This has been the case for some time and has been getting worse year after year. It is pretty shameful the extent to which the US tries to attach itself to the income and wealth of people who are not even living in the country solely because they are American citizens. In some cases, compliance with US tax laws (even though not in the US) are in direct conflict with laws in jurisdictions where people actually reside. In essence, a US citizen is indentured to the US state regardless of where they live.
US law should not have jurisdiction beyond the border. It is creating a growing amount of complications for US citizens that are not within US jurisdiction but which can be held criminally liable for not following US laws even when those laws are in conflict with local laws where they actually live. The indifference of the US government to the consequences to US citizens of their overreach is typical these days.
I live abroad, and US tax laws cause me huge problems...especially since the tax treaty with China is incompletely in a couple of places (e.g. if I go to the US on a biz trip). Let me educate you a bit:
> In some cases, compliance with US tax laws (even though not in the US) are in direct conflict with laws in jurisdictions where people actually reside.
This is why countries have tax treaties, to work these issues out (though there are some bugs, see above). If you don't earn that much, the ~$95k foreign income tax exemption is also very useful.
> In essence, a US citizen is indentured to the US state regardless of where they live.
Thankfully, I'm mostly an indentured servant to the CCP and every year I get to write a big fat +/- $0 on my US tax returns. But I'm just a worker bee.
> It is creating a growing amount of complications for US citizens that are not within US jurisdiction but which can be held criminally liable for not following US laws even when those laws are in conflict with local laws where they actually live.
What are you talking about? The only law I can think of: US citizens are not allowed to participate in corruption (by US law), while some countries require bribes to avoid sending you to jail. Very few laws affect us abroad, the only other ones I can think of relate to child rape and pornagraphy.
Consider the taxes (after the very generous $90+k exemption) a fee for services offered to expatriates. You may never use such services, but your fee pays to make those services available if you ever need them.
The U.S. Embassy system offers world-class services to U.S. citizens with legal, medical, and (depending on the circumstances) financial problems in foreign countries. They will negotiate your release if you are arrested for foreign crimes. They will work with your health provider if you become gravely sick. They will help you reorder credit cards if you are robbed and even provide you with cash advances or a place to stay.
France was also trying to do that recently, since the government there spends way more than they can hope to "steal" from their citizens. They thought it was a good idea to try to tax citizens living abroad (on top of the taxes paid abroad).
If they ever did that, I can tell you a number of French citizens living abroad would just drop their French passport without hesitation.
In practice, the US has lots of bilateral income tax treaties [1] that prevent expats' getting doubly taxed. For example, I'm an American living in London but I don't pay US taxes for work done here because the tax rate is higher here and by treaty, the UK gets first crack at me. I know a few Americans in (low-tax) Singapore who have to pay Singapore taxes, then pay the on top of that to the US government up to the level they would have been taxed if living in the US.
I get extra pain when I go on business trips to the states, which the US doesn't count as being foreign work. So every year I have to fill in a spreadsheet of all the days I worked in each country, and subtract the US days from my tax treaty credits. I have to do the same thing in reverse for the HMRC in the UK. My least favorite part of being an expat :)
Yes, being a US citizen requires you to pay the US tax, even though you live in a different country, work in that country and already pay tax in that country.
It's been like that for a long time already, pretty rediculous of you ask me!
Yes, although there is a high deductible (~$80k, as I recall). It's never been something I needed to worry about, but FATCA most definitely will be. I don't know the answer to your last question, but I've never personally heard of another nation with similar policies.
US citizens living abroad are able to avail themselves of services through embassies and consulates for ordinary problems and call upon the USMC etc. for assistance with extraordinary ones.
There are multiple issues here, and maybe one real but complicated solution besides getting rid of US Citizenship:
US Citizens are taxed on their income by the US regardless of where it was sourced and regardless of where they live. There are exclusions for foreign earned income up $97,600 in 2013 [1], but that does not exempt you from FILING the 1040 and whatever else.
