Tax time pushes some Americans to take a hike

By Atossa Araxia Abrahamian | Reuters – Mon, Apr 16, 2012 6:00 PM EDT

A year ago, in Action Comics, Superman declared plans to renounce his U.S. citizenship.

Genette Eysselinck renounced her U.S. citizenship to become Belgian. (Credit: Reuters/Pascal Parrot)”‘Truth, justice, and the American way’ – it’s not enough anymore,” the comic book superhero said, after both the Iranian and American governments criticized him for joining a peaceful anti-government protest in Tehran.

Last year, almost 1,800 people followed Superman’s lead, renouncing their U.S. citizenship or handing in their Green Cards. That’s a record number since the Internal Revenue Service began publishing a list of those who renounced in 1998. It’s also almost eight times more than the number of citizens who renounced in 2008, and more than the total for 2007, 2008 and 2009 combined.

But not everyone’s motivations are as lofty as Superman’s. Many say they parted ways with America for tax reasons.

The United States is one of the only countries to tax its citizens on income earned while they’re living abroad. And just as Americans stateside must file tax returns each April – this year, the deadline is Tuesday – an estimated 6.3 million U.S. citizens living abroad brace for what they describe as an even tougher process of reporting their income and foreign accounts to the IRS. For them, the deadline is June.

The National Taxpayer Advocate’s Office, part of the IRS, released a report in December that details the difficulties of filing taxes from overseas. It cites heavy paperwork, a lack of online filing options and a dearth of local and foreign-language resources.

For those wishing to legally escape the filing requirements, the only way is to formally renounce their U.S. citizenship. Last year, IRS records show that at least 1,788 people did, and that’s likely an underestimate. The IRS publishes in the Federal Register the names of those who give up their citizenship, and some who renounced say they haven’t seen their name on the list yet.

The State Department said records it keeps differ from those published by the IRS. They indicate that renunciations have remained steady, at about 1,100 each year, said an official.

The decision by the IRS to publish the names is referred to by lawyers as “name and shame.” That’s because those who renounce are seen as willing to give up their citizenship primarily for financial reasons.

There’s also an “exit tax” for the very rich who choose to leave. During the last 25 years, a number of millionaires and billionaires have renounced their citizenship. Among them: Ted Arison, the late founder of Carnival Cruises, and Michael Dingman, a former Ford Motor Co. director.

But those of more modest means renounce, too. They say leaving America is about more than money; it’s about privacy and red tape.

LIABILITY, NOT PRIVILEGE

On April 7, 2011, Peter Dunn raised his right hand before a U.S. consular officer in Toronto and swore that he understood the consequences of giving up his U.S. citizenship. Dunn, a dual U.S.-Canadian citizen who has lived outside the United States since 1986, says he renounced because he felt American citizenship had become more of a liability than a privilege.

[Related: Top 10 Tax-Procrastinating Cities]

As an American, Dunn had to file tax returns and report all of his bank accounts – even joint accounts and his Canadian retirement fund. If he didn’t, he would be breaking U.S. law and could face penalties of up to $100,000 or 50 percent of his undeclared accounts, whichever is larger. Dunn says he was tired of tracking IRS policy changes, and he had no intention of returning to the United States. Renouncing his citizenship, as he puts it, was “a no-brainer.”

“If it was just me then it would be one thing,” says Dunn, a part-time investor who worried that having to share information with the IRS would deter future business partners – and upset his wife, who is Canadian. “Disclosing joint accounts I hold with my wife and anyone I ever want to do business with – that’s just too much. My wife’s account is none of their business.”

Dunn, who blogs about expatriation, takes issue with being characterized as a tax evader. He says the taxes he pays in Canada are higher than what he would pay in the United States, and he says he had always complied with the IRS before renouncing. But, Dunn says, the IRS approach to enforcing compliance is misguided. “It’s making life difficult for a lot of people,” he says. “It’s driving us away.”

OLD, NEW REGULATIONS

Dunn is referring to two filing requirements that affect Americans abroad: the Report of Foreign Bank and Financial Accounts – which has been around since 1970 but now carries penalties for noncompliance – and the Foreign Account Tax Compliance Act, passed in 2010 with the aim of reducing offshore tax evasion.

The first regulation requires all Americans, including those living abroad, with at least $10,000 in overseas bank accounts, to file a supplementary form disclosing all of their foreign accounts. That includes any accounts in which the U.S. citizen has a financial interest. That could include a joint account with a spouse or child, accounts for corporations in which the American owns more than 50 percent of the value of shares of stock, or any trust or estate that benefits the U.S. citizen.

