Attention U.S. taxpayers: Are you ready for FATCA?

This is the biggest scam the American government has going now - taxing its citizens for money it doesn't deserve.

My father was an American dual citizen up until last year - he rescinded his American citizenship so as not to have to participate in this scam.

Wait, so Americans have to pay tax even when they're not living there?

This infuriates me. Taxation without representation. It makes me want to throw crates of tea into Boston Harbor. (Even if you are not a U.S. citizen, be wary. A number of other governments are beginning to follow the U.S. example here.)

The long arm of the U.S. government has gotten horribly out of hand.

The U.S. and Eritrea are the ONLY two nations that tax their non-resident citizens. I already pay the same taxes as Japanese citizens, why should I also have to file with the U.S. when I spend absolutely no time there?

Even if you end up not owing U.S. taxes, filing alone can be a major burden in terms of time and anxiety and a significant expense. Doing the paperwork for Japanese taxes is more than hard enough! Also, add to that the burden of many overseas banks refusing to let U.S. citizens open accounts (and I don't blame them at all). Plus, this is hurting U.S. international competitiveness. I know many corporate types who have left Japan due to the U.S. tax system. These are people who help keep U.S. international business viable.

An irony here is that many 'accidental' U.S. citizens are also subject to tax filing. It should make non-U.S. citizens think twice before giving birth to their child in the U.S.

It's been a primary cause of the rapid increase in citizenship renunciations by those able to.

Overreach at its worst.

This isn't a new policy on taxation, US citizens have always been required to file (as the article states). it's just making it harder to NOT comply with that obligation. This year you can make about 90,000 USD (10.8m JPY) and not have to pay US taxes so it's not like its a fleece. And since US citizens can vote regardless of where in the world they are its not "Taxation without representation" lol. The only ones who should be up in arms about this are people who were illegally not filing their taxes before.

Wait, so Americans have to pay tax even when they're not living there?

Yes, if they make over a certain amount. But even if they don't make that amount, they are still required to submit their income reports to prove that they haven't made enough to have to pay the taxes.

Yes, it's annoying, but we don't necessarily have to pay US taxes if we can do the foreign earned income exclusion or show that we are paying taxes here. Also, it's not taxation without representation because we can still vote by absentee ballot. I hate it, too, but these are the facts. Pretty much exactly as Shinjuku no Yaju explained.

It is this kind of communist like insanity of an out of control government that makes certain of us citizens want to leave. Problem is, just like an oppressive leaning government, they have also made it very hard to leave as some of my acquaintances have discovered the hard way.

It would help if we had more people paying taxes to begin with.

" both resident and non-resident Americans are required to file a U.S. federal income tax return every year,"

I am kinda tired of reading this mis-information. You will read this MANY times ALL over the internet and it just is not true.

If you go to the IRS website and read the VERY well hidden TINY print. You are NOT required by law to file unless you make over 98,100 USD a year and/or have over 10,000 USD in foreign banks (for FATCA).

God bless United States of America we have to pay taxes even we are out of the country and we don't have any benefits for our country! NON!

Home of the free?

This article is missing a ton of things (not withstand it is a bit of old news).

For Americans with foreign income, the reporting on FATCA is year end of $100,000 USD or over. Notwithsanding Americans already need to file an FBAR for over 10,000 USD (this has been around for years and years).

Also reading the agreement between Japan and the US (you can see it online), Japan only needs to report any account holder who's value is over $50,000 USD, so if you are under, another thing not to worry about. Also if your Japn account has no "US" links (eg transfers there, or withdrawals) it is hard to identify as a US account holder if you opened your account in the past. New accoutns must be identified, but older ones are harder.

since US citizens can vote regardless of where in the world they are its not "Taxation without representation"

@Shinjuku, @konekochan

I beg to disagree. Yes we have the right (obligation) to vote, but we have no congressman or other representative in our constituency where we reside.

As such, we are not directly represented in the distant U.S. congress — and that is exactly what the main grievance was of the British colonists in the 13 colonies back in the mid-1700s. Those colonists had marginal representation in the British Parliament, but not full representation.

Plus, living in Japan, even though I am subject to U.S. taxation, I am not allowed to send my English speaking children to U.S.-funded schools, even though there are U.S. schools here in Japan on some of the American military bases. (By the way, the French and German governments subsidize their schools in Japan for their expat communities here.)

