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Capital Control In The U.S. - H.R. 2487 - Hire Act

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cwulff1999
11/5/2010 22:07 EST

Hello All,

Has anyone looked into the bill H.R. 2487 that was passed on 3/18/10? It is imposing a 30% tax on money sent or being held in a foreign bank account. It was buried in the HIRE ACT that was passed to help stimulate small business hiring. You can google it if you haven't already done so.

What is your take on the affect it will have on expatriates? It is in regards to the transferring of U.S. dollars outside the U.S. borders. It is written in legalese and I have a difficult time translating it into plain understandable language.

If I understand what I have read it seems it is going to be 30% more expensive to become a resident of a foreign country. Hopefully, I am wrong.

Any information would be appreciated.

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ILA
11/5/2010 23:34 EST

Hello,cwulff 1999,
Welcome back.
I would imagine that there will be enormous effort to raid the expat bank accounts wherever they happen to be.on the planet.
Some old people in the old countries NEVER tust banks.There is a good reason for that.
Banks may not be a good place to keep your hard earned cash.Perhaps only a minimum kept in them.
By the way thank you for your very helpful Email to me way back when.

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cwulff1999
11/6/2010 19:31 EST

Hi ILA,

Nice to see you are around and doing well.

The reason I ask about H.R. 2487, is that I believe it will have far reaching effects for people living outside the U.S. borders as a U.S. citizen.

I contacted our tax man and he did not even know about this new law. Like I say, it was buried in the HIRE ACT which was intended as a stimulus to create jobs in the small business world. All I have been able to find on the internet is some bits and pieces of the bill and some advice on what it means for the averavge Joe Blow living abroad. It is not only for the fat cats with very large foreign bank accounts, but it is supposedly being applied to any money transfers or precious metals being sent or held in a foreign account.

I hope I am wrong, but I think it will prevent us from residing outside the U.S. borders. We don't want to make a move and find out the cost of living just increased by 30% due to the new law.

I have already heard some horror stories from some people I know that have a son that works in Japan and the bank he has been doing business with for many years has advised him to find another bank to do business with, because they will not be complying with the new law. There have been similar stories that I have heard also. Foreign banks are not going to want to be bothered by all the restrictions this new law will impose upon them. This I believe will be a gigantic problem. I hope I am wrong!

If you hear anything in regards to this topic I would appreciate it if you would let me know.

Thanks much!

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Coloradobill
11/7/2010 11:34 EST

Garry Scott had his accountant look into this, I deleted it but from my fading memory from my old age this is what he found. If you are holding money in a foreign account the bank can hold 30% of any income produced by that account and send it to the USA gov.

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vandtor
11/7/2010 11:45 EST

perhaps I am just being naiive but how does the US Govt. get a hold of your foreign account and I'm just talking about something that is used for your day to day living unless you report it?

There is no US # associated with your Ecuador account such as a SS, Tax ID or even passport. At least in my case 30% of nothing is still nothing.

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cwulff1999
11/7/2010 13:01 EST

Hi Vandtor,

It is my understanding that many foreign banks do business in the U.S. Unless the foreign bank plays ball, they will be required to close the account. There are probably banks that do not conduct business in the U.S. and will not care either way. I guess those are the banks that expats will have to locate.

It never ceases to amaze me how the U.S. can dictate to foreign banks, but they must have some kind of leverage to hold over their heads.

My only advice would be to look up the information on the web and decipher for yourself.

Have a good day!

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vandtor
11/7/2010 13:18 EST

thanks cwulff, it is some murky water. I guess if Uncle Sam wants some of my Ecuadorean bank account then they will need to really turn over some stones because there isn't much there to get :)

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breather
11/7/2010 19:57 EST

My husband and I also learned that more and more foreign banks are refusing to set up accounts and have closed accounts of friends of ours. We are the only country in the world demanding compliance from foreign banks. As you've noted, they're thumbing their noses at us. Love this "hope and change."

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cwulff1999
11/7/2010 20:08 EST

Hi Breather,

I believe it is terrible situation that expats are going to be put in. The "change" and "yes we can" of two years ago is really becoming bad news, "period".

Have the friends of yours that had the bank close their account been able to locate other banks to do business with, or are they having a difficult time?

Thank you for the information and have a good day!

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Maxxgold
11/8/2010 03:57 EST

Gold and cash

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painternc
11/8/2010 09:48 EST

Hope this is some clarification - I copied and pasted it from Gary Scott's ecuadorliving.com

#1: How US Tax Bill Affects Americans Who Transfer Money Abroad

Reader Question: Gary, I’m a subscriber to your Ecuador Living newsletter. My wife and I are 38 and 42 years old respectively, and have been strongly considering at least a part-time ex-pat lifestyle. Ecuador and a couple other countries in Latin America are on our list of potential destinations.