[Related: Tax Day Freebies 2012]

The tax compliance act – the newer law – asks foreign financial institutions such as banks, hedge funds, and private equity funds to provide the IRS with information on U.S. clients.

The United States and five European Union countries recently announced their intent to allow institutions to report the information through their own governments, rather than directly to the IRS. Institutions that do not comply will be subject to a 30 percent withholding tax on certain U.S.-sourced payments and proceeds of property sales beginning in the 2013 tax year – for instance, dividends on investments in U.S. companies.

Some expatriates say they were unaware of the first regulation for years and even decades. In 2008, the IRS received only 218,840 such filings. American nationality law grants citizenship to almost everyone born in the United States or born abroad to American parents, regardless of how much time they’ve spent in the United States. Many may not even know the extent of their U.S. ties.

In 2004, the stakes for noncompliance rose. Failure to file meant potential fines and criminal charges. Americans abroad can be punished for noncompliance even if they owed no income tax – and IRS data show that most of them don’t owe money.

Income up to $95,100 isn’t taxed under a rule called the Foreign Earned Income Exclusion. In 2009, the income cap was $91,400, and 88 percent of all taxpayers claiming the foreign earned income exclusion owed nothing. Since 2008, the IRS has offered several voluntary-disclosure grace periods during which expatriates can file back taxes without facing criminal charges – but with the possibility of incurring penalties.

Marylouise Serrato, head of American Citizens Abroad, a nonprofit organization based in Geneva, says that many members feel scared about reporting requirements they did not know existed. Their disenchantment, she says, is pushing some to renounce.

“Americans abroad are terrified. We’ve had people pay tens of thousands of dollars in fines. We’ve had people pay huge amounts of back taxes,” she says. “Up to this point, we never heard of anyone renouncing, or if they did, they didn’t talk about it,” says Serrato, who says her group does not advocate renunciation.

“Now,” she says, “we’re seeing a lot of people speak openly about it and come to us for information.”

Congress is taking note. “While I fully support measures that reduce fraud and address offshore havens, the U.S. should not have policies that place undue burdens on legitimate Americans abroad,” says Representative Carolyn Maloney, D-N.Y., and the chair of the Congressional Americans Abroad Caucus. Maloney says she has taken the matter to the Department of the Treasury, which oversees the IRS.

‘TOO EXPENSIVE TO KEEP’

Lawyers report that banking is a big reason why people renounce. “I hear about banking problems again and again and again,” says Phil Hodgen, an attorney who has been helping Americans expatriate since 2008. The new reporting rules, he says, pose “a huge administrative burden. It’s made Americans too expensive to keep.”

Francisca N. Mordi, vice president and senior tax counsel at the American Bankers Association, says she has received a number of calls from Americans in Europe complaining about banks closing their accounts. “They’re going to drop Americans like hot potatoes,” Mordi says. “The foreign banks are upset enough about the regulations that they’re saying they just won’t keep American customers, and it’s giving (Americans living abroad) a lot of sleepless nights.”

Taxpayer complaints sometimes make their way to Nina Olson, the U.S. taxpayer advocate for the IRS, who addressed some of the international tax issues in a December report.

“The complexity of international tax law, combined with the administrative burden placed on these taxpayers, creates an environment where taxpayers who are trying their best to comply simply cannot,” the report reads. “For some, this means paying more U.S. tax than is legally required, while others may be subject to steep civil and criminal penalties. For some U.S taxpayers abroad, the tax requirements are so confusing and the compliance burden so great that they give up their U.S. citizenship.”

In the same report, the IRS responded to the criticism, stating that the penalties for failing to report foreign accounts issued in its guidelines are maximums, not set amounts. It said the agency will not fine filers if the lapse is due to a “reasonable cause.” The IRS also acknowledged the need for more public awareness, and it detailed its efforts to inform Americans overseas through fact sheets, a telephone help line and Twitter.

The IRS did not respond to requests for comment.

WOMEN IN A TOUGH SPOT

Around the world, American women’s clubs – known for promoting American culture overseas through Fourth of July celebrations and Thanksgiving dinners – are growing empathetic toward those who renounce.

The American Women’s Club in Dusseldorf, for instance, now links to renunciation information on its Website. The Federation of American Women’s Clubs Overseas has opposed new IRS rules, in part because the rules were pushing members to give up their citizenship. “The candidates are not tax-evaders or un-patriots,” reads the organization’s last annual report.

