As I have written before, the US tax treatment of its ex-pats is draconian and stupid. We end up paying accountants hundreds of dollars each year only to learn we might owe the IRS some paltry some like $67, if anything.
To makes things even more stressful, the implementation of FATCA [the US tax on off-shore assets] swings into full effect starting on July 1, 2014. This drag net, enacted to catch non compliant U.S. taxpayers with funds located abroad, is causing many U.S. citizens living in Canada sleepless nights in anticipation of a call from the IRS.
I have seriously considered renouncing my US citizenship as a result of this law. But it turns out, I may decide not to do that after all. Here is why [from this site]:
Assuming that the proper tax compliance steps have been or will be taken to avoid the imposition of the exit tax under section 877A, the actual process of renouncing one's U.S. citizenship also has immigration issues of which to be wary. Under the U.S. Immigration and Nationality Act,35 additional amendments were added to deny re-entry to the United States if it was determined by the U.S. Attorney General that the former citizen renounced their U.S. citizenship for the purpose of avoiding U.S. tax.36 [emphasis added] This provision became known as the Reed Amendment because of its introduction by then U.S. Representative Jack Reed of Rhode Island. Although it appears that this law is seldom enforced, there is no guarantee that it will continue to be in the future. Under this provision, an individual who is found to have renounced for U.S. tax avoidance purposes will be denied access into the United States and will be considered "inadmissible" for immigration purposes. The Reed Amendment is intended to prevent a tax motivated expatriate from returning to the United States. Representative Reed, in proposing the amendment stated:
"In an instrumental way, I would hope in the future if those very slick and smart tax lawyers advising their clients about how to avoid their taxes suggest expatriation they should also indicate very clearly that the consequences are you cannot return at will to the United States."37
Well hell. The only reason I'm going through all this nonsense is so I can freely visit my son and his family, who live in the US.
I could argue that I renounced my US citizenship not to avoid paying US taxes but to avoid having to pay accountants to demonstrate that I no longer owe the US any taxes. But I wouldn't want to take a chance on winning that argument at the border.
And since I have made it quite clear on this blog that the only reason I would go through the process of renouncing my US citizenship is to avoid having to file US tax returns, I would be clearly in sights of the Reed Amendment.