In addition the US has tax treaties [2] with various countries that dictate who gets first right to tax, based on various criteria. Remember treaties trump internal law.
None of these exempt you from filing a return, even if you owe no tax to Uncle Sam.
Then there's the FBAR[3], which is actually a US FinCen form that is administered by the IRS and must be filed by June 30 of each year. It's for people who either have or maintain "signature authority" on bank accounts with a combined value of over $10,000 in the previous year.
Finally there is now FATCA [4], which imposes new reporting requirements on both US persons and Banks. If you live overseas the amount required to report is quite high, but it's still more reporting. For banks it's a royal PIA and many banks will not turn you away if you are a US Citizen (this is anecdotal, I Don't have numbers).
The problem is that the affected parties, US Citizens living abroad, have no real franchise in congress. That's because you vote in Federal Elections based on your last state of residence, which means that your Senator could care less about you.
The solution: We need about 300,000 expats to move back to Wyoming for a while. Once they decide that they no longer like Wyoming and want to move back overseas, they will vote in Federal elections in Wyoming. The expats will then have a voice in congress and be able to have some influence..
Could care less means they care some, and theoretically could care less than they already care. Couldn't care less means they already don't care at all.
Is this effectively a fee for having a US embassy process paperwork on your behalf, or are they actually trying to charge a fee for individuals to renounce their citizenship? It seems to me that the whole idea of renouncing one's citizenship is to sever all ties previously held to the country and assume the status of a foreigner in the eyes of that country. How they would collect that $450 if that is the case is beyond me.
"1,131 cases to 189 in 2012. It's still a small proportion of the estimated six million Americans abroad"
Yes, I would say that 0.019 percent of the passport-holding population currently living abroad (presumably biased toward the more wealthy passport holders) is a small proportion indeed. What is the comparable figure for people from other countries who renounce their citizenship each year to become naturalized United States citizens? It is surely much higher.
If you want to live abroad and pay no US taxes, shouldn't one also give up rights to any entitlement services from the US government during that period? Otherwise, US tax payers are subsidizing free riders. If I'm a US citizen, but spend my whole life working in another country, should I be entitled to draw social security checks from the US? This would seem to create a moral hazard, as if you could find a tax shelter jurisdiction, you could work there, pay little to no taxes, and still cost the US government to support you.
Generally, government retirement programs aren't really tied to citizenship. You have to have contributed to social security for a number of years to receive benefits. I'm a US citizen, but my income is German, so I will ultimately receive German retirement benefits.
Living abroad, there are few benefits I'm actually entitled to. In some third world nations, if I'm arrested, then I could receive help at the embassy's expense. But I live in a first world country. I receive zero benefits from the US government. I can't think of a single service the US government provides me. In fact, they hold a monopoly on many of the services I need. If I simply want to notarize a form, I have to get to a consulate and then pay $50 (something I get for free in the US). And yet I have to file taxes and sometimes PAY taxes.
And here's an even worse bit: I get exempted from paying on the first ~$90k of foreign earned income, great. But in order to get that benefit, I'm not allowed to spend more than 30 days in any year in the US. That just means I'm not going to visit my home country at all, because if I visit family for 29 days, and later in the year I need to come back home for a funeral or other emergency, well, that would be a trip that could cost upwards of $20k in US taxes.
If I'm a US citizen, but spend my whole life working in another country, should I be entitled to draw social security checks from the US?
You are NOT entitled and you will NOT draw jack from Social Security--unless you paid in for at least 10 years. Then, that is your money.
If you move to US and are dirt poor, I suppose you may get some state aid, medicaid etc but that's a basic right to anyone that lives there. It probably balances out as many will retire, say to Mexico, and not use those services.
It does. However, in principle all US citizens are obligated to pay US taxes no matter where their residence or tax residence may be. There are a couple ways to be credited for tax paid abroad.