So anyway, I stand by what I said: Taxation without (proper) representation

I feel sorry for yanks, this is getting pretty stupid, I would rather have govts who suspect some audit those to find things out rather than having banks worldwide funnel info back to the US & god know whatever countries follow suit.

The amount of info one has to keep if living outside their own country is getting to be rather painful & for the VAST majority UN-BLOODY necessary! Focus on the 1%ers they are the once scamming the taxman!

I feel sorry for yanks

@GW

I appreciate your sympathy. Thank you.

That said, expats from the UK may be next. From what I have heard, the British government has borrowed a page out of the American playbook on this one and is now making moves in the same direction.

I beg to disagree. Yes we have the right (obligation) to vote, but we have no congressman or other representative in our constituency where we reside.

@Sensato: That's not really true. You have to be registered for a certain district in the states in order to be able to vote overseas. So, if you are registered in area in CA, then the person who is running for Congress in that area is your representative. Nothing stops you from reaching out to those who are elected to represent you in whatever district to let them know what you feel about on how the IRS and their policies seem to be unfair or any other issues.

I am a registered voter for my home state, and I get calls (via Vonage) from candidates for local elections and asking for money as well as for congressional elections. It all depends on if you choose to keep up with the political scene on your local level while you are here.

Since Sen. Cruz wants to abolish the IRS if elected as President, I say don't do that, just reform the tax code to make it flat across the board (depending on income level) where everyone pays. Then maybe some of these arcane tax laws and loopholes would go away.

I feel bad for my u.s friends how the heck are you going to live paying two taxes while the rest of the world only pays one tax when over seas. I know be Canadian we don't pay taxes overseas because of some tax agreement, I don't know how you guys are going to do it.

@Robert Dykes any link?

5) I am a U.S. citizen and have no taxable income from the United States, but I have substantial in- come from a foreign source. Am I required to file a U.S. income tax return?

Yes. All U.S. citizens and resident aliens are subject to U.S. tax on their worldwide income. If you paid taxes to a foreign government on in- come from sources outside the Uni- ted States, you may be able to claim a foreign tax credit against your U.S. income tax liability for the foreign taxes paid. Form 1116 is used to fig- ure the allowable credit.

And what if we're self employed?

Strangerland:

This is the biggest scam the American government has going now - taxing its citizens for money it doesn't deserve.

Wow, we actually agree on something for once.

Cant escape the Tax Man! Need to fund the American war of terror one way or another...

In principle, how different is contemporary political system from that of the Medieval Ages when religious organizations were gathering tax from the poor under the name of God? When you read the US Constitution, it's full of idealism but the actual applications of it have been being undermined by earthly powers. Modernism tried to mitigate the integration of these powers in various ways such as letting political authorities watch each other and sharing information with plain daily languages. However, when the massive monetary system and information network are more influenced by few in the power, the old habit seem to have come back even in so called "developed" countries.

Cant escape the Tax Man! Need to fund the American war of terror one way or another...

Actually, the US spends more on welfare and Social Security and other programs for the poor than it does on defense spending. So it needs tax money to keep bribing people to keep voting their elected representatives in power.

Social Security is a bribe? That's like paying yourself to bribe yourself. and defense spending is higher than welfare spending, so as much as you hate the poor and their annoying instance on "not dying"...we (US taxpayers) still spend more on killing the poor than feeding.

I think the U.S. government often sucks as much as the next guy, however there are many wealthy people who tend to hide their money in "tax shelters" and avoid paying taxes at all cost. (Not to mention Corporate loop-holes that often grant Corporations billions back after paying in no taxes.) This puts the burden on the poor to foot the bill. So while I don't think US citizens living in foreign countries should foot the bill, I think if you are a U.S. citizen who is hiding money over seas you should get a 20% penalty in your taxes if you are caught doing it.

Shinjuku No Yaju,

This isn't a new policy on taxation, US citizens have always been required to file (as the article states). it's just making it harder to NOT comply with that obligation.

That might be the case, but the complaints about FATCA are more to do with the unintended consequences it has for people who doing nothing wrong.

This year you can make about 90,000 USD (10.8m JPY) and not have to pay US taxes so it's not like its a fleece.

Whether it is a fleece or not is besides the point - people either obey the law or they don't. The point is that people who obey the law are collateral damage in the attempted crackdown on those who don't.

Is that worth it? I'm not American, but I was under the impression that the USA respected people's freedoms above most else.

The only ones who should be up in arms about this are people who were illegally not filing their taxes before.

