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Comment by rayiner | Hacker News Reader

Is taxing expats abroad really a problem? First, there is a large baseline exemption and most expats abroad don't pay U.S. taxes. Second, if you're intending to permanently leave the U.S. why should you keep U.S. Citizenship? And if you're intending to come back, is it really unfair to tax you?

American citizenship has real benefits, especially if you're rich enough to pay expat taxes. The U.S. protects you and your property everywhere in the world. My dad was stuck in Yemen when the civil war there broke out. His hotel was shelled. That blue passport was his ticket out on a C-130.

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The crux of the issue in the article's title assertion, that "US Expats are toxic" isn't because US Citizens personally have to deal with filing extra taxes; it's because the foreign institutions are also required to file paperwork and go through the hoops. I'm a US citizen living in Germany. When I open a bank account, the US doesn't "just trust" what I report to them, they also require the bank to validate my filings, creating extra paperwork and costs for the bank. Some banks in Germany will refuse to open accounts for Americans because the extra cost and paperwork tips the cost/benefit equation to the point where it doesn't make business sense to serve American customers -- they cost more to do business with than it's worth.

To address the "why should you keep US citizenship?" question: If you move abroad, you won't be able to get citizenship in the country that you reside in for a number of years (depending on where you go), and in many cases, your US citizenship is what makes it easy to get a work visa or residence permit in that foreign country in the first place. So, even if you actually intend to renounce your citizenship, you still have about 5-10 years of living abroad and dealing with the tax implications before you can become a naturalized citizen in the place that you move to.

I'm not trying to argue whether it's fair or unfair to impose the tax on citizens living abroad, just that the logistics don't make the proposal of renouncing ones citizenship so simple.

While many expats don't have to pay US taxes, the reporting requirements are a substantial burden on us - we have to file tax forms in multiple countries, and we have to report on our normal bank accounts, which is pure bullshit.

We don't get any real benefits abroad, and we get charged for everything. Let's say you need something notarized - many places won't accept a foreign notarization, which means you have to go to the embassy. You know how your bank will usually notarize documents for free? The embassy charges you $50 - per signature.

Want to renounce your citizenship? That'll be $2,350.

You managed to end up in the wrong place and civil war breaks out? The US will make some effort to help you, but it wont' come free. U.S. law 22 U.S.C. 2671(b) (2) (A) requires that any departure assistance be provided "on a reimbursable basis to the maximum extent practicable.” This means that evacuation costs are ultimately your responsibility; you will be asked to sign a form promising to repay the U.S. government. (http://travel.state.gov/content/passports/en/emergencies/cri...)

And if you do renounce your citizenship, you risk not even being allowed back in the country to visit family. --People who have done so have been denied visas by the US supposedly because they aren't well enough established in their new country. And yes, this can even happen in the event of family emergencies. So giving up US citizenship could prevent you from visiting a parent or other family member on their deathbed - not something most people want to think about.

The problem isn't just the taxing, you spend several days each year trying to report correctly the fact that you don't owe anything. If you make a mistake, the consequences may be quite severe, so it's safer to hire an expert. Outside the US, experts on US tax law don't grow on trees, so you spend a lot of money on this.

By the way, you speak of giving up citizenship like it's a small thing. Once you do this, you can never get it back.

'US Persons' in the context of this law is not the same as US citizens. It may include family members or business partners of citizens, or even of family members of former residents. It even affects many people who have no personal connection to the US, in some cases even people who have no right to enter the US without a visa if at all.

Fatca requires financial institutions to find and report any such US persons among their customers, and report their details to the US. This can be problematic, not just because so many US persons aren't even aware they are considered US persons, but also because in some countries banking privacy laws make it illegal for banks to record such information of their customers. These banks are now torn between following their local law and following US law. As a result, just offering certain services to US persons may carry a significant risk.

It is a big one. Many expats had to resign their US citizenship to avoid this silly law.

Double taxation only exists in Aethopia and the US.

Read this blog: http://www.overseas-exile.com/

Protection? Yes, maybe that's the reason. To support the US military efforts and budget.

On a side-note: If I would applied to the US greencard, and then decided to move back to Germany, I would have to pay double income taxes. To Germany and to the US. You don't even need to be US citizen.

