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Expatriate Americans Break Up With Uncle Sam to Escape Tax Rules

online.wsj.com

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Re: Expatriate Americans Break Up With Uncle Sam to Escape Tax Rules

#61

Post by Bluestrike2 »

judk wrote: post #25
philiphodgen wrote: post #2

I was quoted in this article. I do lots and lots of this work -- helping people log out of the USA cleanly and permanently. AMA.

Since a lot of us are thinking it: How do you justify you career as a morally acceptable calling?

Really? Would you care to elaborate on your position, as it seems a touch sophomoric.

We're talking about American expats who permanently live abroad, do not utilize taxpayer-funded services, and aren't planning on returning home. Hell, they aren't even utilizing what one might call the privilege of American citizenship. From the government's perspective, there's really no difference between an expat and a corpse (excluding the IRS, naturally).

In that context, how can choosing to renounce their citizenship be considered immoral? Particularly when that citizenship comes with the rather significant problems that are the result of a federal tax code that taxes overseas income for taxpayers abroad whose income will never see the United States (nor, for that matter, will the taxpayer). If we're going to argue about ethical codes, how do you taxing worldwide income and the onerous penalties that disproportionately affect the lower quintiles?

Re: Expatriate Americans Break Up With Uncle Sam to Escape Tax Rules

#62

Post by graeme »

philiphodgen wrote: post #58
graeme wrote: post #53

Earlier quoted context omitted.

Ah, that makes sense, actually. What about someone in Canada, selling a product on a website hosted in the US, with a customer billing address in the US? My intuition says "not us source" because the production and administration of the product was in Canada. There are also categories of income which are exempt from witholding, such as royalties. For instance, Canadian authors receive royalty cheques from Amazon with…

The income tax treaty can reduce US tax on income paid to Canadians down to zero, depending on the type of income. That's what you are seeing with the W-8BEN. For selling stuff across borders, source of income is where ownership changes hands from seller to buyer. If the buyer owns the item as soon as it goes into a DHL pouch in Canada, then it is Canadian-source income and the US can't tax it.

I guess my question was: is a return required on US source income that has been reduced to zero? e.g. royalty payments, where the receiver is in Canada, and sales of products were made in USA.

Assume the income is from licensing, and the license was granted from a Canadian source.

Thanks for answering all these, I should have been more precise with my earlier questions.

Re: Expatriate Americans Break Up With Uncle Sam to Escape Tax Rules

#63

Post by jessriedel »

WildUtah wrote: post #37
jessriedel wrote: post #18

Earlier quoted context omitted.

What countries's citizenships would you suppose is coveted by more people worldwide than the US?

Any EU citizenship is more useful and less dangerous and more lucrative and more flexible and subjects you to less world-wide paperwork, tax, and business restrictions. So Estonia, Poland, Romania, Bulgaria, Slovenia (or is it Slovakia?), Lithuania, Latvia, Slovakia (or Slovenia?), and Greece have more valuable passports for their citizens. If you travel a lot in East Asia, Japan's passport is awfully useful and has…

It sounds like you're talking about the usefulness of citizenship for traveling. But the quotation discussed by deciplex, and his statements, are not qualified in this way.

Extensive nation-hopping is not something most folks in the world can do. (The "onerous tax filing" being even more of a rich-person's problem.) I'd guess that the US citizenship is in fact the most coveted worldwide, all things considered.

Re: Expatriate Americans Break Up With Uncle Sam to Escape Tax Rules

#64

Post by maaku »

jessriedel wrote: post #63
WildUtah wrote: post #37

Earlier quoted context omitted.

Any EU citizenship is more useful and less dangerous and more lucrative and more flexible and subjects you to less world-wide paperwork, tax, and business restrictions. So Estonia, Poland, Romania, Bulgaria, Slovenia (or is it Slovakia?), Lithuania, Latvia, Slovakia (or Slovenia?), and Greece have more valuable passports for their citizens. If you travel a lot in East Asia, Japan's passport is awfully useful and has…

It sounds like you're talking about the usefulness of citizenship for traveling . But the quotation discussed by deciplex, and his statements, are not qualified in this way. Extensive nation-hopping is not something most folks in the world can do. (The "onerous tax filing" being even more of a rich-person's problem.) I'd guess that the US citizenship is in fact the most coveted worldwide, all things considered.

> I'd guess that the US citizenship is in fact the most coveted worldwide, all things considered.

You're assuming people want to live in the US.

Re: Expatriate Americans Break Up With Uncle Sam to Escape Tax Rules

#65

Post by maaku »

scrumper wrote: post #31
clamprecht wrote: post #23

Earlier quoted context omitted.

