Category Archives: accidental Americans

Morales-Santana: U.S. Supreme Court makes it harder for people “born abroad” to U.S. citizen parent(s) to become citizens

Prologue:U.S. citizenship is not as attractive as it was

One benefit of U.S. citizenship: If one is a U.S. citizen then one cannot be deported from the USA

Some Green Card holders become U.S. citizens. Some do NOT become U.S. citizens. Many of those Green Card holders become U.S. citizens in order to avoid the possibility of deportation. Deportation results in expatriation and can (among other things) subject the unfortunate Green Card holder to the S. 877A Expatriation Tax, which can result in significant confiscation of assets. In fact, the S. 877A Expatriation Tax discourages people from seeking Green Cards in the first place.  That said, it is only Green Card Holders who are “long term residents” who are subject to the Exit Tax.

The plight of Mr. Morales-Santana: No U.S. citizenship = the possibility of deportation

The facts as described by the court:

In 2000, the Government sought to remove Morales-Santana based on several criminal convictions, ranking him as alien because, at his time of birth, his father did not satisfy the requirement of five years’ physical presence after age 14. An immigration judge rejected Morales-Santana’s citizenship claim and ordered his removal. Morales­ Santana later moved to reopen the proceedings, asserting that the Government’s refusal to recognize that he derived citizenship from his U. S.-citizen father violated the Constitution’s equal protection guarantee.

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Tweet #Citizide: The new response of US citizens to #FATCA #FBAR #PFIC


Searching for Uncle #FATCA: Where is he? What does he do? Why is he a danger to America? Can Congressman Meadows and Senator Paul save America?

Outline:

April 7, 2017

Part 1: Prologue – Introducing  Uncle FATCA – Who is he? What does he mean in your life?

Part 2: What is FATCA, what are the FATCA IGAs, what is the Meadows Bill and how do these things interact?

Part 3 – What does it mean to repeal FATCA and how exactly does the Meadow Bill repeal FATCA? A section by section analysis

Part 4: An important reminder – FATCA repeal does not mean IGA repeal

Part 5: The text of FATCA and the text of the Meadows Bill (very dry and technical and not likely to be of interest to the casual reader)

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Part 25: What God Hath Wrought – The #FATCA Inquisition (Review, Identify and Report on “U.S. Persons”) – What if the 8 month year old Canadian is a “US Person”?

 

More #Americansabroad will pay capital gains tax on sale of principal residence in Canada

The price of Toronto real estate continues its upward trajectory.

This morning I met with yet another (who could have known) Canadian resident who wishes to renounce U.S. citizenship. This person is completely compliant with his U.S. tax obligations. He is renouncing for a very common reason.

The reason for renouncing U.S. citizenship is to:

Protect the tax free capital gain, which results from the sale of his Canadian principal residence in Canada.
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Part 24: What God Hath Wrought – The #FATCA Inquisition (Review, Identify and Report on “U.S. Persons”) – #FATCA and #Americansabroad with life insurance

As the following tweet makes clear, the problems of “Life Insurance Policies” are NOT restricted to Canada:

Sad but true. It’s quite understandable that from a “U.S. Worldview” that a life insurance policy is nothing but a “sacred instrument of tax deferral” (and therefore of tax evasion). U.S. citizens are the most highly regulated people in the world. As such it is no surprise that the possible purchase of life insurance could trigger FATCA scrutiny. (In that “Shining city on the hill” those who purchase life insurance are clearly “up to no good” – “no good at all”!)

Thank of it! A Canadian citizen who resides in Canada is now being asked the most important biographical question of the 21st century:

“Where were you born? Are you or have you ever been an American citizen?”

(Given the dangers of interacting with U.S. citizens, one’s citizenship status should be required information on every match.com profile …)

So, what led up to this post …

Last night (fear of U.S. citizenship takes place 24 hours a day) I received an email from a man in his seventies. In order to provide for his wife (should he die) he was in the process of applying for a life insurance policy. Now (if it matters), I am not entirely clear on what kind of life insurance policy he was seeking (and unfortunately neither was he). (The policy very likely had a “cash value” component.) That said, shouldn’t a normal person be allowed to apply for a life insurance policy without being accused of being – the only “carbon life form” not deserving of human rights – an American?

The question – “Where were you born?” is interesting. Some overpaid lawyer in the company’s legal department obviously thought that a “U.S. place of birth” was proof positive of “USness”. Well, no. It’s proof positive that somebody was born a U.S. citizen. The U.S. has always used “citizenship as a weapon”. In fact, almost all of the law of U.S. citizenship is a study of the U.S. Government forcibly stripping people of their citizenship – AKA the law of relinquishment. But, I digress … Bottom line: it was and continues to be possible for people born in the United States to relinquish U.S. citizenship.

In this case, (say it isn’t so), this poor guy had actually been born in that great Museum to freedom and opposition to “taxation without representation” – the state of Massachusetts. You know, of “Boston Tea Party” fame and assorted other historical shrines to liberty. Well fortunately, the poor guy had overcome his disabilities triggered by birth (being born American) and had (many years ago) voluntarily naturalized as a Canadian citizen with the full intent of relinquishing U.S. citizenship. Of course he did NOT follow up this liberating event by receiving a CLN (who knew they existed at that time). He therefore, proudly “self-certified” the fact of his “non-USness” and presumably will avoid becoming a FATCA victim.

