British national newspaper The Telegraph reports that:
“200.000 American citizens living in Britain are continuing to fall foul of punitive taxes two years after the introduction of draconian new rules devised by the US tax authorities. They are also prevented from making simple investments.”
“The US is the only country in the world – with the exception of Eritrea- to tax non-resident citizens on income earned overseas.”
Because of the US tax legislation known as FATCA (Foreign Account Tax Compliant Act), major financial companies based in Britain and elsewhere have to report their American clients to the IRS. And some of these companies even refuse to take on US citizens as customers according to The Telegraph.
Americans in Britain, Anglo-Americans with a dual nationality and British citizens with a green card have to file their tax return on a yearly basis to the US Internal Revenue Service (IRS). In most cases they receive a tax credit from income paid in the country they are working in and avoid “double taxation’”.
Many Americans in Britain are unaware of their obligation to file their taxes to the IRS. In the article a tragic example is given of a British resident, grown up in the UK, who is struggling because of his dual US citizenship:
“I do think the US tax system for citizens abroad is unfair.”
Renouncing their US citizenship is one option. But British Americans still have to file the last 5 years of tax returns to the IRS before they can do so. They also have to pay the US consulate a hefty $2.350,-. To fulfil their tax-filing obligation it is best to seek information and advice from a tax expert before taking any steps.
Like many Americans who live abroad, we were diligent about properly filing in our country of residence. We were unaware of any tax obligations related to our American ties.
For us, this all started with a letter from our bank informing us about FATCA. Since this information was new to us, it quickly led to questions like:
“what does the IRS do”, “what does FATCA stand for”, “do I really have to file a US tax report”, “can’t I just give up my passport” and “where can I find my Employer Identification Number”.
That is why we ,from Americans Overseas, made it our goal to inform people. So that all these problems do not become overwhelming and that appropriate action can be taken on time.
We help Americans living abroad to become US tax compliant in an organised way and avoid unnecessary double taxation. Based on your personal situation, we introduce you to the appropriate US tax advisor in our AOS network who will make you a tailor-made offer to help with your tax filings free of charge and free of any obligations.
Contact us for more information
James Connington (2016, October 16). The 40pc tax hit for Britain’s 200,000 Americans. The Telegraph. Retrieved from http://www.telegraph.co.uk.