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The Law That Makes U.S. Expats Toxic

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Re: The Law That Makes U.S. Expats Toxic

#81

Post by cageface »

rayiner wrote: post #40

Is taxing expats abroad really a problem? First, there is a large baseline exemption and most expats abroad don't pay U.S. taxes. Second, if you're intending to permanently leave the U.S. why should you keep U.S. Citizenship? And if you're intending to come back, is it really unfair to tax you? American citizenship has real benefits, especially if you're rich enough to pay expat taxes. The U.S. protects you and your…

Taxing us isn't really the issue. The bigger problem is that they've made the reporting requirements so onerous that many foreign banks no longer offer accounts to American citizens on any terms. This makes longer-term living in a foreign country very problematic.

This law may have been well-intentioned but it has some very toxic fallout for innocent people.

Re: The Law That Makes U.S. Expats Toxic

#82

Post by ckozlowski »

rurban wrote: post #56
rayiner wrote: post #40

Is taxing expats abroad really a problem? First, there is a large baseline exemption and most expats abroad don't pay U.S. taxes. Second, if you're intending to permanently leave the U.S. why should you keep U.S. Citizenship? And if you're intending to come back, is it really unfair to tax you? American citizenship has real benefits, especially if you're rich enough to pay expat taxes. The U.S. protects you and your…

It is a big one. Many expats had to resign their US citizenship to avoid this silly law. Double taxation only exists in Aethopia and the US. Read this blog: http://www.overseas-exile.com/ Protection? Yes, maybe that's the reason. To support the US military efforts and budget. On a side-note: If I would applied to the US greencard, and then decided to move back to Germany, I would have to pay double income taxes. To G…

Not necessarly disagreeing, but when you say "many" (And that 266% increased made headlines everywhere), I feel it needs some context:

8.7 million abroad. 3,417 renounced citizenship.

Or, .039%.

I'm going to take a stab at this and guess that's some of the 1% right there who had millions stashed abroad. Maybe the tax law was painful to them, but for the rest, it's hardly a crisis.

Re: The Law That Makes U.S. Expats Toxic

#83

Post by xlcashlx »

It appears the first $100,000 you make overseas is tax exempt by the FEIE[0].

As far as I understand my rent details as well as bank accounts overseas are reported to the IRS. This extra work can be seen as a burden for both parties.

[0] https://www.irs.gov/Individuals/International-Taxpayers/Fore...

*edit grammar

Re: The Law That Makes U.S. Expats Toxic

#84

Post by privong »

TazeTSchnitzel wrote: post #2

I suspect that the U.S. taxing its citizens abroad has a lot to do with it being the world's richest country and not wanting people (billionaires and such particularly) to be able to easily escape their tax burden by moving abroad.

> I suspect that the U.S. taxing its citizens abroad has a lot to do with it being the world's richest country and not wanting people (billionaires and such particularly) to be able to easily escape their tax burden by moving abroad.

Interestingly, the US relatively high tax compliance rates, compared to other large/industrialized countries [0]. Presuambly the wealth you refer to is what results in the absolute dollar amount of evasion being higher, despite the relatively low rate of evasion.

[0] http://blogs.reuters.com/david-cay-johnston/files/2011/12/GL...

Re: The Law That Makes U.S. Expats Toxic

#85

Post by morgante »

deong wrote: post #76
morgante wrote: post #55

Earlier quoted context omitted.

You're right that this isn't applicable in most European countries, but it does hit Americans harder in other major world cities which have lower taxes than the US, like Hong Kong or Singapore. I'm in Abu Dhabi, where there is no income tax, so tax treaties aren't really helpful. As a result, salaries here are actually proportionally lower than they would be in a higher-tax country, which works out well for everyone…

You're right of course, but this is mostly by design. Rightly or wrongly, the US position is that you need to pay taxes to someone . I think the intent of the laws is at least arguably reasonable, but the execution isn't great. Assuming for the moment that the US isn't going to stop taxing expats on foreign income, I do think the exclusion limit is too low by about half. Making it more like $200k would allow more hig…

> Rightly or wrongly, the US position is that you need to pay taxes to someone. I think the intent of the laws is at least arguably reasonable, but the execution isn't great.

You do pay taxes in (for example) Hong Kong. It's just not as a high as the US rate.

> Making it more like $200k would allow more highly paid "normal workers" to avoid the penalty, while still hitting the very wealthy purely looking at the tax dodge.

That would certainly make sense. Personally, I think a more thorough analysis of income sources is also in order: if you're genuinely working for a foreign company as a foreign employee, I think that should be treated differently than a wealthy person who is just avoiding US residency for tax purposes, despite the majority of their income coming from US sources.

Re: The Law That Makes U.S. Expats Toxic

#86

Post by michaelt »

morgante wrote: post #17

It really doesn't make sense how the US is the only country which insists on taxing their citizens, no matter where they live. It makes American labor less competitive and promotes the insularity of American culture. I'm living abroad and you can definitely see the impact of the US tax system in the background of expats: Americans are severely underrepresented. The same salary, when offered to a British expat and an…

  It really doesn't make sense how the US is the only
  country which insists on taxing their citizens, no
  matter where they live.
Brit here and I disagree - the American system seems a lot fairer.