In Europe, American women say they feel pressure to renounce even from their husbands.

“American women married to non-Americans are only just now finding out that they have to disclose years and years of income and accounts,” says Lucy Stensland Laederich, a leader of the women’s club who lives in Bordeaux, France.

Laederich has been acting as the group’s liaison with politicians and bureaucrats in Washington, D.C., and plans to attend a meeting to discuss expatriate tax issues with Maloney and Treasury Department officials on Tuesday.

“When they decide to come clean and report everything,” she says, “they have to go ask their husbands for all of their bank information, retirement funds, and investment accounts, everything.”

Some of their husbands, Laederich says, refuse to hand over information to the IRS. That leaves the women in difficult predicaments.

“Your options are to ignore the IRS and stick your head in the sand; take your name off of all the accounts and live in a completely cash economy; divorce; or renounce U.S. citizenship,” Laederich says. “We’ve seen all of these things happen.”

DIVORCE OR DISCLOSE

Genette Eysselinck, a friend of Laederich’s, renounced early this year. Her husband, a European Union civil servant, saw no good reason to share his account information with the IRS, she says. And after considering all her options, Eysselinck decided that renouncing was the best path.

“It created a lot of tensions around here,” she says. “Divorce seemed a little extreme, so I asked myself, ‘What am I gaining as an American?’ And the cons outweighed the pros.”

Eysselinck was born in Fort Bragg, North Carolina, and says she grew up on military bases all over the world. Her father, she says, was an Air Force pilot. Eysselinck has lived abroad for decades and no longer has any close connections in the United States.

She spent her final months as an American collecting paperwork and filing tax returns from the past five years, even though she says she owed nothing. Her last act as a citizen was to swear before an American flag that she renounced all ties with the United States. She called the process “gut wrenching.”

“I grew up in a military family where patriotic feeling was very strong” Eysselinck says. “I’m amazed at how terrible I felt renouncing. But it was the only way to get them off my back. It’s very distressing and time consuming to keep up with all the paperwork. But if it’s this bad when I’m 64, how bad will it be when I’m 74?”

(Reporting By Atossa Araxia Abrahamian; editing by Blake Morrison and Michael Williams)

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“The Criminalization of Cash – Orwellian Reality”

Last week’s article titled, “The Criminalization of Cash – Orwellian Reality”, generated some interesting feedback. Most of it was supportive, which was to be expected since the majority of my readers subscribe because they agree with the viewpoints represented.

However, one subscriber had a very different perspective. Actually he went so far as to threaten me and then insinuate my promotion of illegal and immoral acts. Below you can read his initial response to the above mentioned article:

“What you seem to be proposing is illegal and is likely to generate an irs audit. Does the irs know what you are up to?”

Maybe you think I took his response the wrong way, but when I did a little homework on the reader (pretty easy to do since his reply included his website), I realized ‘Stan’ is a Federal Tax Attorney. He works with clients that hold offshore assets helping them reach and/or maintain full compliance with the draconian US laws regarding offshore investments, financial accounts, etc.

My response to ‘Stan’ was;

“I’m not really sure how to take this email. I don’t propose anything illegal. Actually I work with a couple of firms like yours where I recommend them to my clients for tax planning for their offshore businesses and assets. However I don’t appreciate your subtle IRS threats – it’s really quite unprofessional. I wonder if your clients are aware of your business practices.”

‘Stan’s’ abbreviated response was;

“…I must say when you talk about two passports, offshore banking, asset protection and data privacy the uneducated reads, “here’s how you can hide your money from the IRS.” …“Two passports”? What purpose would that serve but to hide the fact that someone is an American? Also, criminalizing cash is a ridiculous statement. It is not illegal to use cash, it is only illegal to use cash when it is part of a money laundering scheme, attempt to circumvent the FBAR rules, avoid CTR’s etc…”

My initial thoughts when I read this were, “There are Idiots Among Us”. Upon further reflection and research into ‘Stan’, I realized the reality; he is just a money-grubbing bureaucrat. When trolling around on his website, I found the following statement;

“He began his career in 1970 as a tax law specialist with the IRS Office of the Chief Counsel in Washington, D.C. He was an IRS trial attorney and then a special assistant to the IRS deputy chief counsel, where he helped administer an office with 5,000 counsel and appeals staff.

