My husband and I are Australian citizens, who, after living in America for 15 years and having both our children there, decided to apply for USA citizenship. Oh, if only my present self could go back in time and scream “ARE YOU AN IDIOT?? – DON’T DO IT!”
After a long and tedious journey to become USA citizens, including having to fly from North Carolina to Sydney (while I was seven months pregnant) to pick up our paperwork from the US Embassy in Sydney (figure that one out) – we finally, Ta-Da!, became citizens. Six weeks later – it took such a long time to process – our personal circumstances changed and we decided to move back to Australia. Oh well… right? We can always move back, we said to ourselves, if this move home doesn’t work out. We are citizens now – we can come and go as we like!
Once back in Australia, we had years of filling out duplicate tax returns, as anyone who has been in our position well knows – one for the USA for the Calendar Year, and one for Australia for the Financial Year. Our returns had to go through an accountant based in the USA (more fees) to be submitted on our behalf. Okay, we were having to pay tax over there as well as here, but it was literally too much of a pain to do anything about.
Then one year our accountant said “do you have a 401K or equivalent account in Australia?” Little did we know such an innocuous question could have such huge ramifications! Having Superannuation accounts in Australia, we stupidly thought Super was the “equivalent” of a 401K. Oh no, no, no my friend! A 401K is NOT the same as a Super fund here as far as the IRS are concerned. Any money you have contributed to Superannuation via Salary Sacrifice is considered income and taxed as such by the USA.
Next came requests for more information, questions and even hints that we were deliberately evading paying tax! Seriously!? We had to re-submit amended tax returns for every return we had filed for over 15 years! (via the accountant – who by this time had decided he was in too deep and referred us to an overseas specialist accountant/lawyer for – yep, you guessed it – yet more fees!) and more tax on the so called “undeclared income”.
About this time we started to seriously consider renouncing our US citizenship – why should we have to pay all this money to the USA government that we earned working in Australia and paid tax on in Australia to fund our retirement – In Australia? How is this fair?
So we contacted a lawyer to start the renunciation procedures. We had to liquidate all of the shares held in our Super fund to ‘prove their net worth’, and provide a “snapshot” of every single asset we owned, every cent, was taken – we were taxed as if we sold everything we owned on that day. Wow, that was NOT a cheap exercise. We were nearly put off, but the thought that we would be doing this for the rest of our working lives filled us with horror and a deep seated sense of injustice. After all, we had paid all the tax owed (more in reality) – in both countries – on time and without trying to evade anything!
So – finally the big day came and we flew to Sydney to formally renounce our USA Citizenship. We were quizzed together and separately as to WHY on earth we would want to expatriate?! Having been forewarned not to say it was for financial reasons, we said (honestly) that it was because we wouldn’t ever be going back there to live. As “non-citizens” they told us we could NEVER ever apply for citizenship again, and we would only be allowed a holiday visa for 20 days – it was as if they were trying to scare us into remaining citizens!
When we were eventually allowed to stand in front of the USA flag, and read from a card – with our hands on our hearts – that we formally renounced our citizenship, it was a huge relief. Of course, it took many months after that for the paperwork to finally come through but – at last! there it was – we were no longer citizens of the U.S. of A.
We are now encouraging both of our adult children to expatriate (both having been born in the US) before they start earning much or gaining any assets. They face a long and costly path – but hopefully not as long and costly as ours was. They, understandably, didn’t want to give up their citizenship as it comes in quite handy when you are travelling to the USA and who knows if they might end up living there one day? These days it almost feels like blackmail – Big Brother knows where you live and he knows every time you open any kind of bank account. Uncle Sam is ready to pounce on you once you start earning any money. Our advice is – get out now, while you can!
I know that this account is long winded and sounds pretty much like everyone else’s who is in our position – but this situation is unjust, unfair and this double standard needs to be stopped. I truly feel for people who are trapped in this circumstance because they literally will be bankrupted trying to get out. We were lucky that we thought we could afford to take such a huge loss.
Like many others I am scared to put my name to this story for fear or potential ramifications. I have been asked to contribute many times, but always felt intimidated and scared that I could be identified and penalized. I hope in some small way it can make a difference.
Adelaide, South Australia.