To be clear, you wouldn't actually pay double-taxes (I think -- if you make more than $100k, it depends on if the Germans and Americans have a treaty over it, but most countries do, I think). You'd have to file twice, but the US side would consist of forms that say you don't owe the US government anything because you already paid more to the Germans than the US would have charged.

There are cases where double taxation can occur that aren't covered under tax treaties. Consider an American working abroad going on a business trip to the USA. Depends in the country, you can be on the hook for taxes in both countries, where neither country recognizes the right of the other to tax.

Double taxation does happen pretty regularly, in particular, the USA often doesn't recognise various types of European investment and pension instruments and that causes complications. It's a really byzantine system that shouldn't even exist at all. People who live outside the USA get nothing from the US government, so they should pay no taxes. Every other country has this figured out.

I filed five returns last year (4 states and 1 federal) and I didn't even leave the U.S.

Not necessarly disagreeing, but when you say "many" (And that 266% increased made headlines everywhere), I feel it needs some context:

8.7 million abroad. 3,417 renounced citizenship.

Or, .039%.

I'm going to take a stab at this and guess that's some of the 1% right there who had millions stashed abroad. Maybe the tax law was painful to them, but for the rest, it's hardly a crisis.

The statistics on renunciations may not be correct. There are lists of people published who renounced, but every time I read a story about FATCA I keep coming across comments posting by people who claim they gave up their citizenship and never appeared on these lists.

The real question is how many people would like to give it up, but can't, because obtaining citizenship where they live is extremely tough and because the US is unusually vindictive towards people who try and renounce. They can even retroactively undo your renunciation if they decide you did it for tax reasons.

Seen from one angle, US citizenship looks a lot like modern slavery. You're born into it, it's difficult to escape, you get no benefit out of the relationship and no matter where in the world you run to your 'owners' will demand a slice of the fruits of your labours.

Thats crazy! I had no idea they can "undo your renunciation". Sounds like slavery to me ;).

This is Hacker News, right? Way easier to work in SV with that blue passport/screaming chicken than otherwise (except possibly countries such as Canada). Throwing away easy access to the Valley strikes me as a reasonably high price for non-retirees to pay.

There are far more hackers outside of SV than in it, I'd guess.

The flip side is that foreigners who invest in America aren't taxed at all. At least in Singapore, I know people who invest in the US stock markets and pay not a single cent in capital gains taxes or dividend taxes (Singapore does not tax these). I'm not sure the citizenship based taxation makes the most sense.

Are you serious? To me, as a person from EU, it seems insane that a country where I haven't actually earned the money would want to tax it in any way or form. That's just ridiculous. You should pay income tax in the country where you made money. And why should I keep citizenship of a country that I moved out of? Because...I want to? Because I feel like a citizen of a country even if I live and make my living somewhere else? Doesn't mean that that country has any right to a part of my income.

A lot of what you ask seems that it could be a personal question depending on who you ask.

I certainly wouldn't presume or preach to others with regards to how they view their country, however:

1. We (I'm an expat as well) pay little taxes to the U.S. because of the foreign earned income credit. The paperwork is onerous, yes. But it's not as bad as some make it out to be, unless you're in an exceptional income bracket.

2. A U.S. passport is a powerful thing. And as the OP mentioned, the benefits are real. We look after our own. http://www.passportindex.org/byRank.php

3. Many U.S. expats wouldn't dream of renouncing their citizenship, because it simply means more to them than that.

It's more than residency, it's identity. And it's something we pay into. Many Americans will tell you...they don't like a lot of taxes...but they /will/ pay taxes, and they expect everyone to. It's a "we're all in this together" bit. Even if you're abroad, and you're paying a paltry amount, you're still chipping in.

Just something many of us do.

It's more than residency, it's identity.

This is the part that often (note: not always) leads to valuing an American higher than a non-American. I have real problems with that. 911 is virtually celebrated, while larger tragedies the world over are not. What makes an American soldier's life more worthwhile than a baby born with Aids in some African backwater? If you believe all the flag-waving, nationalism. Otherwise media.

And I get that small number of deaths is a tragedy, a large number is a statistic. That doesn't change the reality - a life is valuable no matter who's it is, and where that person lives.

I'm a citizen of the world. I was born in Africa, have lived in the US, and now live in Europe. I rate myself as no better or worse than anyone else on this planet, including Americans. Most of all I'm insanely grateful to not be American.

