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Memo to U.S. citizens: Pay your taxes or you may lose your passport

155 Comments
By Eric La Cara

This month the U.S. Congress is putting into effect a new law that empowers the government to revoke passports of citizens who refuse (or somehow neglect) to pay their taxes. According to various sources, this law also gives the U.S. State Department the right to deny tax scofflaws new passports.

If you are in arrears to the tune of $50,000 or more, (including penalties and interest), then your passport may soon be rendered meaningless. The law basically allows for the denial or, as mentioned, the actual revocation of passports for taxpayers who owe Uncle Sam.

The law officially takes effect in January and is a rider to the overall highway funding bill. It is estimated that getting tough with tax delinquents will bring in an additional $398 million over the next decade.

If you are an American who is living and working abroad, this may be particularly troublesome as you, likely, would prefer to someday return home. However, in 2014 there were almost 900,000 notices sent by the U.S. Internal Revenue Service to U.S. citizens living abroad and, should you be one of them, you might find yourself stuck in a legal limbo. Didn’t get any such notice? Well, you’re not off the hook. If you have not received a letter or some kind of notification you are still accountable. Citizens living abroad often may not get the IRS letter as the system does not allow for the best of communication with expats.

This issue will potentially affect so much of an expats life. Expats need their passports for such normal activities as banking, reserving a hotel room and even registering a kid for his or her school. This is not something to ignore as the long arm of U.S. law is extending ever further into the lives of those, who in the past, have managed to avoid paying their taxes.

There are some small exceptions. For example, if you are an American who is venturing forth for humanitarian service, you may be able to receive an exception even if you are behind on tax payments. This new rule is also not applicable to those who are on an IRS payment plan or who are in court contesting a tax case.

The bottom line: You, as an expat citizen living and working abroad, are fully responsible for and accountable to the timely and full payment of taxes owed. There are few hiding place in this increasingly interconnected world, (mail from the IRS notwithstanding).

The author is managing partner and tax practice manager for Capital Tax in Vancouver and Tokyo. He is a U.S. and Japan Personal & Corporate tax specialist with more than 15 years of experience in the area of cross-border structuring and taxation.

© Japan Today

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155 Comments
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Let's hope the IRS will be as single-minded in pursuit of multimillionaires and corporations evading taxes with convoluted schemes involving tax havens and moving profits around the world. Oh, silly me! That's legal of course. With specially opened tax loopholes.

36 ( +40 / -5 )

that's right, put the screws on the small man while the large multinationals pay next to nothing (and in many cases claim tax credits from the government for "costs" they incurred)....

29 ( +32 / -4 )

Terrorism, ISIL, global warming, and now this? When do the threats and fear end? This sounds like a move of desperation. The US is in a very sad state, ruled by the elite and picking on the small fish.

27 ( +30 / -4 )

Pay your taxes.

-7 ( +16 / -22 )

A strong article from Bloomberg against this taxation system: http://www.bloombergview.com/articles/2015-04-24/end-the-american-expat-tax

Only the U.S. and the dictatorship of Eritrea have such a tax policy.

@blacksabbath: don't be so dismissive. People do pay their taxes. I'm a U.S. citizen but have not even visited in 15 years. I have no plans on ever returning. I use no services from the U.S. and have no ties there at all.

I'm happy to pay my taxes in full to the country in which I live and work. My income tax, my pension, my health insurance, the whole lot.

Having to file every year carefully making use of tax exemptions is a potentially costly and time consuming hassle.

The U.S. should join the rest of the world and stop this double taxation.

26 ( +28 / -3 )

powder B.

I'm a U.S. citizen but have not even visited in 15 years. I have no plans on ever returning. I use no services from the U.S. and have no ties there at all

Then you shouldn't care one way or the other when your passport is rendered meaningless.

For the rest of you, pay your taxes.

-26 ( +10 / -35 )

If you are in arrears to the tune of $50,000 or more

Don't worry Engrish teachers, this won't affect you.

-1 ( +0 / -1 )

@black sabbath: as I wrote, I do indeed pay my taxes. I'm asking you, because you seem so dismissive of this, do you support this system? Why the attitude?

Read the article against it. Do a five minute google search. No EU country has this system. Not Canada. Not Japan. Only two countries in the world. You don't find it absurd?

25 ( +26 / -1 )

The American tax system is a bit odd in this regard. As a Canadian living abroad I dont have to pay any taxes to our government, which only taxes residents (as is the norm in every country in the world except the US and Eritrea, which consider all citizens tax subjects regardless of where they live). So my American colleagues are having to file tax returns in the US even though they are also paying taxes in Japan, while I dont. All I had to do was send a form to the Canada Revenue Agency saying I was no longer a resident and their reply was more or less "Fine, just let us know if you ever move back to Canada. Until then we don't need to hear from you."

Just way simpler that way.

15 ( +16 / -1 )

If you owe taxes pay it me and my wife have never payed a dime as we are considered 3 class citizens as we never made over 40,000 in a year Military and razed 2 kids both went on to collage with SS and retirement still don't need to pay taxes but have a reverse mortgage to keep us goin so PAY UP

-13 ( +4 / -16 )

Ah yes, America, "land of the free."

No passport if you don't pay taxes.

What's next?

Conscription?

9 ( +17 / -8 )

A great number of US citizens have already denounced their US citizenship since the IRS instituted FATCA. This kind of enforcement will inevitably cause even more flight from US tax jurisdiction. On the other hand, this action only applies if no payment arrangement has been made (ie; you agree with the IRS) or you are in litigation (ie; you disagree with the IRS), meaning that it really applies only to people who disregard their tax liabilities and want to go on living like the problem doesn't exist.

7 ( +10 / -3 )

Screw em right back. Get a consular officer and renounce your citizenship. If resident of the country you're in, they cannot deport you as you would be stateless. Enough people do that, then I'm sure congress would act.

6 ( +9 / -3 )

Did you know that if you are an American citizen and wish to create a Japanese bank account, you have to provide the local bank here with your social security number? Just another way Uncle Sam is trying to track US citizens living abroad...

File your taxes, whether you owe or not, and everything should be good!

0 ( +4 / -4 )

Jumin Rhee - "Screw em right back. Get a consular officer and renounce your citizenship."

The U.S. charges $2,350 to renounce your citizenship plus they can add the tax bill you owe. It's not a real solution for past tax issues.

10 ( +12 / -2 )

Seamac - just let them take your passport. That sounds free enough.

Opening an account: do they actually CHECK your SS#?

It is estimated that getting tough with tax delinquents will bring in an additional $398 million over the next decade.

Wow. That's about 1% of 1% of last year's budget (US) They're really going after the big fish here, aren't they!

9 ( +9 / -0 )

If you "relinquish" your US citizenship, it's free. A former US person at the office, now Japanese, "relinquished" and didn't pay anything. But in his case it was not just about taxes. And he says there is actually now a line if US peope going through the process at the US embassy, whereas even a year ago there was no line. But it does seem really strange as others have commented above that US coorporations who make billions in profits pay no taxes because they become "based" overseas.

9 ( +9 / -0 )

Although it isn't fun to be Japanese as we we have our problems I do hate to be in the shoes of expariates in Japan who work and pay taxes to Japan and are now expected to pay taxes back home where the "buffaloes roam". Buffaloes almost went extinct and I predict that given the chance many American would prefer to live outside the USA living the country for grabs by people of less intellect and prefer the rule of the new world order.

3 ( +5 / -2 )

@powderb, @rainyday Regarding tax on income earned abroad, "Only the U.S. and the dictatorship of Eritrea have such a tax policy."

This is false, since JAPAN HAS THE SAME POLICY, including for non-citizen residents of Japan (such as, I assume, yourselves).

"Basically, residents have an obligation to pay income tax on incomes derived from both sources in Japan and sources abroad". -Japan National Tax Agency

Yes, if you also pay taxes abroad on this income then one can file for a partial tax credit in Japan (its not automatic), but the widely spouted line that its only the US and Eritrea is incorrect

Know the facts, since you're on the line for it: https://www.nta.go.jp/taxanswer/english/12007.htm

-11 ( +4 / -16 )

JAPAN HAS THE SAME POLICY

Japan requires non-residents to pay Japanese taxes? I hadn't heard that before.

14 ( +17 / -3 )

If you are a US citizen and have PR in Japan, and you let the US gov't take your passport you become stateless. Will you still be able to live and work in Japan while in a state of legal limbo? I just wonder how the J-gov't will view you then since essentially you don't have a "country."

5 ( +5 / -0 )

@supey11 --- I think you can agree that Bloomberg financial news is a reliable source, so spare me the condescending "know the facts." I'm not dismissing your link, it's valuable, but it doesn't change the fact that the vast majority of countries do not have this system.

Don't lump people who voice objections with those who refuse to pay taxes. I am quite happy to pay a northern European level of taxes in return for services used. I am not against taxes at all. I am against these strongarm tactics of the US government, especially when large corporations use every loophole available to avoid payment whilst middle class workers are threatened.

16 ( +17 / -1 )

In a nutshell, jailing you in your resident country with any need of a trial, nice.

4 ( +4 / -0 )

Wow, that surely is one of the harshest tax regimes on Earth! I thought revoking citizenship for terrorism was pushing it, but this is quite extreme!

17 ( +17 / -0 )

@Strangerland If you are a Japanese citizen living abroad (out of Japan), then you are obligated to pay tax in Japan on any income earned abroad. However, Japan is possibly different than the US on this in two ways:

1- Japanese can get a tax credit on any taxes already paid abroad (though for US citizens, they aren't obligated to pay taxes in the US on the first $100,000 or so earned abroad)

2-Japanese can "remove" their residency prior to departure so as not to obligated on such taxes (this isn't possible for US citizens)

However, the removal of residency would only be good for Japanese living long-term abroad as they lose voting rights, some legal rights, and lose their national health insurance (which still actually does cover someone if they are outside Japan).

As far as non-Japanese residents of Japan (anyone with a visa that isn't "tourist"), you can not "remove" your residency other than cancel your visa, so any income earned outside Japan is taxable back in Japan, though a tax credit can be applied for if you deal with the paperwork. So if you have a business or investments outside of Japan and they generate income for yourself, you are obliged to pay tax on this if you hold any non-tourist visa for Japan.

4 ( +7 / -3 )

It is a matter of fact that a British national wouldn't get taxed when working overseas (I.e working in Japan) and that we can voluntarily contribute towards taxes back home if we choose to do so. Something that the US citizens don't have the right to do.

9 ( +9 / -0 )

@powderb "I think you can agree that Bloomberg financial news is a reliable source, so spare me the condescending "know the facts.""

Sorry, I don't wish to sound condescending, but regarding Bloomberg's reliability, I just gave a link to the Japanese Government's tax page which refutes Bloombergs claim in the very first line.

Voting me down or disregarding me doesn't make the Japanese tax policy less true.

-5 ( +3 / -8 )

@Supey11

You are correct that Japan taxes non-citizen residents on their overseas income. (there are may exemptions of course)

But I think you are missing the point that the US taxes its citizen non-residents on their global income. (again with some exceptions)

These two things are entirely different. Eritrea and the US are the only two countries to operate a citizenship based tax system rather than one based on residence.

15 ( +15 / -0 )

@supey11 and @M3M3M3

I am far from an expert on tax law, and will admit if I have erred but the point that M3M3M3 makes is mine as well.

As he or she writes, the US taxes it citizen non-residents, which differs from the link you sent me. It is this system that I, and others, object to.

7 ( +7 / -0 )

I think this whole subject actually attracted a lot of attention because of the continued highhandedness of the IRS and Immigration officers towards those living peacefully abroad by saying "pay taxes or lose your passports". This is beginning to sound like the US cops "Freeze or I'll shoot".

7 ( +8 / -1 )

It might have some bearing on conversations here to know that the maximum foreign earned income exclusion (FEIE, IRS Form 2555) is currently set at US$100,800. In other words, if you make less than $100,800 annually, in principle, you won't have to pay taxes on that income. However, income exceeding that will be taxed for the full amount minus the taxes due for the excluded $108,000.

This is almost double what I make in a year, so I'm in no danger of angering the IRS and speaks to a demographic I don't rub elbows with on a day-to-day basis, to be honest. But it is a pretty fair concession on the part of the IRS, IMO.

