It’s been awhile since we wrote about the IRS’s ongoing efforts to collect taxes from U.S. taxpayers on income from outside the United States. Implementation of the Foreign Account Tax Compliance Act (FATCA) has raised the ante on those efforts in recent months.
FATCA has wide-ranging implications not only for individual taxpayers, but for foreign financial institutions that are increasingly required to share data with the IRS. Financial professionals in the U.S. and abroad are also seeking to sort out the nature of their obligations regarding offshore accounts.
In today’s post, we will take note of a well-publicized story that highlights the extent to which U.S. authorities are willing to go in their attempt to tax foreign income.
The story features the high-profile mayor of London, Boris Johnson. Though Johnson has U.S. citizenship, he hasn’t lived in the U.S. since he was a small child. When the IRS tried to tax him on the sale of his home in Britain, Johnson went right to the press with his opposition.
Mr. Johnson told National Public Radio that it is “outrageous” for the U.S. to tax its citizens on their worldwide income. The U.S. is the only country in the world that tries to do so.
FATCA has given U.S. authorities more tools to enforce this sweeping goal. Many Americans living abroad have given up their passports rather than comply. As we noted in our July 2 post, so have many green card holders.
Many U.S. expatriates support Johnson in his conflict with the IRS. In Canada, some of these expats have even taken the step of making a court challenge to FATCA. They contend that their government does not have the authority to give information to the IRS about the privately held bank accounts of U.S. citizens living in Canada.
There are more than one million of these U.S. expats in Canada. The issue of worldwide taxation raised by Boris Johnson’s case therefore goes far beyond the capital gains taxes owed by one person. It is an issue that affects millions of people around the world.
Source: Forbes, “London’s Boris Johnson Gets Help In IRS Fight,” Robert W. Wood, Nov. 25, 2014