5 ms·

I thought there were tax treaties, basically you don't pay taxes on the first $100k if you paid into the national tax system of the country you are in. I can i

by sjg007 6y ago

I thought there were tax treaties, basically you don't pay taxes on the first $100k if you paid into the national tax system of the country you are in. I can imagine FICA taxes though might be difficult. Maybe US social security would deny benefits if you claimed them without any contributions and residence abroad.

siberianbear 6y ago
The $100k you're referring to is the Foreign Earned Income Exclusion [1]. If you're an American working abroad, you don't need to pay income tax on your first $107,600. The exclusion does not apply to self-employment tax or investment income. That's not even the real problem, though. The problem is that banks don't want to deal with the FATCA compliance issues and just refuse to deal with Americans, period. I've experienced this firsthand as an American expat and it is a colossal pain in the ass. [1] https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion https://www.irs.gov/individuals/international-taxpayers/fore...
- math 6y ago
  I was affiliated with a company in Singapore which had it's bank account closed, I believe due to FACTA, even though at the time no one involved with the company had ever been to the US and didn't have any ties to the US. It was simply that the size of the account was too small to justify the associated administrative burden. FACTA has impact beyond US citizens - pretty annoying.
- sjg007 6y ago
  What about a multinational bank like Citi bank or HSBC etc... I would assume they have experience in these issues.
  - KLexpat 6y ago
    If you're in a country like Malaysia, the domestic branch of a multi-national bank may not accept US citizens, because the Malaysian branch doesn't deal with FATCA/US gov.
- KLexpat 6y ago
  I work in finance and it IS a colossal pain to deal with the FATCA compliance. There is no official guidance to FATCA and its processes, and every country has passed its own FATCA related regulations. Therefore running a FATCA compliant entity in say france requires you to comply with all french laws around fatca. Which also leads to issues with GDPR. This creates a cost of several hundred thousand USD per year just to deal with US clients for most western finance companies, per country they do business in. Or - simply flatly refuse to offer services to any US citizens and rest easy knowing the IRS isn't going to ruin your life just because a US citizen tried to open an account without even depositing a single cent, but you didn't file your IRS stuff correctly
- djohnston 6y ago
  Does this mean you get double taxed on everything over 107?
  - names_are_hard 6y ago
    No. If you earn more than the allowable amount for the Foreign Earned Income Exclusion (FEIE), you claim the Foreign Tax Credit instead. Under the FTC, you essentially pay the higher of the two tax rates. Except the accounting can get tricky if you have multiple sources of income that are taxed at different rates between the US and the foreign country. For example, if you earn 200k in a foreign country and that country charges you 75k on 190k of that, and decides that 10k doesn't count for some reason. Suppose the US rates are such that you owe 60k on 190k, then the FTC erases that 60k. But you might still owe 3k on the remaining 10k that the foreign country ignored.
wiredfool 6y ago
There are actually two exclusions for countries on the treaty list, one is the first ~100k of income, and the other is a tax credit for taxes paid in the other country. So, if you happen to be an expat in a higher tax country (which is certainly Europe), then you won't owe taxes in the US. You still have to file, which can cost $500 for an accountant to make sure everything is correct, but owing taxes isn't really an issue.
- kingosticks 6y ago
  Not always true. Some things may be tax free in your resident country (e.g an ISA in the UK) but pay normal tax rates in the US. Since credits from each income category are separate, you may not have enought credit in the 'bank interest' category to cover what the US demands (I'm simplifying but that's essentially the issue). It may be a small amount but it's still owed tax and I'd imagine it's quite a common situation.
- names_are_hard 6y ago
  As a US citizen in Israel, I do owe some money to the US every year even though I pay more to Israel overall than I would if I only paid the US. This is because the FTC is applied to each dollar of income separately, so in the few places where Israeli taxes are lower than the US I get to pay the US. In a sense you get the worst of both tax regimes.

by sjg007 6y ago

siberianbear 6y ago

The $100k you're referring to is the Foreign Earned Income Exclusion [1]. If you're an American working abroad, you don't need to pay income tax on your first $107,600. The exclusion does not apply to self-employment tax or investment income. That's not even the real problem, though. The problem is that banks don't want to deal with the FATCA compliance issues and just refuse to deal with Americans, period. I've experienced this firsthand as an American expat and it is a colossal pain in the ass. [1] https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion https://www.irs.gov/individuals/international-taxpayers/fore...

math 6y ago
I was affiliated with a company in Singapore which had it's bank account closed, I believe due to FACTA, even though at the time no one involved with the company had ever been to the US and didn't have any ties to the US. It was simply that the size of the account was too small to justify the associated administrative burden. FACTA has impact beyond US citizens - pretty annoying.
sjg007 6y ago
What about a multinational bank like Citi bank or HSBC etc... I would assume they have experience in these issues.
- KLexpat 6y ago
  If you're in a country like Malaysia, the domestic branch of a multi-national bank may not accept US citizens, because the Malaysian branch doesn't deal with FATCA/US gov.
KLexpat 6y ago
I work in finance and it IS a colossal pain to deal with the FATCA compliance. There is no official guidance to FATCA and its processes, and every country has passed its own FATCA related regulations. Therefore running a FATCA compliant entity in say france requires you to comply with all french laws around fatca. Which also leads to issues with GDPR. This creates a cost of several hundred thousand USD per year just to deal with US clients for most western finance companies, per country they do business in. Or - simply flatly refuse to offer services to any US citizens and rest easy knowing the IRS isn't going to ruin your life just because a US citizen tried to open an account without even depositing a single cent, but you didn't file your IRS stuff correctly
djohnston 6y ago
Does this mean you get double taxed on everything over 107?
- names_are_hard 6y ago
  No. If you earn more than the allowable amount for the Foreign Earned Income Exclusion (FEIE), you claim the Foreign Tax Credit instead. Under the FTC, you essentially pay the higher of the two tax rates. Except the accounting can get tricky if you have multiple sources of income that are taxed at different rates between the US and the foreign country. For example, if you earn 200k in a foreign country and that country charges you 75k on 190k of that, and decides that 10k doesn't count for some reason. Suppose the US rates are such that you owe 60k on 190k, then the FTC erases that 60k. But you might still owe 3k on the remaining 10k that the foreign country ignored.

wiredfool 6y ago

There are actually two exclusions for countries on the treaty list, one is the first ~100k of income, and the other is a tax credit for taxes paid in the other country. So, if you happen to be an expat in a higher tax country (which is certainly Europe), then you won't owe taxes in the US. You still have to file, which can cost $500 for an accountant to make sure everything is correct, but owing taxes isn't really an issue.

kingosticks 6y ago
Not always true. Some things may be tax free in your resident country (e.g an ISA in the UK) but pay normal tax rates in the US. Since credits from each income category are separate, you may not have enought credit in the 'bank interest' category to cover what the US demands (I'm simplifying but that's essentially the issue). It may be a small amount but it's still owed tax and I'd imagine it's quite a common situation.
names_are_hard 6y ago
As a US citizen in Israel, I do owe some money to the US every year even though I pay more to Israel overall than I would if I only paid the US. This is because the FTC is applied to each dollar of income separately, so in the few places where Israeli taxes are lower than the US I get to pay the US. In a sense you get the worst of both tax regimes.