Been there, done that, renounced my citizenship in 2013. The US has made living as an expat nearly impossible.

First, because of the taxation: Americans not only have to file tax returns, they also have to provide two detailed reports on their assets, one to the IRS, and one to some other branch of the Treasury Dept.

That would be tolerable; I did it for years. The last straw has been FATCA, which requires your bank to report to the US government. Local banks have no desire to figure out the complicated and ever-changing reporting requirements of a foreign government. Which means that most banks will simply refuse to open an account for an American. And who can blame them?

By the way, there is no legal way for the US to enforce its will on foreign banks. This is done through simple extortion. Since the US$ is still the currency used for international transactions, the US federal reserve can apparently cut off any bank that it doesn't like - which is the death knell for any bank that deals with international investments and transactions (as all but the smallest do nowadays). If the bank is too small to be doing dollar exchanges itself, it then has a representative bank that it works through, and the Fed would then cut that representative bank off from dollar transactions.

Some banking expert can correct my terminology; I'm sure I've not used the right terms. But that's how our bank explained it to us two years ago, when they regretfully informed us that all of our accounts, as well as our mortgage, were being be cancelled.

Which is what caused me to renounce my citizenship, so that I could go to a different bank and say "no, not American".

Oy. I cannot even begin to express my contempt for how America treats her expats. I can't even have my own bank account here because the banks hate dealing with Americans. My husband can have an account because he is employed by a Swiss company, but my work is all in the US.

HA! The Swiss come out in numbers.

Suzanne, BCV almost gave us a hard time and we're both Swiss citizens (I'm dual, my husband isn't) when we opened our accounts and got our mortgage. I'm a SAHM... I earn nothing (not quite true, I think I earned a couple hundred bucks off an insurance policy last year and I have a few investments, but still, the earnings on those don't put me anywhere near the needs-to-be-taxed rate)! But the paperwork is such a PITA... for nothing!

Luckily since we're both Swiss citizens (and my husband is not American at all, even though he lived there legally 15 years, but that's another story) living here we got to keep our accounts, but my mom can't have one since she lives in Boston... even though she's Swiss! They've made the paperwork so onerous that the banks just don't want to deal with anyone affiliated with America unless they're bazillionaires.

Which is win-win for certain parties... bazillionaires can still hide their money in Switzerland, whereas the middle class and moderately wealthy get cracked down on, and the government can point to us and say, "See? See? We're cracking down on Americans with bank accounts!"

I hope you all feel much economically safer now that you know that the IRS is making it tedious for middle class housewives to have bank accounts.

I haven't renounced my US citizenship, though many friends and family have (the final straw for some of them was not being able to pass on their citizenship to kids due to residency requirements, and thus not being able to deduct them). I'm not being double taxed yet, and I'm sentimental.

The really gross thing? If my husband, a non-American, earns over a certain amount I will have to report it. Even though I file separately! He's not even an American!!!!

OH! And an email I just got from the consul reminds me...

If you have a baby, you have to prove you lived 5 years in the US.

Unless you're an unwed mother. Then it is only 1 year.

They REALLY don't want you marrying foreigners.

Question for Bradley and NicoleK:

Suppose a U.S. citizen and a Swiss citizen desire to enter into a partnership to begin a business. Even though a partnership would make economic sense, the 2 partners must consider the effect of FATCA on the arrangement.

Would the Swiss citizen be reluctant to enter into a partnership with an American because, while the Swiss citizen owes no tax to the U.S., the reporting requirements of FATCA means that his personal financial info would be available to the IRS ?

To Amy's scenario above, it is common knowledge that the U.S. is the only country in the world that taxes its citizens on their world-wide income. A French citizen living and earning all of his income in Switzerland owes no tax to France.

Nick,

It would depend on how the partnership is set up. But you bet your bootie that people are hesitant to do business with Americans for that very reason.

