Yesterday, we started this blog post to hopefully encourage those with U.S. tax issues to consider whether they can deal with minor/unintentional FBAR violations as a “stand alone single problem”. There may be no need to escalate and expand one single problem into a multi-dimensional full blown tax problem that may end up with unintended and unanticipated costly professional fees as well as undue time spent! Read on and learn why. Keeping a calm head is most important, even if it is most difficult to do in the face of the scary situation of not being in compliance with the U.S. tax and regulatory regime.
Archive for John Richardson
I suspect that history will show that that the growth in renunciations of U.S. citizenship (and abandonment of Green Cards) continued in 2016. Absent a change in the way that the United States treats its “U.S. Persons Abroad”, I suspect that the growth in renunciations of U.S. citizenship will continue.
The purpose of this post and a short summary:
Tax Residency is becoming an increasingly important topic. Every country has its own rules for determining who is and who is not a “tax resident” of that country. The advent of the OCED CRS (“Common Reporting Standard”) has made the determination of “tax residence” increasingly important.
An introduction to “tax residency.”
Most people equate residency with physical presence. The thinking is that “your residence is where you live”. There is no necessary correlation between where one lives and where one is a “tax resident”. Residence for tax purposes may be only minimally related to residency for immigration purposes. It is possible for people to live in only one country and be a tax resident of multiple countries. The most obvious example is “U.S. citizens residing outside the United States”.
The law does not make dual citizenship illegal; it is merely a reporting requirement.
Federal Law No. 142-FZ on Amendment of Articles 6 and 30 of the Federal Law on Russian Federation Citizenship and Individual Regulations of the Russian Federation, which took effect on 4 August 2014, makes it a criminal offence for Russian nationals to conceal dual citizenship or long-term residence abroad.
It has been widely reported that American actor Steven Seagal has joined American boxer Roy Jones in becoming a citizen of Russia. By becoming Russian citizens, Mr. Seagal and Mr. Jones are now subject to Russia’s Currency laws, which include the requirement to report their non-Russian bank accounts to the Kremlin. Messrs Seagal and Jones may admire Russia. That said, it’s clear that the Kremlin admires the U.S. Treasury in general and Mr. FBAR – America’s most important citizen – in particular.
The primary story is of a U.S. professor who pleaded guilty to an FBAR violation and was subjected to a 100 million FBAR penalty. Notably the “tax loss” was 10 million dollars and the FBAR penalty was 100 million dollars. It appears that Mr. FBAR is becoming an important tool in the arsenal used by the United States Treasury.
For Whom The IRS Form Tolls
I would not want the job that the IRS has to create forms given there are many “information reporting requirements” in the Internal Revenue Code. The IRS has the job (sometimes mandatory “shall” and sometimes permissive “may”) of having to create forms that reflect the intent of the Internal Revenue Code. The forms will not necessarily reflect how the IRS interprets the text and intent of the Code. Once created, the “forms” become a practical substitute for the Code. If you look through your tax return you will find “form” after “form” after “form” how the various provisions of the Internal Revenue Code are “given meaning” (if the meaning can be determined).
How The “Assistance In Collection” Provisions In The Canada-U.S. Tax Treaty Facilitates “U.S. Citizenship Based Taxation”
I commented on an article titled: “Why is the IRS Collecting Taxes for Denmark?” which appeared at the “Procedurally Speaking” blog. The article is about the “assistance in collection” provision which is found in 5 U.S. Tax Treaties (which include: Canada, Denmark, Sweden, France and the Netherlands). I am particularly interested in this because of a recent post at the Isaac Brock Society.
The “Exit Tax”: Dual US/Canada Citizen From Birth, No Canada Citizenship Today = No Exemption To US “Exit Tax”
Relinquishing US citizenship: South African Apartheid, the Accidental Taxpayer and the exit tax
The above references a “guest post” written by Dominic Ferszt of Cape Town South Africa. The post demonstrates how the “dual citizen from birth” exemption to the S. 877A “Exit Tax” relies on the citizenship laws of other nations. In some cases those laws of other nations are arbitrary and unjust. If these laws were U.S. laws, they might violate the equal protection and/or due process guarantees found in the United States constitution. For example, Mr. Ferszt describes how the “dual citizenship exemption” to the “Ext Tax” is dependent on South African “Apartheid Laws”. He describes a situation where a “black” U.S. citizen from birth is denied the benefits of the dual citizen exemption to the Exit Tax, which are available to a “white” dual citizen from birth. (During the “Apartheid Era” Blacks were not entitled to South African citizenship.)