A friend of this site and occasional contributor is P. W. Dunn. Mr. Dunn blogs at righteousinvestor.com. He left the US in response to rising taxes and decreasing freedoms. Here are some pertinent comments from his vantage point in Canada:
New comment on your post “Businesses Begin To Walk Down John Galt’s Path”
Author : P. W. Dunn
Not just American businesses, but the US expat is shrugging when it comes to US citizenship and tax filing requirements. US Treasury reports of expatriations are well below what we expats know to be the case. The US Treasury reported 1780 in 2011: the actual number may be many times that; I assume about 10,000, as the consulates are booked solid with renunciation appointments. The Bern Consulate added two staff to handle renunciations. A Canadian asked for a second appointment in March 2012 at the Vancouver Consulate. After many months of just flat ignoring his requests, the Consulate gave him a second date in June of 2013!
One of the writers at the Isaac Brock Society reported on her own blog that she had to pay $9000 in taxes: (1) Her French unemployment benefits are not considered “earned income” and therefore did not qualify for the Foreign Earned Income Exemption. (2) She and her husband sold a rental property in France to which the United States assigned her capital gains taxes. This woman earned not a single penny in the United States, and it is not as though France is a tax free zone! This story makes me angry. She WAS a loyal democrat, but I think she’s decided to relinquish her US citizenship.
The level of incompetence of the United States government in these matters is FUBAR. The Canadian authorities were not happy with the crackdown, and the IRS said, oh, don’t worry, if the person owes no taxes, we won’t assign any penalties. One woman in Vancouver trying to come into compliance after many years of ignorance regarding the IRS expectations towards citizens abroad, received two bills: one for $11,000 in penalties for one year and another for $56,000 for another year. After paying a professional to write her “reasonable cause” letter, the IRS waived the penalty. She owed no taxes but they claimed that she had incorrectly filled out a form (prob. 3520). One of our bloggers calls the United States “FORM Nation” because they can now assess thousands upon thousands of fines for either not submitting a particular form, or form making errors on the form. No underlying tax or criminal issues need apply to the case, but the IRS can attack the filer on the procedure alone. Form Nation indeed. I too received a bill for over $3000 because I did not fill out the FEIE (Form 2555) to their satisfaction. They could not establish that I was really resident in Canada without that I dot the “i”s and cross the “t”s on the form. Finally, after the fourth attempt to send them the correctly filled out form, they sent me a zero bill.
So frankly, the IRS and the US Ambassador Jacobson to Canada have misrepresented their intentions towards citizens abroad. (Ambassador Jacobson said to Canada: “We are not unreasonable. We are not unsympathetic. We are not irresponsible”–as they continue to abuse expats with threats of 300% FBAR fines! Jacobson said they weren’t after grandma’s savings accounts. But that is just a “fatca” lie. The US has its expat grandmothers in tears worrying over their retirement accounts being revealed to the IRS as a result of the FATCA legislation which I wrote about in an earlier post on your pages, “FATCA: a ticking time bomb for the economy”.
What really angers the US expat is that the 49% living in the United States pay nothing while receiving all kinds of benefits; but we receive only one benefit for what we pay: the right to visit the United States to conduct our affairs or to visit our families–the IRS will soon be able to refuse the renewal of passports to anyone not in compliance. But unlike the 49%, the IRS requires that we pay: if not the outrageous extra territorial tax claims (as in my example of the lady in France) then its consists of these abusive fines which later they will say, “never mind” because they were never warranted in the first place.