Taxing on residency rather than citizenship creates a bizarre system where if you're a millionaire you can enjoy all the benefits of being a British citizen, but you can be "domiciled abroad" in Belize, Seychelles, Monaco, or other tax havens.

Then you can be British enough to donate millions to a political party, receive a knighthood - but pay far less tax than a middle class office worker.

If you want to be taxed like a citizen of Seychelles, it makes sense to me that you'd be a citizen of the Seychelles and not any other country.

Re: The Law That Makes U.S. Expats Toxic

#87

Post by Amezarak »

gambiting wrote: post #25

I said this before, but I will say it again - as a child, I dreamed of emigrating to the US and getting a US citizenship. Nowadays, I would reject one if anybody offered, and if I had one I would denounce it. Like the article states - being American abroad is now seen as liability, and I am not surprised Americans living abroad give up their citizenship just to stop dealing with this nonsense.

I really find it hard to feel sympathetic about rich Americans (only applies to income of 100k+) paying no more taxes than if they lived in America (live in a country with higher income tax, pay US nothing, country with lower tax, pay US the difference.)

This seems hardly worth 'denouncing' American citizenship. Can you explain?

I feel like threads like these really illustrate the difference between someone on HN and the average person.

Re: The Law That Makes U.S. Expats Toxic

#88

Post by deong »

ptaipale wrote: post #47
deong wrote: post #26

Earlier quoted context omitted.

I'm also an American expat (Iceland), and for a lot of people, there will be no difference except for inconvenience. If you make less than about $100,000 per year, you exclude that income from US taxes completely. You still have to file a 1040, but you just declare the income on one line and negate it five lines later. You send the IRS the completed form showing you owe $0 and you're done. And if you make more than $…

> there will be no difference except for inconvenience. There also appears to be a factor of risk. I'm not American but have had Americans in my team. A slight procedural error, either by themselves or by the IRS, can be a huge financial and legal problem, and expose the person to litigation. It seems draconian and unfair to me. Thus the practical consequences are more than minimal.

I actually talked with an accountant in the US my first tax year living year, and her advice was "don't use an accountant". I have no idea if this is true or not, but according to her, the IRS's view is basically, "we know this is complicated stuff, so do your best, and if you make a mistake, no big deal", whereas if you hire an accountant and get something wrong, the assumption is that you're trying to avoid taxes.

Re: The Law That Makes U.S. Expats Toxic

#89

Post by briandear »

rayiner wrote: post #40

Is taxing expats abroad really a problem? First, there is a large baseline exemption and most expats abroad don't pay U.S. taxes. Second, if you're intending to permanently leave the U.S. why should you keep U.S. Citizenship? And if you're intending to come back, is it really unfair to tax you? American citizenship has real benefits, especially if you're rich enough to pay expat taxes. The U.S. protects you and your…

You have no idea what you're talking about. It isn't just about taxation it's about countries being forced to report to the IRS. If you have a foreign account with a balance over $10k and you fail to report the account (in a filing separate from your tax returns,) you are fined $10k -- no exceptions. If the balance just goes above $10k for even one minute, you are on the hook for reporting that account for as long as you have the account. Except for Eritrea, no other country has citizenship based taxation. Additionally, you can't even open bank accounts overseas as an American with many banks. You also don't seem to understand citizenship law. There are millions of Americans who have never even been to the US, yet must file taxes and report bank accounts. As far as that blue passport getting you on a C130.. That doesn't happen anymore. The State Department routinely leaves Americans stranded in war zones while the French actually send the military to get their people out. US consular services abroad are a joke. I've lived overseas for about 8 of the past ten years and I routinely deal with consular nonsense. Finally, to your point about being 'rich enough' to pay taxes; the exception is only about $96k -- however if your working in Paris or London or Tokyo, that is barely a survival wage for a family. That aside, you still are subject to double taxation as well if you're in a country without a tax treaty. Frankly, I suspect you've never lived as an expat nor do you understand the facets of the law that make it so onerous.

I've worn te uniform of the US military and paid my 'dues,' yet to imply that an overseas American is any less American is offensive. When I am outside the US, I do not consume a single taxpayer funded service. All consular services for the most part are self-funded. If the time comes when I need the Marines to come bail me out, send me the bill and I'll pay cash; otherwise the IRS can leave me the hell alone. I am a proud American, but I despise the Democrats who passed FATCA along with the class warfare rhetoric that led to it. To Democrats, overseas Americans are presumed to be money launderers, drug dealers or tax evader. I am neither yet the burden of proof is on me. Did you know when Insend money to the US, I must provide proof of the fund's origins? I have to prove my innocence in order to use my own money! FATCA is worse than the NSA -- it's a license to violate my financial sovereignty.

Re: The Law That Makes U.S. Expats Toxic

#90

Post by tallanvor »

TillE wrote: post #3

The government's actual "solution" to this problem has been to raise the fee of renouncing citizenship, from $450 to $2,350. No problem for wealthy people who want to avoid tax, but quite a large burden on everyone else. I plan to become a German citizen eventually, because I'm probably going to retire here. But thanks to Germany's disallowance of naturalized dual citizenship and America's tax complexities, that requ…

It's not just Germany either. Norway doesn't allow dual citizenship unless the other country doesn't allow you to renounce your citizenship, doing so would require you to put yourself in danger, or if the fee is high enough to be considered unduly burdensome - more than 4% of your general income.
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