I'm an American living in Europe. I report my income to the IRS every year, like you. Reading your comment gave me a scare -- what exactly would trigger the $20,000-80,000 fine or asset seizure?
Is it a failure to report income taxes at all? Or do you make so much more than $100k/year that the double taxation is killing you?
I'm just trying to figure out what, other than their already-reported income being audited, has got all of your expat friends so spooked...
Many people didn't know about the new requirement, and they had to pay big fines.
What will be the next new requirement that startles people who don't have any contact with the country? No one knows. That is the risk, the uncertainty that there might be a requirement that you don't even know about...
It is even worse for US Persons in Canada, many of whom have never even been a US resident in their entire life. The reason is our tax treaty... If you file in Canada, you're good. At least that is how it was. Now they are going after these people because capital gains are exempted from this aspect of the treaty so they think they are compliant by having filed in Canada, but then find out a house the sold 10-20 years ago should have been declared even if they have never had to file US taxes before.
The Foreign Earned Income exclusion does not apply to capital gains, investment or any other "unearned income." So a retired person would by able to claim the FEIE exclusion -- they'd be taxed as if they lived in the United States (with deductions for foreign taxes paid.) Pensions, disability payments, annuity payouts.. not under the FEIE. So for a lower-income retired person, double taxation is a huge problem.
For me, I got an inheritance that I didn't really remember from a relative who passed away years ago. It was put into a foreign bank account since this person wasn't a US citizen and passed away in the country of their birth, and since I got it as a minor I basically ignored it, figuring I could just leave it as a bit of an emergency fund.
When I found out about the new rules and then remembered the bank account (10 years later!) I realized I was probably not in compliance. That's one thing that spooks people: $2000 in a bank account you forgot about can lead to disproportionate fines. I had to do a lot of paperwork to get into compliance, and because I had to transfer the money I actually lost a lot in a poor exchange rate (due to various constraints).
Is it a failure to report income taxes at all? Or do you make so much more than $100k/year that the double taxation is killing you?
I'm just trying to figure out what, other than their already-reported income being audited, has got all of your expat friends so spooked...