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Life as an American Citizen Abroad
Transcription of interview with Marylouise Serrato on July 9, 2012.
Douglas Goldstein, CFPÆ, Financial Planner & Investment Advisor
Marylouise Serrato is the executive director of ACA, The American Citizens Abroad. In 1994,
she moved out of the United States and eventually ended up in Switzerland. She manages their
office in Geneva.
Douglas Goldstein, financial planner & investment advisor, interviewed Serrato on Arutz Sheva
Radio.
Douglas Goldstein: One of the issues that you speak about on your website is the risk
that Americans have living overseas as it relates to the U.S. Governmentís new tax
reporting rules. Could you describe what thatís all about?
Marylouise Serrato: As most Americans may or may not be aware, but should be aware,
no matter where you live and work, you still must file U.S. tax returns. This has been
in vigor for since we can all remember and primarily was initiated during the Kennedy
administration. However, recently thereís been some new legislation, the Foreign Account
Tax Compliance Act or FATCA that was passed as part of the higher act. Within that legislation
is a new reporting vehicle, a new form for Americans living overseas to report their
assets overseas in addition to an existing report called the Foreign Bank Account Report
or FBAR. FBAR has been in existence since about the 1970s and was initially a tool that
was being used to track money launderers or drug lords. It has a completely different
set of rules in terms of what accounts need to be reported and a different set of penalties,
and there is some overlap, though not total overlap, with FATCA.
The big issue with these reporting tools is that theyíre all geared towards finding tax
evaders. I think everyone agrees that itís a noble goal to go after those who should
be paying taxes and are not. However, these two tools are specifically targeted towards
those individuals. But it is also going to pull in people who have just made innocent
filing errors and oversights. As we all know, filing U.S. taxes is highly complex from overseas.
Contrary to what you hear out of Washington and a lot of the tax preparers, many people
overseas donít use professional tax services. Professional tax services are quite expensive.
The average that ACA sees for just a simple tax return is anywhere between $2,000 and
$3,000. Some people simply just donít have access to that and theyíre trying to do this
on their own and obviously are exposing themselves to errors, which in FBARís case is $10,000
per omission per count, or 27.5% of the value of the account.
Douglas Goldstein: Whatís the real difference between the two forms?
Marylouise Serrato: Certain accounts need to be listed on the foreign bank account report
and the determination of that is by how the IRS views these financial tools. For example,
a pension account that you have in a foreign jurisdiction that might be a tax-free pension
account that you think and your foreign tax advisor says, ìNo, thatís a tax-free vehicle.
That has nothing to do with the U.S.î Well, thatís not true. The U.S. doesnít recognize
a lot of foreign pension plans. Those accounts really are considered like a ìbank accountî
so the foreign bank account report really encompasses accounts - current accounts and
savings accounts - but not just under pure and simple understanding as we know it. It
could be other things. It could be a pension account. It could possibly even be some sort
of insurance policy that you carry.
Douglas Goldstein: On your website, you call for the repeal of FATCA, which for someone
living outside of the United States sounds perfectly nice but from the point of view
of the U.S .Government, what do they have to gain from repealing it?
Marylouise Serrato: FATCA not only requires a U.S. citizen on the new Form 8938 to report
bank accounts and potentially other financial vehicles that are not reported on FBAR, but
it is also now going to require banks to report on Americans holding accounts, but not just
Americans but anyone holding U.S. securities who lives outside of the United States.
What weíre seeing from a lot of banks and in particular in Switzerland, because weíre
based in Switzerland, but also throughout Europe, is that many banks are just advising
their clients not to invest in U.S. securities. From a U.S. perspective, this is going to
provide good reporting and theyíre going to get information, but theyíre also going
to see people moving out of the U.S. securities market.
Douglas Goldstein: It
seems that the rules are just so unclear that a lot of banks and brokerages are just hiding
in their shell.
Marylouise Serrato: We just received notification from several Belgian banks that will not open
accounts for American citizens either who are not living in Belgium, but also it is
tipping over to the people who are actually living legitimately as bona fide residents
because once again to your point, the reporting requirement for this are just too onerous.
The incertitude of dealing with the U.S. and what could happen in particular, in light
of the UBS-IRS incident, is just making many banks think twice about it.
On the table now is the discussion of having reciprocity with U.S. banks and if youíve
been looking at the U.S. media on this, youíre seeing that thereís a lot of pushback from
the Florida legislators and also in Texas because whatís good for the goose apparently
isnít good for the gander.
