The Hidden US Tax Liability for Expatriates: A Global Perspective

Many individuals born in the United States who have spent their lives outside the country are often unaware of their tax obligations to the IRS. How do they find out? This article explores the various ways this knowledge comes to light, the impact of FATCA (Foreign Account Tax Compliance Act), and the broader implications for expatriates and non-resident citizens.

How Do They Find Out?

For many US expatriates, their first awareness of the tax liability that has been imposed on them often comes in rather unexpected circumstances. Here are some common triggers that reveal their tax obligations:

When applying for a job or filing their first tax return in America When attending university and seeing advertisements by tax service companies during tax season While on holiday, seeing advertising and notices about tax compliance Reading financial newsletters and news articles during tax season Countless times throughout the year, especially in April, through cable TV news channels and other media coverage When trying to open a bank or investment trading account in a foreign country, as the banker checks their place of birth on their non-US passport While working at a local branch of a big international company based in the US, if they earn stock options or other benefits considered taxable by the IRS When conversing with American colleagues or friends who are frustrated about their tax obligations even after moving abroad

Planning and Accidents

The US demands that its citizens residing abroad fully comply with its tax code. This extends to citizens born in the US and even includes those with dual citizenship. The US tax system is notably unique in its approach, imposing strict compliance on individuals regardless of their current residence or planning. This can lead to considerable confusion and financial burden, as evidenced by the experiences of young US-born individuals like the one mentioned, who is a British citizen solely because her US father registered with the US embassy years ago.

The issue of US tax liability is not a mere annual submission of a form; it significantly impacts individuals' financial planning, especially for those with investment or savings accounts in foreign countries. For instance, the young lady mentioned, who is encouraged to save through ISAs (Individual Savings Accounts) by the UK government, faces significant complications when the IRS views these savings as potential tools for US tax evasion. This stringent approach can result in substantial CPA (Certified Public Accountant) costs, penalties, and even account closures.

The Foreign Account Tax Compliance Act (FATCA)

The 2010 enactment of the Foreign Account Tax Compliance Act (FATCA) marked a significant departure in how the US enforced its tax compliance by foreign financial institutions. FATCA introduced a basic form of extortion, compelling financial institutions worldwide to search through their client databases for signs of US taxpayers and submit this information to the IRS. This has led to situations where individuals with no real connection to the US had their privacy and data protection rights compromised. They were made aware that the USA expects them to file and pay taxes in addition to their home nation's requirements.

Consequences and Outcomes

As a result, many people who had no significant ties to the US have faced severe inconveniences, such as being frozen out of their bank accounts or having to supply US social security numbers. The implementation of FATCA has sparked significant outrage and worries not only among US expatriates but also among residents of other countries who value their privacy and data security. The certification process often involves sending complaints in a language different from the one used by the affected individuals, thereby complicating matters further.

The first video demonstrates the impact of FATCA in the Netherlands, where a large segment of the population faced account closures and had to deal with US government threats. The Dutch government, influenced by these sanctions, effectively threw certain citizens under the bus. The second video shows JR making a complaint to the EU regarding privacy, anti-discrimination, and data protection violations related to FATCA compliance. The final video highlights the fate of a Canadian individual who inadvertently became embroiled in these complex tax regulations. These incidents underscore the far-reaching and often arbitrary nature of US tax requirements.

Conclusion

The story of US expatriates unaware of their tax obligations emphasizes the need for clearer and more understandable tax policies. The extraordinary measures taken by the US, most notably FATCA, have led to significant distress and financial complications for many individuals. It is crucial to address these issues and ensure that citizens and non-citizens alike are properly informed about their tax responsibilities. This not only respects individual privacy but also fosters international goodwill and cooperation.