Another way to avoid double-paying would be to forgo the FEIE and go for the Foreign Tax Credit (IRS form 1116). Taking this approach, you can subtract the amount of taxes you've already paid to a foreign government from your U.S. tax liability.

So, if you owe, say, $15,000 to the IRS, and you've already paid $12,000 to, say, the government of Eritrea, then you'd only have to pay the remaining $3,000 in taxes to the U.S., and NOT, as some would suggest, pay taxes twice. You wouldn't.

Again, a pretty fair concession, all things considered.

To wit, no civilization, modern or otherwise, can function without taxation. While it's a time honored tradition to dump on the IRS and whinge at length about the unfairness of it all, the U.S. absolutely could not exist without taxation. Nor could the U.K. Nor could France. Or Japan. Or Finland. Or Eritrea.

The top ten things our U.S. taxes pay for, in descending order:

1 - National defense - Someone's got to keep the terrorists at bay.

2 - Health care - Common sense.

3 - Income security - retirement benefits, unemployment insurance, Child Tax Credit, food assistance, etc.

4 - Interest on public debt - If you borrow money, you've got to pay interest. The U.S. borrows a lot o' money.

5 - Veteran's benefits - Those folks losing eyes, limbs, sanity to old the terrorists at bay? They earned this and more.

6 - Education and job training - A state without comprehensive education is a failed one.

7 - Law enforcement and immigration control - Courts, prisons, rehabilitation, police forces. Yup.

8 - Energy, environment, & natural resources management - 'Nuff said.

9 - International affairs - Someone's got to convince others to play nicely with us.

10 - Science, Space, & technology - A country without comprehension scientific R&D is a lame one.

And this is only the top ten ways our taxes are put to work. There are many, many more, and I can't think of a single one that's dispensable.

While it would be nice to be able to pick and choose how we want our taxes spent, that's not the definition of a community. It isn't, *"What promotes me?" Rather, it is and should be, "What promotes the common good?" Taxes help accomplish that in countries all around the world.

You want to be pissed off at someone? Get pissed of at multinationals. They avoid paying taxes while everyone else has to. What's fair about that?

-4 ( +6 / -10 )

They need your tax dollars for missiles, not even healthcare. Bum deal.

12 ( +14 / -2 )

Ah yes, America, "land of the free."

It sure is.

No passport if you don't pay taxes.

First you liberals praise when the governments take as much money from you as possible, but when it's applied and concerning passports, now all of a sudden it's considered a crime??

What's next?

Conscription?

Probably not. We don't need it.

-13 ( +9 / -21 )

@M3M3M3, @powderb Yes, that is a good distinction, but not always or entirely true. A Japanese citizen must first remove their residency from Japan through an application process prior to departure (its not automatic) to avoid tax on income earned abroad. Most Japanese do not do this if working abroad, especially if on a contract or if they still have family/children back in Japan. Also, doing so means losing their health insurance, pension, legal rights on most property, voting rights, and custody rights on kids. And if they continue to generate any income back in Japan (through investments, property, salary, or any other business) it would further complicate things

Simply put, for a Japanese to remove their residence from Japan (to become a "non-resident" if you will) might remove tax obligations, but they also lose so much more that some won't (or can't) do it. So while Japan doesn't tax "non-residents" in theory, few take the necessary steps to make that legal distinction, even though on the surface they would be regarded as an "expat".

3 ( +3 / -0 )

@LFRagain: I don't think people are objecting to taxes. I'm not asking "what promotes me?" I envy countries like Denmark and Finland who have high tax rates, but in return an enviable social welfare system.

As I wrote I am happy to pay a high tax rate to the country in which I reside, for whose services I use. I am happily middle class and have no desire to skirt my tax obligation to Japan. I pay in full without complaint.

Like you, I too, fall under the US$100,800 threshold. But I am still burdened with paperwork annually and, now, I take offence the idea of having my travel rights rescinded if I were to somehow run afoul of this U.S. government's outreach.

I don't think these objections are at all out of line, let alone selfish.

9 ( +8 / -0 )

Supey - it's not the exact same system then is it. America doesn't allow it's citizens to get out of paying taxes even if they are not residents. Japan does allow it, even if some don't choose to go that course.

3 ( +5 / -2 )

Two things are certain in life: Death & Taxes.

3 ( +6 / -3 )

So while Japan doesn't tax "non-residents" in theory, few take the necessary steps to make that legal distinction, even though on the surface they would be regarded as an "expat".

Sorry Supey11, but I think you are getting misinformation. Japanese people do not have to 'remove their residency' before they become non-residents for tax purposes. In fact, many people inadvertently become non-residents by spending more than 183 days outside of Japan in another country and end up having to file taxes there. It's really common with inter-company transfers here in Japan. Being a resident or non-resident for tax purposes has nothing to do with other rights. Despite what you claimed above, even a foreign tourist can become a resident in Japan for tax purposes if they spend 183 days or more in Japan.

(You can voluntarily let the tax office know that you have moved overseas and get them to certify this so that you can prove it to your pension provider etc to reduce your withholding tax. I think this might be what you are reading about?)

3 ( +3 / -0 )

@Strangerland Correct, the systems are different. I don't deny it, only the simplified claim that "only the US and Eritrea tax their citizens abroad". (whereas it should state "their officially defined non-resident citizens who maintain no financial or legal connections to their home country", but that's a bit long.)

What it boils down to is that the US has no way to define someone as officially a non-resident citizen. Japan has a residency system (juminhyo) which requires someone to register where they live (so you can remove this if moving abroad), while the US has no such residency system, allowing someone to essentially be homeless (though after the fact one can try to "prove" they were out of the country if necessary, but the US doesn't stamp citizen passports when arriving/departing, so good luck on that).

So its either the freedom of being able to live under the radar as a US citizen yet still pay tax, or its the Big Brother registration system of Japan but not pay tax. Kinda ironic, huh?

1 ( +2 / -1 )

powder,

I take offence the idea of having my travel rights rescinded if I were to somehow run afoul of this U.S. government's outreach.

Respectfully, you cannot reasonably expect to, on the one hand, enjoy all the rights and privileges U.S. citizenship conveys as a passport holder living and working in another country, while on the other hand, avoiding inherent responsibilities as a US citizen -- like filing your tax forms -- simply by virtue of leaving the country.

"Yes, I'm a card-carrying member of this club and expect to be treated as such. But, uh, I don't want to pay my dues because I haven't been to the clubhouse in a while." Really?

U.S. citizens living abroad are being asked to pay what's due as a US citizen, or forfeit some of the benefits of membership to Club U.S.A., in this case, the freedom to travel the world with a U.S. issued passport certifying that you are indeed who you claim to be, something made possible largely by U.S. taxes (see No. 7 on my list above).

In the case of you and I, making less than $100,800 per year, we aren't even being asked to pay. We're only being asked to fill out a tax form. This is not, in my mind, an undue burden. Annoying, yes. Time consuming, definitely. But draconian and unfair? Hardly. It's a couple of click-and-fill-in-the-blank PDFs downloadable for free from the IRS website.

-5 ( +3 / -8 )

There should be a way for non US residents to turn themselves into a company, thereby dodging US taxes just like Apple, Google etc. Or, you set up a company with the rights to your name and then "rent" your name from that company, reducing your income to zero. This is what Starbucks does.

10 ( +10 / -0 )

Lots of outstanding comments on this thread. This issue of taxation of non-residents clearly strikes a nerve with many people. Also, even if you are not a U.S. citizen this issue may affect you down the road because many governments are increasingly following the lead of the U.S./IRS on tax practices. You have been forewarned.

I have argued before that taxation of non-residents is taxation without representation (remember the tea party in Boston Harbor?). Yes, as expats our district for voting/representation is that of our last U.S. residence, but that is obviously not our current residence, and for many of us it has not been for many decades. For true representation we need to be represented in the district where we actually reside. If the U.S. government is going to tax us, then they need to create a voting district, with representatives, exclusively for the overseas expat community so that our voices will be listened to.

Another beef I have regarding this taxation is that as a non-military citizen I am not allowed to send my children to U.S. schools on U.S. military bases in Japan, so I have to pay tens of thousands of dollars a year in private school tuition for them to get an English-language education. But still, I have to pay U.S. taxes on income earned in Japan over a certain amount, even though I already pay full taxes in Japan. Again, taxation without representation. The American revolutionaries in the 1700s despised it, and so do I.

I am glad to pay my full share of taxes in Japan where I reside, but not in the U.S. where I don't reside.

20 ( +19 / -0 )

@M3M3M3 If a Japanese/non-Japanese resident maintains their residency (juminhyo), regardless of the 183 day threshold you stated, they are still obligated to pay tax in Japan, including national tax, pension, Ku-tax, and health insurance. All of this is based on income, whether derived domestically or abroad. But again, one can apply for a tax credit (and again, this isn't automatic) so as not to pay tax twice. A Japanese can remove their juminhyo so they don't need to deal with such paperwork, but a non-citizen can not do this other than cancel their visa.

As far as legal rights, if you remove your juminhyo, you in essence have nowhere to refer to in Japan as residence, so in many legal situations since you aren't connected to any local system, you will have a hard time figuring out any rights, especially those regarding family (yes, yes, J-embassies cover non-resident nationals, but it gets tricky and ill-defined for many domestic Japan issues).

1 ( +1 / -0 )

The war of terror needs to be financed in one way or another.....

2 ( +5 / -3 )

Although I do not agree on the U.S. filing requirement for all U.S citizens residing aboard, but one thing needs to be stated is that it is not double taxation. Whatever taxes you pay in Japan is a foreign tax credit against your U.S. tax bill, so if the tax bill is higher in Japan, then you will not pay any taxes to the U.S. government. But yes, it is a hassle to file U.S. taxes, but your not paying double.

0 ( +3 / -3 )

Interestingly, one demographic that U.S. non-resident citizen taxation affects is that of "accidental Americans." There are hundreds of thousands of them around the world, thousands of whom are Japanese nationals — people who are U.S. citizens as a result of being born on U.S. soil, but left America pre-adulthood.

Some parents actually want their child to be born in the U.S. so that they can get the passport, but it makes me wonder why. All the strings attached could cause major headaches and even financial loss down the road. I know many non-U.S. citizen globetrotters who now shun the idea of getting a green card due to the heavy handedness of the U.S. government.

Anyway, here is one "accidental American's" infuriating experience (google "accidental American" in quotes for many more examples): http://money.cnn.com/2014/12/15/pf/accidental-american-expat-tax/

5 ( +5 / -0 )

@LFRagain: I'd like you to explain what "rights and privileges" I am receiving from the United States while living in Japan as a permanent resident?

If you are simply referring to the right to travel without hindrance, well, that doesn't seem special considering Canadian and EU citizens living abroad are free to travel without having to pay taxes in their home countries.

What rights and privileges are you referring to? Health care? Covered by Japan, and not even universal in the States? Public schools? Transportation? These are concerns for the my country of residence.

Again, more than happy to pay Taxes. No objections. But the "rights and privileges" sound a bit like American exceptionalism.

Never did say it is "draconian" to file annually. It's the threat of having one's passport taken away that is objectionable.

@sensato: have had similar conversations with friends. I'm sure constitutional law professors could enlighten me, but it does seem close to taxation without representation. Not the same, of course, but an interesting idea to entertain.

9 ( +9 / -0 )

@Supey11

Your liability for income tax in Japan has nothing to do with the status on your Juminhyo or whether you have one or not. To be as precise as possible; for income tax purposes, Japan cannot tax anyone (including its own citizens) if they have lived in another country for 183 days with which Japan has signed a tax treaty agreeing to this. Let's look at exactly what the tax treaties with other territorial tax countries say:

[Note: The words 'taxable only in the first contracting state' are key. It means Japan cannot double tax anyone who has spent more than 183 days in these countries, including those who don't notifying the their local ward office that they've moved out.]

