To not want to pay tax as an "Accidental American."

[budinbloom]

Help! Is anyone facing/has faced this recently?

DH is a dual UK/US national from birth. (English Dad, American Mum, born in the US but left for the UK as a baby and never lived or worked there since). He received what we now know is a "FATCA" letter recently and after copious googling and increasing panic, it looks like he is supposed to file tax returns to the US and potentially pay tax on the funds he holds in his ISA. Luckily, they aren't threatening to close his account....yet but the internet says that is what's happening in other countries!

We're still flapping but becoming resigned to the fact that, we have to pay to enter a foreign tax system in the first place before we can exit and renounce his US citizenship if we are to even plan for our future retirement. We're still at the going backwards & forwards stage - should we/shouldn't we? It's so unfair? What do we do? How would they know? We can't lie/nor do we want to? At the same time, we don't want to pay ANY tax to a foreign government on our already taxed UK income. He's always been PAYE here! Is the final solution renouncement but this process which will involve backfiling tax returns which we should never have to do, in the first place and will costs thousands (yes, we've got a few general quotes for the work).

We really want to keep hold of his stocks and shares ISA. Do we only really need to sell the funds in them but keep the actual direct company shares? No-one seems to admit to having anything other than cash ISAs but is that because they have already sold them in advance of filing for the first time? No idea what to do without paying even more for expensive legal/tax advice.

treesy
I have V V close family living in the US
I am registered to vote in the US
I have a current US passport
I travel to the US regularly
I filed IRS returns for another family member using my US social security number

they have not spotted me yet

I would be very grateful if anyone could PM me details of specialist accountants in this area. Especially anyone with knowledge of how ISAs and pensions are to be treated.

I'm a dual US citizen, DH is US, we live in the UK. Pay £800 including VAT a year to file US taxes, to prove we don't owe any money there. Makes me cross. We file our own FBARs as they're easy though tedious.

Plus the stress - this year our tracked tax return got lost in the mail so we had to get another copy from the accountant, send it again...

Accountant said we couldn't have ISAs at all, even cash. US tax man doesn't recognise them as a pension, so views them as interest bearing accounts. Employer pensions are fine (as you can't access them) so we put as much as we can afford into these. You still have to report them every year but they're not taxed.

We were also advised to be careful about pre paying our mortgage as it can generate taxable gains due to exchange rates per the pp. We overpay by £200 a month which is apparently fine (they're really looking for large lump sum repayments) and means the mortgage will be paid by the time I'm 60, but I had hoped to clear it well before then. We use the extra money we had planned to prepay with, to add to pensions. I don't want to think about how our pensions will be taxed by both countries by the time we're old enough to withdraw them, but accountant already said not to plan on taking the 25% tax free lump sum as US will immediately tax it......

Also be careful if you own a company, are trustee of a trust, or are responsible for others' money, as then you can in some instances have to file taxes for that money too. I turned down a volunteer role because it would have meant being signatory on the organisation's bank account and accountant said I would have opened thrm to US scrutiny.

The whole thing is ridiculous and just ties ordinary folks up in knots. The wealthy folk hiding money overseas, who were the reason for FATCA, can afford clever money managers to work around the rules!

I know that they are talking about starting to refuse to issue passports to people whose taxes are delinquent. Whether it will happen or not I don't know, but that would make US citizens unable to travel to the US.

We really don't feel confident enough to file ourselves - having never done it before. Obviously, we don't have to consider any assets in the US because we've never had any in the first place. My MIL is on her own on that one! Seriously, the gamut of emotions from - ignore, it's a scam email, surely they would send a letter through the post - to feeling persecuted and wanting to hide. It's absolutely ridiculous! We're not American expats who know what they are getting into when they go abroad because they've always known that they needed to do their tax returns!

Today, we're feeling that we should just suck it up and get on with it....and then a few hours later, we change our minds because of the injustice of it all. Not helpful too is that we're aware that the timing is crap because we need to pay extra for our future tax expert to provide excuses on our behalf for filing late for this tax year in order to waive penalties! But...it feels so momentous what we're about to do and we're not sure whether we want to do it due to the sheer expense, let alone the taxes we think we have to pay because the US charges CGT on certain investments that the UK gives tax exemption to (to encourage us to save!). We're not worried about the income tax which will be zero and the only advantage of being a higher rate tax country on that score. So, we know enough to have a rough idea (we think) of our tax liability and we do have one. DH is adamant that he is not sacrificing his ISA (which he sees as his second pension). DH is 50, we've had ISAs for a long time - never maxing them out but certainly putting money there instead of savings accounts. It's a real kicker to potentially pay 40% tax on the gain of the funds (I think) over 15 yrs!

