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.
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.
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 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.”
Did Johnson 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 the 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 to get them off his back. But although 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.
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 fined 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 the 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.
Understanding the US tax system, the obligations, and all the additional terms can be difficult. Especially if one lives outside of America. Is your question not answered? Contact us.
U.S. citizens and resident aliens who live abroad are generally required to file a federal income tax return and pay taxes on their worldwide income.Read more... about Who is required to file taxes in the US?
Yes, US citizens are required to file taxes on their worldwide income, regardless of where they are living.Read more... about Do US citizens living abroad still have to file taxes in the US?
Received an American check? You can cash your check in the following ways: cash the check at your own bank, transfer to another person (endorsement), cash checks using an online service or cash the check by another bank.Read more... about How can I cash my US check?
US citizens living abroad may be required to file Form 2555 and/or Form 1116 to claim the foreign-earned income exclusion.Read more... about Are there any special tax forms required for US citizens living abroad?
FBAR (Foreign Bank Account Report) filing is the requirement for certain U.S. individuals and entities to report their foreign financial accounts to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury. The FBAR filing requirement applies to U.S. persons who have a financial interest in, or signature authority over, one or more foreign financial accounts if the aggregate value of those accounts exceeds $10,000 at any time during the calendar year.Read more... about What is FBAR filing?