Canada-Japan Treaty (Article 15)

remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned Contracting State, if:

a) the recipient is present in that other Contracting State for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned

http://www.fin.gc.ca/treaties-conventions/japan_-eng.asp

UK-Japan Treaty (Article 14)

remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned Contracting State if:

(a) the recipient is present in the other Contracting State for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the taxable year or year of assessment concerned;

https://www.gov.uk/government/publications/japan-tax-treaties-in-force

Australia-Japan Treaty (Article 14)

remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned Contracting State if:

a) the recipient is present in the other Contracting State for a period or periods not exceeding in the aggregate 183 days in any 12 month period commencing or ending in the taxable year of that other Contracting State;

https://www.ato.gov.au/General/International-tax-agreements/In-detail/Tax-treaties/Australia-and-Japan-treaty---key-points/

1 ( +1 / -0 )

Another disgusting law. The US is one of the only countries in the world that taxes its citizens no matter where they live. It's already hard enough just to open a new bank account now as an American. And it sucks as Americans abroad because we have no representatives in Congress or the Senate who speak on our interests.

7 ( +7 / -0 )

it does seem close to taxation without representation. Not the same, of course, but an interesting idea to entertain.

True, so I guess I would say taxation with under-representation, and half-hearted, flimsy representation at best by representatives in a far-off district who would rather give their time to issues at home. Also, the colonists in the 1700s were also not completely without representation, but were also shamefully under-represented.

it is not double taxation

@JA-Cruise

I would argue that sometimes it is double taxation in the sense that you are already paying taxes on equal footing with all of the Watanabes in Japan. If the U.S. finds that their tax bill is higher so you owe 'extra' in the U.S. then you are living in Japan at costs equal to or higher (extra airfares, tuitions, etc.) than the Watanabes, but paying more than the Watanabes, and more than your fair share. Plus, you are paying at least double what the Watanabes are paying just for filing taxes.

3 ( +3 / -0 )

Canada does obtain tax revenue from Canadians resident outside the country for income received from Canada. It deducts a non-resident tax of 25% from pension and investment income paid from Canadian sources. It's necessary to file a tax return (or TWO, for pensioners!) to receive any refund due. No voting rights, though.

As M3M3M3 says, they don't double-tax. They do, however want to know how much your overseas income is. Up to $60,000 Canadian, no problem.

2 ( +2 / -0 )

Nice post, LFRAgain.

I don't pay attention to tax stuff; an accountant in America has done my taxes for over 20 years, and I've never paid a penny. As LFR said, unless you're making well over $100K a year, this is a non-issue. Just be sure to file.

1 ( +2 / -1 )

an accountant in America has done my taxes for over 20 years, and I've never paid a penny.

You don't pay the accountant?

5 ( +7 / -2 )

@M3M3M3 Look, I'm not denying your statements on double-tax, I actually agree, as I said above previously: "But again, one can apply for a tax credit (and again, this isn't automatic) so as not to pay tax twice."

But the fact is that Japan taxes income earned abroad which hasn't already been taxed by that country as long as certain residency requirements are met, or if there is no tax treaty with that country. If you keep your juminhyo you still have tax assessment in Japan (for pension, health, ku-tax,etc) even beyond 183 days, but this tax paid abroad can be applied as a tax credit back in Japan. Yet again, all that can be avoided by removing one's juminhyo, which is a system the US does not have.

2 ( +2 / -0 )

@Supey11

If you keep your juminhyo you still have tax assessment in Japan (for pension, health, ku-tax,etc) even beyond 183 days

OK, I can certainly agree with this. I'm sure the city will keep sending bills to your old address for these social insurance plans if you fail to inform them that you've moved out. Same with the NHK fee if you have a TV. But I'm not sure it's accurate to say that Japan has the same policy as the US and Eritrea?

(Also, I'm pretty confident that you could have the bills cancelled or challenge the city's legal entitlement to the money in court if you can prove that you didn't actually live in the city? I don't think sending you a bill means that you actually owe the money in this case. But I'm not an expert on this.)

1 ( +1 / -0 )

@genjuro

If you are a US citizen and have PR in Japan, and you let the US gov't take your passport you become stateless.

No you do not.

The article states that the US may revoke people's passports.

Not having one if you live outside the US would be very inconvenient, but your US citizenship would be intact. The passport is merely a travel document.

3 ( +3 / -0 )

U.S. government is going to tax us, then they need to create a voting district, with representatives, exclusively for the overseas expat community so that our voices will be listened to.

As you've already acknowledged, you have representation in the state you hail from (and you can appeal to your representatives regarding your taxation situation).

Before an ex-pat "voting district" is ever considered, I'd just like to see all U.S. citizens get the same representation you already enjoy. See: Guam, Puerto Rico, and Washington, D.C.

1 ( +1 / -0 )

If you are a US citizen and have PR in Japan, and you let the US gov't take your passport you become stateless.

Uh no you don't.

Cancelling a passport does not equal losing nationality.

Note that all citizens are nationals of the united states, but not all nationals are citizens of the united states but have US passports. This is why us passports say NATIONALITY in them, not Citizenship. This is a caviat of US nationality law.

3 ( +2 / -0 )

$398 M is a rounding error, in the US budget. The US also wants $2350 from you if you renounce your citizenship, plus a percentage of your future income to make up for their loss of tax income. Guess this is the price of freedom...

3 ( +3 / -0 )

Life is complex enough without having to worry about tax demands from a country where you don't live...

Expat U.S. cousins, you have my sympathy.

7 ( +7 / -0 )

What happens if you don't earn the taxable amount but forget to file every year??

2 ( +2 / -0 )

sidesmile: What happens if you don't earn the taxable amount but forget to file every year??

You're not going to be "in arrears to the tune of $50,000 or more, (including penalties and interest)", then. Ref. paragraph 2 of the article.

2 ( +2 / -0 )

What happens if you don't earn the taxable amount but forget to file every year??

Just refile all your taxes back at least 6 years. Nothing will happen if you didn't owe anything.

0 ( +2 / -2 )

@M3M3M3 "I'm pretty confident that you could have the bills cancelled or challenge the city's legal entitlement to the money in court if you can prove that you didn't actually live in the city"

Well, that's why you can remove your residency (juminhyo), but failing to do so and then going abroad won't mean you can get out of any bills after the fact. For example, during that time you'd still be covered with health insurance (including while abroad) and just because you may make no insurance claim, it doesn't mean you weren't entitled to do so if you needed to.

And as far as a court challenge in Japan, good luck with that. It'd probably be cheaper to just pay the tax.

1 ( +1 / -0 )

sidesmile,

What happens if you don't earn the taxable amount but forget to file every year??

Simply file for the years you missed. Include a letter explaining that you forgot -- or whatever reason you want to provide - and send everything in a packet. Make certain all your forms/paperwork is in order and the IRS will accept it without a problem.

.___

powderb,

But the "rights and privileges" sound a bit like American exceptionalism.

I don't know if "exceptionalism" is the right word here. More like, American "specificism" (Yeah, I made that word up). Other countries are perfectly free to adopt similar approaches to tax collection for overseas citizens. Some choose not to, but there's no rational reason to believe that their choice not to is translates to some sort of hyper-progressive liberalism. The system the IRA is adopting just happens to how the U.S. choses to recoup lost revenue that it has a constitutional right to collect. IMO, the U.S. has a legitimate cause for adopting a more radical approach to address the problem of nonpayment.

It's estimated that there are some 7.2 million Americans living abroad, yet for the 2012 tax year, only 825,000 of those Americans filed tax returns. That's fewer than a 12% reply rate.

According to the IRS, some 13.4% of Americans in the U.S. make more than $100,000 per year.

If even only 13.4% of the 6.4 million overseas Americans failing to file earn $100,000 per year or more (and I suspect that percentage is actually much higher), that works out to -- at minimum -- $2.35 billion in lost revenue for those programs I mentioned above.

$2.4 billion would pay for public education for some 192,000 kids in America, or the annual salaries of 45,000 police officers, or the annual budget of 2,300 public libraries, or be enough money to fund the National Academy of Science for 504 years.

It's a lot of money that could be put to very good use in a country that it seems a lot of people like to claim they're a part of, but aren't willing to put their money where their mouth is.

No, I'm not talking about you. But I am talking about a significant portion of the 6.4 million Americans who don't pay taxes intentionally, yet insist they have some sort of inalienable right to a U.S. government issued passport that allows them free movement throughout the world. These folks have been avoiding paying their fair share of taxes for years based on highly dubious justifications that don't stand up to a tax code that works fairly well to keep things on an even bent.

If one does not like the American tax system and prefers to instead move and enjoy the benefits of a different jurisdiction's tax code, then they are absolutely free to do so. But they have to accept that doing so comes with one of two choices: One, accept that as a valid U.S. passport holder, you are still legally required to meet your tax obligations in America, or two, renounce your citizenship and become a citizen of the jurisdiction your prefer to pay taxes -- and enjoy representative taxation -- in.

It's as simple as that.

1 ( +4 / -3 )

@LFRAgain Well said.

0 ( +1 / -1 )

@Black Sabbath

I DO pay my taxes! I pay income taxes to the nation I reside in, Japan, and to the city I reside in, just as Japanese nationals residing in the States pay federal and state income taxes to the US and not to Japan.

As I earn far below the FEIE limit, the issue for me is not taxes, it's the 7,322 pages of paper work (IRS Taxpayer Advicate Service Annual Report to Congress 2011 Vol. 1 page 132) required of me yearly to prove that I do not earn enough to be double taxed. Simply impossible to comply with this requirement.

So for me, it is the fines for not doing the impossible.

Further, I am a victim of identity theft. At one point in my life, someone was driving around on a driver's license with their photo and my name and SS#. That person was arrested but who else is me in the States? Living overseas, I have no way of knowing if someone else has been racking up tax debts in my name.

The VA has leaked my entire service record twice that I know of, yet another way for someone to easily assume my identity while I live in Japan.

This new "law" threatens every single US citizen living abroad with losing their passports and thus their visas to live in the country of their choice and thus their families, employment, homes and friends. And it does so without due process as required by law.

If the US has reason to believe that an individual citizen is delinquent in taxes, then the State must prove probable cause in court, obtain the required warrants and use the existing tax treaties to have the individual extradited back to the states, following the legally prescribed extradition procedures.

To travel is a right. Rights can not be legally revoked administratively, without due process.

This "law" threatens to DESTROY the lives of each and every US citizen living outside the homeland without the accused even having the ability to challenge the revocation.

To you I say, " follow the law".

4 ( +9 / -5 )

What did you expect from the largest debtor nation in the history of the world? Where the politicians force people to take Obamacare health plans, but won't go on it themselve's. It's the only country, besides a small African one, (which can't enforce the law), that if you live outside the country, and work, you still pay US income tax. People still think of America as the land of the Free. lol

2 ( +4 / -2 )

According to LFRAgain, "Respectfully, you cannot reasonably expect to, on the one hand, enjoy all the rights and privileges XYZ citizenship conveys as a passport holder living and working in another country, while on the other hand, avoiding inherent responsibilities as a XYZ citizen -- like filing your tax forms -- simply by virtue of leaving the country."

The many expat citizens of countries other than USA would disagree. As was noted by a previous poster, Canadian citizens (among the others) have no such requirements. Only the unfortunate USA tax slaves.

6 ( +6 / -0 )

...tax scofflaws

That's a new one on me.

2 ( +2 / -0 )

Japan T,

it's the 7,322 pages of paper work . . . required of me yearly to prove that I do not earn enough to be double taxed.

If you earn below the FEIE, then it's three forms, the standard 1040, the 2555, and the new 8965 to explain that you already pay into a legitimate health insurance scheme.

Oh, and you have also have to submit an explanatory statement showing the rate you used to converted your earned foreign income total to U.S. currency.

That's it.

The publication that explains how to fill everything out ( Pub. 54) is a paltry 38 pages long.

If you're filling out 7,322 forms, then you're doing something wrong on an epic scale.

The identity theft and other misfortunes are, well, unfortunate. But they still don't absolve you of your tax obligations. If you find yourself in a situation where you cannot pay your tax liabilities, the IRS has numerous paths for negotiating a payment plan that minimizes economic stress for you. Really.

To travel is a right. Rights can not be legally revoked administratively, without due process.

No one it taking away your right to travel. But they are taking away your "driver's license." You can travel all you want, but just not with the support and confidence of the U.S. government.

