According to various government reports, there are literally trillions of dollars being hidden in offshore accounts by Americans who don?t want to pay their fair share of taxes. Of course, everyone should have to pay his or her fair share to Uncle Sam, but no one should be penalized for income that he or she earned as a citizen of another country before coming to America. However, that is exactly what is happening to many new Americans as soon as they gain citizenship. So why is this injustice happening and can anything be done about it?
At face value, it sounds like the U.S. government is basically stealing from its newly Americanized citizens. In sense, they are, but it really comes to down to paperwork. Because of the government?s efforts to crack down on Americans who are hiding money in overseas bank accounts, these new citizens are getting caught up in the web of justice. However, as it turns out, for them it?s a web of injustice. When a person becomes an American citizen he or she needs to file the proper tax forms. However, many people have no idea that these forms even exist, let alone that they need to fill them out.
Have You Filed Your FBAR?
The problem occurs because these new citizens haven?t filled out a very important document called a Foreign Bank Account Report (FBAR). Basically this means that upon becoming a citizen, or entering the country on an H1B work visa, they need to declare their foreign assets to the IRS. However, the U.S Government doesn?t bother telling people this and it seems that many accountants either don?t know or don?t bother to tell these new immigrants this extremely important piece of information. Failing to make such a declaration can be very costly.
In fact, if you?re a new citizen and you fail to submit this form, you could be fined up to $250,000 and you could also be sentenced to as much as five years in prison. That?s a hefty price to pay because you forgot to fill out a form, or worse yet, you were never told you had to.
The Best of the Best
There is another major downside to this problem. Many of the country?s newest citizens are some of the brightest minds from around the world, who have come to work for some of the biggest and most innovative companies in the U.S., including many for companies in Silicon Valley. By penalizing these people, the government is giving them good reason to pack up and go back to their homelands. That means our country is losing some of the smartest minds in the world. In fact, according to one report, the number of people who renounced their American citizenship between 2011 and 2013 almost doubled. It?s impossible to pin that solely on tax related issues, but the number is astounding.
So what can be done to fix this problem? At the very least, the government should provide a written form to every new resident alien or new citizen so he or she can disclose all assets as part of their being admitted into the U.S. It should clearly state in each person?s own language that he or she would have to pay tax on his or her global income and not just the money earned in the United States.
GROCO Can Help
Although it?s obvious that some kind of reform needs to be made, for now anyone who comes to this country as a newly Americanized citizen or on a temporary work visa, needs to make sure to fill out the proper forms. At GROCO we serve some of Silicon Valley?s biggest players, and we can help you too. We?ll make sure that you have all the proper forms filled out, including the FBAR, which can help you save thousands, or even hundreds of thousands, of dollars that is rightfully yours. You can click here to read more about taxation of foreign individuals living in the U.S., or contact us and we?ll be happy to answer all your tax and accounting questions.