You have that wrong, this law has put out loads of innocent Americans, not to mention all the foreign financial institutions that have been co-erced into helping the IRS with their activities, without any compensation at all for the costs they incur in complying.

Personally I thank my lucky stars that I have a different passport, but circumstances do find me resident in Japan, which in respect of financial freedoms at least is far from ideal. While things aren't yet as bad here, the direction is worrisome. Some foreign financial institutions will not deal with residents of not only the USA, but also those of Japan.

This is so very wrong. The USA and Japan are home to two of the richest peoples on earth, and yet these people's have their freedoms restricted by their authorities? I wish I could opt out of this, without having to pull up my roots and move elsewhere.

FizzBit And what if we're self employed?

It is still considered foreign source income. You would not get the foreign earned income exemption since that applies to employees, but you should have your U.S. tax liability covered by foreign tax credits related to taxes paid in Japan....

Per the 2014 instructions for 2014: "Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it)."

The regulations cited in the article have no relevance to taxpayers, except insofar as it will make it more difficult for tax dodgers to avoid U.S. taxes by squirrelling money away overseas.

To clarify and add to the above rules for U.S. residents of Japan. (I welcome corrections on anything I might have wrong here.)

If you make below a certain income (about $10,000) and have no investments, you don't have to file a U.S. tax return, no matter where you live.

http://www.overseasfiler.com/articles/who_must_file_a_tax_return

If you make over that income, you have to file, but you can exclude your Japanese income as "foreign earned income", up to the limit of about $90 thou. This means you pay income tax on that income to Japan but not to the U.S. So why do Americans have to pay twice? Generally, they don't; that's why.

http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion-Can-I-Claim-the-Exclusion-or-Deduction

If you freelance, you're still liable for U.S. payroll taxes (Social Security and Medicare), even if you're excluding your foreign earned income. There may be some workaround, as Japan and the U.S. have a reciprocal tax agreement. So if you're paying into the Japanese pension system, you don't have to pay U.S. Social Security. That's my understanding anyway; I'm a bit fuzzy on this.

If you have other income in the U.S. (investment income, interest income, etc.), you have to report it and possibly pay tax on it, even if you're under the $90 thou threshold for excluding your Japanese earned income.

If you had more than $10,000 dollars in an overseas bank account at any time in the previous year, you have to give the account details directly to the U.S. Treasury Department (not the IRS). This is to prevent people from using overseas accounts to dodge taxes, and if you're a U.S. taxpayer who is NOT a scofflaw, you should support it.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-FBAR

I think one of the main points is the ridiculousness of non-resident citizens to even be required to self-report(includes anyone deemed "US Person", even people who just travel or vacation extensively within US territories). Take the mayor of London for example. He merely had the misfortune of having been born on US soil.

I think one of the main points is the ridiculousness of non-resident citizens to even be required to self-report

Why is this ridiculous? Are you saying that if you live in Japan but are from Australia, for example, you don't have to report your Australian investment income?

Take the mayor of London for example. He merely had the misfortune of having been born on US soil.

And he has no investments in the U.S.?

@Sensato UK FATCA is already here unfortunately. many deadlines to submit info etc is Sept 2016

Nessie,

As the article states, "Many foreign banks and financial institutions around the world are opting to turn away American clients", so I don't think it's the case that the regulations have no relevance to US taxpayers.

And I think you got Frederic inside out - he means people the U.S. regards as citizens, who are non-resident in the U.S.

The mayor of London happened to be born in the U.S., but he is basically British for all intents and purposes. He sold a property in the U.K. some time back, and there was a capital gain.

But for the privilege he had of being born in America, the IRS expected some tax on the capital gain he made on his sale. Even though he hasn't lived in the U.S. since he was a little kiddy.

In short, residency is the global standard, not citizenship, but the U.S. is out of step.

And he has no investments in the U.S.?

The capital gain the IRS wanted to tax was made on property in the U.K., where the mayor of London is resident.

US citizens overseas must report their income even if its under the excempt rate. Failure to do so is a no no. This has always been the rule but there has been recent additions to it.

This isn't a new tax law, it's just a new reporting law. U.S. citizens have ALWAYS had to pay taxes when living abroad, but only if they make over 100K or something. This is just to force banks to report amount to U.s. authorites. .Before they had to rely on U.S. filing.

This mainly for big corporations (like Google) who are parking huge amounts (like billiions) overseas to avoid U.S. taxes.

FATCAts

How are they going to get away with now?