0 ( +3 / -3 )

actually its not double taxation unless you make over like 90000 USD, I think its up around there now (check your foriegn income exclusion form), then you have to pay. They want you to report your income, otherwise they dont have anyway of knowing where/what/how much your making. I dont see how they could ever take your citizenship, as thats been ruled on by the supreme court unless you renounce, but taking the passport? How can you stay in Japan legally with no passport since your visa is stamped in it?

1 ( +2 / -1 )

To travel is a right. Rights can not be legally revoked administratively, without due process.

If my passport expires (British passports do after 10 years) or fills up with stamps, I no longer have the right to move across international borders (those that require me to show a passport, at least). I have to obtain a new passport first, and as the application has to be sent to Britain, it takes weeks at best, but can run into months. In the meantime, I can't travel, except with special permission.

If you have a legal obligation to file your tax returns every year (which has always been the case), your position is more complicated, logistically and in terms of paperwork, but I am not sure that it is much different from my need to apply for a new passport when my old one is no longer functional. My right to travel is curtailed by my lack of a valid passport. So would yours be.

The solution, obviously enough, is to file your tax returns and pay what is owed.

0 ( +2 / -2 )

"As I earn far below the FEIE limit, the issue for me is not taxes, it's the 7,322 pages of paper work (IRS Taxpayer Advicate Service Annual Report to Congress 2011 Vol. 1 page 132) required of me yearly to prove that I do not earn enough to be double taxed. Simply impossible to comply with this requirement."

what are you referencing when you refer to the 7322 pages your required to submit to prove you dont have to be double taxed. The only forms Im aware of are 1040 and 2555.

1 ( +3 / -2 )

@wipeout & @Badge213 Thanks for clearing that up. It makes more sense now. Also I wasn't aware of the distinction between nationality and citizenship as it applies to US nationality law.

1 ( +1 / -0 )

Was it not recently said in the US that "corporations are people"? If so, like any person, they should be taxed even if they are based overseas, right? Or can a corporation person renounce its citizenship lilke a people person?

1 ( +2 / -1 )

@LRF

what is this 8965 your talking about? does that apply to everyone abroad?

Never heard of it. I heard if you had over 10000 USD in an account, you had to report that as well, but dont quote me on it.

1 ( +1 / -0 )

And the govt seems to be so kind to the former illegals who are able to hook up with legals or natives without paying retroactive taxes!

0 ( +0 / -0 )

I haven't combed through all the comments here but the thing I worry about is not owing taxes, but simply having not filed, which is the real exceptionally annoying thing done to U.S. citizens. I don't owe anything. But I wonder if they'll come after people for not filing. I'm just pretty darn bad at paperwork. It's against the law not to do it.

2 ( +2 / -0 )

@wipeout

Comparing your need for a passport and a us citizen having to file a tax return are different, in the sense that traveling is not a legal right, its a privilege, the same as driving on the roads in Japan is a privilege.

While the article is about penalizing US citizens for not paying taxes due by revoking their passports. The gripe US citizens have is that if they have made a home in Japan and pay Japanese taxes, why should they be required (Forced) to file a tax return for a country they are not resident off?

2 ( +2 / -0 )

@wipeout "How can you stay in Japan legally with no passport since your visa is stamped in it?"

Last month I got a new passport from my home embassy, then went to immigration in Japan to switch over my visa. They said that this is no longer done (as in, no more visa stamp), and that my gaijin card is used at the border instead. So now I have a completely empty passport and am in Japan legally apparently.

Somehow, I feel naked.

2 ( +2 / -0 )

Comparing your need for a passport and a us citizen having to file a tax return are different, in the sense that traveling is not >>a legal right, its a privilege, the same as driving on the roads in Japan is a privilege.

Let's continue like this and in a few years, breathing, will be a privilege.

4 ( +4 / -0 )

Just don't be US citizen anymore - problem solved

1 ( +2 / -1 )

@nippon234

Comparing your need for a passport and a us citizen having to file a tax return are different, in the sense that traveling is not a legal right, its a privilege, the same as driving on the roads in Japan is a privilege.

I think you're confusing me with someone else's comment: it's not my contention that travelling is a legal right, I simply responded to the point.

Nor am I comparing my need for a passport with a US citizen's requirement to file a tax return; I am comparing my need for a passport with the need of a US national for a passport when, for example, trying to take international flights. We both need one, and our supposed right to travel depends upon it.

The justice or otherwise of the US system of taxation is a separate issue. But knowingly putting yourself in a position in which you may have your passport revoked, or may be denied a new one, because you neglect or refuse to comply with the law, is a matter of choice.

@Thanks for clearing that up. It makes more sense now. Also I wasn't aware of the distinction between nationality and citizenship as it applies to US nationality law.

No I don't know the details of that either. The distinction between passport and nationality is a crucial one though. In particular, because in the ever-swirling argument around dual nationality in Japan, a lot of people seem unable to understand the difference.

2 ( +2 / -0 )

I hadn't spotted this one. This is a good move by Congress, as so much money is lost to corruption. All countries need discipline , and good policing because so many of us are not really trustworthy.

-3 ( +1 / -4 )

@ wipeout

The point you are missing is that if a US citizen is resident in Japan and pays taxes, why should there also be a need to file a tax return for a country they are not residing in?

2 ( +3 / -1 )

@nippon234

The point you are missing is that if a US citizen is resident in Japan and pays taxes, why should there also be a need to file a tax return for a country they are not residing in?

That is something for Americans to take to their representatives, if they are sufficiently concerned about it.

The point you are missing is that you can't just rewrite what I say and then criticise me for your phony version of my words. Hence the two corrections in my previous comment.

2 ( +2 / -0 )

@wipeout

Not here to dispute anyone, but you did write:-

I no longer have the right to move across international borders


My right to travel is curtailed by my lack of a valid passport. So would yours be.

To travel is a privilege not a right as you mentioned.

1 ( +2 / -1 )

Is this unreasonable?

-1 ( +1 / -2 )

Regarding the middle class Americans who reside in Japan: If the US tax law hasn't changed since I lived in Japan, something like the first $80,000 of overseas yearly earnings (the figure changes year by year) can be written off by filling out a form 2555 and including it with the form 1040. Every American I knew in Japan was a middle class type who did not earn over $80,000 per year. Many Americans who lived in Japan were not aware that they had to file the 1040, and the form 2555 was "use it or lose it" deal: If you didn't file with the 2555 form, you lost the right to write off the first $80,000. A couple of Americans I knew in Japan to earn far less than $80,000 per annum were hit with a letter from Uncle Sam saying that the IRS was arbitrarily charging them a penalty fee of $5,000 on the basis of what the IRS assumed they had earned during the cited year. Recognizing that a substantial number of Americans residing overseas sincerely didn't know that they were obligated to file yearly 1040 and 2555 forms, it was approximately in the year 2000 that the IRS offered an amnesty program whereby the American citizen residing overseas filled out 1040 and 2555 forms for all of the prior years that they had been living overseas and had not filed. By filling out these forms for those years, the Americans would not be penalized but they would be recognizing the obligation to file US tax returns for all future years.

1 ( +1 / -0 )

If you are in arrears to the tune of $50,000 or more, (including penalties and interest), then your passport may soon be rendered meaningless.

that's right, put the screws on the small man while the large multinationals pay next to nothing (and in many cases claim tax credits from the government for "costs" they incurred)....

If you owe $50,000 or more in back taxes, you aren't a "small man". You're either one of these morons who arbitrarily decided that the Federal Income Tax was unconstitutional and stopped paying, or someone who makes a substantial amount and tried deducting things you had no business deducting... and got caught.

Although it isn't fun to be Japanese as we we have our problems I do hate to be in the shoes of expariates in Japan who work and pay taxes to Japan and are now expected to pay taxes back home where the "buffaloes roam".

A point of contention: This tax law requiring them to pay U.S. taxes even if their money was earned in another country isn't something that they were just now expected to start paying. This has been the rule for a while now and if the expats ignored it, it's no one's fault but their own.

Only the U.S. and the dictatorship of Eritrea have such a tax policy.

According to the Foreign Earned Income tax form (IRS Form 2555), the first $100,800.00 (¥11,791,483) of foreign income are exempt from U.S. taxes. Again, hardly the type of income that would equate to a "small man".

1 ( +2 / -1 )

Does the same thing apply to corporations?!

1 ( +1 / -0 )

LFRAgain

The TAS disagrees. From the TAS ARC 2011 vol. 1 (emphasis added) "The complexity of international tax law combined with the procedural burden on international taxpayers, create an environment where Honest TAXPAYERS WHO ARE TRYING THEIR BEST TO COMPLY SIMPLY CANNOT".

Is it likely the TAS made such a comment for a burden of 38 pages? Or is it more likely, that by not thumbing through the all 7322 + pages of instructions and forms that, perhaps, you might possibly be missing some of your reporting requirements?

I'm betting the TAS knows her stuff. Don't take my word though, please do read this and all subsequent reports in order. I highly recommend having a case of TUMS close at hand, though.

Yes, to travel and live outside one's native country IS a right. If your misunderstanding of the differences between rights, privileges and benefits ( and yes, to travel and live outside one's native land IS a right, internationally recognized human right no less) comes from your education, get a lawyer. You have a hell of a case for educational malpractice.

Taxes are NOT dues....please consult that lawyer. If citizenship were a club and taxes its dues, then legal aliens resident would either not have to pay fed. and state taxes (they do) or they would have full membership rights ( they do not).

If your "club and dues" theory Is true, then the club has the following characteristics. Membership is conferred on most of its members at birth without their consent. While membership has rights that can be surrendered upon relinquishing membership, it comes with a lifetime obligation to pay dues. The relinquishing membership, upon relinquishment must pay off the balance of the members lifetime worth of dues. This is known as the "Exit Tax" and is enforced with the CLN.

Your comment, "Yes, I'm a card-carrying member....a while". Really.", is very strange. That is exactly how the several clubs I have belonged to worked. I leave and cease paying dues. I return, rejoin and start paying dues again.

What are these mythical benefits of club membership I enjoy while living in Japan?

0 ( +4 / -4 )

Tax revenue agents can only harass little people. For wealthy people they will hire lawyer to deal with them and in the end they will only need to pay back a portion - law is fair, but it is more fair to some than others.

1 ( +2 / -1 )

Good thing I have more than one passport then.

Another plus for multiple citizenships.

1 ( +2 / -1 )

"If one does not like the American tax system and prefers to instead move and enjoy the benefits of a different jurisdiction's tax code, then they are absolutely free to do so. But they have to accept that doing so comes with one of two choices: One, accept that as a valid U.S. passport holder, you are still legally required to meet your tax obligations in America, or two, renounce your citizenship and become a citizen of the jurisdiction your prefer to pay taxes -- and enjoy representative taxation -- in."

There seems to be some confusion about the citizenship implications of having no passport. Here they are:

There is none.

A passport simply allows you to travel across international borders. If you have no passport, you are still an American. You can still return to the United States to live. You can vote. In fact, most US citizens do not and never have had a passport. T

Without a passport, you just can't legally travel across international border. You may not like that, but you should know that it is long standard international law that no one has a inherent right to cross international borders. The state has always had the power to grant or not grant passports.

This is about paying your taxes. The government has appropriately decided that income in excess of just under 100k earned oversees is taxable. Read all about it here:

https://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion

1 ( +3 / -2 )

Without a passport, you just can't legally travel across international border

Pretty sure you can go to Mexico, but not come back without a passport. Besides, you can travel to Canada and back without a passport, just a an Enhanced ID, or whatever it's called.

0 ( +1 / -1 )

Nippon234:

article 13 of the Universal Declaration of Human Rights, it asserts that:

a citizen of a state in which that citizen is present has the liberty to travel, reside in, and/or work in any part of the state where one pleases within the limits of respect for the liberty and rights of others, and that a citizen also has the right to leave any country, including his own, and to return to his country at any time

3 ( +3 / -0 )

I never pay taxes, as I never owe any.

1 ( +1 / -0 )

No passport = no visa in Japan. As Jumin Rhee points out, it is an internationally recognized right to leave and reside out side of the nation of your citizenship. Not having a passport prevents this, thus is a violation of a right. In the US, rights can only be infringed upon via a legal process, due process. This law circumvents that, and is thus illegal.

