TaxConnections

 
 

Access Leading Tax Experts And Technology
In Our Global Digital Marketplace

Please enter your input in search


Ten Commandments For U.S. Citizens Living Outside U.S.



Ten Commandments For U.S. Citizens Living Outside The United States

Why are people relinquishing their U.S. citizenship?

The reason that Americans abroad are renouncing U.S. citizenship is because those who wish to obey the laws governing “U.S. citizens living outside the United States” will have to live according to the following 10 Commandments which are found in the Internal Revenue Code which is the Bible of All American citizens (note that these commandments in effect apply only to Americans Abroad).

The “Bible of the American” is based on two basic principles:

Principle 1: The “Bible of the American” hates anything that is foreign. In fact, if the word “Foreign” appears in the “Bible”, the word “penalty” (generally starting at $10,000) is sure to follow.

Principle 2: The “Bible” is designed to punish all forms of “tax deferral” that are not “Homelander Permitted (think IRA) Tax Deferral”.

Now, from these two great principles, we will develop the “Ten Commandments” of living a clean American life outside the United States.

“Living Clean” – The Life of a U.S. citizen abroad

Here are the ten commandments of “Living Clean” that apply to U.S. citizens abroad. They are designed to ensure that:

if a U.S. citizen lives outside the United States that he/she lives according to the principle that:

“When in Rome, live as a Homelander” does, when elsewhere, live as they live elsewhere.

Ten Commandments:

1. Thou shalt NOT have a bank or brokerage account outside the United States. If you do so, it must be reported to U.S. Financial Crimes on an annual basis. Failure to disclose is “Form Crime”. You may be fined an amount that is more than 300% of the value of the account.

2. Thou shalt NOT marry an “alien”. If you do so, you will have difficulty leaving your estate to him or her. Better to return to the Homeland to search for a suitable spouse.

3. Thou shalt ensure that your “alien” spouse agrees to be a U.S. taxpayer. Failure to do so, will result in your having the punitive filing status of “married filing separately”. This will guarantee greater exposure to the Alternative Minimum Tax, the new 3.8% Obamacare surtax, higher tax brackets and lower thresholds for reporting (including FATCA Form 8938) requirements.

4. Thou shalt NOT believe that the sale of your principal residence is a “tax free capital gain”. In fact, the sale of your principal residence will trigger a 23.8% capital gain which means that your house cannot be used as a retirement investment.

5. Thou shalt NOT buy non-U.S. mutual funds. If you do, you will have your gains confiscated in the form of an “Excess Distribution” Tax. Buy American. Buy U.S. mutual funds.

6. Thou shalt buy ONLY “term insurance”. Any other form of “insurance that has cash value” will be treated as a sacred instrument of tax evasion. Furthermore, if you purchase a “foreign insurance policy” thou shalt pay a special excise tax.

7. Thou shalt NOT buy or participate in an RESP, RDSP, employer pension plan, or any other kind of retirement planning vehicle which will be considered to be a TAXABLE “Foreign Trust” (with all the attendant penalty laden reporting requirements).

8. Thou shalt neither be self-employed NOR carry on business through a non-U.S. (AKA “Foreign”) corporation. If you do, punitive taxes, deemed income, and expensive reporting requirements will descend on you.

9. Thou shalt NOT relinquish U.S. citizenship. In the event that you do, you may be subjected to an “Exit Tax” which applies to your “non-U.S.” pension, “non-U.S.” assets, and assets that accumulated after you ceased to live in the United States. In addition, there are certain “Form People” who claim that you may be banished from the Homeland forever.

10. Thou shalt file, every year, file the following forms with the IRS: 1040 and all required schedules, FBAR, FATCA, 8938, 8965, 3520, 3520A, 709 (up to a maximum of up to about 45 forms). Understand that this will cost you thousands of dollars.

And this ladies and gentlemen, is why your problem is NOT “coming into U.S. tax compliance”. Your problem is “living as a tax compliant U.S. citizen abroad”. It really can’t be done (if you want any kind of life).

This post comes from a post that I wrote that originated at Tax Connections and was reposted on the Isaac Brock Society. You can read it here:

“How To Live Outside The United States In An FBAR And FATCA World”

 

Avatar

The Reality of U.S. Citizenship Abroad

My name is John Richardson. I am a Toronto based 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.”

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.

Twitter 

Subscribe to TaxConnections Blog

Enter your email address to subscribe to this blog and receive notifications of new posts by email.



 


Leave a Reply