4 ms·

Every time this is brought up I will ask the same question. Has anyone personally had to pay taxes to the US while living abroad? Not talking about a stock sal

by wil421 5y ago

Every time this is brought up I will ask the same question. Has anyone personally had to pay taxes to the US while living abroad? Not talking about a stock sale or business sale. Talking about making income abroad and owning the US for it. I don’t want to hear about your friend of a friend, you personally. I’ve known people living in places like Costa Rica, China, and all over Europe. No one had to pay a cent ever.

valtism 5y ago
I met someone running an AirBnB in London who was in the process of revoking his US citizenship because he was being taxed by the US despite not working there or having any business there. What blew me away is that he was having to pay thousands of pounds to _revoke_ his citizenship. From an admittedly naïve standpoint that seems like a real rort.
mattjaynes 5y ago
Yes, I pay taxes living abroad. Any US citizen overseas that earns over $107,600 in 2020 (changes slightly every year) may be liable to pay US taxes (depending on what other deduction they may have, etc)[1]. There is the direct financial cost of paying US taxes when living abroad, but it is also a significant cost in time and energy to file taxes for 2 countries. It can get pretty complex, so many need to hire a tax service to handle it properly. Then there are the additional reporting requirements for any banks that you have accounts with, so some banks will not allow you to have an account with them because you are a US citizen. The point is that there are some real downsides to maintaining US citizenship when living overseas. There are many upsides of course, like being able to return to the US at any time and live and work there. If there were an emergency situation, I could probably count on the US embassy to help me evacuate if necessary. Overall, it's a cost/benefit evaluation. If you have citizenship in another advantageous country (or country in a powerful union like the EU) and significant resources, I can see why it would be tempting for some to drop the US citizenship. [1] https://www.irs.gov/individuals/international-taxpayers/figuring-the-foreign-earned-income-exclusion https://www.irs.gov/individuals/international-taxpayers/figu...
- LadyCailin 5y ago
  Except dropping your us citizenship may prevent you from ever stepping foot in the US again, if things like the SAFER Act [0] were to actually pass. Additionally, renouncing puts your name in criminal databases, and probably has lots of other downsides compared to someone that just never had citizenship in the first place. Not to mention all the accidental Americans that never stepped foot in the US! [0] https://en.wikipedia.org/wiki/Reed_Amendment_(immigration)?wprov=sfti1 https://en.wikipedia.org/wiki/Reed_Amendment_(immigration)?w...
  - wil421 5y ago
    If you've never stepped foot in America would you really consider yourself American?
- wil421 5y ago
  How much taxes do you pay to the US? Yes the US will help get you out when you need to. Hostage rescue by special forces in Nigeria[1]. State Department Wuhan evacuation in Jan 2020[2]. 100,000 people evacuated by State Department as of June 2020.[3] [1] https://www.militarytimes.com/news/your-military/2020/10/31/us-forces-rescue-american-hostage-in-nigeria/ https://www.militarytimes.com/news/your-military/2020/10/31/... [2] https://www.state.gov/the-untold-coronavirus-story https://www.state.gov/the-untold-coronavirus-story [3] https://washdiplomat.com/as-coronavirus-spread-state-department-evacuated-over-100000-americans-abroad/ https://washdiplomat.com/as-coronavirus-spread-state-departm...
  - mattjaynes 5y ago
    > I’ve known people living in places like Costa Rica, China, and all over Europe. No one had to pay a cent ever. > How much taxes do you pay to the US? Anecdata won't get us very far in understanding. The point is there are plenty (no idea the exact number) of US citizens abroad that pay taxes. If you're making much over ~$110K and don't have significant deductions, you are paying US taxes. As you can imagine these people are typically experienced technical engineers, executives, business owners, etc. True, most US citizens abroad won't go over the ~$110K, but many do. Either way, you still have the burden of filing taxes in the complex US tax system which is a non-trivial cost in time and resources - in addition to filing taxes in your host country. Is it worth it? Yes, for most, but simplifying the overly complex tax requirements would make it a lot less burdensome for all US citizens at home and abroad.
BrentOzar 5y ago
> Has anyone personally had to pay taxes to the US while living abroad? Yes, I'm living in Iceland at the moment and paying income taxes in the US. Iceland has a teleworker visa that lets you live here tax-free while working remotely for your current employer. That's a fantastic deal for most countries, but I'm not saving any money while we're here. (We're not doing it to save money, just doing it to social distance and enjoy the scenery.)
- wil421 5y ago
  That’s not the same you are still considered as working in the US. You just happen to be staying in a foreign country.
  - BrentOzar 5y ago
    I own my own business, and I sell online training. I'm not working in the US - I'm working in Iceland, selling to people globally, and still paying income tax in the US.
    - toastal 5y ago
      This applies to any self-employed, independent contractor
mwarkentin 5y ago
I was a dual us / Canadian citizen who have *never lived or worked in the US*. I revoked my citizenship 2 years ago, after going through a stock sale here in Canada. The process: - cost me around $20,000 for the lawyer, accountants (had to go back and do 5-6 years of taxes), another $3,000 (I think?) to the US for the revocation process - had to go to the Bahamas in order to get an appointment at an embassy, I never got a response from the ones here (this was the best part, nice little vacation during Canadian winter xD) - cost more tens of thousands in Canadian tax as I couldn’t claim all of my tax deductions in Canada for the year of the sale of it would’ve pushed me over 25,000 owing on the US side and meant I’d have had to pay (there’s a program for clearing up to 25,000 owing taxes when you revoke now) - the IRS fucked up and came back to me this year as owing so I’m continuing to pay the accountants to deal with that for me - caused untold amounts of stress for myself and my wife I had previously basically ignored the whole situation as it seemed entirely ridiculous that I should have to deal with this, however the US has started forcing foreign banks to ask their customers about their citizenship status. It didn’t seem smart to lie about this to my bank (who also happens to be my wife’s employer), so it seemed like I may have been ending up on the IRS radar at some point regardless. All in all an entirely SHIT situation even though technically I probably never would’ve owed outside of your caveats about a stock sale. Had I been compliant it would’ve cost me in money and time each year.
- MeinBlutIstBlau 5y ago
  I know if you're born from a US parent you get citizenship, but what's stopping them from only filing for the birth of a Canadian child in Canada and never acknowledging they have American citizenship? As long as you don't get a birth certificate and SSN in the US, the IRS will never know.
  - mwarkentin 5y ago
    I had a birth certificate, my parents thought it would be potentially helpful for me (this was also almost 40 years ago so a lot of these extra compliance requirements didn’t exist back then). We were concerned that my kids would also potentially be US citizens but it seems like I would have to have lived there for some amount of time for that to kick in.
nraynaud 5y ago
Yes I hit the minimum taxation rate in the US. And I just had a green card.
jfb 5y ago
Yes. Most of my tax is covered by reciprocal tax treaties between my country of residence (Canada) and the US, but I still have to file, and differences in tax regimes mean that there are decisions my family has to take that other families, in the same situation but without a US citizen, don't. For instance, if we sell our house, I will have to pay capital gains in the US, but not in Canada (it's our primary residence and gains from that sale are not taxable in Canada). It's a minor inconvenience for me, but that's because we pay an accountant to handle a relatively complicated tax picture already.
- mwarkentin 5y ago
  The US also recognizes RRSP in the tax treaty but not TFSA so that’s a pretty major retirement planning tool that’s off the table.
  - jfb 5y ago
    Yep.