On other to topics. We most certainly are double taxed. First, the FEIE excludes EARNED income only, hence its name. We are double taxed by being required to satisfy TWO incomparable tax regimes. Residents of Canada pay higher income taxes than residents of the US because Canada provides more services. To offset the higher income taxes, residents of Canads do not pay taxes on the sale of their home as residents of the US must. Anyone deemed a US Person residing in Canada pay BOTH the higher income tax AND tax on the sale of their home. Explain to me how that ain't double taxation?

Having the right IF you can pay for it not a right. Educate yourself about the Exit Tax.

If you have not read the IRS Taxpayer Advocate Service (TAS) Annual Reports to Congress (ARC) for 2011 onwards, you really do not know anywhere near enough on these issues. These alone are not enough, but I believe are a necessary first read.

Passport revocation is for those who owe (determined administratively and not in a court of law) $50,000 or more in taxes AND/OR fees and Penalties. Got to read the actual law and not rely on the news. In is very, very easy for a little guy to rack up $50,000 in fees and penalties even with out owing any tax. Just failing to report or making a simple mathematical error over a period of just a few years and you exceed this threshold. Read the TAS ARCs. FBAR fines for example. Failure to report a single asset, that Tokyo Ginko that has ¥437 ( less than $5.) yen in it that is too far out of the way to close, and the minimum fine is $10,000 times six years. That's a $60,000 fine. It is not clear if FBAR fines with be taken into account in this, with everything else, I believe that at some time will.

0 ( +3 / -3 )

Japan T,

To claim the average overseas taxpayer has to navigate 7,233 documents in order to file is gross exaggeration at best. To claim that you yourself have to navigate through these same 7,233 pages, despite earning, as you claim, "far less" than the FEIE of $100,800, is also a ridiculous stretch of anything resembling the truth.

The 2011 National Taxpayer Advocate Annual Report to Congress is in no way the "smoking gun" you think it is. Even a moment's consideration will tell a sane person that US tax laws for overseas filers cannot possibly be so Byzantine and complex as to sufficiently explain non-payment for some 6.4 million American living overseas.

Anyone applying even a modicum of sense would realize that each of the 17 publications mentioned in the NTA report exists to address very specific and unique taxpayer circumstances, and not, as you would imply, exist as an interconnected and interdependent "must read" compendium for each and every overseas taxpayer. A reasonable person would only seek out information contained in the publication pertaining to him or her, and then only the sections or chapters that apply to him or her.

If you've actually sat down to read even, say, 1% of those aforementioned 7,233 pages, then it is you, friend, who might have cause for civil action against your alma mater for not imparting some degree of common sense in how to negotiate the apparently treacherous waters of indexes and tables of content, or at the very least how to use Google.

For your particular income bracket, Publication 54, Form 1040, and Form 2555 are all you've ever needed, friend.

Regarding your thoughts on freedom to travel, see Black Sabbath's comments. You can travel anywhere you like -- within your own country. But if you want to travel to another sovereign jurisdiction, you have to use a passport. It's a reality of international law. And it you want a passport, you have to ask the US government for one, because it alone has the legally recognized authority to certify that a US citizen is indeed who they say they are when visiting another country as an ostensive representative of the United States, in business, as a tourist, for study, whatever. To wit, your allegedly un-infringable freedom to travel stops dead at the border of another nation, and the only way to gain admittance is with that aforementioned valid passport. This is one of those benefits of membership to Club USA immediately relevant to this discussion that you seem unable or unwilling to recognize.

I'm not going to get into a protracted esoteric debate with you about what constitutes "citizenship" or the philosophical implications of circumstances of birth. Just know that whether you carry a passport or not, you're still an American citizen, and are therefore subject to fulfilling your tax obligations. Don't like what that may entail? Well, you should have been more diligent in learning what earning income, or holding assets, or buying and selling profit overseas fully entailed before making the plunge, consequences be damned. My best advice? Renounce your citizenship and stop so obviously trying to have your cake and eat it at the same time.

2 ( +4 / -2 )

Sucks to be American, move to another country that doesn't have double taxation laws!

1 ( +3 / -2 )

Pay up you cheapskates!

-2 ( +3 / -5 )

the system does not allow for the best of communication with expats.

I agree. The one thing I hate is when they send a letter of what I owe and the due date. The letter then arrives to me a week after the due date so I have no choice but to pay the late fee because they sent their letter by surface mail.

3 ( +3 / -0 )

it is an internationally recognized right to leave and reside out side of the nation of your citizenship

This is simply not true. Nations can control their borders. That is one of the oldest rules in international law. While some and organizations advocate for an extension of the freedom of movement to include a freedom of movement – or migration – between the countries as well as within the countries, this IS NOT INTERNATIONALLY RECOGNIZED.

While you or others may wish it were the case, it is not. If you wish to argue for adoption and recognixiton of the individuals right to cross internationally boundaries, please do.

But that aint the law today.

The failure of many here to recognize that they do not posses an internationally recognized freedom to move across international boundaries is the root of their misunderstanding of this action by the US government.

Passport revocation is for those who owe (determined administratively and not in a court of law)

The US Congress has given the Executive Branch the authority to implement and administer income tax law. This is Con Law 101. Further, there wheres, hows, and whys of income tax has been litigated perhaps more than any other group of laws in US History. IOW, yes, the Courts have been deeply involved in US tax laws.

Further, the courts have time and time again granted the executive WIDE LATITUDE on how to interpret and implement its powers concerning US foreign policy and related fields.

To insinuate that this decision is somehow improper, or rogue, is simply ridiculous.

You, of course, don't need to simply accept the decision. You can either not pay your taxes and face the consequences, or challenge the decision in court, or both.

In the meantime, I strongly recommend you pay your taxes.

0 ( +4 / -4 )

To insinuate that this decision is somehow improper

I won't insinuate anything. It's always an abusive measure to deprive a national from his/her passport. I don't think it's compatible with democracy (and I think the same with Japan seizing passport of freelance journalists or politicians in France with a project to 'cancel' French nationality to binational political opponents). Then, I think the US tax administration is using some people as scapegoats. Their initial goal was to make the super-rich class pay at least some taxes (and ideally pay in proportion as much as the average American), and it's a good intention. They tried the taxation of citizens even when expats. But that has not prevented at all the big fortunes from hiding in tax havens nor finding other ways. So they are making the process harsher (and clearly abusive) for expats with average wealth. A few years ago, they already forced people even largely under taxation level to do increased paperwork at their expense. Later, they started pressuring the major banks in other countries to refuse them services (or lose the right for the bank to operate in the US). Then again, very rich tax slackers are not really bothered, they can afford private banking and hire intermediary that do business in their name. I know modest people that got suddenly barred from banking system in France because they are on a list of people 'suspected of having US nationality or having a partner that does' and to get back to normal, they have to pay for the legal process to prove they are not Americans. Now, it's the passport deprivation and I'm sure they will only catch small fish, even fish bait, while that won't affect the wealthy owners of Walmart, Amazon, etc. What about the next step ? Commando ops to catch the working holidays that didn't fill the 52 000 pages of tax declaration and ship them to Guantanamo ?

No passport = no visa in Japan.

Not necessarily. Japan has exceptionnally granted visas to apatrids (I knew a guy from 'Yugoslavia' that was for a while stateless, and they found a way for him so he could renew his specialist in humanities visa...but not forever, he later got a passport when the conflict was over). If people have permanent residency, they don't need a visa to stay in Japan and Japan may issue them a document to travel abroad and come back to Japan. Some countries will grand them visas, others no. From what I get, that was the way they did with 'Okinawans' and 'zainichi' when they lost Japanese citizenship after the war. I don't say it's a solution.

1 ( +4 / -3 )

US citizens pay the taxes for what ? They don't even have social welfare.

3 ( +5 / -2 )

If you are living in Japan and owe 50,000 dollars in taxes, you probably just need better tax software or a better accountant, unless you have a super super income and are paid in dollars, and in which case you are on your yacht and not reading this.

In any case, most in Congress aren't bright enough to improve or even understand the current tax law, and their predictions of billions of income is likely to be way over the mark. It makes for good, "tough on taxes" videos, though, which I would guess is the primary motivation.

3 ( +3 / -0 )

LFRAgain,

Taking the Sheriff of Nottingham approach on this issue i see.

2 ( +3 / -1 )

Taking the Sheriff of Nottingham approach on this issue i see.

No. I'm taking the mature, responsible adult approach to the issue. Feel free to adopt an alternative stance.

2 ( +4 / -2 )

US tax law/regulation and sense are not strangers, they are mortal enemies.

-1 ( +3 / -4 )

There's a perception that our American friends pay very little in taxes, but, it's actually the opposite. The IRS is as merciless, greedy, and inflexible as any other tax collecting agency in the world. Although, the Canadian Revenue Agency (I'm from Canada) is probably the worst of the lot :-)!

Revocation of passports, effectively citizenship, is as excessive (to say the least) as it is counter-productive. An expat behind on taxes can't begin to make payments if they can't renew their work visas, or travel back to the US to address the situation. However, governments aren't known for thinking its policies through, never mind being reasonable or fair-minded.

1 ( +3 / -2 )

@Japan T,

As I earn far below the FEIE limit, the issue for me is not taxes, it's the 7,322 pages of paper work (IRS Taxpayer Advicate Service Annual Report to Congress 2011 Vol. 1 page 132) required of me yearly to prove that I do not earn enough to be double taxed. Simply impossible to comply with this requirement.

I can confidently call this statement a blatant lie. Did you honestly think nobody would check your reference? Foolish. From the document you referenced:

Publication 4732, Federal Tax Information for U.S. Taxpayers Living Abroad, illustrates the complexity of the filing requirements for individual U.S. taxpayers. The publication refers to at least eight other relevant IRS publications, totaling 563 pages. Further, the additional documents referred to by these eight publications include 4,727 pages of instructions, 667 pages of forms, and another 1,928 pages of form instructions for a total of 7,322 pages.

So are we to believe that ALL EIGHT of those other publications apply to your particular tax situation?! If you're actually filling out the majority of 667 pages of forms that have nothing to do with your particular tax situation, then you're worse than a fool.

As for it being "simply impossible to comply with this requirement", right before the above quote, she submits this bit of information:

At a minimum, individual international taxpayers spent 25 million hours reviewing and completing TY 2009 forms.

You can read this two ways, you can read it as 25 million hours TOTAL from all international taxpayers, which would be a useless statement without knowing how many Americans reside abroad. Oh wait, it DOES state that on page 130!

An estimated five million to seven million American citizens reside abroad.

(A footnote notes that this number does not include American military service members residing abroad)

So if we interpret it this way, Americans residing overseas are spending 3.6 - 5 hours on their taxes (25,000,000 hours / 7,000,000 taxpayers = 3.57 hours). Probably not much different than a lot of people in the U.S. It's HARDLY "simply impossible to comply with this requirement" unless you're extremely lazy.

The OTHER way to read the statement (in case you were trying to go there) is an absolute impossibility, where an individual taxpayer spent 25 million hours preparing their 2009 Tax Return. 25,000,000 / 24 / 365 = 2,853.9 years to complete one return.

1 ( +3 / -2 )

Not esoteric at all. The topic is the changes undertaken by U.S., not the unchanged policies of other nations. Thus, the privilege to enter a country and live there is immaterial to the discussion of the RIGHT to LEAVE your nation and live OUTSIDE of it, which IS a RIGHT. See Jumin Rhee's post. The U.S. IS breaking the law and IS denying all US citizens the RIGHT to LEAVE the U.S. and live OUTSIDE the U.S.. We do not "ask" the gov. for a passport. We CLAIM our RIGHT to leave the U.S. and the passport is provided to facilitate this RIGHT.

I specifically wrote that the TAS ARCs are not enough, in other words not "the smoking gun".