Actually, according to the article, foreign banks and financial institutions are now avoiding US citizens as customers because of the complications it introduces. So if you have a US citizenship, banks abroad won't deal with you.
This doesn't make sense to me. If you give up your citizenship, then presumably you have citizenship elsewhere, so why not just open a bank account under your foreign citizenship? How is the bank to know?
The only thing I can think of is that maybe people are avoiding taxes in the US and their adopted country as well. After all, many countries Americans move to have such high tax rates that after deductions, their US tax liability would be quite small.
This doesn't make sense to me. If you give up your citizenship, then presumably you have citizenship elsewhere, so why not just open a bank account under your foreign citizenship? How is the bank to know?
Yeah, just open a secret Swiss account, who will know.
[+] [-] jandrewrogers|12 years ago|reply
US law should not have jurisdiction beyond the border. It is creating a growing amount of complications for US citizens that are not within US jurisdiction but which can be held criminally liable for not following US laws even when those laws are in conflict with local laws where they actually live. The indifference of the US government to the consequences to US citizens of their overreach is typical these days.
[+] [-] seanmcdirmid|12 years ago|reply
> In some cases, compliance with US tax laws (even though not in the US) are in direct conflict with laws in jurisdictions where people actually reside.
This is why countries have tax treaties, to work these issues out (though there are some bugs, see above). If you don't earn that much, the ~$95k foreign income tax exemption is also very useful.
> In essence, a US citizen is indentured to the US state regardless of where they live.
Thankfully, I'm mostly an indentured servant to the CCP and every year I get to write a big fat +/- $0 on my US tax returns. But I'm just a worker bee.
> It is creating a growing amount of complications for US citizens that are not within US jurisdiction but which can be held criminally liable for not following US laws even when those laws are in conflict with local laws where they actually live.
What are you talking about? The only law I can think of: US citizens are not allowed to participate in corruption (by US law), while some countries require bribes to avoid sending you to jail. Very few laws affect us abroad, the only other ones I can think of relate to child rape and pornagraphy.
[+] [-] pekk|12 years ago|reply
[+] [-] gamblor956|12 years ago|reply
The U.S. Embassy system offers world-class services to U.S. citizens with legal, medical, and (depending on the circumstances) financial problems in foreign countries. They will negotiate your release if you are arrested for foreign crimes. They will work with your health provider if you become gravely sick. They will help you reorder credit cards if you are robbed and even provide you with cash advances or a place to stay.
[+] [-] pixelcort|12 years ago|reply
[+] [-] eschnou|12 years ago|reply
Huh?? Just because you are a US citizen, you have to pay taxes to the US wherever you live? Is any other country in the world having such policies?
[+] [-] ronilan|12 years ago|reply
http://en.wikipedia.org/wiki/International_taxation
[+] [-] ekianjo|12 years ago|reply
If they ever did that, I can tell you a number of French citizens living abroad would just drop their French passport without hesitation.
[+] [-] nohuck13|12 years ago|reply
I get extra pain when I go on business trips to the states, which the US doesn't count as being foreign work. So every year I have to fill in a spreadsheet of all the days I worked in each country, and subtract the US days from my tax treaty credits. I have to do the same thing in reverse for the HMRC in the UK. My least favorite part of being an expat :)
[1] http://www.rumbaklaw.com/resources-and-tools/us-federal-tax-...
[+] [-] dutchbrit|12 years ago|reply
It's been like that for a long time already, pretty rediculous of you ask me!
[+] [-] sipior|12 years ago|reply
[+] [-] brudgers|12 years ago|reply
[+] [-] ari_|12 years ago|reply
US Citizens are taxed on their income by the US regardless of where it was sourced and regardless of where they live. There are exclusions for foreign earned income up $97,600 in 2013 [1], but that does not exempt you from FILING the 1040 and whatever else.
In addition the US has tax treaties [2] with various countries that dictate who gets first right to tax, based on various criteria. Remember treaties trump internal law.
