In July of 2018,members of the European Parliament resoundingly approved a resolution which supported the right of Europe's estimated 300,000 "accidental Americans" to be allowed to cast off their American citizenship (and thus their taxation by the U.S.) more easily and cheaply than is currently possible under U.S. law. (The vote was 470 to 43, with 26 abstentions.)
Over the last few years, thousands of so-called "accidental Americans" have grudgingly accepted the unexpected news that the U.S. considers them to be U.S. citizens, even though they had lived their entire lives, since birth, as citizens of other countries – and as a result of this news, are considered to have tax-reporting and potentially tax-paying obligations.
As regular readers of the American Expat Financial News Journal possibly know better than most, U.S. taxpayers who live abroad (as well as their tax advisers) are increasingly having to consider the potential interactions between U.S. and foreign laws when determining the U.S. tax consequences of a particular financial transaction.
U.S. tax expert Virginia La Torre Jeker explains it this way: "In today's world, it is no longer possible for practitioners to ignore the possible implications of another country’s laws."
Like folks everywhere, Americans are often surprised to discover how different things can be when they live abroad. Sometimes the differences are small; sometimes they're hilarious.
In recent years, as the U.S. has started coming after American expats for unpaid taxes and penalties, the surprise for some Americans has come in the form of what one tax expert we know calls "that OMG moment of realization" that hits when you discover what life-long citizenship-based taxation actually means, and will mean for the rest of your life, particularly if you happen to be an American living abroad who has no immediate plans to return to the States...
As this and other news organizations reported back in February, more Americans handed their citizenships back to Uncle Sam in 2020 than during any other single year to date, in spite of the fact that U.S. embassies and consulates around the world – which are needed to process such citizenship renunciations – were closed or offering reduced services for most of the year...
Last week, we reported the news that the U.S. Internal Revenue Service had announced that U.S. taxpayers could now begin to claim a "reasonable cause" defense, in the event they were ever to find themselves hit with a penalty in connection with a tax matter for which they had "reasonably and in good faith" relied upon any IRS-published FAQs (frequently-asked-questions) that has to do with new tax legislation.
For Virginia La Torre Jeker, the well-known American tax expert and blogger who is (famously) based in Dubai, the IRS's statement was, well, about as clear as mud...