In any case, I thought it might be important to make people aware, that even the simple act of applying for a life insurance policy can now subject people to the FATCA inquisition. I have decided to NOT identify the company in question. But, I promise you that it is a rather large (is there a small one?) Canadian life insurance company. You would know them. And of course:

“To know, know, know them … is to avoid, avoid, avoid them” – as the song goes!

(All Canadian insurance companies presumably operate in the same way.)

Casualty Insurance and the American abroad …

Speaking of insurance in general. Let me remind you Americans living outside the United States that:

1. Although you are allowed to purchase a home or automobile insurance policy from a non-U.S. company that;

2. You are subject to a special excise tax for buying that policy.

You will find this in Section 4371 of the Internal Revenue Code which talks about “Policies issued by FOREIGN insurers” and is in the broader section on “Miscellaneous excise taxes“.

#YouCantMakeThisStuffUp

Spread the word! You can now be FATCAed by attempting to provide for your family by applying for life insurance. Oh and by the wife. Policies with a cash value are likely PFICs! To learn more about the problems of “PFICs and Americans abroad” read here.

John Richardson

Tax residency vs. physical presence: The four questions you must ask before making a country your home

An introduction to “tax residency” …

Most people equate residency with physical presence. They assume that where you are physically presence determines where you live. They further assume that where you live is where you pay your taxes. Conclusion: The country where you live is the country where you must be “tax resident”. Not necessarily!

There is no necessary correlation between where one lives and where one is a “tax resident”. In fact, “residency for tax purposes” may be only minimally related to “residency for immigration (where you live) purposes”. It is possible for people to live in only one country and be a tax resident of multiple countries. The most obvious example is “U.S. citizens residing outside the United States”.

The concept of “tax residency” is fundamental to all systems of taxation. The fundamental question, at the root of all tax systems is:

“what kind of connection to a country is required to assume tax jurisdiction over an “individual”, over “property” or over an “entity”?”

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How to get a US Social Security Number in Canada – A step by step guide

 

Why do some Canadians wish to have a U.S. Social Security number?

Many Canadians are in the process of coming into U.S. tax compliance. One might ask:

Why would a Canadian citizen residing in Canada wish to come into U.S tax compliance?

There are two reasons why Canadian citizen/residents file U.S. tax returns:

1. They have learned that they are U.S. citizens or learned about U.S. “citizenship taxation” (perhaps encouraged by a FATCA letter or their local CPA) and they wish to file U.S. taxes; and/or

2. They have learned that they are U.S. citizens and wish to come into U.S tax compliance to “renounce U.S. citizenship” and avoid “covered expatriate” status (particularly important if they wish to take advantage of the “dual citizenship” exemption to the S. 877A Exit Tax).

Regardless of the motivation, one must do considerable work for the privilege of filing U.S. taxes.

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Around the world in 192 pages: Experiences of #Americansabroad in an #FBAR and #FATCA world

Here it is:

richardsonkishcommentsamericansabroadapril152015internationaltax-2

This is one of seven parts of the Richardson Kish submissions to the Senate Finance Committee in April of 2015. I thank Patricia Moon for her unbelievable effort in putting this document together!

And speaking of Americans abroad in an FBAR and FATCA world, you might like to read:

The message is:

When In Rome, Live As A Homelander

#YouCantMakeThisUp!

John Richardson

 

The “Exit Tax”: Dual US/Canada citizen from birth, no Canada citizenship today = no exemption to US “Exit Tax”

The above tweet references a “guest post” written by Dominic Ferszt of Cape Town South Africa. The post demonstrates how the “dual citizen from birth” exemption to the S. 877A “Exit Tax” relies on the citizenship laws of other nations. In some cases those laws of other nations are arbitrary and unjust. If these laws were U.S. laws, they might violate the equal protection and/or due process guarantees found in the United States constitution. For example, Mr. Ferszt describes how the “dual citizenship exemption” to the “Ext Tax” is dependent on South African “Apartheid Laws”. He describes a situation where a “black” U.S. citizen from birth is denied the benefits of the dual citizen exemption to the Exit Tax, which are available to a “white” dual citizen from birth. (During the “Apartheid Era” Blacks were not entitled to South African citizenship.)

So, what’s the S. 877A “Exit Tax”  dual citizen exemption and how does it work?

The dual citizen exemption, which I have discussed in previous posts,  is found in Internal Revenue Code S. 877A(g)(1)(B) and reads:

(B) Exceptions An individual shall not be treated as meeting the requirements of subparagraph (A) or (B) of section 877(a)(2) if—
(i) the individual—
(I) became at birth a citizen of the United States and a citizen of another country and, as of the expatriation date, continues to be a citizen of, and is taxed as a resident of, such other country, and
(II) has been a resident of the United States (as defined in section 7701(b)(1)(A)(ii)) for not more than 10 taxable years during the 15-taxable year period ending with the taxable year during which the expatriation date occurs, or

Entitlement to the “dual citizen exemption” depends entirely on the citizenship laws of other countries …


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