Last year around 1800 Americans, living abroad, denounced their US citizenship. The U.S. is one of the only countries in the world that requires its citizens living abroad to file tax returns. Those people live and work legally in foreign countries and already pay taxes to their adopted countries. Renouncing ones citizenship is the only way to escape the wrath of the IRS.
The measure is even more intrusive when it comes to what these citizens are required to disclose. For example if your are a US citizen, living in Canada and married to a Canadian, you are required to disclose all of your assets, including joint bank accounts. This law also applies to those holding dual citizenship, which may include people that have never set a foot inside the U.S., i.e. children born to either an American father or mother. This, to me, is an issue of privacy and too intrusive into a foreign citizens bank account. Foreign banks that do business in the United States are required to disclose accounts held by Americans or face hefty fines.
The actions of the IRS go well beyond the law that was passed in order to expose accounts, used as tax havens by wealthier Americans, specifically those holding Swiss bank accounts.
On the heels of comments last week from U.S. Ambassador to Canada David Jacobson, the U.S. Internal Revenue Service quietly posted on its website an update to the information for citizens living abroad.
The fact sheet, which the website lists as last updated on Wednesday, largely confirms what Mr. Jacobson said was expected to come from the IRS, stating that no penalties will be imposed on late returns where no tax is due and failure to file required bank account information will also be forgiven for “reasonable cause.”
Mr. Jacobson said the clarifications were expected in response to “a lot of angst” among dual citizens who did not know they had an obligation to file returns in the United States when they were not living there. Read More Here
Canada has a tax treaty with the United States to avoid double taxation and with foreign tax credits, many of those who file returns will not end up owing taxes south of the border. Since this tax treaty exists, that is intended to avoid double taxing, one has to ask, why the filing of a return is required at all. This seems to be another case of government waste and keeping people employed in the IRS. The US should stop this nonsense and go after real tax evaders, instead of forcing U.S. citizens to give up their citizenship.
The IRS rules also debunk the issue of so-called Romney bank accounts in the Cayman Islands or Switzerland. It certainly shows how bogus the the Democratic Party talking points are on this issue. Think about it.