Americans Helping Americans Abroad

Due to the combination of citizenship-based taxation and complex United States tax rules applicable to non-US assets and income, Americans living outside the United States face particular tax burdens and compliance costs.

The mission of the AARO tax committee is to (1) remain current on tax matters of concern to Americans living abroad, (2) present information on topics of relevance to the community of Americans living abroad through our publications and conferences throughout the year, and (3) actively pursue redressing inequalities before our governmental representatives by raising awareness of laws and legislation which disproportionately burden Americans abroad and proposing and promoting more favorable laws and policies.

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The Tax Reformer Cometh...

At the initiative of Republicans Overseas, the Republican National Committee recently adopted a White House-approved resolution supporting the change from citizenship-based taxation (CBT) to residence-based taxation (RBT) via RO’s proposed Territorial Taxation for Individuals (TTFI). RO reports having "champions and sponsors in both the House and the Senate" and having found "tax loopholes that TTFI would close, thereby making TTFI revenue-positive".

RO has initiated a letter-writing campaign under which overseas Americans would write to the President about eliminating citizenship-based taxation.

At the same time, Democrats Abroad has launched a survey on taxation of overseas Americans and will shape its future advocacy efforts on its results.

It appears obvious that now is the time for Washington to hear from the 9 million Americans that make up its global constituency – the people subject, unlike the citizens of any other modern country in the world, to double taxation, in the country of their residence and in that of their citizenship.

There are many views as to how this situation can be corrected and there are advantages and disadvantages for someone in each of them (but whoever suggested that everything about paying taxes was "good"?).

The AARO board, with the clear support of the AARO membership, has consistently supported a move to residence-based taxation, making the hiring of Americans overseas more attractive to international companies, and reducing the need for burdensome and costly financial reporting requirements on individuals and banks, both to the IRS and under the Foreign Account Tax Compliance Act (FATCA).

In the run-up to serious Congressional efforts to achieve tax reform, we:

  • encourage readers to write now to their legislators (find them at and to tell them how this double liability affects them, personally.
  • encourage readers to participate in the Democrats Abroad survey (which takes around 5 minutes to complete) – deadline September 30.
  • encourage readers to contribute to the Republicans Overseas campaign (sample letter to President Trump provided, to be adapted to individual circumstances) – deadline September 30.

There is at this time no legislation proposing a move to residence-based/territorial taxation, but tax reform is clearly "in the air".  Congress and the Administration must not be allowed to neglect considering the special circumstances of the equivalent of the 12th state in terms of population: the 9 million Americans living and working abroad.

The Latest Expat Tax Advocacy Efforts

Guest blogger post.

It’s hard for a lot of Americans to look beyond their borders. Consequently, issues like expat tax reform get lost in the daily static. Bipartisan cooperation in America feels more uncommon than ever. So when Democrats and Republicans do converge on an issue, you can be sure it’s a consequential one.

The Problem

According to the State Department, there are nearly eight million Americans who live in other countries but who maintain a residence in the U.S. This voting bloc is large enough to sway a close election. And most of America’s elections are close these days.

Simply put, eight million Americans is not a trivial number of people. For the sake of reference, there were only 10 states in 2015 which had populations greater than ten million persons.

So what’s on the mind of overseas Americans these days?

Because America does not stand with the rest of the world in imposing residence-based taxes, American expats must struggle with incompatible foreign tax codes and ponderous domestic requirements.

Worse, the IRS no longer has a physical presence abroad. [Editor’s note: AARO has been critical of the decision to close all IRS overseas offices.] So, when things get complicated with expatriates’ taxes — and something almost always does — their only recourse is to flock to overburdened and understaffed telephone lines to get it straightened out. On top of that, tax filing for Americans overseas can be excessively costly and time-consuming.

The word “degrading’ comes to mind. Most seasoned adults recognize paying taxes as a privilege and an obligation of living in an advanced democracy, but the process of paying them should be as straightforward as it is consistent for all Americans.

The Latest Efforts

One of the easiest solutions America could adopt to solve this problem is to switch to residence-based taxes.

The trouble is, too few people even recognize this is a problem. Folks in Congress have their hands full and most voting Americans don’t even participate in presidential elections, much less weigh in on an issue which literally feels like a world away.

Nevertheless, this issue enjoys bipartisan support among Americans abroad. Active public awareness and petition campaigns are underway as we speak from both “sides’ of the American political aisle overseas.