I just received the following note regarding a recently passed piece of legislation in the US. Can you please comment on its impact to folks considering a move outside the US in the next decade?
Should a foreign bank/investment account be set up ASAP in advance of the provision of this law mentioned? Should any potential property purchase timeline be moved up in advance of this law?
Incidentally, I do agree with your suggestion, seconded by many others, to always rent in a foreign locale before settling on a property. Here’s the note: “The most troublesome change is in the new bill, H.R. 2847, in the Title V offset provisions. On January 1, 2013, these provisions will take place. From that point forward a 30% tax will be withheld when Americans transfer money offshore. The bank will directly deduct this money and forward it to the government. The government is indemnifying the banks against lawsuits! The speakers had been told that some banks have jumped the gun and are already implementing this new procedure, before the 2013 deadline. Any insight you can provide would be most welcome. Thank you,”

My Reply: I asked our tax attorney Joe Cox and he replied: “Gary, There is a bill that has a 30% withholding on income for those international banks and trust companies that want to and will comply. Just a way to help the US collect on offshore earnings. If the account is declared the withholding might not be necessary. I have seen no instructions on how it works. Joe”

Joe is an extremely experienced tax attorney so if my understanding is correct, there is a bill by this name and number. However it is not related to US persons transferring money abroad. The bill is aimed at encouraging overseas banks… if they choose… to withhold 30% of report income earned at that overseas bank. If the overseas account is already reported and income declared (as it should be) then the withholding won’t take place.

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ILA
11/8/2010 10:43 EST

Gary Scott 's info is allegedly dubious at best ,always has been.
Therefore regarding financial matters ,his assurances would be particularly allegedly hogwash.
sorry painternc.

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cwulff1999
11/8/2010 11:52 EST

Hi Painternc,

That is also my understanding, that a foreign bank account that is earning money for an expat should be reported due to tax laws and the taxes paid by the expat.

My concern with this new legislation is the transfering of money to a foreign account. It is my understanding that money transfered outside the U.S. borders will be taxed 30%. In other words if I would take a distribution from my 401k or pension plan on a monthly basis and have it wired overseas, I will be paying the normal income tax for that distribution, which I should, due to the pre-tax status of the money, but it will also be taxed the new 30% because it is being moved outside the borders.

It is difficult to get clarification on this matter. It is another one of those laws that has been buried inside another piece of legislation (our government seems to be so adept at that) that has nothing to do with taxation and not much if anything has been reported on it by the mainstream media.

I appreciate the information.

Have a good day!

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vandtor
11/8/2010 12:02 EST

So if that would be the case then why not just send the distribution to a US account and then take small increments? most debit cards work overseas and then deposit that money into the foreign account, thus eliminating part of the paper trail and the only fee incurred is the ATM fee.

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Maxxgold
11/8/2010 12:45 EST

As bad as this is what is worse is the devaluation of the dollar. Gold is at a record high today at $1405/oz

Also what will stop them at 30%? The IRS extends it's grip worldwide and nobody but expats will care.

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Maxxgold
11/8/2010 12:47 EST

Vandtor has got a good idea. Learn from history. Keep your money in your matress

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smossman
11/8/2010 15:03 EST

I just checked federal legislation for HR 2487. This is a bill that directs the Sec of Def to research military ID options. The latest action was referral to the Subcom. on Mil. Personnel on June 8, 2010.

Is there is another bill number that may be correct?

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ILA
11/8/2010 15:13 EST

Hi cwulff1999,
TODAY ironically,I received an email from a friend living in the Los Angeles area in California.She said that there has been a run on the Los Angeles banks today and riots and that the news is not covering it
If that were the case,one wonders how long before it starts happening across the country.
Don't know for sure,
don't live there.
Obama out of the country too
Last depression,the banks closed for a bank holiday,to stop withdrawals

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pronto
11/8/2010 19:27 EST

smossman
try 2847

Cheers

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Maxxgold
11/8/2010 21:22 EST

http://current.com/news/92780245_global-political-awakening-atms-crash-across-the-country-after-bank-holiday-warnings.htm

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cwulff1999
11/8/2010 23:25 EST

Hi smossman,

If you google HR 2487 you will find some articles on the new tax.

If you google 2847 you will find information on the HIRE ACT.

I don't know which is the correct bill number, but 2487 will get you to some information on the new tax.

I don't know why the two numbers are on the web. Confusing!!

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cwulff1999
4/17/2011 17:31 EST

I see there are finally many expats starting to wake up to the fact the U.S. wants 30% fo their money that is transferred outside the U.S. borders.

