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Expat Americans Mustn't Miss Virus-Driven Tax Reliefs - ACA

Tom Burroughes, Group Editor , 25 March 2020

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American Citizens Abroad frequently calls on Washington DC's lawmakers and tax enforcement authorities to change how US expats are taxed, arguing that the country's worldwide system is unduly onerous.

(Updates story with advisors' comments on UK-based persons' positions, details.)

An advocacy group for expat Americans argues they should get the same coronavirus-driven tax reliefs as those which apply to domestic US citizens.

The call has come in a message from American Citizens Abroad to legislators in Washington DC, ACA said in a statement. 

Last week the Internal Revenue Service waived the late payment penalties and interest on tax due until 15 July; the filing deadline is also postponed until the same date because of the disruption to economic activity caused by the pandemic.

ACA said such measures “must ensure that Americans living and working overseas are treated in the same manner as other taxpayers, and that special issues arising from the fact that they live outside the US are addressed, so as to avoid mistakes and unintended consequences”. 

“All too often, as evidenced by the recent Tax Cuts and Jobs Act, consideration has not been given to how changes will affect the community of Americans overseas,” ACA said, referring to the 2017 legislation. At the time, the group criticised the “Transition Tax", enacted as part of the Act. The ACA said that expats who run small businesses will be unfairly caught up in its sights because the measure should be aimed at large corporations stashing foreign earnings offshore.

In its letter to Congress this week, ACA said that lawmakers must examine “the mechanics of refunds, limitations based on gross income, and loans to small businesses”, to ensure that US-based citizens and expats are on the same page.

“The Congress, Treasury and IRS must ensure that Americans overseas are treated equitably. In many cases, US citizens overseas claim foreign tax credits, resulting in little or no US tax liability, even though they have significant adjusted gross income. These individuals should not be adversely affected, and they should not be subject to reduced refunds/credits,” Marylouise Serrato, ACA executive director, said. 

The problems faced by US citizens living overseas has prompted a number of them to renounce their citizenship. It has also prompted a number of specialist wealth managers to provide financial services for them. While estimates vary widely, there are said to be as many as eight million US expats.

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