Thereís been a significant amount of pushback from the U.S. banks on this, so as you say
with foreign banks there has been some pushback, but itís been more quiet in terms of the
people on the ground, who are the ones who are getting hit with the problem because theyíre
having bank accounts close or mortgage called in or canít maintain accounts.
Douglas Goldstein: Many U.S. mutual funds have decided that they no longer want to have
American citizens who have an address outside of the United States. They donít want them
as clients, and this creates a terrible Catch-22, which is that U.S. citizens are not allowed
to own off shore mutual funds and they now canít own U.S. mutual funds. The mutual fund
is the standard vehicle that many people use for investment, so they simply have nothing
available to them at this point.
Marylouise Serrato: Weíre saying this as well for our testimonials. A lot of people
are coming to us saying, ìIíve been a long-term resident of Germany, or wherever, and Iíve
invested in certain things that are tax-free here because Iím preparing for my retirement,
and now I found out that theyíre not tax-free, and then the things that are tax-free, I donít
have access to them,î so theyíre very worried. Theyíre being squeezed by both sides. As
we see it economically for the U.S., this is just not good policy. It doesnít encourage
people to invest in the United States. It doesnít encourage people, even foreigners,
to go to the United States.
Douglas Goldstein: But havenít they received billions of dollars in tax revenues as a result
of these new rules?
Marylouise Serrato: They have, and if you look at some of their extrapolations, they
estimate that this is going to just be a continued trend. Unfortunately, we donít concur. Obviously,
certain people initially came in right away, and most of those people are actually Americans
who are not living overseas, or Americans who are resident stateside who are using these
tools exactly for the purpose of the IRS without searching them out. But we all know that people
are going to change behavior. People are going to start to look at other options of how to
invest, and thereís just no way that this is going to be an ongoing revenue source.
Douglas Goldstein: What about the possibility, which is now becoming big in the news, of
U.S. citizens who really donít intend to move back stateside, mailing back the passport
and giving up their citizenship?
Marylouise Serrato: What the ACA is seeing is that thereís an increase of discussion
on this, so obviously ACA is an organization that advocates for Americans, and we want
Washington and the legislature to empower us and to realize the enormous value that
we provide overseas economically, as well as being sort of local ambassadors. But there
are many people who are up against very difficult decisions and particular people who are married
to foreign nationals, where thereís a reporting requirement for joint accounts or for a business
that they held together. Children of these dual nationals that have never lived and worked
in the United States, who in their 30s and 40s and are trying to do business overseas
suddenly realize, ìOh my gosh, I have a U.S. passport and I had an obligation. Those people
are in a very difficult situation and obviously many are making the decision to renounce their
citizenship.
Some who have created a business and a career overseas are just finding that they cannot
operate with a U.S. passport. If you enter into a start-up partnership, if 10% or more
of that entity is owned by Americans, that whole entity has to be reported to the IRS.
Itís simply locking out Americans who are overseas looking to get into the next new
technology, next big idea. Theyíre being shut out. After all, why take the American
and have all of that reporting to have to deal with when you can take the Frenchman
and just be able to bypass all of that?
Douglas Goldstein: How can people follow your work?
Marylouise Serrato: You can follow us by logging in to our website, which is www.americansabroad.org.
You can follow us on Facebook, American Citizens Abroad, and we also have a Twitter @ACA voice.
We post updates on our website regularly. If you become a member and sign up, we have
a newsletter that youíll get 10 times a year. Were always out there. Weíre always in Washington.
Weíve been to Washington five or six times already this year. Weíre going to have a
committed office in Washington starting the latter part of this year. Please join us,
please become a member or donate to ACA because truly we are the only worldwide organization
out there interfacing with Washington and talking to them.
Douglas Goldstein, CFPÆ, is the director of Profile Investment Services and the host
of the Goldstein on Gelt radio show (Monday nights at 7:00 PM on www.israelnationalradio.com.
He is a licensed financial professional both in the U.S. and Israel. Securities offered
through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA, SIFMA. Accounts carried
by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company.
His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered
at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.
Disclaimer: This document is a transcription and/or an educational article. While it is
believed to be current and accurate, divergence from the original is to be expected. The original
podcast can be heard at https://sites.google.com/site/goldsteinradioshows/. All information on this website is purely
information and should not be used as the sole basis for making financial decisions.
The opinions rendered herein are those of the guests, and not necessarily those of Douglas
Goldstein, Profile Investment Services, Ltd., or Israel National News. Readers should consult
with a professional financial advisor before making any financial decisions. Please see
the complete disclaimer at https://sites.google.com/site/goldsteinradioshows/.