It is going to get much worse people! You mark my words.

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LiliyaBykova
4/18/2011 12:38 EST

OK, I woke up to this fact - what do I see?
I can send funds from my name account in US based bank to my name Ec based bank.
I personally don't care.
Amy Prisco and other english speaking realtors - I feel generous today - here is business idea for you.
Open business account in US based bank - don't forget to consult with lawyer-CPA. You probably already have account in Ecuador based bank.
Now adv your business - buy real estate with us and
you don't have to do "30% hassle"
All the potential expats/buyers have to do - send funds from their US based bank to the realtor US based bank. Realtor then have a task to send it from HIS/HER name(or corporation name) account in US to HIS/HER (or corporation) name to Ecuador.

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zootenval
4/19/2011 08:25 EST

Another good take on this:

Amidst many new challenges that expats are facing with more restrictive immigration policies in many countries around the world, a new difficulty has reared its head for Americans living abroad — but this one comes from the country they left behind.

Part of the HIRE Act, signed into effect by the president in mid-March 2010, requires foreign banks to report to the Internal Revenue Service account information for US citizens with savings in excess of $50,000. They are fishing for tax evaders and Americans keeping funds in foreign tax havens, but they are going to catch an entire sea worth of law abiding, tax legit US foreign residents in their nets.

If foreign banks do not report the income holdings of US citizens to the IRS, they face a 30% withholding on all investment payments they receive from the USA until they comply. In reaction to this policy, some foreign banks have closed their doors to US citizens altogether — it is apparently better to loose the money of potential American clientele than it is to deal with their government.

The U.S. government – under a new law incorporated in the Hiring Incentives to Restore Employment Act signed by President Barack Obama on 18 March 2010 – is demanding that international financial institutions reveal which of their clients are U.S. citizens with accounts of more than $50,000. Foreign banks are, in effect, being asked to act as the international enforcement arms of the Internal Revenue Service. Those banks that don’t comply will be subject to a 30% withholding tax on all payments made to them in the U.S. Many banks and wealth managers have decided it is far easier to politely show their U.S. clients the door. -Wall Street Journal

This tax fishing wing of the HIRE Act is meant to be a fund raiser for the rest of the program, which is a domestic employment stimulation initiative. So economic incentives are to be granted to employers who hire perpetually unemployed laborers with money appropriated from American tax dodgers.

The $15 billion bill was primarily designed to create jobs. The tax elements were added during the final stages of negotiations in order to help cover the cost of the incentives being offered to employers. -US Tax Proposal May Affect Expats

????
Sounds fair, but, as with most things in government, I hold strong doubts as to the efficiency of its implementation, and a fresh problem is created in the process:

The USA is trying to police the banking practices of the entire planet. Some of the banks of the world are not taking too kindly to such intrusions into where their money comes from. A few have even closed their doors to American citizens.

The Wall Street Journal reports:

Mr. Krause says: “We’re likely to see a scenario in which U.S. expats are encourage – or forced, depending on your point of view – to use U.S. banking affiliates abroad. They will have options but nowhere near the same range of options as everyone else.” -Wall Street Journal

But the extent to which banks in other countries are really closing their doors to US citizens is unclear to me right now. This is a new policy, much of what I read about it is just speculation about what could happen — the real knee jerk effects of the HIRE Act on Americans living abroad will take time to tell, though renouncements of US citizenship have reputedly risen sharply around the world since this act was signed into law in March.



The aim of these HIRE laws are not really to police the financial institutions that Americans use when living and working abroad but to help the IRS take their due from very wealthy US citizens — most of whom are living in the USA and are not expats or foreign residents — who are harboring excessive amounts of money in tax havens abroad. The expat, who is often just etching out simple a living for himself abroad, stands to be caught in the cross fire.

The biggest problem for US expats working abroad is that they generally get paid in foreign currency that they keep in foreign bank accounts. If they were denied access to local banking, they would be economically blighted on many fronts: financial actions like direct deposit, debit card withdraws, and sending electronic transfers to make purchases has become the standard ways of moving money all over the world. Without access to a local bank account, an expat is put into a financially limiting position and is at a disadvantage in the country that, for all intensive purposes, is their home.

I have had bank accounts abroad on two occasions, both in China. I would receive money through local direct deposit which I would therefore access with an ATM card. I was in the country long term, I had temporary residency status, and it was much to my benefit to have the local bank accounts. I received money electronically and I withdrew it electronically — this was the rule, there was no other way.

