US Citizenship and Taxation: The Unfair Burden Facing Meghan Merkle
When Meghan Markle, the Duchess of Sussex, decides to take on a British passport, she may also face a significant dilemma: should she renounce her US citizenship to avoid the harsh realities of taxation and compliance?
Generally, the decision to renounce US citizenship is not primarily driven by tax concerns. However, the stringent requirements and severe penalties imposed by the FATCA (Foreign Account Tax Compliance Act) have forced countless US citizens to either renounce or live in fear of potential audits and financial repercussions.
The Harsh Realities of FATCA Compliance
FATCA, initiated by President Obama in 2010, mandates that US citizens report their foreign financial assets, including bank accounts, investments, and other valuable holdings. This requirement can be extremely burdensome, particularly for expatriates living in countries with different tax regulations and financial systems.
Consider the following letter, which humorously highlights the challenging aspects of FATCA compliance:
“Dear Duchess of Sussex,
On behalf of the US Treasury and Congress, the IRS would like to congratulate you and Prince Harry on your marriage. In the spirit of reflecting on the birth of our nation, we would like to inform you of the following:
You are required to fill out Form 8938 identifying all of your “foreign to us” bank accounts, including any checking or joint accounts with your husband, as well as any volunteer organization, non-profit, or trust funds, even down to your debit card balances. Please monitor our website for any changes to the due dates, as we may do so at our discretion. Failure to comply will result in penalties ranging from $10,000 to $100,000 per violation, and could even lead to the cancellation of your passport.
In addition, you must fill out the Financial Crimes Network Form 114 (FBAR), which duplicates the information required by Form 8938. This is necessary to double the penalties mentioned above. Notably, we will levy these penalties whether or not you owe taxes, as we believe that anyone living overseas with a bank account is a terrorist or a money launderer.
Furthermore, if you and Prince Harry have children, we will automatically pass this obligation to them, even though they may have British citizenship. We know that they will be considered American for tax purposes, meaning you cannot “touch” Harry’s bank accounts without facing harsh penalties.
Additionally, if your bank does not report the required information, we will seize 30% of any US assets they hold, which could affect your ability to sustain a business or philanthropic organization in the UK.
Despite your wealth and resources, you can expect to hire compliance professionals who will benefit from your struggle, while the lower and middle-class citizens continue to face the brunt of these regulations.
As a final point, if we suspect you owe debt, we can cancel your passport, and you may be stuck internationally without any due process.
Updates and questions may take several hours to process, and we cannot guarantee a fair hearing, but you can still contact us if you wish.
Congratulations again on your wedding. Hugs to Prince Harry.
The IRS”
The Dilemma: Renouncing US Citizenship
While the above letter is satire, it highlights the challenges that many US citizens face when living overseas. Renouncing US citizenship can be a complex and expensive process, particularly since FATCA has raised the cost of renunciation and introduced exit taxes that can severely impact your finances.
The decision to renounce US citizenship is not taken lightly. It involves a lengthy process of meeting with the IRS and a consulate, and it can result in financial penalties and loss of access to some financial services. Moreover, the long-term impact on your ability to travel, work, and conduct business in the US cannot be overlooked.
However, if Meghan Markle decides to renounce her US citizenship, she will no longer be subject to the burden of FATCA and other US tax regulations. The decision to do so may be influenced by the complexity and depth of these regulations, which can be overwhelming for many expatriates.
Conclusion: The Unjust Burden of US Citizenship and Taxation
While the US remains a powerful and influential nation, the requirements and penalties associated with FATCA have created an unnecessary burden for many US citizens living abroad. Renouncing US citizenship is a serious decision that comes with its own set of challenges, but for some, it may provide a much-needed reprieve from the harsh realities of taxation and compliance.
It is crucial for potential expatriates like Meghan Markle to carefully consider their options and seek professional advice to navigate the complex world of US citizenship and taxation.