After 15 years as chief legal counsel for the IRS Sacramento District, ‘Stan’ entered private practice. He is not licensed to practice law in California; his practice focuses exclusively on federal tax law.

Helping offshore investors voluntarily comply with IRS rules is central to the practice — and it’s lucrative. “With clients like this, there’s not an issue of getting paid,” ‘Stan’ said. The IRS is not going after people without money.”

I have several issues with this parasite.

Issue number 1 – He threatened me. Like any other red-blooded testosterone filled male, I don’t take too kindly to being threatened. I’m really not sure why he would even subscribe to my asset protection newsletter unless he is just a spook looking for someone to go after so he can justify his miserable existence.

It goes a bit deeper though. He threatened me because he knows putting knowledge about asset protection, 2nd passports, offshore banking, and offshore companies into the hands of intelligent, productive people like you is dangerous – at least dangerous to him. He is like the engineer who designs with intentional flaws to ensure his job security. This type of person is dangerous to your liberty.

Issue number 2 – Narrowly-focused statist mindset. His comment that having a 2nd passport is either stupid, or just ignorant. Either way, the lack of intelligent thought is dangerous. There are numerous reasons an American would want to have an 2nd passport.

For example;
The wife of one of my best friend’s holds both an American and an Irish passport. Her parents were born there and wanted her to retain their heritage.
A Russian client of mine has a St. Kitts passport. Russians have difficulty getting travel visas and with his business he frequently needs to take short notice trips. This is very difficult with only a Russian passport.
A friend of mine was born in Denmark, but has lived most of his life in the US. He holds both passports. The Danish passport allows him freedom to travel to many South American countries visa-free as well as work, own property, and bank in the EU uninhibited.
An American client of mine is a commercial real estate investor in South America and Europe. His Italian passport allows him much more freedom of travel as well as ability to transact business in the EU.
Honestly the list can go on and on. The list of reasons for wanting a 2nd passport are innumerable. But this parasite of the people believes the only reason you would want one is to defraud the US government and deprive people like him of his wealth.

Issue number 3 – He is stupid and lazy. I have no tolerance for either of those traits. Maybe I’m just not a nice person, but life is short and I prefer to spend time with intelligent and productive people. ‘Stan’ is neither.

He makes the comment, “criminalizing cash is a ridiculous statement.” In this case he is exhibiting stupidity or laziness, or maybe both. The article in question discusses 3 countries that have recently criminalized cash transactions over a certain threshold. It doesn’t take a genius to do a quick Google search and confirm the facts in my article are true.

Italy, Argentina and Spain have all recently made cash transactions over a certain amount illegal. Maybe the US is next. Maybe not. Who knows, but the reality is this guy claims to be an expert on offshore compliance matters and he couldn’t be bothered with the facts. He only wants to refute them.

Lastly, the statement found from his website shows me he is just the money-grubbing bureaucrat I perceived him to be. He clearly states his mission is to go after wealthy offshore investors and charge them fees to get compliant with big brother’s statist agenda. Keep in mind this guy was on big brother’s payroll; now he is one of the anointed ones tasked with bringing your hard-earned dollars back into the coffers of the ruling class.

Just to be clear, I highly recommend that each one of you that have offshore investments, offshore companies, andoffshore trusts comply with all reporting requirements. The penalties for non-compliance are too high and can make your life quite hellish. But ‘Stan’ has devoted his entire life to ensuring the longevity of the empire, and frankly – he disgusts me.

For those of you interested in learning from the world’s top experts in asset protection, 2nd passports, offshore banking, offshore investments, data privacy and more; visit our website, “Global Escape Hatch” to get on the early notification list. This is the official site for our offshore conference in Panama coming this fall – September 19-23.

This event will be like nothing else you have ever experienced. You will have the ability to listen to the world’s top experts on these topics as well as meet them and ask your questions face-to-face in a unique, tropical island setting. Hopefully parasites like ‘Stan’ will be too busy leeching off his wealthy American clients to attend.

I look forward to meeting many of you there.

Contact us today to schedule your free 30 minute asset protection consultation. Until next week, live well.
Bobby Casey
Managing Director
+1-347-410-5041

Scotiabank

The Bank of Nova Scotia (in French, Banque de Nouvelle-Écosse, and commonly Scotiabank in English and Banque Scotia in French) is the third largest bank in Canada by deposits and market capitalization. The bank was founded in 1832 in Halifax, Nova Scotia, and its primary corporate offices are located in Toronto, Ontario The company ranks at number 120 on the Forbes Global 2000 listing. 

