For Americans in Canada, even college savings can become an IRS trap

“Every patch laid over that rule creates another form, another penalty, another trap.”

Jennifer, a U.S. citizen currently living in Canada

Dear Congress,

I have lived in Canada since 2007, when I moved here with my husband, who was returning to his home country for work. I remain registered to vote in Kentucky, and I have voted in every U.S. election since I left. I follow American politics and changes in the law closely. As a permanent resident of Canada, I file and pay taxes in both countries on income I earn here.

When my children were born, we registered their births with the consulate, proud to document their American citizenship and everything it stands for: their heritage, their opportunities and our hope of moving back one day.

Ordinary choices, extraordinary paperwork

I prepare U.S. returns for Americans abroad, so I see this system from both sides. The rules are absurdly complicated for the most ordinary decisions. Opening a college savings account for your child can pull you into Forms 3520, 8858, 8833, 8938 and the FBAR. Penalties for filing late are enormous, while the IRS offers almost no guidance on how to get it right.

The service is abysmal. One phone line for every international taxpayer, barely staffed and often answered by people with little knowledge of our situation. Transcripts are hard to obtain. ID.me is hard to register for. Refunds can now only be paid into a U.S. bank account. Among my clients, the oldest can no longer manage to file or pay at all, and there is nobody at the end of the line to help them.

The rule that creates the traps

For years, I told myself that clearer guidance and simpler forms would be enough. I no longer believe that. What has to change is the rule that produces all this paperwork: the United States taxes its citizens on the basis of their nationality rather than where they live. Every patch laid over that rule creates another form, another penalty, another trap.

That is why the Residence-Based Taxation for Americans Abroad Act matters so much to me. It would let Americans like me be treated as what we already are: residents of the country where we live, taxed by the United States on our U.S. income and gains. Almost every other country in the world does this for its own citizens. The bill asks nothing more than that the United States do the same.

I am not asking to escape my obligations. I pay my taxes in the country where I earn my income, where my children go to school and where my life is. I am asking you to support this bill and to see it through.

Respectfully,

Jennifer in Canada