I have lived solely in Australia for 3 decades. I kept my US Citizenship thinking that there was no drawback from doing so. I was told I had to continue to file US Tax returns and I would just send the US based CPA my Australian Tax Return & they would send me a huge document saying “No Tax Due” & I would sign it. It was incomprehensible to me how the Australian Tax return was converted to the IRS Tax return. I just thought I would never owe anything due to the tax paid in Australia.
This went on for many years until one year the USA Accountant said I had a huge Tax bill. I couldn’t understand this as all of my US Returns never owed a cent, but it seems that they had been preparing my returns incorrectly and all my deductions in Australia were not deductions in the USA. This was the start of my long intense problem that lasted from for several years
I was never told by the USA CPA that my Self-Managed Superannuation account here in Australia was not considered by the IRS as SUPER, it was considered a Foreign Trust and hence had been reported incorrectly; so all of my Super Savings here & interest income in it was treated by the USA as STRAIGHT INCOME and taxed as such going back 8 years. I lost all the benefit of my Super Savings. Then because the US CPA didn’t fill out the single page Foreign Trust Form the IRS Penalised me 30% of the total amount of my Super Balance. I had hired very good tax lawyers in the USA to handle all my dealings with the IRS & instead of getting me a fair result they were predatory in their billing & let things drag on & on.
The other large issue was all of the money I gave to Charities in Australia over the 8 years were not allowed my US Tax returns because “They were not recognised as USA Approved Charities”. This is another issue that the US CPA never advised me about. So between losing my SUPER & my Charitable deductions I owed a huge sum to the IRS, then add on USA Tax Lawyers & Australian Tax Lawyers fees.
I was so distraught ( I was also being treated for a blood cancer at this time ) I decided to give up my USA Citizenship & all the hassles that entailed. The day I had to give that final statement I was in tears at the counter at the US consulate in Sydney, I felt I had been betrayed & abused by the US. Then I had to file the final IRS form 8854 which again looks at all your assets as Capital Gains at the value the day you gave up your citizenship.
This whole situation was like having a second full time job, the lawyers who were supposed to help & protect you become part of the problem. If I could have chosen between Chemotherapy & dealing with this legal situation, I would have chosen Chemotherapy because at least you would know when the end would happen & the worst thing would be that you could die. With the legal matters months turn to years & I felt totally helpless that it would be resolved before I died.
I made one mistake & was willing to take responsibility for that & I did but all the above things I mentioned were so unfair that I couldn’t cope with it.
So I feel a huge responsibility to help publicise this situation so that other people don’t suffer as I had to for nearly 5 years. Australia is supposed to be the USAs’ best friend; how can best friends treat each other like this ?
– Shaun