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Who Stands to Suffer the Most Under FATCA?

Article Summary:

FATCA has the potential of destroying the lives of Americans living overseas, but most Americans and politicians don’t seem to care. But the fact is, most American expats are actually poor and middle class, and they stand to lose the most when it comes into force January 2013.

Photo Credit:Examiner

Original Article Text From Examiner:

FATCA: Obama’s New Year Surprise Against American Expats

In Ernest Hemingway’s reminiscence A Movable Feast, one gets a glimpse of life among American expatriate artists and writers living and having adventures in Paris during the Roaring 20s. Today, American expats live all over the world – having adventures in Africa, creating art in Berlin, helping children in Cambodia, discovering ancient spirituality in India, and starting businesses in Tianjin. But all this may soon come to an end.

FATCA has been completely ignored during the 2012 Presidential contest by both Barack Obama and Mitt Romney. It has the potential of destroying the lives of Americans living overseas, but most Americans and politicians don’t care. In all the drum beating about getting the tax dodgers and the fat cats, FATCA is about to take effect immediately beginning January 2013.

A part of the Hiring Incentives to Restore Employment Act of 2010, a bill primarily meant to encourage domestic employment in the United States, politicians snuck in the Foreign Account Tax Compliance Act (FATCA) and had it passed on March 18 2010. FATCA was “sold” on the premise that it would force the rich to pay their fair share of the taxes. And on the surface, it looks like a method to go after and tax multinational corporations with offshore accounts. But the real targets end up being the American expatriate community.

Over 6 million Americans are living abroad and many are not paying American taxes. For most domestic Americans who would never even think of living in or experiencing any other country besides the US of A, the live and die in America crowd, the ones who can relate to the John Mellencamp song “Small Town,” FATCA is a “no brainer.” Nothing is worse than a rich tax dodger hiding his money overseas when struggling Americans are trying to make ends meet. But the fact is, most American expats are actually poor and middle class. And they ARE paying taxes in the countries they are living in.

American citizens are the only people in the world required to be taxed on their income if the income is made outside the United States. This results in an unfair double taxation. But it is not only the American expat that the IRS will go after. It is also anyone who is a permanent resident or a dual citizen of the United States. That means that if you are an immigrant to the US that still owns a house overseas and collects rent on that house, you have to declare and pay taxes on that income even if none of it will ever come into the United States.

In addition, expatriates will lose all privacy of their financial information that the Americans who stay in their own country will retain. This is because FATCA requires all foreign banks, insurance companies, and other financial institutions to openly reveal all private account information on every American citizen to the IRS. Nothing will be withheld. If there is evidence of past income, the expat can legally be arrested on tax evasion upon setting foot on his beloved United States.

Even Liu Xiangmin of the People’s Bank of China says this “contravenes many countries’ privacy and data protection laws.” Yet, foreign countries are submitting to the American requirement even though it would lead to the divulgence of enough prvate information to make any country consider avoiding Americans as security risks.

There will also be heavy fines levied on American expats, permanent residents and dual citizens who do not file United States tax forms regularly after January 2013 – fines that can amount to thousands of dollars whether the person has made taxable income or not.

This could result in a lot of Americans coming home. Foreign companies will be less likely to hire American citizens because of the additional paperwork and transparency of their finances. American companies overseas will hire less American managers for their overseas operations for similar reasons. The young American entrepreneur will find it hard to make a partnership with a small company in the Philippines because the Philippian company would have to reveal their private financial information to the IRS.

The American traveling in India and working for ashrams may find that the ashrams are preferring to hire people from other countries over her. The guy who was working for a small software company while enjoying the beach in Thialand may find that the small software companies don’t want his work anymore. The visiting American scholar to Oxford may have a hard time opening a local bank account because the banks don’t want his business. The artist selling her work in Prague finds she has to pay far more in taxes than if she just sat in the good ol’ USA. And all the while they are all getting fined left and right by the IRS.

Meanwhile, the fat cats and multinational corporations are embracing this law as they work with their lawyers and off shore banks.

Link to Original Article:

From Examiner

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