Many Americans work and live overseas or in Canada and Mexico. They are loyal Americans but they pay taxes to their host country.
Under President Obama, the IRS is going after these citizens with a vengeance. It’s not the taxes that the Obama administration seeks but the penalties that can be three to six times what is actually owed.
The people hardest hit are not the wealthy, but people with less than $100,000 saved for retirement who thought they were up to snuff on their U.S. taxes.
Thousands find their only recourse in fighting a Department of Justice with seemingly limitless resources is to renounce their citizenship.
The Wall Street Journal detailed the plight of Patricia Moon, whose ancestry in America predates the Revolutionary War. But she fell in love with a Canadian and moved to Toronto. She fears that even though she committed no tax fraud, she may be penalized. That’s why Moon became one of 1,001 Americans abroad to renounce their citizenship so far this year.
“I bawled my eyes out,” she said.
Moon, 59, and her husband fear the IRS would seek nearly a half-million dollars in penalties because she had undeclared savings and checking accounts. These assets were never hidden and have no U.S. taxes owed.
“I was afraid we would have to cash in our retirement accounts and sell our home,” she told the Journal.
She is far from alone. The Journal reported that an IRS “amnesty” program hit the people with the smallest accounts hardest. The bottom 10 percent paid penalties that averaged 5.8 times the taxes owed, while the top 10 percent paid penalties that were 3.1 times higher than the taxes owed, on average.
Under threat of prosecution, more than 43,000 U.S. citizens abroad have paid $6 billion in penalties and taxes since President Obama became president.
Nearly 8,000 taxpayers renounced their citizenship in that time -- which is 60 percent more than the 5,000 renunciations in the previous decade.
How odd that an administration whose first Treasury secretary, Tim Geithner, failed to pay his taxes without penalty is harshly penalizing people who allegedly made the same mistake.