by wil421 5y ago

valtism 5y ago

I met someone running an AirBnB in London who was in the process of revoking his US citizenship because he was being taxed by the US despite not working there or having any business there. What blew me away is that he was having to pay thousands of pounds to _revoke_ his citizenship. From an admittedly naïve standpoint that seems like a real rort.

mattjaynes 5y ago

Yes, I pay taxes living abroad. Any US citizen overseas that earns over $107,600 in 2020 (changes slightly every year) may be liable to pay US taxes (depending on what other deduction they may have, etc)[1]. There is the direct financial cost of paying US taxes when living abroad, but it is also a significant cost in time and energy to file taxes for 2 countries. It can get pretty complex, so many need to hire a tax service to handle it properly. Then there are the additional reporting requirements for any banks that you have accounts with, so some banks will not allow you to have an account with them because you are a US citizen. The point is that there are some real downsides to maintaining US citizenship when living overseas. There are many upsides of course, like being able to return to the US at any time and live and work there. If there were an emergency situation, I could probably count on the US embassy to help me evacuate if necessary. Overall, it's a cost/benefit evaluation. If you have citizenship in another advantageous country (or country in a powerful union like the EU) and significant resources, I can see why it would be tempting for some to drop the US citizenship. [1] https://www.irs.gov/individuals/international-taxpayers/figuring-the-foreign-earned-income-exclusion https://www.irs.gov/individuals/international-taxpayers/figu...

