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Comment by earthtolazlo | Hacker News Reader

You are welcome to give up your American citizenship if that income tax becomes too burdensome for you.

There are actually things like the expatriation tax and "name and shame" provisions which discourage people from renouncing for tax purposes.

Also (note that I am not an accountant or lawyer and this is not advice), most ordinary people won't see any problem with taxation while abroad beyond the actual inconvenience of filing a 1040 because the foreign earned income exclusion (https://www.irs.gov/individuals/international-taxpayers/fore...) allows you to exclude foreign earned income up to $100,000 from US taxation. Since ordinary people pretty much all earn less than this, they only have to pay taxes to whatever country they are actually in. Only people who are rich enough to hire accountants have to worry about double taxation, and they can probably avoid it by other means that are well-studied among rich peoples' accountants.

I guess it depends on your definition of "ordinary people", but if you're going abroad for long-term work in any "middle class" industry, you're eventually going to have extremely complicated taxes.

Retirement savings, stock options, real estate, and any sort of investment account makes your U.S. tax return go from "a 1040" to a towering mountain of special forms. A lot of them also lose you the right to e-file, for some reason. And many aren't supported by tax software, or are handled incorrectly.

A lot of "foreign" banks – i.e. your _local_ banks – won't even talk to you. They tell you to make your investments in the U.S. instead, so you get to pay international wire transfer fees and foreign currency exchange fees on every investment. And if you want to move it back, you get to pay them again.

You won't necessarily owe any tax in the U.S., but you sure pay for it in either filing time (10s to 100s of hours) or expat tax accountant fees.

> They tell you to make your investments in the U.S.

And, extra maddeningly, a number of American institutions won't even talk to you, either.

Try calling up Vanguard or Charles Schwab if you're just a normal person who lives abroad and see how quickly they'll tell you "sorry! we don't want your business"

Even if you still have a permanent US address (i.e., not just some post box).

WBK (https://www.bzwbk.pl/) seemed more than willing to open me a bank account quite recently. There were a few more forms due to my being a US citizen, but it seemed like actually fewer than my wife (a Polish citizen with a US Green Card) needed to do the same thing. Maybe things are stricter in the West than in Poland?

It depends on the bank. Essentially it boils down to whether the "foreign" bank is willing to go through the compliance and data-sharing that is impressed upon them by working with Americans. Some do, many understandably can't be bothered.

Right, so why all the fuss over whether some of them don't bother? How many banks do you need? As long as there's one that will take your business, why should you care that the one down the block won't? I guess it could be an issue if you're in a rural area with limited banking competition? Even then, most banking is done online now and a couple of trips a year to the "big city" to get some business taken care of (see the consulate, visit a specialist doctor, sign for a loan, whatever) is just part of life if you're in a smaller town, no matter where in the world that is.

"All of the fuss" is not so much that the choices of banking available to an American abroad are reduced (though they are, and not necessarily due to the laws and regulations of the host country; and of course it depends how difficult it is based on the country) but that FINCEN/FBAR compliance which is in principle aimed at those evading taxes actually results in real pain for typical Americans who are living and working abroad, who only want to do right tax-wise.

> most ordinary people won't see any problem with taxation while abroad beyond the actual inconvenience of filing a 1040 because the foreign earned income exclusion

Well that and most banks refusing American customers because they don't want to deal with FBAR/FINCEN reporting.

My American friends here in Europe have a really difficult time opening a bank account due to this rule.

It's not only foreign banks refusing American customers. American companies such as Fidelity, Vanguard, Charles Schwab and so on won't open investment accounts for Americans abroad and will freeze accounts if they discover you are abroad.

You don't know what you're talking about. Social Security isn't earned income for example, so expat retirees get to pay taxes on that in the US AND their country of residence. You also don't seem to understand how FATCA works and taxation from stuff such as rental properties or retirement account income or even ordinary capital gains such as selling a house.

> Since ordinary people pretty much all earn less than this..

Ever lived in Switzerland? Or London?

> I am not an accountant or lawyer and this is not advice..

It's worse than that, it's just ignorant of the tax and financial reality of being an overseas American.

Sorry, I'm not ignorant of that stuff, it just doesn't apply to me in any meaningful degree. I'm not retired, or close to it, and I don't have any investment income, and I've never owned a home. I just work for a living. Perhaps I oversimplified when I said "ordinary people," but I meant regular working stiffs. I guess I should have remembered the audience on this site is mainly not in that category.

