5 ms·

most people with complex tax situations pay a accountant $500-2000 per year to do their taxes and move on with their life.

opportune 5y ago
It’s not just about paying an accountant but also not accidentally doing something that ends up highly taxable. Example: moving to a country without a tax treaty with the US and getting double taxed, at least temporarily.
- NovemberWhiskey 5y ago
  I had a US citizen colleague who moved from Singapore to the UK and just got absolutely killed on tax - I can't remember the exact details but there was some kind of annual (or less frequent) election he had to make that was correct for Singapore but meant he ended up paying full US and UK taxes on his income with very little relief.
- doopy1 5y ago
  I thought that in tax treaty situations you only pay the maximum tax rate? So the place you lived/ worked gets their tax cut or the US gets the difference (or something along those lines). Hard to imagine someone paying 70% of their income in taxes just for living somewhere else for a little while.
  - jandrewrogers 5y ago
    It isn't that simple in practice unless your finances are trivial. Even under a tax treaty there are a several circumstances where you'll pay more total taxes than if you solely paid taxes in either country. Tax incidence is determined per income type, it is not based on your total tax return; you can pay more taxes locally than you would in the US and still owe a lot of taxes to the US. Similarly, differences in definitions, recognition, taxation across types of income can differ between countries such that you end up paying taxes that are not recognized by the US and therefore are not credited as taxes paid. It is pretty complicated. The US tax code places an indefensible burden on expats. Also, some States (looking at you California) can require you to pay income taxes even if you live overseas for the entire year.
  - ska 5y ago
    While that's probably right in spirit most of the time for simple taxes, this entirely depends on the tax treaty. Other factors to think about: - not all countries have tax treaties, the default is you owe in both places - tax deferment schemes complicate things (e.g. 401(k)), the countries won't look at this income the same way - some tax treaties require specific actions, missing these may leave you owing - not all income types will be treated the same way in both jurisdiction (e.g. cap gains, rental properties,etc.) - etc.
- ghaff 5y ago
  Which is the other reason to pay way too much money to an accountant. So you can ask them questions about this sort of thing. (Though you get to obscure edge cases and accountants may not know all the ins and outs of international tax consequences.)
  - opportune 5y ago
    In my limited experience accountants can get even relatively trivial things (like state tax credits for cases of partial residency) wrong. I’m sure there are different levels of quality/attention you can get the more you pay, including talking to pedigreed tax attorneys, but it’s expensive. Personally I think there is a high dollar value in just not having to worry about these kinds of things. If I were entering a complex working situation or moving to another country, I would probably take steps to make things as simple as possible such as ending work in December and starting something new in January, not realizing investment income, putting assets in corporations or trusts to defer any income, etc.
    - ghaff 5y ago
      Absolutely. As far as I know, I've never had issues with my accountant although my filings are such a thick sheaf at this point that, who knows? (And my income sources aren't even that complicated.) I do fear state tax filings are about to get more complicated with some states apparently looking to collect money for even one day business trips. I wish Congress would get off the blocks and pass the minimum 30 day exclusion that's been brought up a couple times.
- ageitgey 5y ago
  You can also get caught up if you move between countries that have tax treaties but where the tax years don't align on the calendar and where the schedule for paying estimated taxes are different, like the US and the UK. The US tax year runs from Jan - Dec, with a quarterly estimated tax payment schedule for self-employed people. In the UK, it runs from Apr - Mar, with bi-annual tax bills. So there's a point at the end of the calendar year where you owe US taxes (that you should be able to fully wipe out with tax paid to the UK), but the UK hasn't calculated the tax amount yet nor asked for the money yet, so you can't show the US that you already paid those taxes under the tax treaty. So you end up owing two countries taxes on the same money, at least temporarily. tl;dr - everything sucks, hire an accountant
ska 5y ago
Depending on the mix of countries, it can be really hard to find an accountant who actually knows how to do it properly. It's also entirely possible that the answer you get is "well, this is how we interpret the updated tax treaty, but nobody has tried it in court so we aren't sure." Usually this stuff is in the details rather than the basic question, but it can be fiddly.
- ageitgey 5y ago
  So true. I have the simplest mix of countries possible (US citizen / UK resident) and getting clear answers from an accountant on various questions is harder than one might expect because cross-border scenarios aren't always clearly defined in the law. A lot of it comes down to the accountant saying "our firm recommends X as more defensible based on recent changes in legislation, but if you want to do Y, here is why that might also be possible."
organsnyder 5y ago
Yep. We have a complex tax situation this year (a first for us), and our accountant has saved us an amount equal to 10x what we're paying him.
cultofmetatron 5y ago
checks out. I am a digital nomad. I pay about $300/month to bench to take care of it all for me. They handle day by day accounting and file at the end of the year for me. 100% worth the money.

opportune 5y ago

It’s not just about paying an accountant but also not accidentally doing something that ends up highly taxable. Example: moving to a country without a tax treaty with the US and getting double taxed, at least temporarily.

