What is the problem?

Because of the United States' unique taxation regime of citizenship-based taxation (CBT) compliance with US tax filing is costly as many US citizens are unable to manage filing themselves due to the complexity and number of forms without the help of a professional tax preparer.  Cost for this reporting can range in the thousands of dollars for a "simple" filing. Added to this are the IRS's assessment of penalties are linked to tax evasion meaning that simple errors of omission could result in steep penalties which US citizens would need to adjudicate from distance with the IRS.

US citizens overseas may experience banking lock-out by some foreign financial institutions that have chosen to eliminate their US-person client base to minimize their exposure to the Foreign Account Tax Compliance Act (FATCA) reporting requirements, withholding fees and potential penalties.

FATCA form 8938 must be filed with an annual tax filing however, in addition to these filing requirements a US citizens must also file a Foreign Bank Account Report (FBAR).  Whereas FATCA form 8938 requires the reporting of only certain foreign financial accounts, an FBAR requires the reporting of all foreign financial accounts.  The overlap in these filing requirements can be confusing and costly, in terms of penalties.

ACA tracks and advocates to correct some of the worse problems that complying with the US tax code imposes :

What are we doing about it?

ACA is the only organization representing US citizens overseas that has advocated for the adoption of residence-based taxation (RBT), taxing income based on where it is earned, since its creation in 1978.  ACA has taken concrete steps to build awareness of and acceptance for a roadmap to RBT. Alongside this ACA has been advocating to the US Treasury, the IRS and Congress to provide immediate relief through regulatory treatment for some of the most pressing problems.

  1. ACA has developed Same Country Exemption (SCE) for FATCA reporting and is advocating to the US Treasury for its adoption. SCE would remove from the reporting regimes the financial accounts a US citizens holds in their country of residence.

  2. ACA is calling for the simplification of the two financial account reporting regimes; the Foreign Account Tax Compliance Act (FATCA) and the Foreign Bank Account Report (FBAR). Given the duplicative nature of these forms, the US Treasury and IRS should simplify the filing requirements.

  3. ACA’s side-by-side comparative showing how and where changes needed to be made to the current Citizenship-based taxation regime to make it Residence-based gives the Congress and tax writing committees a roadmap for RBT.

  4. ACA data and research by contractor District Economic Group (DEG) to provide data and revenue estimates for ACA’s side-by-side which includes critical baseline data on the asset composition and size of the overseas community, is vitally important to development of the legislative proposals for the Congress and tax writing committees.

View our submissions to Congress about this issue and other here.

How can you help?

What has been achieved so far?

Once FATCA was passed as legislation ACA immediate informed Congress of the issues on the horizon with regard to banking lockout. ACA developed its Same Country Exemption (SCE) proposal which has been supported by the National Taxpayer Advocate and mirrored in Congressional legislation. Through ACA’s advocacy the threshold levels for reporting for US citizens overseas were raised to a higher level given that US citizens overseas would logically have higher balances given that they are resident outside of the US.

The National Taxpayer Advocate (NTA) has proposed and supported regulatory treatment for many of the US citizen overseas filing issues; including a Same Country Exemption regulatory treatment for FATCA. The NTA latest report to Congress highlights many of these.

Legislation has been introduced in prior Congresses and will be reintroduced in the current Congress in support of a Same Country Exception treatment for FATCA filing.

ACA were also cited in a 2017 research paper on US offshore tax enforcement.

Where can I find out more?

In this Section

Same Country Exemption

Foreign Account Tax Compliance Act (FATCA)

Foreign Bank Account Report (FBAR)

Tax Treaties

General Compliance

TCJA and GILTI regimes: US Businesses Overseas