As for family, his UK born siblings are rattled because they have expired US passports even though it's clear to me that they shouldn't be since they don't have "BORN IN THE USA" tattooed on all their ID. At the moment, it feels like the star of David (yeah, I'm aware that I'm ranting now!)

There is no good end to this - trying to fill in the correct data of a requested W9 form is only the start of a journey. The logical follow through is that - IF we start on this path, we have to follow through and pay thousands. We're literally teetering on the brink of what seems the point of no return.

And yet I've been "delinquent" for three decades
and am registered to vote in the USA
but have not yet hand an iota of problem

you are all assuming that the IRS are competent
as an accountant
I do not

so I'll keep my records and wait till they get their asses in gear

Today, we're feeling that we should just suck it up and get on with it....and then a few hours later, we change our minds because of the injustice of it all

The injustice issue is irrelevant. Anyone who's dealt with US bureaucracy has felt it, but realised that you have to jump through the hoops anyway.

At this point you just need to decide whether to risk not paying thousands in back taxes and know you're breaking the law, or pay it and know that you're not breaking the law.

I'd be tempted to leave it except for the fact that you've had the FATCA letter.

It's a real kicker to potentially pay 40% tax on the gain of the funds (I think) over 15 yrs

Just saw this - I believe the investment gain tax rate is 15%, not 40%, if that helps.

Honestly, from the experience I've had with FATCA I don't think trying to ignore it will end well. The best outcome you can work towards is to get to a position where you're compliant and can give up the citizenship to get out of the system.

I know it completely sucks. A lot of people were aghast that it catches people in your position in such a heavy handed way.

I'm sorry you're having to deal with this.

SO MUCH PARANOIA
sorry but I used "free fillable forms online"
for several years
the help sheets were great
I happen to be a CCAB accountant but a UK CIOT is a chocolate teapot for US law

the main thing is
keep good records, do not panic
in the case I have, the IRS backed away from FATCA the moment it cost them money
tee hee
nuff said

Ugh, I know you can't underestimate how punitive and unfair the US law code can be, but compliance is surely the better option, rationally speaking. The OP's DH would still have to file 5 years of compliant returns and pay some kind of exit tax to renounce his citizenship, right? Make sure you are getting good advice, and pay for it.

I thought the foreign currency gain on the mortgage is only taxed at teh point when the mortgaged is paid off or refinanced -- you don't need to pay on the gain or loss each year.

Sorry, OP, I got muddled on whether he was debating about whether to renounce. If your DH would be happy to never enter the US again, I wonder if they would really pursue it?

It's such an unfair and galling position you're in. It's worth drawing attention to this petition to the EU Parliament to block enforcement of FATCA:
american-accidental.com/en/support-the-petition-against-fatca-at-the-european-parliament/

@TalkinPeece Your views are intriguing and I would like to subscribe to your newsletter.

Not sure if you have answered:
But as an American you as the mother should be filing taxes as well.
So this not only applies to you son, but to you.
One way round this is to renounce your citizenship - you cannot have it both ways.

TalkinPeace
Yes, we've read enough that the reporting requirements gathered by financial institutions is likely to land in the ether. So, the strategy of giving the least amount of data, if any data, would probably work for quite along time. It's a massive jump from never filing to having assessed tax debts to the IRS if you don't give any data. We do realise this (after watching the millions of Canadians openly rebelling on blogs/forums/the whole can of internet worms) which is why we are so indecisive.

But....you can't transfer an ISA (new accounts are being blocked as soon as you declare your place of birth - we tried that already!) I suspect that all applications for financial products will prove an obstacle as soon as you appear "American" (apparently, already happening in other countries). So potentially, new bank accounts, mortgages, insurance, pensions, etc. It's OK if you don't do anything to trigger a FATCA letter at the moment - basically, any action which requires you to reveal that you are an American citizen for tax purposes e.g US passport or in DH's case - his place of birth. They explicitly ask you the question so it's hard to avoid. I suspect that you can remain under the radar longer if you were born in the UK and lie but you can't with an obviously American city place of birth. So...it makes life difficult without renouncing because we need to wave around a certificate of nationality loss to protect & preserve his pension/retirement savings and I guess avoid any headaches for me & our DC in the future.

