La rentrée (back to school season) has a special meaning for those of us who are considered "U.S. Persons" by the government of the United States of America.
For those of you not in the know, October 15 is the last deadline for U.S. Persons to file their tax returns with the U.S. government.
What exactly is a "U.S. Person"? Some people think it is synonymous with U.S. citizen and they are partially correct. A U.S. Person can be a U.S. citizen but it's also a Green Card Holder or the citizen of another country with a connection to the U.S.
What do all U.S. Persons have in common? They are all subject to the worldwide tax and reporting requirements of the American Treasury Department and Internal Revenue Service (le fisc). That means that wherever they are they must file tax returns, foreign bank accounts reports and pay taxes to the United States. Yes, you heard right, U.S. Persons must file and pay U.S. taxes even if they live, work and raise families outside the U.S., and their income was entirely earned and invested abroad. This is true even if they aren't U.S. citizens.
What does a U.S. Person look like? According to some lawmakers in the U.S., and even the American public back in the beloved homeland, U.S. Persons living outside the U.S. are: yacht-owning jet-setters swathed in mink and dripping with diamonds who spend their days drinking champagne in Monaco or Sao Paulo chortling over their good fortune at the expense of the poor homeland American.
I and the other middle and lower-income U.S. Persons I know must be doing something wrong here. We seemed to have missed the memo that said that only rich Americans are allowed to live abroad. I guess that globalization is supposed to be a closed club and ordinary Americans need not apply for membership. I had no idea.
As for those U.S. Persons who are so fortunate to have a connection to the U.S., well, these folks are clearly in the wrong because they don't choose to forsake their home countries, move to the U.S. and become regular homeland Americans (one of the captive citizens I described in the previous paragraph). The American government seems to think that this ingratitude should be punished in some way. I think it's safe to say that the French, Canadians, Germans, Brits and other nationalities I've talked to aren't really on board with that.
Today I'd like to introduce you to Swedish Citizen. He's not only a U.S. Person but he's a real person, not a stereotype. I know he's real because I've met him (and many others in my travels). Here's his picture:
How would I describe him? Let me be very American here and say, "Nice guy." Fun and funny. Gutsy, too. Firmly in the beer drinker category (hardly a swiller of champagne). He's a Swedish (EU) citizen.
We have a lot in common and not just because we have to file U.S. tax returns. However, that is one of our pressing concerns right now. I'm working on mine and Swedish citizen is working on his. He's almost done and he was kind enough to pass along a picture of his efforts.
This, mes amis, is what the U.S. tax return of a U.S. Person living abroad who earns no income in the United States looks like:
Daunting, isn't it? And I can assure you that mine looks very similar.
But do you know what the worst part of this annual exercise is? Above and beyond the time, the stress, the frustration and all those dead trees sacrificed to create this monstrosity?
Nobody wins here. Nobody.
Not the U.S. Person abroad who in 80-90% of the cases will not owe any tax to the United States.
Not the IRS who must waste their time wading through these complex returns most of which return no revenue whatsoever to the U.S. Treasury. The resources they allocate to manage the Overseas Compliance Dance are resources that could have been used to seek out the true tax evaders - those who live in the U.S. and illegally park their money in offshore accounts to evade U.S. tax.
Not the people of the United States of America who are paying for the public servants who must process all this and who will see nothing from this activity. No revenue for better schools, better roads, and it sure won't lower their tax burdens.
On the contrary, in the event that ALL U.S. Persons abroad become compliant tomorrow (6-7 million American citizens abroad, and an unknown number of Green Card holders in the U.S. and non-US citizens with a connection to the U.S.), it is quite likely that the American taxpayer would actually be paying out more money in government administrative costs just in order to keep this very expensive dance going. He will be paying solely for the privilege of seeing public servants push Swedish Citizen's paper around while doing the rhumba.
I invite you to think of it this way: We are all paying a lot of money to go to a bad party and no one is better off for having showed up.
May I make a modest suggestion?
How about we stop the music, get everybody off the dance floor, and sit down and talk about this?
I'll buy the beer.