By the A.M. Costa Rica staff
The U.S. Treasury Department has declined
to adopt the same country exemption that
would free many expats from burdensome
The announcement of the decision comes at
the same time that the National
Taxpayer Advocate said the tax-collecting
Internal Revenue has in some cases imposed
unnecessary burdens and failed to protect
the rights of affected taxpayers. That criticism was in
reference to enforcing the 2010
Foreign Account Tax Compliance Act.
The tax advocate, Nina Olson, in her
annual report to Congress characterized
these burdens as additional tax
preparation fees and the unwillingness of
some foreign financial institutions to do
business with U.S. expatriates.
The private advocacy organization,
the American Citizens Abroad, was
more blunt. The Treasury Department slams
the door on same country exemption for
Americans abroad, it said. The Internal
Revenue Service is affiliated with the
The exemption would have eliminated IRS
reporting requirements for expats who bank
in the same country in which they live.
American Citizens Abroad noted it had
worked on the exemption proposal for two
years but it said the Treasury officials
declined to make changes for fear of the
risk of tax avoidance involving money in
Citizens Abroad said that tax cheats were
a relatively small population of U.S.
taxpayers residing in a foreign country
A.M. Costa Rica
their local bank to evade U.S. tax.
The expat advocacy association and similar
groups also are working to change the U.S.
Tax Code to use a geographical rule
instead of a citizenship rule. Now U.S.
citizens must pay taxes on money earned
abroad, too, although there are some
exemptions. The association prefers the
way nearly all other countries tax their
citizens on just money earned within the
The Foreign Account Tax Compliance Act
requires U.S. citizens to report their
assets held abroad each year when they
file a tax return. The law also requires
foreign banks to file reports on their
U.S. citizen customers, which is why some
of the banks have declined to do business
with expats. The rule also applies to
green card holders, those with double
citizenship and spouses of U.S. citizens.
American Citizens Abroad said that the
Treasury Department either missed the
point or failed reasonably to balance the
considerations when it declined to make
changes in the regulations.
It said it hopes to bring up the subject
again with the new administration.