A financial prisoner, trapped by FATCA compliance laws

“I value my citizenship, I vote, I like to do things right, and I don't mind transparency. But I am overwhelmed, a financial prisoner to an opaque system, and a second-class citizen.”

— Hannah, an American from Pennsylvania who currently lives in Germany

Dear Congress,

Today, June 15, is the automatic two-month extension deadline for many overseas U.S. citizens to file their 2025 federal income tax returns. As a constituent from Pennsylvania living abroad, this deadline is another reminder of how citizenship-based taxation has turned me into a financial prisoner.

My children and I have been locked out of the financial system where we live by FATCA compliance laws even though our daily life is firmly rooted outside the United States. These unfair compliance measures force us into an ongoing cycle of complex paperwork, massive bureaucracy, and intense personal stress.

Obligations of citizenship-based taxation

I am an American citizen. For the past 12 years, I have resided exclusively in Germany. My dual-national children and I are burdened by the obligations of citizen-based taxation imposed by the U.S. tax system.

Because the United States is the only developed country that taxes its citizens on their worldwide income, even when they have lived abroad their whole lives, I have to do more than pay taxes in Germany, where the tax burden is already very high. I must also file a tax return with the IRS every year, made especially complicated by my foreign ties, and I have to meticulously calculate the value of all my foreign financial accounts, even my point-based mandatory occupational retirement account. My children will eventually have to do the same.

I value my citizenship, I vote, I like to do things right, and I don't mind transparency. But I am overwhelmed, a financial prisoner to an opaque system, and a second-class citizen. I am really just an ordinary person who fell in love with a German while affiliated with the U.S. military community in Kaiserslautern. I am a housewife now with two small children. My income is consistently excludable or below the standard deduction, making the reporting process a massive paperwork headache just to come out at zero. Surely it is a burden to the IRS, too.

I have exhausted far more hours than the IRS estimated taxpayer time burden trying to understand what is expected of me (IRC Section 988 on foreign currency gains of over $200 incurred by personal transactions is particularly onerous when you're not equipped to interpret tax law). We do not have the disposable income to spend on professional tax preparation, but we can't afford to make a mistake either. We try to keep my reporting obligations as simple as possible to hopefully avoid both.

Foreign investments and family financial risk

But, as a foreign woman raising children here in Germany, this issue goes further than the inconvenience of excluding foreign income. I am putting myself at risk by trusting my husband (a non-resident alien from the U.S. tax perspective) with sole signature authority over our primary savings and foreign investments. I do this simply to avoid the hassle and risk of owning them as a U.S. citizen. Unfortunately, there are also European compliance laws that prevent us from investing freely in the United States. Gift and inheritance laws make this sharing of financial assets a gray zone in both systems. A breakdown of our marriage would be financially catastrophic. Should my husband pass away before me, my children and I would be further burdened simply by being the automatic beneficiaries, by German inheritance law, of any modest, foreign-based investments (e.g. PFICs). Even his life insurance and retirement accounts would carry major U.S. tax implications.

My children's German grandparents would like to set up junior investment accounts for them, but that is simply not feasible and could even carry punitive consequences. My boys may also face discrimination when opening foreign bank accounts due to the Foreign Account Tax Compliance Act. They are German and American, but they aren't able to freely exercise their citizenry in either country.

I don't agree with everything President Trump says, but I do stand with his campaign statement: "I support ending the Double Taxation of overseas Americans." Needing to coordinate the requirements of multiple tax systems simultaneously is a hardship for average Americans who have made their homes abroad, and it needs to stop.

Sincerely,

Hannah from Germany