People that write these articles always fall into a few camps 1) they don't understand their tax position 2) they've received some extremely dodgy advice 3) they're trying to be 'clever' with their money or 4) are extremely wealthy and have very complicated finances and they're trying to dodge US taxes but retain the benefits of citizenship

Is holding a mutual fund in your home country dodgy?

It subjects you to the punitively complex PFIC rules. These are largely a protectionist measure for the US financial system but you get caught up in them regardless.

To do your US taxes correctly as an ex-pat is really complex. If you just file a 1040 you’ve missed a number of forms to document your foreign holdings.

Does being clever with your money include a retirement fund that is considered absolutely vanilla in the country you are living in? Because the USA assumes that all financial services in the world provide exactly the same format of financial reporting that US services do. So retirement funds that are the foreign equivalent of an ordinary 401K have high compliance costs if you need to file with the USA.

If you had any sort of local assets beyond a simple checking account, such as a retirement account or real estate, you were probably doing it wrong and are lucky not to have gotten caught.

Edited to add: either that, or you were doing it before 2010 or so, in which case, yeah, it was apparently way simpler back then.

Plenty of people earn more than that, that's barely anywhere near the level of a typical software engineer in many locations.

And at that point there's a lot of paperwork to correctly attribute the foreign taxes. Even more so if the country one lives in has mandatory pension or retirement funds, at which point you need someone well versed in 2+ country's tax laws and corresponding agreements to figure out what to write in the forms, never mind what needs paying. (Did I mention: once the country of residence processes the tax return, the US tax return may need amending with further payments based on the actual tax amount in the country of residence.) It's pure expensive time-killing bureacracy.

It gets worse if you want to invest outside of your retirement schemes. Other posters here seem to have already brought up the PFIC issue.

One result of the tax laws is that Americans are nowadays refused custom at most financial institutions in most countries.

That amount 127k if I remember correctly is after taxes (net) in the country of where the earning occurred. In Canada 127k USD equates to about 175k CAD. To earn 175k net in Canada you would need to be earning over 250k CAD. I don't know anyone in Toronto earning more than that as a developer. Actually I know many who can't even break 100-110k CAD. The best paying jobs are in the Valley and USA, if you know of any Canadian outfits paying over $250k CAD please let me know.

Many of the posters who brought up PFIC are probably referring to Investments they made before they became US Citizens. Even then you would only pay taxes on what your investment earned and that is after any write offs you might have.

Like OP said, this procedure is difficult for the very rich or people who are looking to evade taxes. Otherwise it is a simple procedure and doesn't affect the average person.

lol.

Ever heard of Singapore? Hong Kong? Switzerland?

If you're self-employed, working and living abroad you must pay self-employment tax regardless of the foreign tax exclusion amount. It's ridiculous.

Expats are entitled to Social Security and Medicare (once they meet the qualifying thresholds like age). Therefore, they are also required to pay in to Social Security.

  If you buy a house, things are going to be complicated.
  If you have a workplace pension from your job, you're probably screwed. State pensions have screwed people too.
  If you invest in stocks, or mutual funds, you'll pay more in tax preparation than you'll make.
  If you set up your own company and are not paid as an employee but as the owner, you will be screwed.
  Rent out a property, screwed.
  Fail to declare every account that you're a signatory on? Prepare to pay up to 125% of the contents. 
  If you're children are beneficiaries of a trust set up by their non-american grand-parents? Totally screwed.

Almost every American expat I've spoken to has had a shock when they find they totally didn't understand their commitments. The only ones who didn't were employees of big banks/hedge funds whose employers paid a big 4 accountant to take care of everything.

From what I have heard, the issue isn't paying taxes, but filing them. Do you not have to file even if your income is below $127K? As in you need to file and disclose everything, but won't owe any taxes?

The burden I always hear about is that the reporting requirements are high, and institutions in other countries are not equipped to provide as much detail as the US wants.