FATCA: How American Babies Overseas Are Ensnared In Government Tax Net

In a way, this is a boring story about a seemingly rare problem. It’s about banks, federal law, taxes and people who go to great lengths to avoid paying their taxes. The law is called FATCA.

But if you can wade through a bit of the boring information, it’s also a story about the meaning of roots, heritage and mother’s heartache when an unlikely source threatens to sever those roots. It’s about feeling abandoned by the people who are supposed to protect you.

Banks. Never did I imagine, as my belly swelled with each of my babies, that banks would have the power to define my children’s identities or that a bank’s reach would dislodge my girls in a subtle slice separating them from our heritage, from my home, from parts of me that made me who I am.

You see, I’m a U.S. citizen who happened to fall in love with someone who is not. My husband is Swiss and we decided to start our family in his home town, near his job that had more stability than mine, that had better health insurance and vacation plans (that meant more and longer family visits) and good schools. Our two little girls would be the beneficiaries of the best of both of our worlds — they have dual citizenship.

Aside from the typical exhausted mom stuff, some postpartum mood issues and the homesickness felt by anyone who lives far away from their families, life for us is good. I imagined my girls’ lives filled with amazing opportunities. I dreamed of the advantages we could provide for them, the chance to experience life in Europe and the United States, doors wide open for them to consider the vast education and creative opportunities in two countries, learning lots of languages, the support and knowledge they would garner from two families steeped in two unique cultures.  I had no idea that they would be ensnared in their own government’s net to catch tax cheats before they could even talk.

Our youngest daughter was probably a couple of months old in 2013 when I called the bank to open a savings account for her. A few days later they called back with news that seemed at the time merely annoying. A U.S. law that would go into effect the following year had put a crushing pressure on international banks if they dealt with American clients. She explained that the bank was, like many others, following a policy to deny accounts to Americans, even if this was for an infant. I could open another account for myself, since I was an existing customer, and add my daughter’s name as a beneficiary. I found out later that this was a lucky compromise. Many Swiss banks were completely closing any account belonging to an American so that they didn’t have to saddle themselves with the scrutiny, cost, and exposure to penalties of the United States. I don’t know if, one day down the road, my bank will follow suit.

The law is called FATCA, Foreign Account Tax Compliance Act, and its job is to catch tax cheats. You can read about it here … if you need a cure for insomnia.

It sounds so simple. The United States is one of two countries in the world that taxes citizens living outside its borders, Eritrea being the other. Hooray for the U.S. government, it can bring money back to the battered U.S. economy. Let’s not forget that the United States is third on a list of easiest places to hide money with its own tax havens , like Delaware, where it’s easier to create a shell corporation than to get a library card. But great. I pay my taxes, everyone else should, too. Cheaters piss me off.

But the reality for my babies, for hundreds of thousands of others, is starkly different. According to this overview, between 2000 and 2009, about half a million American babies were born outside U.S. borders. That’s about the size of the city of Detroit, almost double the population of Lincoln, Neb.

My American-ness is with me no matter where I am

Being an immigrant or an expat is a challenging emotional experience, even when you are a member of a privileged group in a privileged society. But one thing I hadn’t expected was that the love I had for my own country could grow even greater. You know what they say about distance and fond hearts. When I watched our Olympic athletes compete or saw the stars and stripes painted on a house in Switzerland (I wonder if their neighbors complained about these folks’ ability to integrate!)…

… I became a mushy pile of pride, nostalgia and home sickness. My heart pounded and, once in a while, hot, sloppy tears remind me how American I am and will always be. (I actually cried tears of relief when I saw that Ernest Hemingway was still labeled an American though he lived much of his life outside its borders.) I feel, not just pride, but love, love despite my country’s faults and for its fight to be better, for its openness, for its creativity, for its boldness, for its warmth.  (If you want what I consider to be a fantastic definition of love of country, check out the video below)

When my girls were born in Switzerland, I felt honored to be able to give them American citizenship. I am raising them with as much of their American heritage that I can provide. At this young age, that mostly includes trips every year to visit my family, feeding them my mom and grandma’s spaghetti, reading books about discovering Michigan, Skype chats with their grandpa and cousins and scraping together Halloween parties in a place that has no clue about the holiday.

At 3 and 4 years old, my girls don’t yet understand that this place they love so much, as my daughter has called it “The United States in Michigan”, where they beg me at least once a week to board a plane to visit family, may not be concerned about their ability to live as functioning members of their community.

The day I got the call that American accounts, my baby’s tiny savings account, was no longer accepted, I felt a stab in my still healing belly. I was frustrated with my bank, I was frustrated with people who try to cheat and make it more difficult for people who follow the rules. But most of all, I was hurt that my babies were ensnared in the government’s net to catch tax cheats with no help, no understanding from the institutions and policy makers who say they have our interests at heart.