NessieMar. 25, 2015 - 04:12PM JST 1.If you make below a certain income (about $10,000) and have no investments, you don't have to file a U.S. tax >return, no matter where you live. http://www.overseasfiler.com/articles/whomustfileatax_return

5petalsMar. 25, 2015 - 06:38PM JST US citizens overseas must report their income even if its under the excempt rate. Failure to do so is a no no. This has >always been the rule but there has been recent additions to it.

These two statements are at odds. As far as I am aware (and I am very aware) a US citizen or US Perm Res, residing outside of the US has no obligation to file a tax return if their income is below the IRS established income threshold for that class (ie; ind, married, head of household etc). The same applies to those living IN the US.

As an accountant, I'd like to clarify issues around foreign bank account reporting and annual income tax reporting.

First, they are two separate filings - they cannot be filed together, and have no primary affect on one another. Filing an income tax return is dependent on the same terms, whether you are resident in the US or not; however there is a foreign tax exemption for most income earned and taxed overseas. Foreign bank reporting is limited by different thresholds. So, theoretically, if you had an account over the foreign bank reporting threshold, but had income under the income tax reporting threshold, you would report your foreign bank holdings but would not need to file an income tax return - however, it's more likely that it would be the other way around.

A more onerous provision is that you have an obligation to report the location of accounts that you control, as say a financial advisor, but have no ownership.

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Not as an accountant, I would like to add that income tax reporting for non-residents isn't unreasonable, and it's not 'taxation without representation.' You still get representation and protection by the US embassy and social security/Medicare benefits upon retirement. For representative purposes, you are resident of the same state and congressional district as before you emigrated.

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As a historical aside, the above an useful rallying cry for the Revolution; however, most of the taxes had been rescinded. The bad blood was more the result that the colonial governments rejected parliamentary supremacy because the colonies were organized as charter grants between themselves and the king - no parliamentary involvement - and with distinct legal personality and sovereignty (such as Hanover at the time, or as Australia or Canada today). The British parliament wanted to incorporate all of its territories under its own legal personality. These two positions are irreconcilable and led to increasing incidents and eventually revolt.

The famed Boston Tea Party is one such: the British government withdrew the tax on imported tea, allowing it to flow in at market rates. The merchants who had been buying tea illegally and selling at a markup (still cheaper than the importation tax) would be put out of business, so they arranged to attack an EIC ship and destroy is cargo. But the aforementioned bad blood led to entrenchment and militancy instead of compromise (such as the refusal to allow Franklin to pay for the destroyed cargo).

The mayor of London happened to be born in the U.S., but he is basically British for all intents and purposes. He sold a property in the U.K. some time back, and there was a capital gain. But for the privilege he had of being born in America, the IRS expected some tax on the capital gain he made on his sale. Even though he hasn't lived in the U.S. since he was a little kiddy.

He wasn't just born in the U.S. He has a U.S. passport. The rule is to prevent dual nationals from exploiting their dual status.

Anti-taxxxxers need to calm down. Americans have always had to pay income tax on income in access of some amount.

FATCA is about making US corporations pay up. Now, they hide their assets overseas, and play all kind of games to avoid paying their taxes.

I say, make them pay.

This infuriates me. Taxation without representation. It makes me want to throw crates of tea into Boston Harbor. (Even if you are not a U.S. citizen, be wary. A number of other governments are beginning to follow the U.S. example here.)

Try again. If you are a U.S. citizen then you have a voting district and are represented (unless you last lived within the confines of Washington D.C. - in which case you really ARE taxed without representation).

http://www.fvap.gov/citizen-voter

"If you are a U.S. citizen then you have a voting district and are represented"

Not necessarily. The person must have an address in order to register to vote. So, some "US PERSONS" may indeed be subject to taxation (tax reporting) without representation. I know of several just such individuals.

Nessie,

He wasn't just born in the U.S. He has a U.S. passport.

His first passport as a kid was a U.S. one, but as an adult he travels on a U.K. passport.

This thing all blew up when he tried to fly to Mexico or some place (transiting through the U.S.) with his family, but he alone got stuck because they wouldn't let him through without a U.S. pasport, which he no longer had since he was long since travelling on a U.K. one.

The rule is to prevent dual nationals from exploiting their dual status.

Whatever the intent (fortunately as a non-American, I haven't a clue), I don't see what it has to do with the mayor of London selling his property, besides his unfortunate circumstance of being regarded as a U.S. citizen by the U.S. and thus liable for U.S. taxes. If he'd known about all this before I imagine he'd have renounced long ago.