Just shouting & kicking as I go under....

Born in the USA live in Canada for 45+ years. Will never claim any USA pension or social security benefits. Was told to ignor.
The only people I know who comply, have worked in the USA and plan to collect small pensions at some point.

budin
Oh blimey, I come up against the impact of FATCA every month

• I cannot open bank accounts
• my IFA is very limited on which funds they can use
• my employer has loads of extra forms for pensions
• I am a company director

I am not in the least bit hidden - my name and address are all over the web because of my work and when the IRS come knocking I'll line the numbers up and ask for my taxes back

dsc1907
Think priorities
what was in it for the organiser of that conference to say
"line up your ducks and do nothing"
no fees to be earned that way

In my own work I encourage 100% compliance - it pays my rent

when dealing with FATCA I play a different game as its my own money at stake

Budin
I've had no problems with ISA and other savings since FATCA
(I was born in the USA and my Tax name is my US one so its really, really obvious)
I just give them all my UK UTR and if they say no I move on a provider who will say yes.

Ah, bugger, I'd blissfully forgotten about all this. I'm going to have to renounce before I start earning next year, I'll never be able to afford private accountants to protect me from the wrath of Uncle Sam.

Has anyone else renounced recently? Do they give you some sort of certificate to prove to banks, etc, that you're not a citizen anymore?

My husband and I are both UK born but lived in USA for number of years and have USA citizenship. As do our children who were born there. We've been back in UK for quite a few years and at first I filled tax returns with the IRS. Quite ironic as I don't do a UK tax return. We never owed the IRS
anything as our income comes within the foreign earned income exclusion. If it was above then we would do foreign tax paid credit, or whatever that's called. Anyway after a while I stopped bothering, and the IRS never contacted me. Then last year I got worried because of scare stories and also because we have some money in USA pensions which we will want to access at some point, and contacted various tax advisers who were going to charge me £££ to file. I thought screw that, why should I pay all that to tell the IRS I don't owe them anything? So I got an American friend to purchase Turbo tax for me which was about 80 dollars and did one year's return using that, then used it as a template to do four years' back returns. I also filed the FBARS on line, for the past however many years. The whole thing took me ages and ages, and made me weep endlessly, but I heard nothing from the IRS after I sent the returns off. I've just done this year's using my template from previous years which really was pretty straightforward. We have earned income, rental income, capital gains and ISAs. So my advice is use Turbo tax or similar, and always file paper returns, not online. I don't see why the IRS should drive me to give up my US citizenship!

Budinbloom. Please pay close attention.
Don’t do anything rash until you have done a lot more research. There are several million accidental Americans or dual citizens living outside the US who haven’t filed and do not need to file.
Once you enter the IRS system, it becomes a nightmare. Better to stay out.
If your bank doesn’t know he is US born, DONT tell them and carry on.
If they do, you could tell them he is renouncing US citizenship.

You will be told by others that you need to be tax compliant before renouncing but this is very simply not true. State department does not talk to IRS except to give them a list of those who have renounced.

So, Make an appointment at the nearest US consulate. Fill in the forms. Pay $2350. In due course he will receive a certificate of loss of nationality.
After that, do not file anything. There is nothing they can or will do. The IRS is broke, their computers are decades out of date and they cannot chase an unknown person in another country.
A good resource is the Isaac Brock Society. We have helped hundreds in your position. It’s a lot of reading on a rather haphazard forum but well worth it. Good luck.

To Mrs. Pratchett. You can renounce without being tax compliant . They are not connected.

clockwork you do get a certificate upon renouncing.

You also have to indicate on a form that you are tax compliant before you renounce. Whether the IRS would ever know if you tick yes when you're not compliant, I don't know.

I renounced four years ago. It was expensive but very easy. I didn't file any tax returns. I received a Certificate of Lost Nationality which I have since used to open an account with no problems.

The European Parliament has recently done a study on the problems created for EU/US dual citizens by the FATCA legislation. You can download it from the EU Think Tank website. The title is "FATCA Legislation and its Application at International and EU Level"

Anyone born in the US has this problem because the US birthplace indicates US citizenship unless you can prove otherwise. Renunciation solves the problem.

If you don't want to renounce, the other solution is to move savings to the US. It's the tax-free savings such as ISA (stocks and shares) that incur US tax, usually, because the fact that they're free of UK tax allows the IRS to tax them without breaching the terms of the US-UK Double Taxation Treaty.