None of these exempt you from filing a return, even if you owe no tax to Uncle Sam.
Then there's the FBAR[3], which is actually a US FinCen form that is administered by the IRS and must be filed by June 30 of each year. It's for people who either have or maintain "signature authority" on bank accounts with a combined value of over $10,000 in the previous year.
Finally there is now FATCA [4], which imposes new reporting requirements on both US persons and Banks. If you live overseas the amount required to report is quite high, but it's still more reporting. For banks it's a royal PIA and many banks will not turn you away if you are a US Citizen (this is anecdotal, I Don't have numbers).
The problem is that the affected parties, US Citizens living abroad, have no real franchise in congress. That's because you vote in Federal Elections based on your last state of residence, which means that your Senator could care less about you.
The solution: We need about 300,000 expats to move back to Wyoming for a while. Once they decide that they no longer like Wyoming and want to move back overseas, they will vote in Federal elections in Wyoming. The expats will then have a voice in congress and be able to have some influence..
[1].http://www.irs.gov/Individuals/International-Taxpayers/Forei... [2]http://www.irs.gov/Businesses/International-Businesses/Unite... [3]http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employ...
[+] [-] Afforess|12 years ago|reply
Could care less means they care some, and theoretically could care less than they already care. Couldn't care less means they already don't care at all.
[+] [-] scottjad|12 years ago|reply
http://en.wikipedia.org/wiki/Renunciation_of_citizenship#Uni...
[+] [-] john_b|12 years ago|reply
[+] [-] tokenadult|12 years ago|reply
Yes, I would say that 0.019 percent of the passport-holding population currently living abroad (presumably biased toward the more wealthy passport holders) is a small proportion indeed. What is the comparable figure for people from other countries who renounce their citizenship each year to become naturalized United States citizens? It is surely much higher.
[+] [-] cromwellian|12 years ago|reply
[+] [-] lgbr|12 years ago|reply
Living abroad, there are few benefits I'm actually entitled to. In some third world nations, if I'm arrested, then I could receive help at the embassy's expense. But I live in a first world country. I receive zero benefits from the US government. I can't think of a single service the US government provides me. In fact, they hold a monopoly on many of the services I need. If I simply want to notarize a form, I have to get to a consulate and then pay $50 (something I get for free in the US). And yet I have to file taxes and sometimes PAY taxes.
And here's an even worse bit: I get exempted from paying on the first ~$90k of foreign earned income, great. But in order to get that benefit, I'm not allowed to spend more than 30 days in any year in the US. That just means I'm not going to visit my home country at all, because if I visit family for 29 days, and later in the year I need to come back home for a funeral or other emergency, well, that would be a trip that could cost upwards of $20k in US taxes.
[+] [-] bsullivan01|12 years ago|reply
You are NOT entitled and you will NOT draw jack from Social Security--unless you paid in for at least 10 years. Then, that is your money.
If you move to US and are dirt poor, I suppose you may get some state aid, medicaid etc but that's a basic right to anyone that lives there. It probably balances out as many will retire, say to Mexico, and not use those services.
[+] [-] te_chris|12 years ago|reply
[+] [-] thaumasiotes|12 years ago|reply
[+] [-] deadfish|12 years ago|reply
[+] [-] guard-of-terra|12 years ago|reply
I think the world should be shelling DC, I mean, forget Iran and Syria, right?
[+] [-] pekk|12 years ago|reply
[+] [-] Svip|12 years ago|reply
[+] [-] Aloisius|12 years ago|reply
The only thing I can think of is that maybe people are avoiding taxes in the US and their adopted country as well. After all, many countries Americans move to have such high tax rates that after deductions, their US tax liability would be quite small.
[+] [-] UnoriginalGuy|12 years ago|reply
PS - The answers to all of these questions is contained within the article.
[+] [-] bsullivan01|12 years ago|reply
Yeah, just open a secret Swiss account, who will know.