The silent knife

As my eyes opened to the situation, I was hit with the shocking realization that my daughters may have to give up their American citizenship. Shortly after the conversation with our bank, news came that Tina Turner had renounced her U.S. citizenship. And then more and more people were making the gut-wrenching decision to give up theirs. This story by BBC gives a powerful overview of just how difficult it is. And I understood. My daughters can’t stay on my accounts forever. One day, a day that to my mommy-mind is coming oh so fast, my girls will be old enough to work, to have jobs, vocations, for which they will be paid. A proud milestone in anyone’s life. They will need a way to deposit their earnings, to withdraw money for expenses. To live.  Yet it appears now they will have to make a choice, a choice to keep their navy blue passport or to surrender it and be treated as an outsider so that they can perform the simplest of tasks — open a bank account in their own name. 

In the grand scheme of things, we are a small and perhaps seen as an insignificant piece of a massive collection. Some of our fellow Americans may not even care that a family of its citizens who live outside its borders are overlooked. But we pay our taxes, we abide by the rules, and we hold America deep in our hearts. We wave our flag on the 4th of July and bow our heads on Thanksgiving. And we become, in a sense, ambassadors, the human face of our nation represented in countries where people may only see us as Hollywood or the devastation broadcast in the news. Our ability to function as Americans does matter, whether we live in Michigan or Texas or Switzerland or Chile. 

I don’t want my girls to have to give up their citizenship. But if the day comes when they have to walk into the U.S. Embassy, raise their right hands and swear an oath, an action I and their father took to declare their births when the United States claimed my daughters as part of its citizenry, I will stand with them, holding their hands and believing a little less in my country.

25 thoughts on “FATCA: How American Babies Overseas Are Ensnared In Government Tax Net”

  1. OMG what bureaucratically BS!

    Swiss banks take money from worse people than “Americans”, and nobody says a word. Our economy benefits from the Bankgeheimnis BIG TIME, and I don’t want to know how many RICH people (not innocent toddlers) hide their fortune without paying taxes.

    Don’t they even benefit from the fact that their Dad (and therefore the girls themselves?) are Swiss?

    1. Unfortunately being Swiss doesn’t mean anything if they have an ounce of American-ness. 🙁 Even people who didn’t even realize their parents got them citizenship, who never lived in the country, who don’t speak English, who have never identified as American have to go through these difficult and very expensive hoops for years. It’s crazy.

      1. Chrristina

        Tamara it isn’t the Swiss Banks. It is the law known as FATCA. Banks all over the world have to do the same thing.

  2. I think about this all the time. It’s not boring. It’s quite interesting. My children, my South African husband, and I all are USA citizens, paying our taxes…every year. I think it’s quite interesting that our UK friends are only now even thinking about becoming Swiss after living, buying, and committing to living in Switzerland. Only when pressure is put upon them are they thinking about becoming the citizens of the country they have raised their children in. I’m very excited at the idea of becoming a Swiss citizen. To pass the German tests, social and government questions, and the integration policies. We could only open one bank account and get one credit card. And it was hard work. No one wants to give Americans bank accounts or credit cards. I love your post. Very good current events…

    1. I’m glad you were able to at least get an account though. If I ever get Swiss citizenship I still don’t think I could ever give up my American citizenship. If it starts to cause us too many restrictions, or the double taxation (when my best-selling novel comes out, you know 😉 ) becomes a crippling financial burden, maybe that changes things. God forbid if my husband dies before me, how would an American get by on their own here. 🙁

  3. I always think the American tax thing for those living abroad is so unfair. What a steep price to pay for citizenship. I can totally relate to not wanting to lose connection with your home country.

  4. I can see how upsetting this is for you. People don’t appreciate the anguish that sometimes comes with bringing your children up in another culture. Of course we can’t know for certain but this is a very heightened phase in US-Swiss banking troubles, with the recent amnesty for tax-evading Swiss banks only closing in January. The banks are jittery because of the huge fines. Hopefully things will have normalised in a few years before your girls have to worry about banking.

    1. That’s my hope, as this is really just getting started, that in 10 years things will be different. The skeptic in me has a hard time imagining our government pulling back from collecting taxes abroad if it turns out to be bringing in the amount of money they expect. But maybe. Hopefully.

      1. Karen

        There’s a group raising money to sue the US government to stop taxation of non-resident citizens. You can find them at citizenshiptaxation.ca

  5. Ellen

    Tara, it is hard. One of my four has taken the step and renounced.

      1. Mary Jo

        This is heart-breaking. Our wish as parents is to widen our children’s opportunities, not narrow them. I don’t understand why the US can’t make an exception for ordinary people, i.e. those earning less than $200,000 / year. We are not tax evaders.
        In my case, I haven’t owed a cent in US taxes in the past 27 years, yet every year I must spend $300 to make sure my taxes are filed correctly. That’s a $8100 citizenship tax, as far as I’m concerned.
        And now my two young adult children must file as well. They don’t want to spend that much money every year to comply with the exceptional tax laws of a country they’ve never lived in, and yet they love to engage with the US and all their family there.
        I just keep hoping that Americans abroad will be able to pressure the government to repeal this oppressive burden.

