Forbes claims that former British Prime Minister Boris Johnson outwitted the IRS. Johnson might be admired by anyone who has battled against the formidable IRS in America. After all, he faced the IRS despite being a Brit and ultimately managed to defeat them.
American citizen because Johnson was born in the United States
The former prime minister, Boris Johnson, was born in America but left at the age of five. That required dealing with the IRS on top of British taxes every year.
Does Boris Johnson have American citizenship?
Then in 2017, it came out that he renounced his U.S. citizenship the prior year and was on the official published list of Americans who renounced. He had infamously avoided IRS fines and finally put a stop to his tax dispute by renouncing his American citizenship.
Check out Johnson’s 2014 interview with NPR if you want to hear a displeased taxpayer complain about being bombarded with IRS requests for capital gains tax. The sale of his first home in the UK was taxed by the IRS.
Johnson said it was outrageous to tax U.S. citizens everywhere, no matter what. He hasn’t lived in the U.S. since he was five years old. Asked in 2014 whether he would pay the bill, Johnson replied: “No is the answer. I think it’s absolutely outrageous. Why should I? I think, you know, I’m not a … I, you know, I haven’t lived in the U.S. for, you know, well, since I was five years old … I pay the lion’s share of my tax, I pay my taxes to the full in the U.K. where I live and work.”
Paying exit tax
Did Johnson really beat the IRS? Renouncing would not eliminate a previous or present tax debt, though. Although the specifics remain private, Mr. Johnson most likely had to pay the IRS to be allowed to renounce.
To exit the United States tax system, you generally must prove five years of U.S. tax compliance, and in some cases, you also pay an exit tax. Some long-term residents giving up Green Cards must pay the tax too. Every three months, the U.S. Treasury Department publicly names individuals who renounced their U.S. citizenship. Renouncing is undoubtedly not for the weak of heart, but it is a possibility for those who don’t want to continue making payments to the IRS.
Politicians are not the only ones who get tempted. There are many Americans who are tempted. Federal Register data shows that renunciations spiked after American Congress passed FATCA—the Foreign Account Tax Compliance Act.
FATCA requires non-U.S. banks and financial institutions around the world to reveal American account details or risk big penalties. Americans living and working in foreign countries must generally report and pay taxes where they live. But they must also continue to file taxes in the US, where reporting is based on their worldwide income. Some say a move to residence-based taxation is too big a fix for the U.S. to make.
We will never know the details of the tax agreement Boris made with the IRS in order to get them off his back. But despite the fact that he most likely paid the American’s taxes in full and with interest, he may have avoided fines.
However, you can’t take away from him the victory of surrendering his American passport and ceasing to report and pay his yearly taxes to the American IRS.
More information about American citizenship and the US tax obligation
We, the founders of Americans Overseas, were born in the Netherlands and obtained our American nationality through our (American) mother.
When we heard about the US tax system for the first time around 2013, we were in total disbelief (it can’t be true!), anger (how can they do this?), fear (am I going to get fines or pick up other problems?), and panic (what should I do?). It is (unfortunately) true that there is an additional American tax levy. But there’s no information from local government, and when approached, the consulate referred us to the IRS, and the IRS was impenetrable.
That’s why we started this initiative to help people from all over the world by providing proper information about the US tax system to avoid unnecessary panic, and offering help free of obligation and free of charge. If needed, we have a network of affordable professionals (accountants) who can help you with your tax obligations.