HMRC letter regarding savings account

EdSwippet

missile wrote: »

I will have some of whatever drugs you are on.

...and thank you for conceding by resorting to the ad hominem fallacy.

colsten

EdSwippet wrote: »

Should Rosa Parks have just got up and moved to the back of the bus?

It is an insult to Rosa Parks and other black americans to compare her struggle with the rules that apply to US citizens in 2014.

EdSwippet

colsten wrote: »

It is an insult to Rosa Parks and other black americans to compare her struggle with the rules that apply to US citizens in 2014.

Not at all. It is an excellent illustration of how the statement that "rules are rules" does not and cannot justify bad rules in any context.

bowlhead99

There are all sorts of provocative 'rules are rules' images that can be brought to mind where clearly a rule should not be enforced because it's a dumbass rule.

However: in the case of US citizenship, you get it at birth, you pay your taxes (or at least, complete an annual return, even if there is no actual tax to pay because you didn't earn enough or you earned it overseas and paid local taxes so can take a deduction etc etc), and they use the taxes to run the country and carry out all sorts of acts inside and outside the US.

If you remain a citizen, you have freedom of movement within the States and all kinds of rights that non-citizens don't have. Outside the US you have consular protection. If you don't want any of that stuff and you want to go live somewhere else, you can formally expatriate, they will give you a certificate and have no further interest in letting you into their country without a visa or protecting you overseas or collecting annual tax returns.

So, while the US is unique in collecting tax returns from their citizens overseas, there seems to be a rationale for it, even if it is not the rationale followed by other nations. The fact that it is not very efficient because it is difficult to enforce, is problematic for the US government and is why other nations do not bother to tax nonresident citizens even if they would like to.

Still, something like FATCA helps the IRS understand what assets and incomes their residents have offshore that might 'accidentally' not make it onto a tax return, and through the same process it helps them understand what assets and incomes their citizens have offshore that might not make it onto a tax return. Both residents and citizens are supposed to do tax returns and if they don't like it they can stop being a resident or a citizen or both. The addition of the new rules would hopefully increase the compliance rates of its residents and citizens and so while enforcement is still difficult it has moved down the scale from extremely difficult to very difficult.

For someone who is unaware she should have been doing tax returns because she was never told and never thought to enquire (or in all honesty, was aware she should have looked into it but brushed it under the carpet), this is a serious headache. Any set of rules always has people around the periphery who get caught in the crossfire and ends up being more trouble than it is worth for the $$ that has been 'evaded'. But this does not mean that taxing citizens worldwide is a bad rule or that FATCA is fundamentally a bad rule (though those working in financial services no doubt wish it did not exist).

leonc888

Very sorry for the late reply but I will get the letter tomorrow to copy and show you lot.

She is totally unaware of anything to do with US only all her life had a US passport and that's it, she is not wise with financial things at has a standard job lived and worked in UK all her life with exception being born in US and moved over as a baby.

Regards to her passport she has renewed at the US embassy every time but only reason she never changed from US to UK password was the cost of doing so and thought nothing of it as its just a passport.

She is a honest person and paid all her dues etc but up a good life here and family, in fact all her family are from UK and all she wants to do is the right thing but the bank who sent the letter simple said ring America to get it sorted

Any way I appreciate all the response on this and will be back to post an copy of the letter(s) she got hopefully tomorrow.

colsten

leonc888 wrote: »

the bank who sent the letter simple said ring America to get it sorted

There is a branch of the US IRS in the US embassy in London: http://london.usembassy.gov/irs/index.html. Plus lots of information for US citiziens on the US embassy website.

Also of relevance: http://www.irs.gov/uac/Newsroom/IRS-Reminds-Those-with-Foreign-Assets-of-U.S.-Tax-Obligations-2014

EdSwippet

bowlhead99 wrote: »

There are all sorts of provocative 'rules are rules' images that can be brought to mind where clearly a rule should not be enforced because it's a dumbass rule.

Thank you for a thoughtful and considered reply. I suspect we agree more than disagree, but there are a couple of nuances you either missed or seem unaware of that it is worth noting.

bowlhead99 wrote: »

However: in the case of US citizenship, you get it at birth, you pay your taxes (or at least, complete an annual return, even if there is no actual tax to pay because you didn't earn enough or you earned it overseas and paid local taxes so can take a deduction etc etc), and they use the taxes to run the country and carry out all sorts of acts inside and outside the US.