        1. It is such a tough position to be in. That is no small change for a lot of people, especially young people just starting out. I can imagine it quickly grows to resentment. 🙁

  6. We have chosen not to open an account for G here just because of the fees attached to banking in this country. We have a few (connected) accounts at a single bank, as well as a Swiss credit card, but that’s it. If I ever get a job here, we’ll open one more so that I can get paid as well.

    It’s interesting for me to look at this from your perspective, and a couple of other families I know, who are one-half Swiss and one-half American. They have to handle everything differently than we do; we’re all American and will be beholden to the US for years to come. We certainly won’t be getting Swiss citizenship anytime soon.

    It is really too bad that the US banking and taxation regulations have made life so difficult for us regular people. People who have the funds to hide money will always be able to find away. Meanwhile, we’ll be over here getting taxed twice and worrying about whether or not we completed our federal forms correctly.

    1. Yes it is such a shame. And you’re right, people who want to hide their money have the means to hire people to find the loopholes. I have had to make concessions that I would tell any other person: “DO NOT DO THIS!” For instance, all of our finances are in my husband’s name alone. Because he is not a U.S. citizen, once my name is added, all of his assets have to be reported to the U.S. government. And so, if, god forbid, something happens between us, I could be in a very dire circumstance. But I don’t know what else to do. 🙁 Crazy. I’m glad you were able to get accounts at all!

  7. Sherry B

    It’s not just Switzerland – it’s all around the world. Imagine international banks having to hire staff just to file forms for the IRS in the USA! Why would they do that? And then be fined if they don’t? Not worth it – it’s much easier to close their citizens’ accounts. We’ve seen this in France, England and even Canada (which may have the best relationship with the US banking system); US citizens are persona non grata with international banks. And DON’T get me started on filing taxes in two countries!

  8. JC Double Taxed

    Tara, you may consider joining others and speak out more about the injustices of the US government in regards to tax and compliance requirements of US persons living overseas. The longer you live overseas the greater the injustices will appear to you.

    The US should shift to Residence Based Taxation like all other OECD nations. The US has no right to punish and vilify US Persons overseas because their “liberty” and pursuit of happiness has led their “journey of life” to making homes in nonUS countries.

    The US laws are contra to American founding principles. This is wrong and anti American:Double Taxation Without Representation or Services, and with Tax Cheat Penalties and Treatment.

    US citizenship should be about the greatest liberty in the world. Yet the truth is US persons living overseas are tremendously disadvantaged by the US government compared to nationals from all other OECD countries.

    Any US persons living overseas caught up in this must visit the message boards of The Isaac Brock Society, and Facebook Citizenship Based Taxation and American Expatriates Groups; consider supporting the Canadian FATCA IGA Lawsuit, and contribute to citizenshiptaxation dot ca.

    1. You’ve given me a lot to consider. For me, at the moment, I just wanted to express the sadness I felt as a mother when I realized the weight that will be placed on my girls simply because I chose to give them access to their rights to U.S. citizenship. I can imagine the intricacies will reveal themselves to me as time goes on.

  9. Andy

    Only PostFinance is required to open an ordinary account for any Swiss citizen who wants one. http://www.swissinfo.ch/eng/swiss-expats-caught-in-middle-of-us-tax-conflict/32137500

    For better or worse, not every child born to an American citizen abroad is attributed US citizenship. http://www.afsa.org/citizenship-and-unwed-border-moms-misfortune-geography

    Increasingly, Americans abroad are failing to register the birth of children to a US consular office. That does not change the fact of nationality (or lack there of) but the US Government is willing to treat certain unregistered (“doubtful”) citizens as aliens. https://fam.state.gov/fam/07fam/07fam0080.html (7 FAM 085) and 9 FAM 202.1-2(a) https://fam.state.gov/fam/09FAM/09FAM020201.html

    US financial institutions are increasingly unwilling to open mutual fund and other investment accounts for persons abroad, even those with American citizenship. That said, the USA is still a haven for foreign “hot money” and, indeed, money-launderers who manage to create a clean trail for funds invested in real estate, secret LLCs, dynasty trusts, and so on.

    1. That’s good to know about PostFinance. Thank you. I am also concerned about the restrictions on U.S. investments.

  10. What a tough situation, I feel for you. I also just heard that Australia is keen to start taxing its overseas citizens in a similar way to the US does… hopefully won’t affect those of us who’ve been away for nearly 10 years. Yikes!

    1. Oh no, another reader just mentioned that other countries were considering this U.S. based approach. What a shame. 🙁

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