This doesn't really apply to expats, but income tax isn't really about income, it's about funding all the public services you use. There are problems right now in parts of Canada where wealthy people from other countries are sending their families here and staying to work in their home countries. Their families live in multimillion dollar houses and get hundreds of thousands a year in "child support", but they also consume a lot of public services that they never paid into, like roads, healthcare, schools, and sometimes even welfare. Millionaires are getting welfare! It's insane.

That sounds like "child support" should be taxed then. If expats can send "millions of dollars" to family in Canada and they don't pay a single cent as tax, then it's a tax system problem. And hey, on the other hand, if that family spends those millions in Canada, then it's a net benefit :P I'm sure even if the "income" is not taxed, all the money they spend actually is, so their amount of taxes paid to Canada might be significant.

For sure it's a tax system problem, but in the usual case (where it was already taxed once in Canada) it makes sense not to double-tax child support.

AFAICT most of the money isn't spent here, it's parked here as a hedge in case something goes south in the home country, usually in real estate holdings. The biggest effect I can see is that housing in the city is too expensive for the locals now so families are being driven out into rural areas.

Why? Why should the location of where you make money matter? If I make a million dollars in Indiana, I need to pay taxes on it. If you make it in Hong Kong, you shouldn't?

It's not like federal income is an admission fee. Or a direct tax on something the citizen uses (like a toll road). You benefit just as much from the government building a VA hospital, AIDS research, or a US carrier stationed near Syria.

You don't suddenly stop being an American when you go live somewhere else.

I don't think we will ever agree on this. I think income tax should only be paid in the country where you made the money, because the money comes from a business in that country. You think you should also pay it in the country where you are from, because you should support it(even if that country hasn't done anything to help you earn that money). To me, that sounds insane. To you, it doesn't. I'm not sure we can reach an understanding.

Taxing us isn't really the issue. The bigger problem is that they've made the reporting requirements so onerous that many foreign banks no longer offer accounts to American citizens on any terms. This makes longer-term living in a foreign country very problematic.

This law may have been well-intentioned but it has some very toxic fallout for innocent people.

You have no idea what you're talking about. It isn't just about taxation it's about countries being forced to report to the IRS. If you have a foreign account with a balance over $10k and you fail to report the account (in a filing separate from your tax returns,) you are fined $10k -- no exceptions. If the balance just goes above $10k for even one minute, you are on the hook for reporting that account for as long as you have the account. Except for Eritrea, no other country has citizenship based taxation. Additionally, you can't even open bank accounts overseas as an American with many banks. You also don't seem to understand citizenship law. There are millions of Americans who have never even been to the US, yet must file taxes and report bank accounts. As far as that blue passport getting you on a C130.. That doesn't happen anymore. The State Department routinely leaves Americans stranded in war zones while the French actually send the military to get their people out. US consular services abroad are a joke. I've lived overseas for about 8 of the past ten years and I routinely deal with consular nonsense. Finally, to your point about being 'rich enough' to pay taxes; the exception is only about $96k -- however if your working in Paris or London or Tokyo, that is barely a survival wage for a family. That aside, you still are subject to double taxation as well if you're in a country without a tax treaty. Frankly, I suspect you've never lived as an expat nor do you understand the facets of the law that make it so onerous.

I've worn te uniform of the US military and paid my 'dues,' yet to imply that an overseas American is any less American is offensive. When I am outside the US, I do not consume a single taxpayer funded service. All consular services for the most part are self-funded. If the time comes when I need the Marines to come bail me out, send me the bill and I'll pay cash; otherwise the IRS can leave me the hell alone. I am a proud American, but I despise the Democrats who passed FATCA along with the class warfare rhetoric that led to it. To Democrats, overseas Americans are presumed to be money launderers, drug dealers or tax evader. I am neither yet the burden of proof is on me. Did you know when Insend money to the US, I must provide proof of the fund's origins? I have to prove my innocence in order to use my own money! FATCA is worse than the NSA -- it's a license to violate my financial sovereignty.

plus you might get a call by the local CIA station asking you for a favor you would prefer to avoid.

I partially agree. I lived in Australia for 5 years making a nice salary and I was required to pay zero taxes to the US government during that time.

My biggest complaint is the paperwork. Besides FATCA, there is also the FBAR filing requirement. You need to report every foreign bank account that has more than $10,000 in it. This amount hasn't changed since the 70s.

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