If sense was to be found in laws and regulations, why the need for lawyers and the recently greatly expanded compliance industry? What is the modicum of sense of a 74,608 (as of 2014) page US income tax code? How about being a "citizen for tax purposes" while not being a citizen for immigration purposes? Non US citizens living in their homelands with expired green cards having to report their non US assets to the U.S.? How about "accidental Americans" having to comply with tax laws of a foreign country? How about the U.S. signing the UN resolution of condemnation of Eritrea for its diaspora tax and its methods of enforcement while the U.S. does the same. From Robert W. Woods of Forbes "20 Really Stupid Things in the U.S. tax Code", "Individuals spend 6.1 billion hours a year doing their tax filings, the equivalent of a year's work for 3 million full-time workers". U.S. Tax Court Judge Joseph W. Nega wrote in an order, "taxpayers rely on IRS guidance at their own peril.". Margaret Wente "I came here (Canada) at 13, and I have been a citizen since 1979. I do not have a U.S. Passport or any U.S. Earnings. But the IRS wants to confiscate a large chunk of my retirement savings". FATCA is expected to collect $9 billion for the U.S. but cost all other countries a total of $200 billion dollars to implement it, what is the sense of extorting friend and foe alike, especially in a time when the U.S. has few friends left in the world. From Steven J. Mopsick's "FBAR Penalty Administration: "good Government" or "Bad Government", "Our "client" were troopers on the IRS front line, trying to decipher a statute so complex, Congress sometimes didn't know what it was they were asking us to do.". My Japanese spouse living in their homeland is a "nonresident alien" according to the IRS. U.S. tax law/regulation and sense are not strangers, they are mortal enemies.

Your statements on my actions are incorrect. I know from personal experience filing my tax returns from Japan and dealing with the IRS that the burden on filing is much greater than you suggest and that there in no sense whatsoever in the filing requirements. I too believed that around 38 pages was all that was required until the IRS sent me a letter demanding much more.

The confusion between rights with benefits remains.

An English royalist from the 1770s would be right at home with your attitude.

-2 ( +3 / -5 )

Revocation of passports, effectively citizenship, is as excessive (to say the least) as it is counter-productive.

Revocation of the passport simply leaves the citizen without a passport. Citizenship is not affected, and remains the same.

Here are some reasons an American citizen might be passportless:

Never had one, never applied.

Passport expired.

Passport full.

Application in progress.

Passport revoked.

Passport denied on application (e.g. felons, people owing child support).

4 ( +4 / -0 )

I had a chat with somebody I know well who used to be an IRS agent (one of those guys who would come to peoples' houses and take the keys to their homes and cars and anything else of value), and I was told that as long as I filed and showed that I was already paying taxes on my income in Japan, then it was very unlikely that they would come chasing after me in Japan. Why? Because the number of American expats living abroad are so vast and so spread out across the globe. They really wouldn't know where to begin with the limited manpower they have. On top of that, they already have more than enough on their plates at home to do without getting involved with all of the international legal mumbo-jumbo of hunting us all down. I mean, seriously, can you imagine how bogged down they would be even if they attempted to enforce such a thing regardless of the legality?

Anyway, if things go from worse to worse, then I just might consider giving up my citizenship since I'm now getting older, the fact that my spouse is Japanese and I have questions and concerns about the quality of life I (or we) could expect should I (or we) return to the U.S. I'm sure I'm not alone when I say that many of us are just one bad day from giving up our citizenships.

3 ( +3 / -0 )

The U.S. IS breaking the law and IS denying all US citizens the RIGHT to LEAVE the U.S. and live OUTSIDE the U.S.

You haven't been denied the right to leave, nor are the many thousands of people who leave the US to reside abroad every year. And you are still living outside the United States, so you haven't been denied that right either, even if you could demonstrate, which you haven't, that it is actually backed by a law.

We do not "ask" the gov. for a passport. We CLAIM our RIGHT to leave the U.S. and the passport is provided to facilitate this RIGHT.

You may think you're claiming the right when you submit your application forms, but an approval process is involved, and the authorities have the power to deny an application.

1 ( +2 / -1 )

You DO NOT need to DO all 667 pages of forms but you DO need to CHECK to see which apply to you each and every year. The rules change yearly and your individual situation changes. If you are not checking all these yearly, then the likelihood that you are in compliance is not very great. If you are lazily just going through the motions of filing the same as you always have as if on auto pilot you are likely to have a very rude awakening at the hands of the IRS.

I too just filed the same every year until well over a decade ago when a letter from the IRS directed me to provide the exact dollar amount received on each payday. They required that I use the exchange rate of the actual date of payment. This demand was accompanied with statement that accurate information must be provided and that each error or omission would result in a fine of $10,000 per instance. This requirement was for the current tax year and all others to follow, as stated in the letter.

At that time I had only one employer thus only one payday a month and only 12 exchange rates to deal with, yet with incomplete and inaccurate documentation (three monthly statements never received and the hand written yearly statement of earnings differing from the amount I actually received) from my employer who was engaged in creative accounting to cover the fact that she was stealing from her foreign employees to pay for the schools utility bills, not having a computer nor even a calculator (I was one broke individual at that time) to aid with the computations, the threat of massive fines for simple errors, it took a very, very long time to complete that year's tax return and to double and triple check it. Still, it was sent off with great fear that I must have made at least one error and thus receive a fine equal to a third of a year's pay.

It has been over a decade ago but a confounding factor was the 1 dollar and 27 cents of capital gains I received on a mutual fund I had at the time in the States.

@Fadamor

I do hope that everyone will check my references but that they do so with critical thinking and an open mind. You are making the mistaken assumption that all the estimated 5 to 7 million overseas Americans are filing tax returns. If returns were received from all citizens living overseas, there would be no need to estimate how many there were, now would there? Another confounding factor is FBAR forms in which roughly only 500,000 were received around this time. There has been many incorrect statements on the requirements of FBAR on this thread. I encourage everyone to research this as well.

"The IRS Has New Favorite People to Audit" BY BEN STEVERMAN APR 9, 2015 "The only major group that saw an increase in their chances of an audit last year? Taxpayers living overseas. New laws and regulations on investments held overseas have made their tax filing much more difficult."

$50,000 owed is reported to include fees, interest and penalties. One can very easily rack up that amount in penalties even without owing any tax.

-3 ( +2 / -5 )

$50,000 owed is reported to include fees, interest and penalties. One can very easily rack up that amount in penalties even without owing any tax.

Not if you comply with the law. And this is the point where your arguments concerning assertion of your rights collapse, because one right you don't have is to pick and choose which tax laws apply to you. You have already demonstrated through this comment thread that you are completely aware of a legal obligation to file your returns.

If you do so, your passport is safe. But yes, if the paperwork is insanely detailed and incorrect information is penalized, then you can't dick around - unless you are prepared to accept the consequences. So don't, and you'll be fine.

0 ( +2 / -2 )

Fadamor

Your calculation is waaaaaaaaaaaay off!

From tax-expatriation.com

Where the IRS WILL LIKELY LOOK OVERSEAS: USCs are Millions Yet US Tax Returns are Just a Few Hundred Thousand

Posted Jan. 28, 2015

"...TAS reported about 700,000 returns were filed in 2010 by US taxpayers abroad, while estimating about 6.32 million US citizens reside abroad. See, p. 37 of the Taxpayer's Advocate Annual Report of 2012-" They provide a link.

"These numbers do not even try to quantify the number of lawful permanent residents ("green card holders") who reside around the world, who are not filing US income tax returns." They probably have no reasonable reason to know they are required to do so.

I do not have time to track down which year's numbers you are using and the number of returns received and hours spent for that year, so my calculation also will be off but much closer to correct than yours. I will substitute 7 million estimated USCs with the 700,000 tax returns. 25 million / 700,000 = 35.7 hours or close to a full week of full time work. Perhaps you do not work full time and can afford a full week at the busiest time of the year (for me), I can not. Nor can many of us who are the working poor. Especially at risk of huge fines for simple errors or omissions if we do undertake to expose ourselves to that risk.

Folks, if you are spending somewhere in the ballpark of a week's full time labour on your tax returns, then the likelihood that you are in compliance is not good.

As we can take a screen shot from one movie of a 12 movie epic and hope to understand the whole epic, we also can not hope to understand what is going with the issues of FATCA, FBAR and CBT with just reading an article here and there. This bigger, deeper and broader than most realize and unless you study these issues like you have never studied anything before, you are in for one hell of a "OMG" moment.

And to complete the goodies this one article provides, it further states "The Foreign Earned Income Exclusion is Only Available if a US Income Tax Return is Filed". Link provided in the article.

Read on.

-4 ( +1 / -5 )

Well it is good I do not own the US government anything....

2 ( +2 / -0 )

I am wondering how is this "passport suppression for money reason" interfering with the International Covenant on Civil and Political Rights, I believe the USA signed but does not apply it (Japan signed too). Personally I feel good to be a citizen from a country which not only signed but also respect this treaty.

Article 12

  1. Everyone lawfully within the territory of a State shall, within that territory, have the right to liberty of movement and freedom to choose his residence.

  2. Everyone shall be free to leave any country, including his own.

  3. The above-mentioned rights shall not be subject to any restrictions except those which are provided by law, are necessary to protect national security, public order (ordre public), public health or morals or the rights and freedoms of others, and are consistent with the other rights recognized in the present Covenant.

  4. No one shall be arbitrarily deprived of the right to enter his own country.
2 ( +2 / -0 )

You speak of the law, that I do not have the right to choose which laws to follow and which to ignore. That applies to the US gov. too, for FATCA/FBAR and CBT (all facets of the same issue) at a minimum violate the 4th, 5th, 6th and 8th amendments, which are law. The affirmation by the Supreme Court in Cook vs. Tait is on incredibly shaky ground as it is not based upon any statute or legal premise, rather the esoteric benefit of citizenship upon the citizen and their property wherever they reside.

The equal protection clause prevents the gov. from making demands of one group of citizens that it does not make of all citizens. Thus, FBAR as applied to USCs abroad violates this as homelanders are not required to self report assets to FINCEN, a law enforcement agency, in violation of both equal protection and the 5th amendment.

I am not violating law, rather standing firm on my Constitutionally protected rights the US seems intent to violate.

But let's go deeper. Which law should our children follow? Mine have not been registered as births abroad and to everyone in the world except the US gov. and supporters of its CBT, they are solely Japanese citizens. Yet, you demand they follow US law, the law of one of their parents, not the law of the land of their birth, residence, native language, culture, employment and law. What right, sirs, do you have to demand that their pay homage to your land!?!!!? Answer, you have NONE!

Same holds true for accidental Americans of all stripes and green card holders.

FBAR/FATCA, CBT and the passport revocation provision are all facets of the same issue. There are very legitimate reasons for law abiding citizens to NOT comply with the UNLAWFUL dictates of an absent or foreign government. For instance, FBAR's reasonable cause clause explicitly denies violating local law as reasonable cause for not fulfilling FBAR requirements. This can be found in Internal Revenue Bulletin: 2012-8. February 21, 2012. T.D. 9567. Reporting of Specified Foreign Financial Assets. C. Reasonable cause exception

"FOR THIS PURPOSE, THE FACT THAT A FOREIGN JURISDICTION WOULD IMPOSE A CIVIL OR CRIMINAL PENALTY ON THE SPECIFIED PERSON ( OR ANY OTHER PERSON ) FOR DISCLOSING THE REQUIRED INFORMATION IS NOT REASONABLE CAUSE."

The US gov. subordinates illegal activity. So you arbiters of right and wrong, of what is and is not law, the high priests of the almighty 74,608 (as 2014) page US tax code, pray tell, which law we MUST IGNORE? Must we IGNORE the LAW of the nations we have CHOSEN to live in and follow the sacred law of the US? Or will your holinesses allow us to follow the law of the lands we choose as home and to ignore your sacred "law".

You assert that I do not have the right choose which laws to follow and which to ignore, yet the "law" you demand I follow forces me to do just that! I chose to follow the laws of the land I live in.

-4 ( +1 / -5 )

@JapanT

You assert that I do not have the right choose which laws to follow and which to ignore, yet the "law" you demand I follow forces me to do just that! I chose to follow the laws of the land I live in.

I don't demand it, I simply recommend it, because you have devoted considerable energy to complaining about the consequences.

-1 ( +1 / -2 )

"I had a chat with somebody I know well who used to be an IRS agent (one of those guys who would come to peoples' houses and take the keys to their homes and cars and anything else of value), and I was told that as long as I filed and showed that I was already paying taxes on my income in Japan, then it was very unlikely that they would come chasing after me in Japan."

