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If you're a US citizen permanently living abroad, you still have to pay taxes to the US. As far as I know, relinquishing citizenship is the only way to avoid th

If you're a US citizen permanently living abroad, you still have to pay taxes to the US. As far as I know, relinquishing citizenship is the only way to avoid that. The treaties might make the taxes fair in the end, or even reduce the taxes owed to zero, but it's still a ridiculous requirement and a lot of headache and potential accounting expenses for the individual. You still need to file the paperwork. Then there are things like FBAR. Pension savings can also be tricky, since the US apparently doesn't honor foreign equivalents to 401(k). Employer contributions, and tax-deferred contributes, can/will end up being taxed under the same double-taxing scheme as regular income. As a counter-example, I moved from Norway to the US some years ago. I was required to pay income tax to Norway for (if I remember correctly) two years after moving, and the Norwegian tax authorities would tax me on my entire US income, but allowed me to use the US taxes as a credit against my Norwegian tax obligation. After the two years, I no longer have to pay Norwegian taxes on my US income.

rahimnathwani 8y ago
What you have written is correct, but there are two separate questions: 1) Should US citizens resident abroad be subject to US tax on their non-US income? 2) Do US citizens resident abroad have to pay 'double tax' on their non-US income? I was only talking about #2. The answer to this: mostly not (bar your examples about effectively eliminating deductions for pension contributions). You're also talking about #1, about which I have expressed no opinion. I can see both sides of the argument.
- atombender 8y ago
  True, but if US non-residents were not taxed by the US, the whole issue goes away. In case I wasn't clear, even if "double taxation" doesn't actually result in double taxation or an additional tax obligation -- i.e. (owed_US - owed_foreign) > 0 -- then it's still an unnecessary headache for the citizen. In the US, thanks to extremely complicated rules and lack of centralized information collection -- many people use an accountant to file their taxes, which is much less common in other parts of the world. In my native Norway, for example, the tax authorities already have everything most people need to file, and indeed if you don't file at all they will simply calculate your taxes for you. (Unlike the US, they will mail a bill if you owe anything.) Living outside the US then potentially means having to use an American accountant to figure things out, unless something like TurboTax can do the job. (Last I checked, apps like TurboTax didn't do complex use cases like FBAR.)
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robocat 8y ago
> As far as I know, relinquishing citizenship is the only way to avoid that. I was told that you can't relinquish US citizenship to avoid taxes. If that is your actual reason, you must find a suitable lie instead.

rahimnathwani 8y ago

What you have written is correct, but there are two separate questions: 1) Should US citizens resident abroad be subject to US tax on their non-US income? 2) Do US citizens resident abroad have to pay 'double tax' on their non-US income? I was only talking about #2. The answer to this: mostly not (bar your examples about effectively eliminating deductions for pension contributions). You're also talking about #1, about which I have expressed no opinion. I can see both sides of the argument.

atombender 8y ago
True, but if US non-residents were not taxed by the US, the whole issue goes away. In case I wasn't clear, even if "double taxation" doesn't actually result in double taxation or an additional tax obligation -- i.e. (owed_US - owed_foreign) > 0 -- then it's still an unnecessary headache for the citizen. In the US, thanks to extremely complicated rules and lack of centralized information collection -- many people use an accountant to file their taxes, which is much less common in other parts of the world. In my native Norway, for example, the tax authorities already have everything most people need to file, and indeed if you don't file at all they will simply calculate your taxes for you. (Unlike the US, they will mail a bill if you owe anything.) Living outside the US then potentially means having to use an American accountant to figure things out, unless something like TurboTax can do the job. (Last I checked, apps like TurboTax didn't do complex use cases like FBAR.)

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robocat 8y ago

> As far as I know, relinquishing citizenship is the only way to avoid that. I was told that you can't relinquish US citizenship to avoid taxes. If that is your actual reason, you must find a suitable lie instead.