Canadian friends gather at a bar, and the discussion turns to stupid Americans, I buy everybody a beer – after all, I am a billionaire tax cheat – and the conversation goes straight down hill as John spews his diatribe against stupid America.

One of John the billionaire’s cars.

Perhaps the United Nations should step in — like America would listen to them — and create a new human right, the right to file only one tax return. It’s a sad state of affairs that I would even have to suggest such a thing. America, the greatest nation on earth? The next time I hear that, I’m going to punch that person in the face. To over seven million expats, America is the stupidest nation on earth.

Is anybody listening? $$$$$

A Plea To Congress — Adopt Residence Based Taxation!

Tags

ACA, Expat, FBAR, FTACHA, IRS, RBT, Taxes

I am an American expat holding both American and Canadian citizenships. I live in Canada where I pay federal and provincial income taxes. America also requires me to file federal income taxes with them, the only country in the world with this requirement on its citizens, other than Eritrea, which America actually has condemned for this practice.

What does this mean? We need to consider a few other features, but for most of us, it simply means double the paperwork. It does for me, for now.

I get a FEIE (foreign earned income exclusion) of $97,000. I make less than that, so I get to write off all of my salary on my American tax return. Wow, you think. I wish I could do that. Remember, I live abroad and I pay taxes to Canada and New Brunswick. Your American rates are far lower. Don’t be happy for me.

Canada is a different country than America. I know most Americans have trouble with this concept, but that’s the way it is. Canada sets its own monetary policies and incentives for its residents – remember this word resident; it’s important. Because our taxes are higher, we also have generous tax savings incentives. I can invest in RRSPs, tax free savings accounts, company pensions, and other obscure vehicles depending on what’s hot with politicians at the time. Capital gains have been treated with favor as have dividends. Special deductions have existed for emerging market companies. I don’t know all the rules. Does anybody?

So when I’m done filing my Canadian mess – yes, it’s no fun here either – I then have to re-file with America. I cannot do it online because I live outside her border, so I download PDFs, fill them out as best I can, write off all my income, fill out RRSP waiver forms – I hope that’s what they are – and file zero taxes. I also file an FBAR (foreign bank and financial accounts) report. I have to list all financial accounts I have with a signing authority over. I have authority over all sorts of things – personal, child educational savings, and a charity organization. I have to file the account information and highest balance of the year of all these accounts.

Note 1: I wonder if I’m breaking Canadian law or professional accounting ethics rules by reporting a Canadian charity’s bank information and balances to the American government. If I am, what do I do?

Note 2: If this was done in America, there’d be revolution. Guns would fire at such a proposal.

Note 3: America already gets all of your financial data, so you do not have to file. Aren’t you happy you have such an all-seeing government?

I don’t own a business. If I did, it would be a bigger mess. They don’t get the FEIE. They have to claim the taxes they pay to Canada as a deduction. Ever do a business tax return? Ever have to do payroll filings? Yeah, fun. Now do it for two countries. I would never work as a contractor here, not through myself as a sole proprietorship. I’d at least incorporate and pay myself a salary. That way I could file corporately once , the easier individual form twice, and still maintain my FEIE. Fun. Not!

Some politicians in America – Raul Grijalva (D CA), John Tierney (D MA), and Mike Honda (D CA) – want to do away with the FEIE altogether. They see millions of us excluding huge sums of revenue and think it’s a loophole. Who knows how these politicians really think? Their analysis gives a number in the order of $71 billion in extra tax revenue over ten years. I don’t have their analysis, but I would bet $20 Canadian dollars that this is the expected total of the FEIE claimed.

http://isaacbrocksociety.ca/2012/03/27/congressional-progressive-caucus-budget-for-all-would-end-foreign-earned-income-exclusion/

Go back to my paragraph on business filers. If the FEIE disappeared, I would also claim foreign incomes taxes. I would replace the FEIE with the taxes I pay. I may not come out the same, though. This company pension I claim will not be allowed on my American form because it is not an American pension. That tax free savings account is not recognized down south. I and millions of others may end up owing taxes to America.

Fair? Hell not!

These are not legitimate taxes. These are taxes due because tax savings incentives in Canada do not qualify in America. I spend all of this money saving for retirement the best I can, and America undercuts me. They say you cannot do that. They say you have to invest in our vehicles. What are they called? 401K’s. I don’t know. I live up here. I cannot even buy them because I don’t live in America. My employer does not offer an American pension. And if they did, if I could invest in these American retirement plans, Canada wouldn’t accept them because I live in Canada. I’m a Canadian resident and I have to abide by Canadian tax law while I’m living here. The same goes for Canadians living in America – and there are many . They have to pay American taxes according to American tax laws. Makes sense. And you know what? They do not have to file taxes in Canada because they are not residents. They do not have to do double paperwork and try to figure out a way to make their 401Ks work in Canada at its higher tax rates. And if Canada did that? If Canada applied its higher tax rates to Canadians living in America, the American government would be all over it for stealing their tax dollars. My tax preparation will become more complex but so will the IRS’s. It will be more difficult to do the paperwork. Extra income will be offset by extra cost. And we will find other ways to not pay. Count on it. We will dump these useless tax savings accounts and find different ways to save for retirement. America will not save any money this way, and its citizens abroad will suffer more. We will likely renounce citizenship in droves. I know I will.

Congress, read this blog. You have seven million of us plenipotentiaries on the ground. Our influence abroad matters both financially and diplomatically. America’s image abroad is dismal, and I’m being nice. Very few of us help it. In fact, we join in on the denunciations. Very few of us talk positively about America, and most of us talk very negatively. Why should we help? You treat us like criminals. You treat us like shit.

Listen to ACA (American Citizens Abroad) and adopt their residency based taxation proposal. Do it now!

http://americansabroad.org/files/6513/6370/3681/finalsubrbtmarch2013.pdf

Philadelphia Voice

Tags

Eagles, Expat, IRS, Joe, Linebacker, Philadelphia, Taxes

Joe
With the
Philadelphia voice
Tells me what I want to hear
He’s a straight-up guy
Not about chatter
He gets to the point
And doesn’t want to hear
Roundabout questions
And especially not
Comments on Philadelphia sports
Not in this hot weather
Not about his cold teams
And now my taxes
Don’t seem so hard to prepare
For this delinquent expat
He’s thrown away my worries
Discarded them like
An Eagles’ linebacker
Throwing down a slow blocker
To get at his target
And destroy him
I still don’t like
the IRS
But I like
Philadelphia
I like
Joe