NovemberWhiskey 5y ago
I had a US citizen colleague who moved from Singapore to the UK and just got absolutely killed on tax - I can't remember the exact details but there was some kind of annual (or less frequent) election he had to make that was correct for Singapore but meant he ended up paying full US and UK taxes on his income with very little relief.
doopy1 5y ago
I thought that in tax treaty situations you only pay the maximum tax rate? So the place you lived/ worked gets their tax cut or the US gets the difference (or something along those lines). Hard to imagine someone paying 70% of their income in taxes just for living somewhere else for a little while.
- jandrewrogers 5y ago
  It isn't that simple in practice unless your finances are trivial. Even under a tax treaty there are a several circumstances where you'll pay more total taxes than if you solely paid taxes in either country. Tax incidence is determined per income type, it is not based on your total tax return; you can pay more taxes locally than you would in the US and still owe a lot of taxes to the US. Similarly, differences in definitions, recognition, taxation across types of income can differ between countries such that you end up paying taxes that are not recognized by the US and therefore are not credited as taxes paid. It is pretty complicated. The US tax code places an indefensible burden on expats. Also, some States (looking at you California) can require you to pay income taxes even if you live overseas for the entire year.
- ska 5y ago
  While that's probably right in spirit most of the time for simple taxes, this entirely depends on the tax treaty. Other factors to think about: - not all countries have tax treaties, the default is you owe in both places - tax deferment schemes complicate things (e.g. 401(k)), the countries won't look at this income the same way - some tax treaties require specific actions, missing these may leave you owing - not all income types will be treated the same way in both jurisdiction (e.g. cap gains, rental properties,etc.) - etc.
ghaff 5y ago
Which is the other reason to pay way too much money to an accountant. So you can ask them questions about this sort of thing. (Though you get to obscure edge cases and accountants may not know all the ins and outs of international tax consequences.)
- opportune 5y ago
  In my limited experience accountants can get even relatively trivial things (like state tax credits for cases of partial residency) wrong. I’m sure there are different levels of quality/attention you can get the more you pay, including talking to pedigreed tax attorneys, but it’s expensive. Personally I think there is a high dollar value in just not having to worry about these kinds of things. If I were entering a complex working situation or moving to another country, I would probably take steps to make things as simple as possible such as ending work in December and starting something new in January, not realizing investment income, putting assets in corporations or trusts to defer any income, etc.
  - ghaff 5y ago
    Absolutely. As far as I know, I've never had issues with my accountant although my filings are such a thick sheaf at this point that, who knows? (And my income sources aren't even that complicated.) I do fear state tax filings are about to get more complicated with some states apparently looking to collect money for even one day business trips. I wish Congress would get off the blocks and pass the minimum 30 day exclusion that's been brought up a couple times.
ageitgey 5y ago
You can also get caught up if you move between countries that have tax treaties but where the tax years don't align on the calendar and where the schedule for paying estimated taxes are different, like the US and the UK. The US tax year runs from Jan - Dec, with a quarterly estimated tax payment schedule for self-employed people. In the UK, it runs from Apr - Mar, with bi-annual tax bills. So there's a point at the end of the calendar year where you owe US taxes (that you should be able to fully wipe out with tax paid to the UK), but the UK hasn't calculated the tax amount yet nor asked for the money yet, so you can't show the US that you already paid those taxes under the tax treaty. So you end up owing two countries taxes on the same money, at least temporarily. tl;dr - everything sucks, hire an accountant

ska 5y ago

Depending on the mix of countries, it can be really hard to find an accountant who actually knows how to do it properly. It's also entirely possible that the answer you get is "well, this is how we interpret the updated tax treaty, but nobody has tried it in court so we aren't sure." Usually this stuff is in the details rather than the basic question, but it can be fiddly.

ageitgey 5y ago
So true. I have the simplest mix of countries possible (US citizen / UK resident) and getting clear answers from an accountant on various questions is harder than one might expect because cross-border scenarios aren't always clearly defined in the law. A lot of it comes down to the accountant saying "our firm recommends X as more defensible based on recent changes in legislation, but if you want to do Y, here is why that might also be possible."

organsnyder 5y ago

Yep. We have a complex tax situation this year (a first for us), and our accountant has saved us an amount equal to 10x what we're paying him.

cultofmetatron 5y ago

checks out. I am a digital nomad. I pay about $300/month to bench to take care of it all for me. They handle day by day accounting and file at the end of the year for me. 100% worth the money.