LadyCailin 5y ago
Except dropping your us citizenship may prevent you from ever stepping foot in the US again, if things like the SAFER Act [0] were to actually pass. Additionally, renouncing puts your name in criminal databases, and probably has lots of other downsides compared to someone that just never had citizenship in the first place. Not to mention all the accidental Americans that never stepped foot in the US! [0] https://en.wikipedia.org/wiki/Reed_Amendment_(immigration)?wprov=sfti1 https://en.wikipedia.org/wiki/Reed_Amendment_(immigration)?w...
- wil421 5y ago
  If you've never stepped foot in America would you really consider yourself American?
wil421 5y ago
How much taxes do you pay to the US? Yes the US will help get you out when you need to. Hostage rescue by special forces in Nigeria[1]. State Department Wuhan evacuation in Jan 2020[2]. 100,000 people evacuated by State Department as of June 2020.[3] [1] https://www.militarytimes.com/news/your-military/2020/10/31/us-forces-rescue-american-hostage-in-nigeria/ https://www.militarytimes.com/news/your-military/2020/10/31/... [2] https://www.state.gov/the-untold-coronavirus-story https://www.state.gov/the-untold-coronavirus-story [3] https://washdiplomat.com/as-coronavirus-spread-state-department-evacuated-over-100000-americans-abroad/ https://washdiplomat.com/as-coronavirus-spread-state-departm...
- mattjaynes 5y ago
  > I’ve known people living in places like Costa Rica, China, and all over Europe. No one had to pay a cent ever. > How much taxes do you pay to the US? Anecdata won't get us very far in understanding. The point is there are plenty (no idea the exact number) of US citizens abroad that pay taxes. If you're making much over ~$110K and don't have significant deductions, you are paying US taxes. As you can imagine these people are typically experienced technical engineers, executives, business owners, etc. True, most US citizens abroad won't go over the ~$110K, but many do. Either way, you still have the burden of filing taxes in the complex US tax system which is a non-trivial cost in time and resources - in addition to filing taxes in your host country. Is it worth it? Yes, for most, but simplifying the overly complex tax requirements would make it a lot less burdensome for all US citizens at home and abroad.

BrentOzar 5y ago

> Has anyone personally had to pay taxes to the US while living abroad? Yes, I'm living in Iceland at the moment and paying income taxes in the US. Iceland has a teleworker visa that lets you live here tax-free while working remotely for your current employer. That's a fantastic deal for most countries, but I'm not saving any money while we're here. (We're not doing it to save money, just doing it to social distance and enjoy the scenery.)

wil421 5y ago
That’s not the same you are still considered as working in the US. You just happen to be staying in a foreign country.
- BrentOzar 5y ago
  I own my own business, and I sell online training. I'm not working in the US - I'm working in Iceland, selling to people globally, and still paying income tax in the US.
  - toastal 5y ago
    This applies to any self-employed, independent contractor

mwarkentin 5y ago

I was a dual us / Canadian citizen who have *never lived or worked in the US*. I revoked my citizenship 2 years ago, after going through a stock sale here in Canada. The process: - cost me around $20,000 for the lawyer, accountants (had to go back and do 5-6 years of taxes), another $3,000 (I think?) to the US for the revocation process - had to go to the Bahamas in order to get an appointment at an embassy, I never got a response from the ones here (this was the best part, nice little vacation during Canadian winter xD) - cost more tens of thousands in Canadian tax as I couldn’t claim all of my tax deductions in Canada for the year of the sale of it would’ve pushed me over 25,000 owing on the US side and meant I’d have had to pay (there’s a program for clearing up to 25,000 owing taxes when you revoke now) - the IRS fucked up and came back to me this year as owing so I’m continuing to pay the accountants to deal with that for me - caused untold amounts of stress for myself and my wife I had previously basically ignored the whole situation as it seemed entirely ridiculous that I should have to deal with this, however the US has started forcing foreign banks to ask their customers about their citizenship status. It didn’t seem smart to lie about this to my bank (who also happens to be my wife’s employer), so it seemed like I may have been ending up on the IRS radar at some point regardless. All in all an entirely SHIT situation even though technically I probably never would’ve owed outside of your caveats about a stock sale. Had I been compliant it would’ve cost me in money and time each year.

MeinBlutIstBlau 5y ago
I know if you're born from a US parent you get citizenship, but what's stopping them from only filing for the birth of a Canadian child in Canada and never acknowledging they have American citizenship? As long as you don't get a birth certificate and SSN in the US, the IRS will never know.
- mwarkentin 5y ago
  I had a birth certificate, my parents thought it would be potentially helpful for me (this was also almost 40 years ago so a lot of these extra compliance requirements didn’t exist back then). We were concerned that my kids would also potentially be US citizens but it seems like I would have to have lived there for some amount of time for that to kick in.

nraynaud 5y ago

Yes I hit the minimum taxation rate in the US. And I just had a green card.

jfb 5y ago

Yes. Most of my tax is covered by reciprocal tax treaties between my country of residence (Canada) and the US, but I still have to file, and differences in tax regimes mean that there are decisions my family has to take that other families, in the same situation but without a US citizen, don't. For instance, if we sell our house, I will have to pay capital gains in the US, but not in Canada (it's our primary residence and gains from that sale are not taxable in Canada). It's a minor inconvenience for me, but that's because we pay an accountant to handle a relatively complicated tax picture already.

mwarkentin 5y ago
The US also recognizes RRSP in the tax treaty but not TFSA so that’s a pretty major retirement planning tool that’s off the table.
- jfb 5y ago
  Yep.