This summer, in order to keep my husband's bank account (the one I'm not allowed to be joint with) we had to provide all our tax returns from 2009 for the bank to see. Fun!

And right now, our 2013 US taxes aren't filed yet because my husband changed jobs and in Switzerland pensions follow you. The IRS considers this a taxable event, even though it's a retirement account and we never saw the money. It just goes from one company pension fund to another. The accountant is still battling the former employer because the IRS demands a level of information that companies don't usually provide.

It's super fun. My husband talks all the time about renouncing his citizenship when we get our Swiss passports (7 more years until we can apply). I'm not sure I could ever renounce.

"And right now, our 2013 US taxes aren't filed yet..." - Suzanne Lucas

Oh, no! And tomorrow is the extension deadline!

Hi Suzanne! Don't worry, you'll get there. The longer you are away, the more you can see the US government's behavior objectively. And that behavior gets worse year-by-year.

If you're still here in seven years, I'll bet you a beer (or a nice glass of wine, if you prefer) that you'll be ecstatic to finally be able to expatriate.

Not to mention utterly relieved to be rid of the IRS and all the paperwork and difficulties it creates. I just sent in my 2013 expatriation return (no tax due, but FR 2000 to get the massive paperwork done). Last one ever - I cannot tell you how good that feels!

This is why I'm in favor of the flat tax and dismantling of the IRS. I just can't stand them. People who've never been on their bad side or had to deal with anything above a 1040 EZ just don't get it.

I did not formally renounce my US citizenship because that is a major hassle, I just married a wonderful woman from the UK, got a UK passport and stuck my US passport in a shredder.

I stopped filing tax returns and ignore any attempts to contact me. I no longer have any relatives living in the USA and the internet means I can stay in contact with my friends just fine. I must say never being able to go back physically have not bothered me at all. I did this 10 years ago and I do not regret it one bit.

That said, I do kind of miss getting felt up by some obese barely literate public sector worker and having my luggage broken into by the TSA ;-)

When it comes to taxes, the US is the schoolyard bully who doesn't give a shit about rules, regulations, or even rationality. It just wants your fucking money and will keep harassing and persecuting you until it gets it.

Bully: "Gimme your lunch money!"
You: "I don't have any. I didn't bring it today."
Bully: "Gimme your lunch money!!"
You: "I don't have it. Besides you've taken my lunch money every day for the last three weeks."
Bully: "GIMME YOUR LUNCH MONEY!!!"
You: "You've even been told that if you keep bullying people for money, you could be expelled from school."
Bully (smashing your head with a brick he found): "GIMME YOUR LUNCH MONEY OR I WILL FUCKING KILL YOU RIGHT HERE!!!!!!!!!!"

That's pretty much how the IRS operates these days.

NicoleK: If you have a baby, you have to prove you lived 5 years in the US.

That's to determine if the child is a natural born citizen of the U.S., per 8 USC, section 1308

This is a really big deal. It is nearly impossible to be an american and live and work outside of our borders. Which is ridiculous. But it fits in with the global taxation scheme the US is still pushing. If we just taxed what happened inside of our borders like every other sane nation out there then this problem would go away.

Sorry, that's section 1401. Don't know where I got section 1308.

"the U.S. is the only country in the world that taxes its citizens on their world-wide income."

No, Japan does too, or tries to. The Japanese tax office is bad in a different way...really down the rabbit hole. Their position is that everyone cheats, and they have quotas (!)so if they audit your business and find nothing they start rifling through all your other assets in the hopes of finding something that they can bring back to the head office as 'omiage' (souvenirs). We have to provide a bank statement from our bank account in the US and they made a lot of noise about the interest we earned, wanted proof of the value of our house there, they were quite interested in taxing our US assets (I think we've avoided it so far...I haven't seen this year's tax return yet).

