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April 11, 2011 - Phil Hodgen

Anonymous story from an ex-citizen

I received this in my email inbox, along with permission to post it.

Dear Mr. Hodgen:

I wanted to thank you for your blog.  It has been very helpful and I would like some advice from you and your readers.  You said that I could tell my story anonymously and here it is:

I’ve lived outside of the United States since Ronald Reagan was president.  I thought it would be a unique learning experience to do my graduate studies abroad, and oops, I married someone here and never returned to the US except for visits.  Now I am nigh on 50 years old and have learned to speak two foreign languages; I never made much money until recently but my spouse owns a successful business.  Every year I’ve filed my 1040’s with the IRS, though I couldn’t possibly owe anything since the tax rates in my country of residence are higher.

I first decided to lose my US citizenship when I learned of the expatriation tax that was instituted by the Heroes Earnings Assistance and Relief Tax Act of 2008.  I am far from wealthy enough so far, but with the US dollar going down the tubes and my own business thriving, I can imagine a near future where my loss of citizenship would become expensive.  So I applied to the citizenship of my spouse’s country, recently obtained it and then informed the US Consulate General here that I was no longer an American citizen, since taking a foreign citizenship is a relinquishing act provided it be done voluntarily and with the intention of loss of citizenship (see 8 U.S.C. 1481).

I have considered the yearly filing of a second tax return a nonsensical nuisance; but when I learned of the FBAR requirements I was filled with dread.  I know that FAQ 17 says that if I am up-to-date with my taxes all I need to do is file the delinquent FBARs and they would simply forgive me.  But what if they don’t accept my excuses?  I can’t take that risk.  You see, while I don’t make much my spouse earns six figures.  I have signing authority on many accounts that are not dependant on my income but my spouse’s, and I am not willing to expose my spouse to the caprice of the IRS, an organization which has clearly gone off its rocker together with the US Congress and President Obama.  My spouse is not an American—and now we have no desire ever to live in the US—though we once thought it would be nice to have a condo in Hawaii.  We’ve been driven away—I skipped my annual professional conference last year, and I will miss the family get together in December.

You see, I’m afraid to return to the US.  I’ve recently lost my citizenship.  I am about to try to make this divorce friendly, so that I might be able to visit, because normally citizens of my country can visit without a visa.  But the problem is that I am not FBAR compliant, nor do I ever plan to be. The Voluntary Disclosure Programs, as I’ve read on your blog and elsewhere, have shown me one thing:  the IRS is after my money.  Well, I am just not going to cooperate.  I’d rather stay in exile for the rest of my life than give this rapacious and profligate government even one red penny.  I will file my final 1040’s and the 8854, and I will hope that IRS will just shrug when they see that I am still just a small fry and that there are bigger fish out there who have committed real crimes—because I’ve done nothing wrong.  For how was I supposed to know about FBAR, an obscure law that was never much enforced until 2003?  Besides, something deep inside of me tells me that the US government has no right to this information in the first place, since it is likely a violation of something called the “Bill of Rights”, which protects my security regarding papers.  It is so ridiculous.  It is not like my bank account information will lead to the abduction of a terrorist, a tax evader or a money launderer.  So hopefully, the IRS will shrug and just leave me alone, but there is a paucity of information on the internet about what they can or what they will do to me now.

I explained my situation to my foreign (not US) lawyer, and he recommended moving our accounts to a bank with no branches in the USA so that the IRS could not hold the bank’s US assets hostage in order to have access to my accounts.   He says they don’t play fair.  And it would be unfair indeed, because of all of the wealth in our accounts has been earned here, and most of it by my foreign spouse and through our successful retirement investments (all legal accounts).  I spoke with my bank manager, and I explained to her my situation and the new law (FACTA) which is going to cause her bank to snitch on me and every other American client in her bank—despite the possibility that it violates our privacy laws here.  My bank manager got back to me two weeks later but she could not guarantee my privacy and security, even though I informed her that I am no longer a citizen of the United States.  She asked for my request in writing, and I said, “Look, willful violation of FBAR is punishable with many lashes; so no, I’m not going to ask you anything in writing.”  So now I must do what my lawyer suggested, and I will move as many accounts as I feel could be violated by the IRS.  This is like ten accounts or so.  I feel like some kind of terrorist who doesn’t dare sleep in the same place two nights in a row.  Only, I don’t dare leave my money in the same bank as before.

Now as for our family reunion:  I told my sisters (one of whom is a lawyer) that I feel funny about traveling to the US for the moment.  They said that I was suffering from senile dementia and that it is not like the IRS is sufficiently organized to nab me at the border.  Anyway, I was wondering what you and your readers might be able to tell me about this problem.

This whole situation has filled me with great hatred towards the authorities in the US and I have begun to bad mouth the United States whenever and wherever I get a chance, and here in my new country, that is already a popular past time, and so it helps me to fit in.  I consider myself an economic refugee, and there are many such freedom seekers in my lineage.  Meanwhile, the economy of the United States is going to hell in a hand-basket. So I guess, in a way, God saved me and made me to prosper by taking me to foreign country—just like Joseph; and perhaps, like Joseph, I will be the salvation of the rest of my American family and of my dear father in his old age.

Your truly,

Ex-Citizen

Americans Living Abroad Expatriation Voluntary Disclosure