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If a person has no income or capital gains from the U.S. and doesn’t live in the U.S. shouldn’t they be exempt from paying U.S. taxes? Also, shouldn’t foreign

by syops 5y ago

If a person has no income or capital gains from the U.S. and doesn’t live in the U.S. shouldn’t they be exempt from paying U.S. taxes? Also, shouldn’t foreign financial institutions be exempt from reporting to the U.S. about financial activities of U.S. citizens when they are outside the U.S.? I think the answer to both questions ought to be yes. EDIT: I’m aware of the rules regarding income taxes for Americans based on their citizenship and not on where the income was earned. My questions address this and by saying ‘yes’ to them I’m indicating that these rules are dumb in my opinion.

eatbitseveryday 5y ago
Ought to, but US citizens must still report taxes every year on all global income. Some amount is exempt, though one still needs to file.
ironchef 5y ago
"If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside." - per the IRS (https://www.irs.gov/individuals/international-taxpayers/taxpayers-living-abroad https://www.irs.gov/individuals/international-taxpayers/taxp...)
Miner49er 5y ago
Wouldn't this create loopholes? A US citizen could leave the US to make foreign investments, then come back to the US and be exempt on taxes on this foreign investments while enjoying the benefits of being in the US and not paying their share of taxes.
- AYBABTME 5y ago
  Most countries tax worldwide income of their _residents_ (not citizens). So in your scenario, you'd end up paying tax on the foreign investments if you profit from it when you resume being a US resident. Unless you don't declare the foreign assets, which would be illegal (gotta file an FBAR each year). There's no loophole here, a large majority of countries work this way, and OECD countries certainly do (although some have different treatments for short term residents). Usually the logic is: if you don't pay taxes in country A, you'll pay in country B anyways. And you'll pay an exit tax when you go from country A to B in many cases, so country A gets their cut.
- jimmydorry 5y ago
  Most civilized countries determine tax status based on where the person lived for the year. Reporting how much you earn overseas is one thing, but paying taxes twice while living and earning overseas is extraordinarily cruel.
FabHK 5y ago
As the article mentions, the USA and Eritrea tax based on citizenship, not residence.
alephnan 5y ago
Foreign banks in nations with treaties with the United States require you to file a special form to the IRS when opening a bank account, furthermore they will report information on your bank account to the US government.
deleted 5y ago
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by syops 5y ago

eatbitseveryday 5y ago

Ought to, but US citizens must still report taxes every year on all global income. Some amount is exempt, though one still needs to file.

ironchef 5y ago

"If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside." - per the IRS (https://www.irs.gov/individuals/international-taxpayers/taxpayers-living-abroad https://www.irs.gov/individuals/international-taxpayers/taxp...)

Miner49er 5y ago

Wouldn't this create loopholes? A US citizen could leave the US to make foreign investments, then come back to the US and be exempt on taxes on this foreign investments while enjoying the benefits of being in the US and not paying their share of taxes.

AYBABTME 5y ago
Most countries tax worldwide income of their _residents_ (not citizens). So in your scenario, you'd end up paying tax on the foreign investments if you profit from it when you resume being a US resident. Unless you don't declare the foreign assets, which would be illegal (gotta file an FBAR each year). There's no loophole here, a large majority of countries work this way, and OECD countries certainly do (although some have different treatments for short term residents). Usually the logic is: if you don't pay taxes in country A, you'll pay in country B anyways. And you'll pay an exit tax when you go from country A to B in many cases, so country A gets their cut.
jimmydorry 5y ago
Most civilized countries determine tax status based on where the person lived for the year. Reporting how much you earn overseas is one thing, but paying taxes twice while living and earning overseas is extraordinarily cruel.

FabHK 5y ago

As the article mentions, the USA and Eritrea tax based on citizenship, not residence.

alephnan 5y ago

Foreign banks in nations with treaties with the United States require you to file a special form to the IRS when opening a bank account, furthermore they will report information on your bank account to the US government.

deleted 5y ago

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