When they found out that we got almost no interest for the past 4 years, they started making noise about the money I inherited when my mother passed away. Inheritance in Japan is taxed heavily, taxes starting at over $500,000. The amount I got is far less, but they were trying to reclassify it as income so they could tax it at 29.4%. That $30,000 or so would earn them a major pat on the head back at the office. Gotta fill those quotas, keep bending the rules and asset definitions if you have to...I don't know how they think they can get away with it...they are officially auditing my husband's business (mandatory every 4-5 years) but then when they don't find anything illegal they keep expanding the audit to include my private income, absolutely not affiliated in any way with the business and I'm not even a Japanese national.

When they found out that we got almost no interest for the past 4 years, they started making noise about the money I inherited when my mother passed away. Inheritance in Japan is taxed heavily, taxes starting at over $500,000. The amount I got is far less, but they were trying to reclassify it as income so they could tax it at 29.4%. That $30,000 or so would earn them a major pat on the head back at the office. Gotta fill those quotas, keep bending the rules and asset definitions if you have to...I don't know how they think they can get away with it...they are officially auditing my husband's business (mandatory every 4-5 years) but then when they don't find anything illegal they keep expanding the audit to include my private income, absolutely not affiliated in any way with the business and I'm not even a Japanese national.

Posted by: crella at October 14, 2014 6:13 PM

My husband would like to stay in Japan after retirement. This is a big part of the reason why we wont be.

'Inheritance in Japan is taxed heavily, taxes starting at over $500,000. '

That was unclear. What I meant is that normally you only get taxed *if your inheritance is over $500,000*...and that they'd be really stretching to tax what I got.

" This is a big part of the reason why we wont be."

What Isab, the way the tax office operates? How does it work the other way around, when you live in the US but have property in Japan? That's a twist we haven't tried yet.

What Isab, the way the tax office operates? How does it work the other way around, when you live in the US but have property in Japan? That's a twist we haven't tried yet.

Posted by: crella at October 14, 2014 8:30 PM

Yes. Once my husband is no longer a US government employee, in order to stay longer than 90 days on a tourist visa, he has to register as a foreigner, and pay Japanese taxes on all his income from the US, in addition to property taxes in Japan, if we bought a house,

We could continue to shop on base, but upon his retirement they would attempt to tax all our US income and property.

I don't know about the reverse. I know way more about the US system than the Japanese one.
I assume if you were to keep property in Japan, and rent it out, both governments would be coming after the rental income if you were to report it.

The Japanese are very honest, about personal issues, but I suspect cheating the tax man, is a national sport over here.

My husband's Japanese is getting good enough, that he is starting to understand the culture a bit better.

The Japanese dislike people who get government benefits, and they dislike taxes.

The US military protects the free world, the US economy props up the world, the dollar is the world's reserve currency, shut up and pay your taxes.

Isab, if you didn't buy your US house with finds sent over from Japan, they're not going to look for it. We are based here, and a lot of money went over for the signing so we left a trail for them to follow. To my knowledge, they can ask for records, but they do not have the leeway to search for US assets under your name. I don't think they have that much reach.

Cheating the tax man IS a national sport, because they charge so much! Inheritance tax is something outrageous like 75% over a certain amount, combined land holdings, savings, stocks and bonds etc. The system is still feudal in that the don't want wealth to continue for 3 generations. They manage to break you by then. There are very few 4th or 5th generation millionaires here. Income tax goes up to 55% of income (I'm sure you're familiar with it, Isab, but many of the other readers probably aren't).

They'll try and get a cut when we sell the house in the US. We'll sell it at a loss (just the way the market is now) so maybe they'll back off. Usually you pay no taxes if you sell at a loss.

Wow, the Evil HR Lady and the Advice Goddess on the same thread on the same blog? My day is made.

Ahem. Yes, the U.S. government is thuggish in this area (okay, not JUST here...) The best way to go about working overseas is to work for a big company that will make good on your extra tax burden (though, as a financial type, can I just say what an enormous pain it is to deal with those payments from an accounting point of view? Whine). Should you HAVE to do that? No.