Scotiabank is proud to be the only Canadian bank serving the Dominican Republic. Through 54 branch locations across the country, we offer a broad range of retail and commercial services, including electronic cash management.

Scotiabank established branches in Santo Domingo, Dominican Republic in 1920, and we continue to offer the benefit of our international banking expertise to local and non-resident customers.

If you’re dreaming of buying a vacation home here, take advantage of our extensive experience, regional knowledge and network of local professional contacts. We can help you through the process, so you feel comfortable and assured that you’re making informed decisions.

Scotiabank is at home in the Dominican Republic, where you’ll discover modern sophistication, old world charm and a colorful fusion of Spanish, French, Haitian and African influences. Experience the wonders of land and sea with endless outdoor activities and adventures. Commune with nature, hiking and bird watching at one of the many picturesque national parks, or relax on sun-drenched, palm-studded beaches. And when the sun sets, the world-class casinos and exciting jazz clubs will entice you to join in the island’s unique and vibrant culture.

Scotiabank is part of the community and culture of the Dominican Republic.

KEY CHARACTERISTICS FOR RESIDENTIAL MORTGAGES (FINISHED PROPERTIES) AND CONSTRUCTION FINANCING

– 8% Interest Rate for residences (subject to review at the time of disbursement). 9% Interest rate for construction.
– Competitive legal expenses. We only charge the legal expenses of the operation, such as Mortgage Registration Tax and Property Transfer Tax. Scotiabank charges no closing fees.
– For loans from US$0.00 to US$1,500,000, we finance up to 70% for up to 25 years.
– For loans from US$1,500,001 to US$2,500,000, we finance up to 65% for up to 20 years.
– Personalized services
– Fast and efficient disbursement.
– Financing of one property per customer.
– Title deeds must be transfer in the personal name of customer

KEY CHARACTERISTICS FOR LAND LOTS FINANCING
– 9% Interest Rate
– 50% financing
– Maximum amount US$750,000
– Maximum term 15 years

Requirements for USD mortgage loans are the following:

APPLICANT
– Copy of passport and identification document
– Last two income tax statements
– Authorization to issue a Credit Bureau Report from the customer’s country of residence
– Income letter, if an employee
– Letter of reference of your 2 primary banks at your country of residence
– Evidence of assets in your country of residence
– Assignment of insurance policy (to be issued in DR with Scotia Corredores de Seguros)
– Appraisal of the property by a bank authorized appraiser to be made in DR

However, there may be cases where, due to the nature of the customer and their credit profile, we would need to request additional documents

Scotiabank can modify the product features described in this letter according to market conditions.

About the account, Scotiabank requires,

– Copy of Passport and other identification ID, like drivers license, social security card or social insurance card.
– Two reference letters addressed to Scotiabank; One from a bank you’ve had a business relationship for the last two years; and one from a professional colleague (or two from banks that you’ve had business relationship)
– Because of your status as a foreigner in the Dominican Republic in order for us to process an amount above USD$10,000.00, its origin is needed for processing purposes and to abide by the local laws. Please provide us with bank references as well as proof of the origin of the cash.
– For Canadian residents, due to a Canadian Government disposition, only checking account are available.

 

LOAN REQUIREMENTS, BANCO POPULAR, DOMINICAN REPUBLIC

LOAN REQUIREMENTS

BANCO POPULAR

 LAS TERRENAS, SAMANA PENINSULA, DOMINICAN REPUBLIC

8 November, 2007

With Cedula (residency card):

<!1.     Bank statements from last year (not required if banking with Banco Popular)

<!2.      Passport

<!3.       A letter from purchaser asking for the loan

<!4.       Met Jaime the bank manager

<!5.       Financial statement from accountant showing Net Worth

<!6.       Appraisal done by bank appointed appraiser. Bank Manager accompanies. (+/- $150.00 USD)

Without Cedula: all the above plus…

<!1.       Last income tax statement

<!2.       International credit report from TransUnion (´Express¨ prices are more)

a.       United States                US$  20.00

b.      Europe                                US$180.00

c.       Spain                                US$100.00

d.      Latin America                US$125.00

e.      Caribbean                US$250.00

Banko Popular loans 80% of the value of the property so expect to pay 20% down

Interest rate at time of this writing is 9.0% USD and 13.95% Peso

This is for a 20 year note

DanDannyDaniel L Hussmann

DR Paradise Realty

829-644-8094

http://www.drparadise.com