Dateline: Tbilisi, Georgia I’m not a fan of the idea of Donald Trump becoming president; and it’s not often you will hear me defend anything he says, but today I am going to do just that. You see, President Obama recently commented on Trump’s plan to build a wall along the Mexican-US border and make Mexico pay for it. Something in Obama’s response struck me as total garbage. In his retort, Obama’s said: “The notion that we are going to track every Western Union bit of money that is being sent to Mexico, good luck with that.” In other words, Obama is arguing that Trump’s idea that the US government is big enough and evasive enough to stop every Juan and María from sending money across the border is impossible. Yet, Obama created FATCA. Obama is the poster child for Big Government being able to track down every Joe and Sally on the planet, extract all their financial information, and make it nigh impossible for them to open or maintain a bank account where they live. He may call Trump an idiot for thinking he can track every bank account to Mexico, but Obama wrote the book on how to do it, so I really don’t know what he’s talking about.
Could FATCA law be repealed?
The good news is that there are other candidates who have their head on a bit straighter and who — instead of proposing to build a wall and increase government power to do so — have proposed repealing FATCA. Ted Cruz has stated:
“The Foreign Account Tax Compliance Act (FATCA) has burdened the millions of Americans living overseas and their businesses by restricting access to banks, insurance, and financial services. FATCA should be repealed. There are better ways to ensure tax compliance that do not involve threatening the livelihoods of our fellow citizens living abroad.
[Update: Unfortunately, as this article was being written, Ted Cruz ended his presidential campaign. All the more reason to set up your Plan B.] If FATCA were to be repealed, it would be one of the greater achievements for freedom in the United States and for US persons across the globe. The world-wide witch hunt that is FATCA and FBAR has kept too many people from being able to open a bank account, get a mortgage, or run a local business without unnecessary hardship. As we’ve discussed before, too many financial institutions around the world see US citizens as a burden to their business — and all thanks to the US government and its pet FATCA.
Reining in FATCA’s reach
Even if FATCA is not repealed in it’s entirety, I would welcome any change that would reduce the burden brought on by US financial bullying. One situation that I’ve seen talked about among expat communities is one in which FATCA would cease to apply to those who can prove that they are no longer residents of the United States. The US may be a long way from reversing citizenship-based taxation, but the right win in this presidential election could secure that FATCA and FBAR will not reach those who no longer reside within the borders of the Land of the Free. In this futuristic situation, if you were to move out of the country — say to Singapore, Hong Kong, Georgia, Malaysia, or even to Mexico like one of my team members has done — once you can prove that you’re really out of the country, you would no longer be subject to FATCA or have to file FBARs. After all, why would a bonafide non-resident have something to hide from a government that, apart from its insistence on taxing them, has no involvement in their day-to-day life? If you live in a foreign country, there really isn’t anything to hide about having foreign bank accounts. So why should you have to jump through all the hoops and go through the entire process of reporting all your foreign financial information? If anything, it should be the Mitt Romney’s who should have to go through the FATCAs and the FBARs. These are the people who still live in the US and could potentially have something to hide. Think about it, how many people go to Mexico just because they want to hide their money? They might go and hide their money there, but they don’t want to live there. The Mitt Romney’s of the world want the comforts of living in their chateau in Boston. You can’t do that if you live outside the US.
Avoid the pitfalls and get a Plan B
Still, this is just a hypothetical situation you can dream about. The harsh truth of reality is that government is getting bigger and the people who promise to make it even more so are the ones at the top of the political polls. If you live overseas, chances are that you will continue to be affected by FATCA and FBAR and everything else that comes attached to citizenship-based taxation. There are legal ways you can reduce your tax bill, including the Foreign Earned Income Exclusion, but the bottom line is that it can be tricky figuring out everything the government requires from US citizens overseas. There are certain people I’ve talked to in the last month who can’t just directly take the FEIE or move out of the country and pay zero tax using it. It all depends on your situation. And, of course, all US citizens — taxed or not — have to fill out all these forms and there are a lot of pitfalls to it. In the end, your two most realistic options are 1) to make sure you really are in compliance with every law and requirement and then just try to mitigate taxes or 2) renounce citizenship. Either option you decide to take, I can help. Apply for a Strategy Call today to determine your best plan of action.