Although I never made that much money in China, many people do. If you work as an English teacher in China, you stand to collect a decent amount of savings; if you work as an English teacher in Japan or Oman, you stand to make a lot of money. In the recent economic scheme, a person working and living abroad really needs a local bank account to interact financially in the place they live. This is simply, the money classes of the world use their funds electronically — the days of holding on to your money are gone, money is now moved electronically.

I cannot tell you how someone can deposit hard currency into a bank that they are half way around the world from. If I did not have my local bank accounts in China, I would not have been able to put money in the bank short of sending Western Union transfers home to my parents to deposit into my account. With debit card technology quickly becoming the rule of accessing money and making large purchases all around the world, bank access is beyond convince, it is becoming essential. For people making money abroad, a local bank account is the clutch first move towards digitalizing their money.

And once money is digitalized it can be sent all over the world, regardless of what country you are in.

If the banks of the world really do start denying American citizens accounts en masse, American expats and foreign workers will be put in a very compromising position.

Where will they keep their money if not in a local account — in a shoebox? I have a friend teaching English in Oman. He told me that he was able to save $30,000 from one year of work. He would need a mighty large shoe box indeed.

I have a friend who was traveling through Kyrgyzstan, he recounted a story of talking with a group of nomads who once ask him how big his bag of money was. He had to explain, with difficulty, that Americans don’t keep money in bags, they keep it in banks. The knee-jerk reactions from this HIRE act may send Americans living abroad back to the financial stone age. We live in a world where money is computed electronically, commerce and wealth are not only measured by paper and coin but by little numbers on a computer screen. To remove the ability of US expats to deposit their legally earned foreign income in banks is to greatly limit their ability to use their own money.

The money that American expats receive from working abroad is that they are often already taxed locally. The United States is the only developed country in the world that seeks to tax its expats twice. If you Work Abroad, you must file your earnings with the IRS — even if you have already paid taxes in the country where the money was made. Many US expats that I have known do abide, in some part at least, by the tax rules of their home country. If you are in the USA for under 30 days in a given year and make under $80,000, you don’t have any tax liability anyway. Requesting the bank details of these individuals is a moot point to start with.

The number of people the HIRE Act is going after is a relatively small minority of very wealthy Americans who stash money away from the tax man abroad, but this policy could drastically impact great numbers of law abiding, tax legit, Americans working, living, and using the banking resources in other countries. The rich who are keeping their money in tax havens are more than likely rich enough to find ways to continue side stepping laws such as this — but the American citizen living abroad, teaching English, working another job, or running a small time business may have their bank account information seized and analyzed by the IRS, or their accounts may be closed by foreign banks ill disposed to being given orders by the US government.

If the HIRE Act really does cause the knee jerk reaction that some sources are predicting, the American expat is given another new obstacle when making a home abroad: they must find a way to ship their earnings to the USA, only use US banks when abroad, denounce their citizenship, or keep their earnings in a shoe box.

My government seems to be digging behind the couch cushions for any scrap of loose change it can find, it is cannibalizing its own people in the process.

The life of the expat is always precarious — one shift in governmental policy in their surrogate home can send them packing for the hills, one turn in geo-political relations can give them the boot, twists and turns in international economic relations can present new challenges, more obstacles, and addition hoops to jump through in an ever changing world. When you live in a foreign country you are forever floating on the ebbs and flows of international Politics, economics, and immigration policy. Expats are perpetually floating on their moorings at the dock of their chosen country, very rarely do they ever find themselves with firm ground to build upon.

The effects of the HIRE Act are just one of a number of new obstacles placed before the American living abroad.

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marciaz
4/19/2011 11:54 EST

I'm pretty sure that the amount has to be 10k or over, and as long as you are transferring from an account with YOUR name to an account with YOUR SAME name (under 10k) this law will not apply to you. I will find the article that stated this and post it momentarily.

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cwulff1999
4/19/2011 14:58 EST

Here are some links to some information on the Hire Act:

http://www.picassodreams.com/picasso_dreams/2010/03/hr-2487-capital-control-act-read-subtitle-aforeign-account-tax-compliance.html

http://www.goldandsilverexchange.info/IRS-money-grab.html

http://primapanama.blogs.com/_panama_residential_devel/2010/03/disturbing-new-us-law-aims-to-end-individual-foreign-bank-accounts.html

This is the actual "Hire Act" document:

http://primapanama.blogs.com/files/hire-act-of-3-18-10.pdf (Starts at page 27)

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vandtor
4/19/2011 18:01 EST

I am a little divided over this. I like the idea that the US has a method to go after these companies and individuals hiding money overseas. However, I don't like that this could potentially be a problem personally although on second thought it maybe a problem that I would like to have because it would mean that I actually have assets.

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