There are lots of complicated interactions with things like pension funds and mortgages that can easily push your "income" over $100k/yr even if your salary is nowhere near that level, which is at any rate, not all that much these days especially for people in the Hacker News industries.

It's a pretty terrible systems.

So making $110k now makes me a rich person with an army of accountants. Got it. Thanks.

All other things aside, the American taxation-by-citizehship instead of residence has some nasty and unfortunate consequences that your comment suggests you've never considered.

Some Dutch people in the Netherlands who were incidentally born in the US (ergo, also US citizens) but have never lived or worked in the US are now presented with the absurd scenario of actually having to do what you suggest. Of course this is just one country; in principle it applies to anyone who returned home to another country after being born in the US.

Here is the case of a woman, who was taken by her parents back to the NL as a baby, now has to establish herself first in a country in which she's never worked or lived in order to renounce an unwanted citizenship. She must get a social security number, file six years of previous taxes to a foreign country, and only then can she seek renouncing of her US citizenship. In case you were unaware, simply renouncing also costs several thousand dollars.

https://nos.nl/nieuwsuur/artikel/2044332-amerikaanse-belasti...

http://www.dutchnews.nl/news/archives/2015/06/us-tax-service...

So yeah, just give it up! Piece of cake! /s

Amazing levels of ignorance here. Even this has become difficult and awkward thanks to an effort to close the door after Eduardo Saverin et al bolted. Hacker News seems to be a reliable place for people to holding forth on situations that they don't understand; it's no wonder that the brains trust here gets regularly crucified on n-gate.

Good luck with that, fee has increased significantly and you may be required to pay an exit tax:

"The Exit Tax is computed as if you sold all your assets on the day before you expatriated, and had to report the gain. Currently, net capital gains can be taxed as high as 23.8%, including the net investment income tax."

This doesn't actually prevent you from leaving though, and is probably seen by many (most?) people as entirely fair.

It prevents you from leaving if you can't afford to pay the tax. And lol, how is an exit tax even remotely fair? Would you have described the USSR's exit visas as fair too? The US acts like it owns its citizens as property. The tax regime around citizenship is dangerously close to crossing the line to slavery.

Indeed. Almost a quarter of my net worth? The income from the remainder would still be taxed in the new jurisdiction.

Slaves in antiquity could commonly buy their freedom, too.

Presumably you have to pay the tax due to capital gains on assets you own, so the solution is pretty simple: sell a fraction of those assets to cover the tax. This really isn't rocket science.

That's an incredibly ignorant comment.

When you give up your US citizenship and the process is complete, as far as the US is concerned, you might as well never have been a citizen at all. This means that when you want/need to visit the country (such as to visit a sick or dying family member), you can be denied entrance - the claim they'll use is that you don't have enough "ties" to your new country for them to be certain that you won't try to stay illegally.

While not everyone goes through that, it can and does happen.

> as far as the US is concerned, you might as well never have been a citizen at all

I guess that's better than the alternative: being treated worse because you're deemed a "traitor" or "deserter" for giving up US citizenship.

> This means that when you want/need to visit the country, you can be denied entrance

This I can understand. You aren't a citizen anymore and thus have the same rights as any other foreigner visiting the US.

If there is no further discrimination against you for being a ex-citizen, I personally don't see why ex-citizens shouldn't have the same requirements as non-citizens for entry.

> the claim they'll use is that you don't have enough "ties" to your new country for them to be certain that you won't try to stay illegally.

Yeah, that's extra shitty.

You aren’t allowed to give up your US citizenship without paying at least 10 more years of US taxes. Even if your citizenship was inherited and you haven’t lived in the s since you were a toddler.

Only if you have another citizenship to turn to. Being stateless isn't an option.

> Being stateless isn't an option.

That is unless you're a rich company - then you can create shell entities with effectively no domicile that earn income, but aren't taxed in any country.

Corporations are people, my friend. People with extraordinary abilities.

They shouldn’t be people, and shouldn’t pay income tax.

It's quite difficult and time-consuming to acquire an alternate passport, absent family ties or similar.

The US has very strong lock-in with regard to taxes, and they don't hesitate to exploit it.

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