Meet Bob: The American Pope Who Still Has to File US Taxes

I still can’t get over the fact that there’s an American pope… and that his friends refer to him as ‘Bob’.

Bob. It just makes him seem like a regular dude who’d be drinking a beer and shouting at the umpire at a Cubs game.

Something else that makes the new Pope seem extremely down to earth is that he shares the same pain as 100+ millions of his fellow Americans: paying taxes.

Clergy are considered employees of the Church and generally receive salaries, which means they must pay taxes just like anyone else.

US citizens are special, however. Unlike France, Germany, Britain, Japan, Brazil, Canada, Australia, and just about every other country on the planet, the US taxes its citizens regardless of whether or not they live in the United States.

If you’re a citizen of New Zealand, but you live in another country, then for the most part you aren’t subject to taxation in New Zealand anymore.

But not Americans. If a US citizen moves abroad, he or she is still subject to paying taxes to the IRS.

This includes Bob, who worked in Peru for many years. So, as a US citizen, he should have been filing tax returns each year… PLUS additional foreign disclosures.

For example, if he had a foreign bank account in Peru with more than $10,000, he should have also been filing Form FinCEN 114, the Report of Foreign Bank and Financial Accounts (also known as the FBAR). He might also have had to file Form 8938 to the IRS as well, which is yet another foreign account disclosure form, plus Schedule B 1040.

And even now that he’s the Pope, he’s technically still required to file with the IRS and fork over Uncle Sam’s fair share of his ~$400,000 papal salary.

Pope Leo isn’t even the only head of state to be in this position: Ecuador’s current President, Daniel Noboa, was born in Miami and is therefore a US citizen by birth. The President of Palau, Surangel Whipps, is also a US citizen from Maryland.

All of these guys are subject to US taxation, even though they lead sovereign nations. And there is no exception in the US tax code for Kings, Presidents, or even Popes.

There are plenty more from the past, including King Bhumipol of Thailand, who was born in Massachusetts and reigned until his passing in 2016.

Even former British Prime Minister Boris Johnson was a US citizen by virtue of his birth in New York City.

Johnson’s case is interesting because it highlights how ridiculous the plight of many US citizens living abroad can be.

Years ago, Johnson sold his flat for a profit of roughly $1MM when he was still the Mayor of London; he paid capital gains tax in the UK… but in addition, the IRS demanded that he pay capital gains tax in the US as well.

Johnson said the demand was “outrageous” and renounced his US citizenship.

In fairness, US citizens living abroad do receive some breaks; “earned income”, i.e. wages and salary, can be excluded from tax up to $130,000 per person. But it doesn’t apply to other forms of income like dividends, capital gains, rental income, or even Social Security.

Because Johnson’s gain was from real estate and not “earned income”, his property sale was taxable under the US tax code.

Additionally, expats still must file complicated returns which includes more forms and compliance than the average taxpayer. They may still be subject to Alternative Minimum Tax. They are far more likely to have to file ridiculous offshore disclosures simply for having a local bank account where they live.

And these requirements aren’t even indexed for inflation. Again, you must file an FBAR if you have foreign accounts exceeding $10,000. This number hasn’t changed since the requirement was introduced in 1970.

Sure, $10k was a lot of money in 1970. It’s not so much today. But the numbers haven’t changed.

Moreover, taxes for expats can be even more complicated if you’re working overseas. Someone who lives and works in London for a British company, for example, must pay UK taxes AND US taxes; the math is incredibly complicated because it requires calculation of various tax credits and more.

Accountants make a lot of money from this complexity, and the bill for annual compliance can be unaffordable to many people.

I read a story about an American in the UK who was married to a British man; they weren’t rich by any means… barely middle class in fact. But her annual tax compliance became too expensive, and the woman had to renounce her US citizenship simply because she could no longer afford to pay the accountants.

After renouncing, she said she “wanted to vomit”. Obviously, it was not something she ever wanted to give up. But she didn’t have a choice.

This is the bizarre thing: I think if anyone in Congress understood how ridiculous US tax policy is for expats, they’d probably change the rules. But no one is really aware of it… because there is no one in Congress representing expats.

The State Department estimates that there are at least 5 million Americans living abroad. As a percentage of the country, this means there should be around 7 members of Congress (and probably two Senators) representing expats. Instead, there are zero.

If someone in Congress were to write up a bill that disproportionately harmed 5 million people in the state of Oregon, every Congressional representative and Senator from Oregon would be screaming about it and prevent the bill from passing.

But there is no one in Congress advocating for Americans living abroad who will stand for them if some bill or legislation disproportionately harms expats.

This is weird, because American expats pay taxes. But no one is representing them.

I believe the Founding Fathers called this “Taxation without Representation”.

Donald Trump made a promise during the campaign to end this… yet sadly there was not a word about expats in the “ONE BIG BEAUTIFUL” bill that was released this week.

Maybe the Bob will finally be the one to shine some light on this issue.

Source

Simon Black is an international investor, entrepreneur and permanent traveler. His daily letter is both educational and entertaining, and we suggest that those who want unbiased, actionable information about global opportunities sign up for Sovereign Man’s free, actionable newsletter at http://www.SovereignMan.com.

From Simon Black of SovereignMan.com

Source: https://www.schiffsovereign.com/trends/meet-bob-the-american-pope-who-still-has-to-file-us-taxes-152794/