I dont think thats entirely true. Let it laspe a few years and youll get a letter. They got regional offices in Asia, can pull up your name in a computer. For all the money they get youd think they would have one in Japan but I dont think they do anymore, but that might of changed. Now, will they fine you or take possesion of your stuff? hardly think so. They would, as the agent said tell you to start reporting and make you file for what you didnt report. Known people who had to do it, was no big deal. Just get on the right side with them.

Still waiting on what the 8965 is for.

2 ( +2 / -0 )

@wipeout

So you are saying that USCs should break local law as demanded by US law? It can not be both.

Read the entire post. Especially that from the IRS IRB. Which law do we follow sir? Me, I follow the laws of the land I choose to live in, as required by that land. The US is subordination illegal activity. Any 'law" that does so must not be followed for their is no legal basis for it as it is in itself in violation of law.

And I would like someone to address the laws the US is breaking with this instead of just mindlessly repeating the same thing over and over again. It's like Monty Python's argument clinic with many here.

5petals

Your experience is far different than mine. Hope it works out for you. Remember them FBARs!

-3 ( +1 / -4 )

Well Im not one to wag the finger at you, and I think that such rules and laws should be communicated clearly to citizens so they are aware and not penalized latter. It makes sense, that if your in another country and paying taxes, or living as a dependant of somebody who is, that you should be exempt from double taxation. If not, then this peculiar rule should be stated clearly in your passport. The dept of state clearly shows us the consequences of relequishing citizenship, as it is written in our passport in great detail about expatriating acts and their consequences. Having said that, I think its every U.S. citizens right to voice their concern, but I wouldnt practice civil disobedience when it comes to the IRS; just look what happened to Wesley Snipes. Taking away ones passport seems a bit extreme to me, for example how could one attend a funeral etc? They could of just froze the assets of the offender and all their U.S. accounts.

3 ( +3 / -0 )

So you are saying that USCs should break local law as demanded by US law? It can not be both.

I'm saying you can piss about to your heart's content proving in this thread and anywhere else that will listen to you that the US requirement and penalties are illegal, or that it's literally impossible for you to handle the paperwork, and when you eventually run out of breath, you will still be required to deal with your tax returns to the satisfaction of the IRS. Failing to do so has potential consequences, and as you object particularly strongly to those consequences, and evidently want to avoid them, then making the choice that prevents that - filing your return - would be a sensible move. Not one you have to take - it's your life - but a sensible one nonetheless.

Like I said, you'll run out of breath eventually, and still be precisely where you were when this thread began. You said something to the effect that you are "standing firm on your Constitutionally protected rights" in a previous comment. I'm not seeing it, and I don't think posting verbiage in this website has any legal or constitutional standing. The actual way to challenge a law on constitutional grounds is likely a far more irksome, bureaucratic, and expensive process than going through tax paperwork.

1 ( +3 / -2 )

wipeout

It appears that the anti-taxers are as rational as the anti-Vaxers...

-1 ( +3 / -4 )

This very important law (one that could seriously impact millions of families) was quietly passed by burying it deep down in a "highway bill." Tells you all you need to know about US democracy these days.

0 ( +2 / -2 )

Use the "credit freeze" option to lock your credit before leaving the USA. -Must be done through all 3 credit agencies (Experian, Equifax, etc). $10 each.

People need to understand that "The Federal Reserve" is a private bank and the IRS the enforcement arm. People that are bound to this fiat currency must abide by their rules and pay said tariff. Even if you don't accept Federal Reserve debt notes -if you are a U.S. Citizen you must file at least a yearly IRS tax form.

1 ( +1 / -0 )

Black Sabbath & wipeout,

I could take 90% of the argument propped up by the most vocal opponents of this new policy and distill them all down to this: "I hate paying taxes."

That in and of itself is not a crime. After all, who actually likes paying taxes for anything? But to actually not pay in some sort of highly convoluted protest? Well, that's against the law.

But taxes have been part and parcel of the human experience since we decided to marshall our resources and build walled communities to keep out enemies. They are a necessity in a world in which the needs of the many outweigh the needs of the few. Or the one.

(props to Spock)

Pay your taxes and your passport will live to see another immigration stamp.

1 ( +4 / -3 )

@wipeout First, I would like to thank you for at least acknowledging the literal impossibility of the filing requirements. It is disappointing however, that you then go on to a suggest that I must do the impossible because to not do so would be worse. If we put this into the real world, that line of thinking would be akin to "Yes, it is literally impossible to swim across the Atlantic Ocean but it is not as wide as the Pacific so better start swimming. " I am not just "pissing" on here about this. I am trying to inform as many as possible as to the realities of our situation, hoping to encourage people to really research these "laws", what they require and the over all results, at the very least. You know, that whole "awareness raising" thing.

@Blacksabbath and LFRAgain

As you refuse to provide any other answer than "Pay your taxes you cheat, protester!" Then we can take it that you support forcing a full week of full time labor's worth of paperwork to prove one does not earn enough to owe taxes to the US. We can take it that you support bloodline taxation (children born outside the US of just 1 USC parent regardless of nationality of the child), taxation based upon place of birth (accidental Americans). That you support taxing non US citizens who spent too much time in the US regardless of having a green card. That you support the IRS and the Treasury Dept. as a whole violating multiple amendments of the Constitution. And that you support the IRS compelling you to break local laws. You two have more than earned your "King George III 2016" campaign pins. Wear them with pride.

As I DO PAY MY TAXES, I take great offense being repeatedly told to pay my taxes and being called a tax cheat and tax protester. Instead of just calling people names, how about commenting on the facts presented by others?

One of those facts I would really like you to explain is the statement I provided earlier from the IRS IR bulletin compelling all of us, including you, to violate local law. If I were a citizen of any other nation I would be right angry that a foreign power compels their citizens, to whom my nation extended the privileges of entry and residence, to break the laws of my country.

-5 ( +0 / -5 )

@wipeout First, I would like to thank you for at least acknowledging the literal impossibility of the filing requirements.

I don't. I take the fact that all the Americans I know are filing their returns as an indication of the opposite.

2 ( +3 / -1 )

After all, who actually likes paying taxes for anything?

I do. The best places in the world have relatively middling taxes, high education and high democracy.

3 ( +4 / -1 )

The best places in the world have relatively middling taxes, high education and high democracy.

Excellent point.

1 ( +3 / -2 )

@5petals

Your point is well taken but it is not an issue of civil disobedience for me. I stopped filing over a decade ago because what they were requiring of me was simply impossible to do. Being forced to provide accurate information under threat of massive fines for each error or omission while my employer could/would not provide complete nor accurate information at a time when fines for not filing could not be more than the amount owed in tax, the only option available was not to expose myself to the possibility of the fines for misreporting. All my personal issues are predicated on the IRS requiring me to report the exact dollar amount for the actual date payments were received, increasing the time needed to complete my return to over a full work week, and the fines for making an error. Wish, want or try (and how I DID try) there was no way I could complete them without quitting several of my jobs.

The closest my situation comes to civil disobedience is with my refusal to follow the unlawful requirement that I spy on my spouse's finances for FINCEN. I will not break the trust of my spouse, local civic groups whose money I may be in charge of from time to time, a business partner nor any of my employers who may give me signature authority over one of their accounts, and I especially will not violate local law to satisfy the IRS. I do not think that that stance is civil disobedience.

I do hope that there are no ugly surprises awaiting you.

@Wipeout

I too was filing my returns until the IRS changed the requirements, making them impossible to comply with. Further, as I had a joint accounts with non USCs, how do you reconcile the FBAR filing requirements to send their private financial information to a foreign power, even if it would cause myself or others to violate local laws?

That statement from the IRS IR bulletin really should cause everyone to stop and reconsider everything they thought they knew of the US and all the implications of every USC abroad either a criminal (either under local law or under US law) or a criminal in waiting.

@Black Sabbath and LFRAgain

Nobody here is arguing against that statement.

-4 ( +1 / -5 )

I do hope that there are no ugly surprises awaiting you.

Considering I haven't stopped filing since moving to Japan some 15 years ago, I would imagine my chances of getting an ugly surprise and your chances, having stopped filing over a decade ago, are markedly different.

I'm no longer going to indulge this debate with you, and I'll tell you why. Instead of substantiated fact and reason, you lend greater credence to exaggeration. Instead of objectivity, you prefer sweeping and gross generalizations. On the one hand, you claim you would file if you but simply understood what was being asked of you. But then on the other, you write at length about what you perceive to be an inherently unfair, unjust, and illegal US tax code -- at least for overseas filers.

You still cling to the fallacy that you are being double taxed simply because you pay taxes in the country you currently live in, believing that to be "enough," not recognizing that Japan (or wherever you happen to be now) and the United States, along with their respective tax codes and requirements, are entirely unique and separate entities.

And you wrap everything up with a long and clearly well rehearsed treatise about the illegality of seizing passports as a way to compel wayward taxpayers to comply with the law, all but shouting from the mountaintop that, yes, you realize perfectly well you owe Uncle Sam back taxes that he has every legal right to ask for, but you'd gotten away with not paying thus far, so boy was it a shocker to see him come a knockin' this way.

Again, it seems an awful lot like you want to have you cake and eat it too. You want to be a US citizen carrying a US passport issued by the US government, but pay Japanese tax rates, follow Japan tax laws alone, and absolve yourself of any and all legal tax obligations to the US government above and beyond what you've paid to Japan because you A) find the forms too complicated to fill out . . . despite having not filed, as you readily admit, for more than a decade, and/or B) find US tax laws so draconian and unjust (if your "King George III" refrains are any indication) as to invite open rejection.

Just reach out to the IRS. Send them an email. Use a fake e-mail address and VPN, if necessary, particularly if you're worried about them finding you and sending someone to actually knock on your door (although, after 10 years, I imagine they aren't that interested in hunting you down in person). Explain your situation, ask what your standing is with the IRS, and ask what your options are if the situation is indeed as dire as you fear it to be. Then think about where to go from there.

But this, "I haven't filed in more than a decade, but I'm still going to tell all of you woefully ill informed overseas Americans who have managed to file successfully about how the system is really stacked against you" riff you're sticking with really isn't very convincing or compelling.

1 ( +4 / -3 )

I live in Canada and recently an American colleague at work renounced her US citizenship, not because she didn't want to pay her US taxes, but because it was costing her thousands of dollars a year to have an accountant do her US taxes. Additionally, even if she did everything in good faith, if the US tax authorities challenged what she paid, they could levy huge fines. For a single woman in her 60s working two part-time jobs to make ends meet, keeping her US citizenship didn't make any sense.

I've read elsewhere that some European banks are refusing to open accounts for Americans because the reporting requirements from the US government are so onerous, it's not worth it for the bank.

2 ( +2 / -0 )

. . . it was costing her thousands of dollars a year to have an accountant do her US taxes.

I'm going to go ahead and call shenanigans on any claims of financial struggle or adversity for your ex-American colleague.

Anyone who would have the need or the resources to secure the services of an accountant at the cost of "thousands of dollars" annually is very clearly in an income bracket that has no right to use the term, "making ends meet." Typically, anyone paying "thousands of dollars" to an accountant is doing so to maximize tax savings on a diverse annual income stream exceeding US$200,000.

$200,000 annually for a single person, or even half of that? Those "ends" are meeting up just fine.

1 ( +4 / -3 )

@LFRAgain

I'm going to go ahead and call shenanigans You're wrong, but I admire your confidence at being able to comment so assuredly on a case that you have no knowledge of.

I was amazed when she told me how much it was costing her to have her taxes done in the US and have no reason to doubt what she's telling me.

2 ( +2 / -0 )

I was amazed when she told me how much it was costing her to have her taxes done in the US and have no reason to doubt what she's telling me.

You should be more amazed that she, on the one hand, was allegedly barely making ends meet with a presumably simple, scarcely adequate annual income, yet was paradoxically able and willing to fork over "thousands of dollars per year" to an accountant.

When the average rate for a respectable CPA to prepare moderately complicated taxes is in the realm of $200 per hour (they typically charge by the hour, not by the circumstances), and the average tax return requires a little over two hours of preparation time, we're looking at some wonky inconsistencies here. Your colleague is claiming that an accounting professional reuquired at minimum 10 hours to prepare a return on a income that barely allowed her to "make ends meet"?

