Monday December 8, 2014
In a perfect illustration of just how ridiculous the US government’s tax policies are, Mayor of London Boris Johnson is being pursued by the IRS for capital gains taxes he owes for selling his residence in London. Apparently Mr. Johnson was born in New York and, despite the fact that his parents returned to Britain when he was five years old, has never given up his US citizenship. Like many other people who through no fault of their own become United States citizens, he never realized that the US government, situated as it is across an ocean, claims to be the rightful owner of a substantial portion of his income and assets.
If Mr. Johnson hasn’t paid capital gains tax on the sale of his house, I’m assuming that he also hasn’t filed a yearly Form 1040 tax return, nor has he probably submitted his annual Report of Foreign Bank and Financial Accounts (FBAR). I’m sure IRS is salivating right now just thinking about all the penalties, back taxes, and interest they can charge him.
The sad thing about this situation is that it takes a prominent example like this to expose the absurdity of US tax laws. US citizens living abroad have for years been seeing their access to foreign bank accounts cut off due to over-reaching laws such as the Foreign Account Tax Compliance Act (FATCA), and the situation will only get worse. While Mr. Johnson may end up getting a slap on the wrist due to his political stature, the same cannot be said for other innocent victims, not just the accidental Americans, but those who have lived and worked abroad for years and decades and now find themselves shut offfrom an international banking system that now sees Americans as toxic.