"Accidental Americans" In The Age Of Fatca

[Editor's Note: The following post is by TDV Editor-in-Chief, Jeff Berwick]

Imagine one day waking up and realizing that a certain nation is proclaiming you are their citizen, and that you owe them taxes on your past, present and future income, even though you’ve perhaps never even set foot in that nation! For many so-called “accidental Americans” this is the reality.  

One example is that of Julie Veilleux. When she discovered this startling news, she marched to the nearest US embassy to renounce her citizenship. After all, she had lived in Canada since she was a young child, and the middle-aged woman didn’t know she carried dual citizenship. Regardless, renouncing citizenship wouldn’t absolve her of the many “penalties” the Internal Revenue Service (IRS) will claim she owes them.

Accidental Americans are particularly flustered by the new American tax regime, FATCA, which comes into effect in less than 100 days. It seems every couple of years the IRS has to change the tax code for Americans abroad. Goes to show how incompetent and disorganized government agencies are, and also why they must depend on violence. This new regime entails a worldwide push to get every last penny out of Americans abroad, as well as everyone holding dual citizenship…even if they don’t know about it!

The US government is desperate. As we’ve reported, and is well-established, the US government is trillions of dollars in debt. Why clampdown on Americans abroad? Approximately 7 million Americans live abroad. According to the IRS, the governent only received 400,000 tax returns from expatriates in 2010 – a compliance rate of approximately 6%. Presumably, the compliance of dual-citizen children is far lower. Customs and Immigration is now sharing information with the IRS and, should any of the non-compliant 94% expats or their accidentally American offspring set foot on US soil, they could be thrown in a cage.  As IRS Commissioner Doug Shulman stated in 2009: “We are in the middle of an unprecedented period for our global international tax enforcement efforts. We have pierced international bank secrecy laws, and we are making a serious dent in offshore tax evasion.”

This international enforcement effort includes taxing the income of children! Their innocence and ignorance will come second to the fact that the IRS needs money. The IRS will literally break the piggy-bank, as well as college funds and parents’ retirement savings. The US government looks absolutely ridiculous in front of the world with this new legislation. As Reuters declared,

“A U.S. law meant to snuff out billions of dollars in offshore tax evasion has drawn the criticism of the world’s banks and business people, who dismiss it as imperialist and ‘the neutron bomb of the global financial system’…A senior American finance executive at the Hong Kong branch of a major investment house [declared] that FATCA was ‘America’s most imperialist act since it invaded the Philippine Islands in 1899.’ The regulation…was ‘engendering a profound and growing anti-American sentiment abroad.’”

If the US government and its cronies cannot strongarm people into complying, they will depend on data gathering to find those who accidental Americans not in compliance with the law. Beginning June 30, 2014, right before FATCA goes into effect, both Canada and the US will begin sharing information on people entering and leaving either country. 

Both Canada and the US will know precisely when you have been in, and for how long, each country. What does this mean? Here is what can happen when you violate a visa, for example…You can be banned from travel to US if unlawfully present. For Canadians, the consequences are: a) 3-year travel ban if unlawfully present for between 180 and 365 days; and b) a 10-year travel ban if unlawfully present for more than 365 days; Owing US income tax on worldwide income. The US taxes US citizens and “US residents” on their worldwide income, one of the few nations to do so. Getting deemed a US resident and being subject to tax on your worldwide income is a mess most would like to avoid, but not everyone does; The US also taxes US citizens and “US residents” on the fair market value of their worldwide assets at death. The result is that the heirs of the uninformed Canadian can find their inheritance subject to the US estate tax.

Who knows – whereas the “selfie” in its infancy was known as a vain phenomenon, perhaps in the future it will be known as a form of security from international taxmen! That is how one Philadelphia-man, who lives much of the year in New York, sees it.  Andrew Jarvis started an architecture firm in 2012, in New York, but he lived in Philadelphia. That’s when he had the idea to use selfies for a practical purpose – to prove his residency to the IRS.  Splitting his time between the two cities, 51% of time was at home in Philadelphia. Keeping track of receipts and travel documents might not be enough, so to be extra safe, he began taking photos of himself in front of his house with the Philadelphia Inquirer from that day. This will probably in the future be applied to countries as well! 

I once had a girlfriend of Vietnamese descent. We didn’t have much in common but we were happy together at the time. We met around 2004 while I was living in Santa Monica, California. She was Canadian and her parents wanted her to go to the US to “find an American husband” so she could get a US passport. What a dumb idea. Why people would want a certified certificate of slavery, an American passport, is beyond me. Her parents, and many people who want US citizenship, don’t know and have been brainwashed by worldwide propaganda beamed from Hollywood showing the rags-to-riches, gold-paved streets of America. Once you get here, though, you realize the only metal on the streets is in the holsters on the police.

An American passport is like the branding of a cow. There’s no getting rid of it. Many people are renouncing citizenship, and this is an option, but the process is arduous and costly. Get an American passport, become a slave. It’s not exactly 1700s style slavery, but that’s simply because thet tax regime is more efficient when the people at least have a veneer of being free. Let’s face it, having an American passport is worse than a North Korean passport. At least the North Korean government has not the wherewithal to find you, tax you, and imprison you.

FATCA DRAGNET

For accidental Americans the real problems are just beginning. Leaks about National Security Agency capabilities and agendas have grave implications for not only American citizens, but all world citizens. Who might be feeling most sick to their stomach? That’s the accidental Americans. I can imagine it feels like a grave violation when a country in which you have no history purports to own you. Heck, it makes anarcho-capitalists sick to their stomach when the place they’ve lived their entire lives claims they are cattle. 

Accidental Americans are going to get caught in the FATCA dragnet. It would do them well to educate themselves about the American taxation system. They can begin, if they already have it, by reading their accidental passport. It states on page 28:

“D) US Taxes: All US citizens working and residing abroad are required to file and report on their worldwide income. Consult IRS Publication 54, “Tax Guide for US Citizens and Resident Aliens Abroad.’”

The TDV Wealth Management Crisis Conference in Cabo San Lucas from April 30th to May 4th can go a long way towards educating Americans, accidental and otherwise, of their options. There are still ways to protect yourself. I’ve used many of the techniques you’ll learn (and am working on using the ones I have yet to) and there’s no conference in the world as personalized, to the point and helpful as TDVWMCC in Cabo. We will get you started on the right foot. You and your families futures will indubitably be more secure after you attend this seminar. For more info on where to begin, click here.