It sounds like she was either incredbibly unwise about how to better spend that limited income of hers, or she wasn't being entirely forthcoming about her self-reported "plight."

2 ( +4 / -2 )

LFRAgain

Upton Sinclair famously said: "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"

2 ( +3 / -1 )

Black Sabbath: Upton Sinclair famously said: "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"

How'd he know about AGW? It's like he had a crystal ball!

2 ( +2 / -0 )

Pay n pay n pay tax. USA land of freedom and lighthouse of shining democracy for world to see. USA: I have bills to pay, my citizens. Dont u like to pay for my predators and airplane pewpew in middle east. This cost money, my child. To keep u safe. What about maintain forces in japan, south korea, NATO. Youthink this come from printing monopoly money. Grow up. White americans must pay. Many immigrants still poor, how to extor... i mean asking them to pay. Arm forces is the foundation of our nation n YOUr bills support CIA secret ops to control how the world look at USA. Common pay up. Nothing is free.

-3 ( +0 / -3 )

"Your point is well taken but it is not an issue of civil disobedience for me. I stopped filing over a decade ago because what they were requiring of me was simply impossible to do."

Dude I dont know what kind of job you got, but if your employed by somebody I think all you need is that gensenchuryo....whatever they call it (income statement) from your employer or city hall and get it translated or do it yourself; fill out the 1040 and 2555 and your good. I think they just want a general idea of what you made and if your making over the 100000 excemption. Do we all keep every receipt of every expense or sale? If you got a business in Japan, then Im sure your already reporting income to the J gov, and your corp info like minutes of meetings income statement etc. Seems you could just sum all that up, but I dont know your situation.

2 ( +3 / -1 )

@Japan T

I too was filing my returns until the IRS changed the requirements, making them impossible to comply with. Further, as I had a joint accounts with non USCs, how do you reconcile the FBAR filing requirements to send their private financial information to a foreign power, even if it would cause myself or others to violate local laws?

I don't have to reconcile it, but I expect you do. Though it's also possible the IRS will simply ignore you if you fail to file. Your risk, not mine.

I can look at the general pattern of your comments and see a fair amount of scope, in among the feeble excuses, for exaggeration, misinterpretation, shaky legal analysis, and incorrect legal conclusions. In other words, just because you say something is so doesn't make it so, and the general tone of your comments on this subject doesn't inspire confidence.

1 ( +3 / -2 )

LFRAgain

My statements on the complexity come from filing tax returns as did my ugly surprise. I stopped filing because my choice was quit all my jobs during tax time (which would leave me unemployed until the following year) and dedicate myself to filing tax returns to prove that I owed no tax to the US or not file. What they required of me at that time took over a full week of doing nothing other than my tax return. The IRS forced me into noncompliance. I owe no tax to the IRS.

Your comments on the cost for tax return preparation differs from what the IRS reports. Again, from the 2001 IRS ARC, section one International Most Serious Problems (msp) page 154. irS tax attachés estimate international tax preparation costs can exceed $1,000 per return, while civic organizations of american citizens abroad set the figure as high as $2,000 per return.19 in contrast, the treasury inspector General for tax administration (tiGta) estimates the average compliance costs for individuals in the United States range between $173 and $373.20

Comments from tax consultants operating under new laws requiring all paid tax prepares to register with the IRS and those dealing with "cross boarder" issues to obtain special accreditation, state that these represent very simple and straight forward returns. Having any non US investments, pensions, insurance, joint accounts with nonUSCs, etc...complicate things immensely and add to the basic costs cited above.

One hand we have a former USC in Canada reporting the huge cost of compliance backed up by the IRS and tax professionals dealing with these issues on the other hand is LFRAgain.

On one hand we have the TAS citing 7323 pages regarding overseas filers and this from John Koshien the IRS Commissioner, who has a law degree from Yale, "This system is really beyond the pale of making sense." And "I wouldn't think about trying to fill out my tax return and I don't have a very complicated tax situation.". And LFRAgain is over here saying that all one needs to fulfill their filing burden is a "modicum of sense".

My situation when the IRS sent me a letter demanding that I provide the exact dollar amount received each payday was a college grad living in the most expensive city in the world making $30,000 a yr at an eikaiwa and paying off a $30,000 dollar college loan. OH! and that $1 and 27cent Capital Gains. In utter disbelief at this requirement, I called the IRS-in the dead of night due the time difference on my dime, er yen. They confirmed the need to provide this info. Several days later, unbelieving how tedious and time consuming it turned out be, I called again and it was reconfirmed. That is an example of an ugly surprise I am trying to warn people about.

My manager was engaged in illegal financial activity and hid it by not issuing several months of statements and issuing a hand written yearly statement that showed me being paid more than I received. Learned this in the process of doing my US tax return that year.

The tax code and accompanying rules and regs are so great in volume that no one person can possibly know them all. Get the one person who happens to know of some obscure rule that can be applied to your situation reviewing your return and your toast.

Beyond that, there are very serious issues of the IRS breaking the law and compelling us to do so to fulfill our filing obligations.

-3 ( +1 / -4 )

Nope. I'm done.

-1 ( +0 / -1 )

I am exaggerating nothing, just pulling quotes from various sources, mainly gov. documents.

Not at all that broad. My points are, that there are very easy to understand reasons 1. Why person who wants to be in compliance can not and 2. Why a person who wants to be in compliance should not. The complexities of filing answer to the first and the unlawful, untrustworthy and unfair practices of the Treasury dept. speak to the second. The utter lack of sense in our tax system applies to both.

Yes, I stopped filing because what they required of me simply could not be complied with. That was near two decades ago.

Now I am married and have children. More recent changes, which are in fact unlawful, unfair and dangerous to attempt to comply with, are preventing me from even considering getting back into compliance even if it were possible.

You attitude seems to be that we must follow whatever the IRS dictates, as if it were King and the king is law and all the king's proclamations must be followed regardless of the outcome. Thus the King George III reference.

@ wipeout

So you expect all USC overseas with joint accounts with non USC to choose between which set of laws to follow? If so, what legal argument would you give for the US compelling its citizens to commit criminal acts abroad of pay huge fines at home? What legal argument would you give for the US compelling any US citizen to make this decision?

@Cosukuri

Where did you find the info on holders of Japanese PR not needing a passport. This would be very useful info for many.

-3 ( +1 / -4 )

So you expect all USC overseas with joint accounts with non USC to choose between which set of laws to follow?

If you return to the comment of mine that you're replying to, it's clear that I don't say I expect anything. I think it would be wiser to have done your tax returns over the last ten years, as you were required to, instead of spending your time posting reams of justification and amateur legal argument.

3 ( +4 / -1 )

Yes, I am not a lawyer but one need not be a lawyer to read the repeated use of " in violation of statute" in regards to IRS actions and " has not done X as required by statute" regarding inaction on the part of the IRS in the TAS ARCs to understand that there are many, very serious legal issues with all this that should have been resolved long before implementation.

It does not take legal training to research and find that the passport revocation provision, as well as FATCA were slipped into already monstrously large bills at the eleventh hour, calling into question not only the value of voting records, as those who made up their minds for or against a bill based upon their earlier reading of the bill could not know of the last minute changes, but also of the overall health of American democracy.

It does not take a legal mind to learn that both FATCA and the recent jump in the renunciation fee failed to follow the legally prescribed methods of implementation. Neither underwent the legally required cost-benefit analysis, for one example.

One does not need to be a lawyer to clearly see all arguments on the need for the revenue FATCA would bring into the treasury as false. The projected cost of implementation has always been higher than the hoped for revenue, so revenue can not be the reason behind FATCA. The fact that only 9% of overseas tax filers owe tax further weakens that argument.

However, amateur that I be, here are a few professionals and what a couple have to say on the legal issues.

"Columbia Law School Blog Should Lex Americana be universal? FATCA turns foreign banks into tax informants By Georges Ugeux June 19, 2013

"Over the last decades, a number of initiatives taken by various US administrations on both sides of the aisle have raised concerns about the actual legality of the extraterritoriality attached to laws imposed by the United States of America on other jurisdictions around the world, often using “persuasion” rather than legal due process. In my first course on International Private Law at the Catholic University of Louvain, we were taught that tax laws could not extend beyond the borders of the taxation authorities. The territoriality of tax laws is confirmed by the literature. The double taxation treaties confirm this principle to which the United States is the most significant exception.

As we write this post, Switzerland is confronted with an “emergency” law submitted to its Parliament to accommodate Uncle Sam’s disclosure requirements. The justification is unambiguous: if you don’t do it, we will ban your banks from operating in the United States."

Not a ringing endorsement.

Then there is this from Allison Christians.

"IRS Claims Statutory Authority for FATCA Agreements Where no Such Authority Exists." Please find and read the article.

John Nolan, Phil Hodgen, Patricia Moon, John Richardson, Steven J. Mopsick, James George Jatras and James Bopp Jr. represent only a few of those who are not amateurs who support one or more of the views I have posted here. I will leave it to those interested to track down who these people are, space here being limited.

While it can be pointed out that the Bopp FATCA challenge (which cited multiple violations of the Bill of Rights amount other laws) has lost its first round, it does not take a lawyer to read the 4th amendment and Judge Rose's statement that the plaintiffs' 4th amendment rights are not violated by FATCA to understand that citizens' rights were not foremost in the mind of Judge Rose as he wrote his decision. Other parts of his decision mesh nicely with statements of others who support CBT and all it has spawned, the reported hardships imposed upon citizens overseas are either nonexistent or minor but do not matter anyway as the government's need of revenue is of greater importance. In short, the government's need of revenue to pay for benefits for homelanders trump any rights or hardships expats may have have.

As FATCA is revenue negative, a non legal mind wonders how he arrived at his decision.

Ironically, one of the few things that Democrats Abroad and Republicans Abroad agree upon, that FATCA causes undue hardship on expats, is ignored by supporters of CBT and thus far the courts. The two groups differ greatly in their solutions for the problem, one calling for its complete repeal, the other for special carve outs for themselves., but they do agree that these issues cause lots of difficulties for Americans living abroad.

One need not be a lawyer to comment on these.

One does not need to be a lawyer to read about the OVDP bait and switch in which some participants ended up paying 129 times more than they owed and more than allowed by statute to understand that the IRS is not a good faith negotiator, that it does not adhere as strictly to the law as one would wish.

Nor does one need to be a lawyer to read what lawyers have written. And there are many great arguments that FATCA, FBAR, CBT and now the passport revocation provision do in fact infringe upon, or absolutely ignore many rights and violate multiple laws and are in fact unconstitutional.

To tie up another loose end, there are no more ugly surprises for me. Ugliness to be sure, but no ugly surprises, I have already had mine. No, the ugly surprise awaits those who have been dutifully submitting their US tax returns year after year with every reasonable expectation that they are doing all that is required, only to find out, as I did, that they are not in compliance, have not been in compliance and that it is entirely outside of their ability to be in compliance. THAT is the ugly surprise.

0 ( +1 / -1 )

Revocation of the passport simply leaves the citizen without a passport. Citizenship is not affected, and remains the same.

@wipeout, I didn't mean they'd actually lose their citizenship. Just that the end result would have a similar effect.

Without a valid passport, it's very difficult to travel or return home to address tax debt. Also, renewing work visas overseas would be extremely hard, if not impossible.

1 ( +1 / -0 )

Be happy you don't own a business in both Japan and America, then you'll have a horrific tax situation, like I do.

Basically, the treaty they put in place is frustrating because neither side follows it. I must pay social security taxes in the U.S. on my U.S. income even though the social security treaty specifically says no. I must pay full investment taxes in the U.S. despite the fact that this is capped by treaty at 10% for America, the rest going to my resident country, Japan. America just ignores this part. I also get to pay the Obamacare tax, which I should not have to pay according to the treaty. Now with My Number, the screws are being put to everyone who isn't in Shakai Hoken for any reason, and we'll be paying even more despite the fact that I'll never collect anything from japan on that, as I'm not crazy enough to live here in my old age when taxes will be 75%.

0 ( +1 / -1 )

@Peter Payne

With over $19 trillion of debt and unfounded mandates drawing this, the US is likely to be in a similar situation as Japan when you retire.

But at least you do not need to worry about double taxation. According to many on this thread, it doesn't exist.

1 ( +1 / -0 )

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