Other countries also act outside their own national boundaries, but none of them (well, except Eritrea) require payment from their nationals abroad. If your argument is that US actions outside the US benefit everyone, US citizen and non-citizen alike, then surely by that argument all non-US citizens should also be paying US tax?

bowlhead99 wrote: »

If you remain a citizen, you have freedom of movement within the States and all kinds of rights that non-citizens don't have. Outside the US you have consular protection. If you don't want any of that stuff and you want to go live somewhere else, you can formally expatriate, they will give you a certificate and have no further interest in letting you into their country without a visa or protecting you overseas or collecting annual tax returns.

Sort of. However, you make it sound simpler than it is.

To renounce US citizenship requires two visits to a US consulate. Many are so booked up with renunciation appointments that waits of six months to a year for an appointment are normal. The cost is $2,350 and more than 20 times the average for losing a citizenship, clearly a barrier to exit. The US may levy an 'exit tax' when you leave -- payment of capital gains tax on unrealized capital gains (including your home), and instant and full income tax on your entire retirement savings pot.

Getting a US visa once you have renounced may not be possible. There is something called the Reed Amendment, which attempts to prevent ex-US citizens from return to the US for any purpose. It's never been enforced -- likely unconstitutional -- but that doesn't mean it won't be enforced in future. And if that were not enough, the proposed Ex-PATRIOT act goes further by extending the ban and levying a lifetime of future US tax on ex-US citizens.

There is also a class of person who can never renounce US citizenship -- the developmentally disabled. The US will not accept renunciation from anyone it claims does not understand the concept. And parents or guardians may not do it for them.

bowlhead99 wrote: »

So, while the US is unique in collecting tax returns from their citizens overseas, there seems to be a rationale for it, even if it is not the rationale followed by other nations. The fact that it is not very efficient because it is difficult to enforce, is problematic for the US government and is why other nations do not bother to tax nonresident citizens even if they would like to.

The rationale was to prevent US citizens from dodging a 3% tax during the US civil war. Congress seems not to have noticed that the US civil war is over. And that US tax rates have ballooned from 3% to more than 40%.

bowlhead99 wrote: »

Still, something like FATCA helps the IRS understand what assets and incomes their residents have offshore that might 'accidentally' not make it onto a tax return, and through the same process it helps them understand what assets and incomes their citizens have offshore that might not make it onto a tax return. Both residents and citizens are supposed to do tax returns and if they don't like it they can stop being a resident or a citizen or both. The addition of the new rules would hopefully increase the compliance rates of its residents and citizens and so while enforcement is still difficult it has moved down the scale from extremely difficult to very difficult.

The US certainly believes that FATCA will increase compliance among citizens abroad. What it seems to be increasing more, though, is US citizenship renunciation, now running at levels eight times or so those of a few years ago. Many of these renunciations are forced by inability to open a bank account -- see NS&I terms and conditions regarding US citizens, for example. Arguably many of these renunciants are long-time residents of other countries, and so really US citizens 'in name only', but the word is getting out. Talented non-US citizens, likely STEM graduates, thinking about a move to the US for work will notice, and many will decide they should go elsewhere instead.

bowlhead99 wrote: »

For someone who is unaware she should have been doing tax returns because she was never told and never thought to enquire (or in all honesty, was aware she should have looked into it but brushed it under the carpet), this is a serious headache. Any set of rules always has people around the periphery who get caught in the crossfire and ends up being more trouble than it is worth for the $$ that has been 'evaded'. But this does not mean that taxing citizens worldwide is a bad rule or that FATCA is fundamentally a bad rule (though those working in financial services no doubt wish it did not exist).

I think the term you want here is 'collateral damage'. Often a problem, the question is one of balance. FATCA is scored to bring in $800M annually to the US, but its costs to non-US banks alone, costs that will be passed on to you and me in the guise of higher investment fees, are estimated at ten times this, so $8B. That alone is enough to classify FATCA as fundamentally bad.

oldtoolie

to Leonc888: Don't worry too much about this. The overwhelming majority of expat US citizens are honest as well and there are mechanisms to get her affairs in order. As far as the bank is concerned, just answer the questions correctly.

Here's a link to some good advice:

http://www.greenbacktaxservices.com/us-expat-tax-guides/

missile

EdSwippet wrote: »

...and thank you for conceding by resorting to the ad hominem fallacy.

I concede nothing. I find it hard to believe she did not know and I am very pleased she has been caught. If she doesn't like it ...... too f...g bad pay up !!!!

mgdavid

missile wrote: »

....... I find it hard to believe she did not know .........

I suspect that is because you haven't stopped to think about it. OP has been here for 50 years, is still working and pays NI so is under 65, ergo came to this country around 15 years of age. Does that make it any easier for you to understand why she would not have known anything about US income tax returns?