Here's something I've been wondering, totally hypothetical but could be real for someone else: Puerto Rico has this new tax law that basically limits taxes to like 4% or less, if you are a resident of PR. Let's say Bob is an American who expects to have a big exit in 2015 (or he has lots of GOOG stock and wants to sell it). Normally Bob would pay US capital gains taxes (15-20%, maybe 23.8%), plus California taxes (as…

US citizens overseas are required to declare all income (and capital gains) to the IRS regardless of source. They still have to file returns in the US. Bob will owe tax as a result, but he can probably write off the 4% he payed in PR against his US taxes. He's not a resident of California, so he likely avoids the state tax. (Note: I don't know specifically about Puerto Rico, but generally the above is the case for US…

Puerto Rico is not overseas, it is part of the US...

Re: Expatriate Americans Break Up With Uncle Sam to Escape Tax Rules

#66

Post by ximeng »

judk wrote: post #25
philiphodgen wrote: post #2

I was quoted in this article. I do lots and lots of this work -- helping people log out of the USA cleanly and permanently. AMA.

Since a lot of us are thinking it: How do you justify you career as a morally acceptable calling?

"The IRS fined him more than $172,000, roughly eight times his back taxes" - this also seems to require some justification.

Re: Expatriate Americans Break Up With Uncle Sam to Escape Tax Rules

#67

Post by nikdaheratik »

ebiester wrote: post #40
judk wrote: post #26

Why does WSJ (and NYT) add extra words to make headlines more awkward? Is WSJ really trying to argue that expats are dodging tax rules , not taxes ?

It's really pretty bad. We're not even talking about the wealthy in many cases. You basically have to have an tax preparer who specializes in expat issues handle your taxes, and they aren't cheap. This is not a job for H&R Block.

It depends on how much money you earn and where you live, mainly. If you make However, the issue with the WSJ article, where you would also have to disclose retirement and savings accounts or pay a penalty can be an unpleasant surprise for people. Makes me want to just put everything in my spouse's name and pretend the U.S. government doesn't exist.

Re: Expatriate Americans Break Up With Uncle Sam to Escape Tax Rules

#68

Post by NonEUCitizen »

philiphodgen wrote: post #55
hkmurakami wrote: post #48

Earlier quoted context omitted.

When you give up your citizenship, don't you owe the IRS capital gains tax on all assets you own, as if you had liquidated them? (iirc)

Correct. If you are "rich" ($2 million net worth or $157k average tax bill over the previous five years) then you pretend you sold everything. The first $680k of gain is tax free but you pay tax on everything above that. Bad things happen to your retirement plans and IRAs.

What happens to your retirement plans? Treated as if you withdrew all of them that year?

Re: Expatriate Americans Break Up With Uncle Sam to Escape Tax Rules

#69

Post by deciplex »

jessriedel wrote: post #63
WildUtah wrote: post #37

Earlier quoted context omitted.

Any EU citizenship is more useful and less dangerous and more lucrative and more flexible and subjects you to less world-wide paperwork, tax, and business restrictions. So Estonia, Poland, Romania, Bulgaria, Slovenia (or is it Slovakia?), Lithuania, Latvia, Slovakia (or Slovenia?), and Greece have more valuable passports for their citizens. If you travel a lot in East Asia, Japan's passport is awfully useful and has…

It sounds like you're talking about the usefulness of citizenship for traveling . But the quotation discussed by deciplex, and his statements, are not qualified in this way. Extensive nation-hopping is not something most folks in the world can do. (The "onerous tax filing" being even more of a rich-person's problem.) I'd guess that the US citizenship is in fact the most coveted worldwide, all things considered.

Well, at least you admit you're just guessing...

And, did you bother to read the article? I'm surprised you write off these regulations for expats as 'rich-people problems'.

Re: Expatriate Americans Break Up With Uncle Sam to Escape Tax Rules

#70

Post by jmadsen »

deciplex wrote: post #51
philiphodgen wrote: post #46

Earlier quoted context omitted.

The US taxes you on wages only if you are within the borders when you do the work. So a noncitizen doing work outside the USA and getting paid by a US customer or employer is not taxable in the USA on those wages. You would not need that intervening corporation in Ireland for income tax reasons but there are probably good business reasons for putting a layer between you and the US company. If you are a US citizen you…

>If you are a US citizen you are taxed on your wages no matter where you are on Planet Earth. Some relief is possible (first approx $100k not taxable, for instance). Correct me if I'm wrong, but after that $100K deduction you're essentially paying the higher of the local tax, or the US tax?

you are paying BOTH - another reason this is an issue.

expats pay tax on full amount to host country, plus tax on amount over $92k to US. So the money over $92K is double taxed - making it "pointless" (not completely, obviously) to earn that extra

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