Yahoo article about Expats, taxes, and renouncing US citizenship

http://finance.yahoo.com/news/tax-time-pushes-americans-hike-204320491.html

One of the many articles now surfacing. Here's another similar article recently released. It's worth expanding the "Read More Comments" button at the bottom of the article.

http://rendezvous.blogs.nytimes.com/2012/04/16/americans-the-tax-man-cometh-wherever-you-are/?ref=global

Very interesting articles and comments were as would be expected. Thanks for posting.

Thankfully with only two bank accounts my FBAR filing has never been complicated as one is a simple current account and the other a savings account. The massive 0.5% gross interest on the savings account doesn't generate enough 'passive income' to make any difference one way or another.

BUT - during my last conversation with one of the 'financial advisors' at our bank - and we have had one account there since 1993  when they found that both DH and I are USC (DH is also UKC by birth), they REFUSED to talk about putting any of our money into higher yield investments. The said the paperwork was 'too complicated' because we are USCs.

Good article and some great comments.

IMHO FATCA filing should be fairly easily avoided for most expats because of the $200k and $400k thresholds, but the real trouble will come if when you try to open an account or buy financial services you are refused because of your citizenship.

Although FATCA is likely to be a government to government agreement, (for the U.K and certain other E.U countries at least). There had been tensions between FATCA and the BBA, (British Bankers Association), in relation to banking services for U.S citizens and subsequent closure, should the account holder be deemed recalcitrant.

BBA and DLA Piper notice link below. Some good bedtime reading...

http://ebookbrowse.com/fatca-bba-20101029-pdf-d94037463

The closing remark from the DLA Piper letter to BBA. The Hubris of the Congress in passing such law is amazing.

"UK law may therefore prevent UK FFIs from complying with various provisions of FATCA. The corollary of is that they may have no alternative but to disinvest in US securities and disassociate themselves from relevant counterparties. In turn, this may of course have unintended consequences in the US that may far outweigh any perceived benefits in relation to the mischief that FATCA was intended to address."

Getting back to expatriation ie renouncing US citizenship or giving up a Green Card. If you leave the US as a US citizen you can choose whether to also expatriate, but as a Green Card holder you don't have the choice as if you decide to live abroad you loose your US residency. If you expatriate you have to file an 8854 with the IRS and Part V 7a states

7a Do you have any eligible deferred compensation items? Checking the “Yes” box is an irrevocable waiver of any right to claim any reduction in withholding for such eligible deferred compensation item under any
treaty with the United States . . . . . . . . . . . . . Yes No

So if you have US retirement funds and you file form 8854 to notify the IRS of your expatriation you will give up all your treaty rights and be taxed as an NRA and have 30% tax withheld on any retirement income.

So I would not expatriate if you have US retirement funds. FATCA and US tax filing may be a pain, but it's better than having 30% tax withheld and having to file a 1040NR to claim back excess withholding. If you are a Green Card holder with US deferred compensation you have no choice in the matter.

If you have no financial accounts in the US, want to avoid FATCA and 1040s and fall below the income/net worth thresholds to pay the exit tax, then expatriation seems like a way to simplify your tax life. Otherwise just suck up the inconvenience; you'll be better off as a US citizen.

http://finance.yahoo.com/news/tax-time-pushes-americans-hike-204320491.html

It strikes me that the new FATCA regs are just making US expats aware of reporting requirements they've had all along.

I think you're referring to Part IV Section B line 7a. Providing you're not regarded as an "covered expatriate" for 2011, then section B would not apply.

I think you're referring to Part IV Section B line 7a. Providing you're not regarded as an "covered expatriate" for 2011, then section B would not apply.

Yes you're right. So it isnt as bad as I thought. If you meet the income and net worth limits and have your taxes upto date for the last 5 years you can expatriate and keep your treaty rights. So even with US retirement accounts it might be a good idea.

One of the things I don't get is why there's never any mention of conflicts with EU law. If it's going to be a govt to govt (UK-US) agreement, UK law still has to be compliant with EU law. And given the frequency of dual citizenship, some of the americans will be dual US-EU citizens. So, for example, if a UK-US dual citizen is denied a bank account (or whatever) in the UK shouldn't that be the denial of goods and services to an EU citizen.

One of the things I don't get is why there's never any mention of conflicts with EU law. If it's going to be a govt to govt (UK-US) agreement, UK law still has to be compliant with EU law. And given the frequency of dual citizenship, some of the americans will be dual US-EU citizens. So, for example, if a UK-US dual citizen is denied a bank account (or whatever) in the UK shouldn't that be the denial of goods and services to an EU citizen.

The EU has already blessed the efforts of the US, UK, France, Italy, and Spain to proceed exploring the government to government information sharing relationship. Government to government did away with any privacy law concerns.

As for denial of service, for financial institutions wishing not to be compliant, it would be more of an inability to meet requirements. A business, in this case the banks for example, could not be forced to take on accounts that would cost the institutions more money or manpower than they are willing to spend. Sorry mate, the job's too big!

The information sharing from the 5 countries depends on two issues. First, the lobbying power of financial institutions in each EU country in persuading their government to agree to the terms, at whatever cost, in order to prevent a possibility of a 30% witholding. Second, the agreement depends on the 'reciprocity' of the US in releasing like data on foreign accounts in the US to the EU partners. As I understand it, this requires an agreement to share information from the US Congress. I don't know where this stands in the US at present, but I do know there was strong opposition from the US financial industry. Has it passed?

If the US ends up not agreeing to release data and there is no reward for HMRC, etc., then the first issue, power of the financial institutions, becomes the main driver.

A big OOPS! I forgot to include Germany. So it's the US and 5 EU partners. 

As for denial of service, for financial institutions wishing not to be compliant, it would be more of an inability to meet requirements. A business, in this case the banks for example, could not be forced to take on accounts that would cost the institutions more money or manpower than they are willing to spend. Sorry mate, the job's too big!

If I'm a UK/US citizen and UK resident and under UK law the bank is supposed to offer me an account how can it use the inconvenience of a US law to refuse me and thus break UK law?

If I'm a UK/US citizen and UK resident and under UK law the bank is supposed to offer me an account how can it use the inconvenience of a US law to refuse me and thus break UK law?

RE: Reply No. 2 in this thread from Vadio, 3rd paragraph.

Perhaps you should ask the financial advisor from the bank that refused to discuss opening an account for Vadios husband (a dual UKC/USC). 

"If I'm a UK/US citizen and UK resident and under UK law the bank is supposed to offer me an account how can it use the inconvenience of a US law to refuse me and thus break UK law?"

Open the account as a U.K citizen, not U.S. You're not regarded as a foreign national in your own country. The bank has done it's job with take on procedures. Some banks, especially with on-line applications ask voluntary information, such as dual nationality, ignore it...

If you're a USC only, then there is a legal obligation to allow you to open an account, providing you're U.K resident. British banks don't like to deal with nonresidents for some reason, while Stateside banks don't care where you live.