If you are or have ever been a tax-paying American expat, Democrats Abroad would like your help shedding light on the ways our tax regulations are burdensome and borderline discriminatory.

Expat tax reform is also largely supported on the Right. Like Democrats Abroad, Republicans Overseas is actively encouraging anybody with firsthand experience or even just strong opinions to join their letter-writing campaign and sign their petitions. They will deliver all the letters they receive to President Trump in early October of 2017.

Making the world a better place requires us to become worldlier citizens. Nobody who wishes to broaden their horizons should see their efforts held back by outdated bureaucracy.

Kate Harveston is a journalist and freelance writer. Find more of her writing on her blog, Only Slightly Biased

Editors note: AARO works with many organizations in our advocacy efforts. To learn more about our position on taxation and financial reporting, see our position paper on the issue.

Testimony from Taxpayer Advocate Public Forum

On May 17, Marylouise Serrato, Executive Director of ACA, presented testimony on behalf of AARO, ACA and FAWCO at a Public Forum organized by Nina E. Olson, National Taxpayer Advocate. The purpose of these forums is to gather as many perspectives as possible from as many taxpayer communities as possible to help the IRS in developing its "vision" for a "Future State".

Read more ...

Save the Dolphins!

This title might seem more appropriate for the Greenpeace newsletter, but I hope it caught your attention!

It was such a pleasure to meet many of you at the recent Annual General Meeting, a great opportunity for the AARO community to exchange ideas. Your ideas there and the feedback from the member survey have energized us for the work ahead.

In a discussion after the meeting about the difficult tax situation for Americans abroad, one member aptly likened us to dolphins being caught in tuna nets. While the mission of combatting global tax evasion and criminal money laundering is a laudable one, the measures taken to achieve that purpose should not be unduly burdensome to an entire class of law-abiding citizens. AARO has made important progress in bringing the situation of us “dolphins” to the attention of Washington and the National Taxpayer Advocate (Nina Olson), as Lucy Laederich and Tim Ramier reminded us. Yet, as John Fredenberger mentioned, as global tax evasion scandals inevitably take the limelight in the international press, it is a tough environment in which to be heard!

On May 5, 2016, in response to the international press attention surrounding the release of the “Panama Papers”, the Obama administration announced a number of initiatives directed at enhancing financial transparency in the United States. In a letter to Paul Ryan, Secretary of the Treasury Jacob J. Lew highlighted the measures the Treasury have recently taken: (1) finalizing customer due diligence regulations for financial institutions and (2) issuing proposed regulations increasing information reporting requirements for certain wholly-owned U.S. entities. These entities, often organized in Delaware, may be used to shield foreign owners of non-U.S. assets or non-U.S. bank accounts. The IRS has hitched these new regulations to the existing rules for reporting non-U.S. entities with U.S. owners, which affect many AARO members. As we discussed at the recent Tax 202 meeting, these requirements are complex and subject to significant penalties for non-compliance.

Secretary Lew also called for Congress to act to take further measures, including passing legislation to require U.S. financial institutions to provide the same information that foreign financial institutions must provide the IRS under FATCA. As John Fredenberger mentioned at the AGM, lack of full reciprocity under FATCA is a topic that is currently being studied by the French government as a basis for principled objection to FATCA and its impact on the significant number of “accidental Americans” in France.

In an unfortunate turn of phrase, the Secretary’s letter states that “FATCA allows us to gain insight into the accounts of U.S. citizens abroad, limiting the ability of tax evaders to hide assets in overseas accounts.” In fact, FACTA is not directed at the accounts of U.S. citizens abroad but accounts themselves located outside the United States. This statement is illustrative of how Washington continues to confuse us dolphins for tunas, and highlights the importance of the advocacy work by AARO and its members to lobby for changes to alleviate the undue burdens of FATCA on Americans abroad, such as the “same country exception” to FATCA reporting. 

The tax committee welcomes your participation and input as we work to coordinate global efforts, raise awareness and achieve solutions for the benefit of all Americans abroad.

Nora Newton Muller
Member of the AARO Tax Committee

Step By Step Video: How to File Your FBAR

It's FinCEN Form 114 (FBAR) filing season. We found this video useful. It provides step-by-step advice on how to file this form:

Remember that your 2015 FBAR is due on June 30th 2016, and no exensions are allowed. 

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