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Part 1 – Life In The “Penalty Box” – U.S. Citizens And Green Card Holders Living Outside The US



On October 18, 2011 the U.S. Ambassador to Canada – Ambassador Jacobson – made a speech on “U.S. Canada Relations” to the Canadian club. The speech took place after the frightening summer of 2011 during which thousands of Canadians:

1 Learned that they might be considered to be U.S. citizens;

2. Learned that they might be required to file U.S. taxes;

3. Made attempts to file those taxes (often through the 2011 “OVDI” program).

Americans abroad throughout the world were living in a “state of fear and confusion” sheer terror.

Q. Why would citizens and residents of Canada be required to file U.S. tax returns at all?

A. Mostly, because they were deemed by the United States (under its citizenship laws) to be U.S. citizens.

Yes, the United States imposes taxes based on citizenship. Okay, but wait. Anybody “Born In The USA” is automatically a U.S. citizen. In practice, what the U.S. calls “citizenship-based taxation”, is the imposition of taxes based on a U.S. “place of birth”. Taxation based on “place of birth”? In the 21st century?

People don’t choose where they are born!

Back to Ambassador Jacobson …

Ambassador Jacobson made a few comments on this issue. In the context of detailing difficulties in U.S. Canada relations, the Ambassador remarked:

The third coffin sighting arises from recent media coverage of an issue that has been around for about 100 years, since the United States imposed an income tax in 1913. From the beginning, my country has taxed the incomes of American Citizens no matter where they live, no matter where they earn their livings.

This is different from the way Canada — and some other countries — do it.

Well, the Ambassador was absolutely one hundred percent correct. The word “some” has a technical meaning. The meaning of the word “some” is:

“There is at least one that.”

In a purely logical sense, the word “some” could (and in some cases) can include “all”. Actually, what the Ambassador should have said was this:

“This is different from the way Canada — and ALL OTHER countries — (except the United States and Eritrea) do it”.

This would have been more honest. (But, Ambassadors don’t get “paid the big bucks” for their honesty.)

The United States and the African nation of Eritrea are the only two countries that impose taxes based on citizenship. “Citizenship based” taxation has and continues to inflict untold misery on the large number of people who were born in the United States but live outside the United States. For U.S. taxpayers living abroad, U.S. tax compliance often results in:

– double taxation

– intrusive asset disclosures

– impossibly high tax preparation fees

– unjustifiable stress and anxiety

– restrictions on retirement planning

– special burdens on your marriage

Yes, it’s really true.

To describe it more objectively, those with a U.S. birthplace (who have not relinquished U.S. citizenship) and live outside the United States (this would mean in another country) are:

1. Deemed to be residents of the United States for the purposes of taxation (this is also true for “Green Card Holders”); but

2. Their assets are deemed to be “offshore” and “foreign”.

If you read the “Internal Revenue Code” you will see that:

If the word “foreign” appears, the word “penalty” is sure to follow.

To put it simply, those U.S. citizens (and this includes Green Card holders too) who live outside the United States live life in the “penalty box”.

I look forward to sharing these issues and concerns with you at the “Internet Tax Summit” on September 21 2015.

This has been Part 1 – “Life In The Penalty Box”. I will continue this series of posts in the days leading up to the “Internet Tax Summit“.

John Richardson

P.S. People who live outside the United States ALWAYS pay taxes to their country of residence too!

The Reality of U.S. Citizenship Abroad

My name is John Richardson. I am a dual citizen. I am a lawyer – member of the Bar of Ontario. This means that, any counselling session you have with me will be governed by the rules of “lawyer client” privilege. This means that:

“What’s said in my office, stays in my office.”

I am also a member of the American Citizens Abroad Professional Tax Advisory Council (PTAC). This is an advisory panel focused on assisting American Citizens Abroad in an FBAR and FATCA world.

The U.S. imposes complex rules and life restrictions on its citizens wherever they live. These restrictions are becoming more and more difficult for those U.S. citizens who choose to live outside the United States.

FATCA is the mechanism to enforce those “complex rules and life restrictions” on Americans abroad. As a result, many U.S. citizens abroad are renouncing their U.S. citizenship. Although this is very sad. It is also the reality.

One comment

  1. calgary411 says:

    Ambassador Jacobson said *My message on this one is to sit tight. We are not unreasonable. We are not unsympathetic. We are not irresponsible.*

    The US Ambassador to Canada David Jacobson left Canada without ever answering the questions of any *US Persons in Canada*. Many now over 70-year old grandma’s, like me, are still sitting tight. The new US Ambassador to Canada, Bruce Heyman, is no more communicative.

    In the meantime, we’ve paid outrageous US compliance industry professionals fees and must raise money to fight in the courts for justice. Since I learned about this and while I’ve been sitting tight, the fee for renunciation has gone from $0.00 to US$450.00 to US$2,350.

    Lives are in shambles and today we learned of another whose end of life was hastened by the stress of issues for *US Persons Abroad*. As far as I’m concerned, the effects of FATCA and US CBT shortens, stresses and devalues the lives of innocent people. This must be addressed. This must be changed.

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