It is awful - I'm glad you never had to deal with. It provides little revenue and causes a huge amount of hassle and makes living overseas way more difficult.

American expat here - agreed with the other expats - it’s the filing that really, really sucks. Like really. Breaking the difficulty down in terms of priority.

1 - just trying to work through what all might possibly be owed and not owed to US as well as the country(ies) one operates in.

2 - Identifying through which paperwork to declare it, while also ensuring income / business reporting is copacetic with the tax regime of the country that same is actually earned in. As a business owner, (many operating overseas are looking after a business) I have to complete corporate accounts (which costs $$$$ and takes forever) before I can file American income tax for the same accounting year.

3 - the value of the tax liability itself is a distant third in terms of hassle than any of the above. (I’ll include in this bucket the fact that Americans are taxed on income earned abroad, putting us at enormous disadvantage for work opportunities vis—a-vis peer expats who come from other countries)

Why doesn't the US reduce it to a flat tax? Say, $1000/year to send you your election ballot, and evacuate you in case something goes horribly wrong.

The US government doesn't work like that. There isn't some logical person making logical decisions.

For this change to occur, many senators and representatives would have to be directly and personally incentivized to make the change.

They aren't.

Moreover, they're incentivized to do the opposite. Expats aren't a sympathetic group to any major voting demographic.

And how about they make this service opt-in. I was born in the US but I have had nothing to do with the place for 95% of my life and I don't want their help. Why must I fill out their paperwork every year or pay them money to opt-out (which I can't even do anymore because of the current backlog).

Most countries don’t tax citizens living abroad on foreign revenue, and just forget about them once they become residents elsewhere (unless they still have income from their country of origin).

And by most here, you mean every single country in the world apart from the US, Eritrea, Myanmar and Hungary.

Hungary does not tax it's citizens living abroad.

I was going by the table at https://en.wikipedia.org/wiki/International_taxation#Individ... but it’s entirely possible that it’s incorrect.

It looks like Hungary technically taxes nonresident citizens except in almost every case where it would matter.

That's pretty easily dealt with through residency thresholds. We do this in the UK, counting people resident for tax purposes if they spend more than so many days in the UK in a given year. I would be very surprised if the US doesn't already do this to determine non-citizens tax status.

That's how state taxes are dealt with in the US and a number of people go to great pains to make sure they stay exactly the number of days in some high-tax state that lets them skirt liability. I'd be surprised if similar things didn't happen in Europe but I don't pretend to be as familiar with what goes on there.

Sure, people definitely skirt around the edge if the rules. They’ll do that wherever you set the thresholds though.

If you are not allowed to open financial accounts for investments in the country you are living in because they do not want to have information sent to the IRS, you'll think differently.

I know at least one country that will not let you even open a bank account if you have a green card or US citizenship. Actually, even if you're a foreigner living in the US (student, H-1, etc), that country will not let you open a bank account - even if you are a citizen of that country. The rule is simple: If you have ties to the US that could require you reporting your bank account to the IRS, then you cannot open a bank account.

I don't understand how the IRS can know what you do in foreign banks

First hand experience (US citizen): When you open a bank account overseas, they ask you if you are subject to FACTA (US passport or green card). Then you are given a multi-lingual form that explains all about FACTA, and require you submit your passport (for scan/photocopy) and to sign a form acknowledging the bank will end your account details annually (at least!) to the US IRS. I confirm this is true multiple times -- different banks, different countries. Surprisingly, even ones where the service is 100% non-English (read/write/speak!), they will still bring out multi-linguage forms and do a bunch of pointing to confirm.

Funny story: Overseas, I can remember going through anti-money laundering training. The week after, I went to open a new bank account. When I told them I was a US citizen, the account rep said -- without missing a beat -- "Do you want to report?" Jeez. That question alone is probably enough to get that bank into trouble! Obviously, that person failed their own FACTA training...

The IRS requires you to report all bank accounts you have in foreign countries when you file taxes:

https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance...

> FATCA also requires such persons to report their non-U.S. financial assets annually to the Internal Revenue Service (IRS) on form 8938, which is in addition to the older and further redundant requirement to report them annually to the Financial Crimes Enforcement Network (FinCEN) on form 114 (also known as 'FBAR')

What's ridiculous is that it also "requires" foreign banks to report details of accounts by US holders - even if the bank has no relation to the US.

Find me a bank in 2021 that doesn't clear US dollars. That is the big gotcha. This is one of the ways that the long arm of the US Treasury applies force is by restricting US dollar clearing if any banks in a jurisdiction refuse to comply. Literally: They would say to a developing country: Get that local bank in order, or we will not allow any one in your country (central bank or businesses) to trade or clear any US dollar transactions. Remember: Most US dollars overseas move by SWIFT transactions.

Because they apparently require foreign banks to report it.

Now, how do they actually enforce that supposed "obligation"? I do not know.

But it doesn’t surprise me. The US has already enforced it’s laws on foreign companies' dealing abroad merely because they had used dollars in their transactions.

They haven’t enforced it yet (for the banks, for non-compliant Americans, they have). But they’ve signed treaties with many governments to allow this, and they threaten foreign banks with fines related to any US dealings.

They say you play ball or lose access to the US banking system, which is pretty much a death sentence.

It generally doesn't, but the law says you have to tell it or face prison time.

And there are some instances of information sharing via tax treaty, but I haven't seen exact details on how it works.

Which country is this?

I'm aware of restrictions in France and Pakistan from coworkers on H-1 visas from those countries. Note that both probably do provide a way to open it if you go through some lengthy "exceptions" process, but it wasn't worth the hassle.

Basically, ever since the IRS required you to report foreign accounts (2007 or 2008), some countries have made it harder for people based in the US to get accounts. They see it as an indirect means to collect intelligence by the US.