That was some expensive first air he breathed when he was born in the land of the free.

"Not as an accountant, I would like to add that income tax reporting for non-residents isn't unreasonable..."

@Steven Shultz, that's your opinion. As noted in the article, the only two countries that lay such a taxation burden on its nonresident citizens are USA and Eritrea. Ridiculous. That's my opinion.

International taxes are way, way out of hand. What I have to do is:

a) estimate my US taxes by March 15, which is hard since that a lot to calculate without all the paperwork yet b) pay tons of tax to Japan, including taxes on my U.S. business, as if it were using Japanese roads. The max rate is 55%. c) by July, submit my taxes to the US, with all the information on Japanese taxes already paid. To avoid dual taxation, they kindly let me subtract ある程度 "a certain amount" of my valid taxes paid to one government so I'm only dual taxed "a little" because screw greedy business owners d) I then submit tax documents again by the end of the year to Japan again, with the final 1040 numbers filled in, and pay a bunch more tax. e) because Japanese people save "too much" I am banned from having a U.S. 401(k) because Japan is more interested in twisting every facet of the tax code to its benefit rather than any kind of fairness. f) in the latest twist, anyone with a certain net worth living in Japan who tries to leave gets to pay taxes on all profits he earned on any investments ever, so I'm basically chained to Japan forever, because screw business owners or anyone who tries to leave for any reason. (Japan will kindly return "a certain percent" of this tax to me if and when I sell the investments in another country, the main goal being to keep wealthy people from going to low tax countries.)

Considering this is the situation in 2015, I'm definitely wondering what we'll be looking at in 2025. Tax rates will be 10% higher at least, effectively taxing us like Europeans despite offering none of the benefits Europeans enjoy, all while greatly lowering corporate taxes by the way, for reasons that are quite hard to figure out. Maybe they assume corporations will give those profits to their employees, which will then pay this higher rate of tax.

Thanks for the correction, Educator.

It's still rather onerous for an accidental citizen to have to jump through the many hoops. And despite recent severe increases in the cost of renunciation, more and more people are willing to pay the exorbitant fees and do the paperwork in order to throw off the shackles of US citizenship. It has become a liability rather than an asset.

Every year, USA IRS publish the new tax preparation guides issue, get and follow the instruction. due is 0 or not, just file form. If you are registered in one of 50 states that charge state income tax for none residing constituents, don;t forget that, too. It seems that Fed income tax rate increase every year. Also. don't forget IRS was stronger than FBI. FBI xould not catch Al Capone and bootleggers. Then FBI destroyed Capone gangs. IRS is money collecting agency. /each state has responsibility of paying welfare. IRS do not give away money.

The statements that Americans have always has been required to file FBARs and that only those committing crimes have any thing to fear are both incorrect.

The FBAR requirements have been around since the early 1970s but were originally intended and applied only to residents of the U.S. with accounts outside the U.S. . These were not used for US persons living outside the U.S. until 2004 yet remained unknown to most until even much more recently, 2009-10 to present.

The innocent have the most to fear from FBAR. FBAR requires all US Persons to report all accounts they have signature authority over if they total $10,000 in aggregate. For those who have signatory authority for their Japanese employer, they must report that account to the U.S. IRS, thus breaking the trust placed upon them by their employer, most likely violating the terms of their contract and violate Japanese law.

If the US Person shares an account with their non US citizen spouse, they must also report that account to the U.S. IRS, violating the trust of their spouse.

If a US Person handles the account for example the local children's group, if the accounts of the US person are over $10,000 in aggregate, this too must be reported, violating the trust of their friends, neighbors and the parents of their children's friends, and again, possibly Japanese law too.

FBAR places the burden of deciding which set of laws to obey and any decision means that one set of laws or the other must be broken. Should a US Person follow the law of the country they reside in, they are breaking the law of their far off homeland. If they choose to follow the law of their far off home land, they must break the law of their the country they reside in and the faith and trust of family, neighbors, friends, business partners and employers. With FATCA, the threat of being permanently financially ruined for following local law has become real. This is wrong! It is morally wrong! It is ethically wrong! As it breaks US law, Japanese law and international law, it is legally wrong as well. There is no justification for any of this.

Japan wants to and I guess has the power to tax my nontaxable social security and retirement

that I receive. They want to tax the full amount even though most is spent in the United States.

They hate US citizens apparently.

World is gone money crazy. I guess i may have to go to the Balkans get citizenship and renounce

the USA