4 ms·

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 ye

by deong 11y ago

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 $100,000 but live in a country that isn't a tax-haven, you exclude that income too because you're only taxed on the difference between the taxes you would owe the US government and the taxes you paid in your home country. In Europe at least, you're almost always taxed at a higher rate than the US would have taxed you, so again, you don't owe anything. You're only looking at that 30% burden if you live in a country with no taxes and you make millions of dollars (because again, the first $100k is excluded). I agree it's a bit crazy that the US taxes worldwide income, but the practical consequences seem pretty minimal. My bank has no problem with me as a customer, or at least if they do, they haven't said anything to me about it.

ptaipale 11y ago
> 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.
- deong 11y ago
  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.
  - ptaipale 11y ago
    That advice sounds to me a bit like if you go on trial for some small thing (let's say a pub brawl), and you're told "don't get a lawyer, it will make you look bad". Perhaps it is sometimes a good advice, but it can also be a spectacularly bad one.
    - deong 11y ago
      Yeah, I was a bit leery as well, but my situation isn't that complicated, so I saved the money and did it myself. Will update from prison later if it comes to that. :)
  - vidarh 11y ago
    It seems tax authorities can be surprisingly flexible as long as they don't get a whiff of attempted tax evasion anywhere. E.g. at some point around 2000 or so, I'd just moved to the UK, and my personal finances were total chaos around the move. I'd sold quite a lot of shares in Norway, and traded quite a bit on NASDAQ via a US brokerage account (in 2000... yes, it got ugly; thankfully not that much money), and had income from both UK and Norway split between employment and contracting in the same tax year. And transfers back and forth between my UK, US and Norwegian accounts... To make it more annoying, UK and Norway have different tax years (Norway follow calendar year, UK does not). And to be honest my record-keeping at the time was shoddy to the extreme. So I wrote a letter to UK and Norwegian tax authorities where I set out the details of my income, assets and losses as best I could. I told them I had no clue how to accurately figure out exactly what was due (for the US it was easy because it was all losses that year; the US brokerage account was just relevant because it provided deductions for losses on my Norwegian taxes). Gave them a number each that I thought was close to correct. Filled in my tax returns with estimates (and explained in my letters that the numbers were estimates). Both just accepted my estimate with no arguments, and no requests for further documentation. No fines, or angry letters, or conflicting estimated tax calculations or anything, which was what I feared when I sent it all off.
    - morgante 11y ago
      I don't know much about the UK or Norwegian tax authorities, but at least with the IRS you might have just gotten lucky. They only have sufficient manpower to go after a small percentage of questionable returns, so even if you make a lot of mistakes on yours (or evades taxes), there's still a good chance you won't get audited unless you're a big fish.
morgante 11y ago
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 besides Americans. The exclusion is helpful, but you can still end up with a substantial tax bill as well as having to be careful about how much time you spend in the US.
- deong 11y ago
  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 highly paid "normal workers" to avoid the penalty, while still hitting the very wealthy purely looking at the tax dodge. And the limitations on time spent in the US are absurdly low as well. I'm an academic, so if I attend a couple of conferences there, I actually have to count the days left when I book a holiday to spend with my family. I have almost as many paid vacation days in Iceland as I'm allowed to spend in the US without forfeiting my bona fide tax home status, which is ludicrous.
  - morgante 11y ago
    > 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.
seanmcdirmid 11y ago
You can't really work in Hong Kong, Singapore, or Switzerland making over $100k without milking the housing deduction given that income taxes are lower than the states. If the country has no taxes, the foreign income exemption doesn't work. Also, it maybe doesn't work if you are going to get a job in Iran, Cuba, or North Korea...there are certain standards to meet.
RP_Joe 11y ago
What about social security taxes?

by deong 11y ago

ptaipale 11y ago

> 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.

deong 11y ago
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.
- ptaipale 11y ago
  That advice sounds to me a bit like if you go on trial for some small thing (let's say a pub brawl), and you're told "don't get a lawyer, it will make you look bad". Perhaps it is sometimes a good advice, but it can also be a spectacularly bad one.
  - deong 11y ago
    Yeah, I was a bit leery as well, but my situation isn't that complicated, so I saved the money and did it myself. Will update from prison later if it comes to that. :)
- vidarh 11y ago
  It seems tax authorities can be surprisingly flexible as long as they don't get a whiff of attempted tax evasion anywhere. E.g. at some point around 2000 or so, I'd just moved to the UK, and my personal finances were total chaos around the move. I'd sold quite a lot of shares in Norway, and traded quite a bit on NASDAQ via a US brokerage account (in 2000... yes, it got ugly; thankfully not that much money), and had income from both UK and Norway split between employment and contracting in the same tax year. And transfers back and forth between my UK, US and Norwegian accounts... To make it more annoying, UK and Norway have different tax years (Norway follow calendar year, UK does not). And to be honest my record-keeping at the time was shoddy to the extreme. So I wrote a letter to UK and Norwegian tax authorities where I set out the details of my income, assets and losses as best I could. I told them I had no clue how to accurately figure out exactly what was due (for the US it was easy because it was all losses that year; the US brokerage account was just relevant because it provided deductions for losses on my Norwegian taxes). Gave them a number each that I thought was close to correct. Filled in my tax returns with estimates (and explained in my letters that the numbers were estimates). Both just accepted my estimate with no arguments, and no requests for further documentation. No fines, or angry letters, or conflicting estimated tax calculations or anything, which was what I feared when I sent it all off.
  - morgante 11y ago
    I don't know much about the UK or Norwegian tax authorities, but at least with the IRS you might have just gotten lucky. They only have sufficient manpower to go after a small percentage of questionable returns, so even if you make a lot of mistakes on yours (or evades taxes), there's still a good chance you won't get audited unless you're a big fish.

morgante 11y ago

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 besides Americans. The exclusion is helpful, but you can still end up with a substantial tax bill as well as having to be careful about how much time you spend in the US.

deong 11y ago
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 highly paid "normal workers" to avoid the penalty, while still hitting the very wealthy purely looking at the tax dodge. And the limitations on time spent in the US are absurdly low as well. I'm an academic, so if I attend a couple of conferences there, I actually have to count the days left when I book a holiday to spend with my family. I have almost as many paid vacation days in Iceland as I'm allowed to spend in the US without forfeiting my bona fide tax home status, which is ludicrous.
- morgante 11y ago
  > 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.

seanmcdirmid 11y ago

You can't really work in Hong Kong, Singapore, or Switzerland making over $100k without milking the housing deduction given that income taxes are lower than the states. If the country has no taxes, the foreign income exemption doesn't work. Also, it maybe doesn't work if you are going to get a job in Iran, Cuba, or North Korea...there are certain standards to meet.

RP_Joe 11y ago

What about social security taxes?