4 ms·

Your representation is a bit exaggerated. The law simplistically simplifies to: if your income is above $X, then if your foreign tax payment $Y is less than the

Your representation is a bit exaggerated. The law simplistically simplifies to: if your income is above $X, then if your foreign tax payment $Y is less than the theoretical amount of tax you would have paid doing the same work under American Tax laws $Z, then please remit the difference ($Z-$Y) to the American government. I've personally filled out the forms several times, for multiple periods (full and partial). However I do agree with you: sure it would be nice not to pay that fee, isn't that true of every expense in general? It seems you either have a complicated personal situation or are in a jurisdiction that's purposefully set up to benefit/interact with the US in a tax advantagous way (aka a tax shelter, though that's going away - see general harmonization trends in EU, etc). Without delving into your personal situation, your personal tax situation should not impact your employment. Your citizenship might in certain highly regulated industries maybe. In the US you are not asked if you file joint or single on your tax return as part of the interview. You are correct on renounciation. And worse, let's assume the renounciation fee is 1/3rd of the wealth, should your net worth be concentrated and iliquid (you own nothing but a paid off home) you now need to generate a transaction which you might not want to otherwise do (sentimental, bad timing, poor market prices for the asset or low liquidity). If you have a complicated personal situation, you also hire professional help even if you reside purely domestically. Not fair to pin it all on the foreign taxation code.

academia_hack 5y ago
Some years are fine, just subtract the earned income exemption and move on. Others are nightmares. Unlike in America, where there are accountants lurking around every corner, the tax code here is very "simple" (the vast majority of people probably never fill out a tax return in their lives). This means accountants charge like you're some sort of multi-millionaire business owner (since that's who their clients typically are). My last quote to get US & domestic taxes filed here when I was a grad student was $6,000 on a total income of <$50k. My situation wasn't that complicated - I had 2 part time jobs, won a competition prize for $20,000 and sold some stock. I just did my best to file on my own. I probably got something wrong since it's crazy confusing. Prizes are tax-free here, but taxable in the US and not typically "earned income" but are maybe covered by the foreign income exemption or a dual taxation agreement (since I did have to report it to the taxman here, the tax rate was just zero). I literally couldn't afford to figure out how much tax I owed and to who - nevermind the taxes themselves! Hopefully the IRS doesn't care enough to seize me the next time I visit my family. I tried my best, but that doesn't necessarily mean much in court. I think a lot of the problem is with the American tax code in general, but American accountants know nothing about the tax code here so I can't just ring up H&R Block and ask them to file over zoom (I've tried). Meanwhile, the only accountants who know about American taxes over here are specialist catering to the millionaire expat market. An hour of their time costs more than I earn in a week.
- throwaway287391 5y ago
  > Prizes are tax-free here Off-topic but: this always seemed like the most bizarre thing to me. What's the rationale? Why do governments want to incentivize people winning "prizes" over "honest work"? (My HN engineer brain also wants to know what the distinction is that prevents companies from calling any payment for a one-time contract a "prize" for completing the work, but I'm sure there's some unsatisfying "you know it when you see it" or "laws are people not code" type answer.)
  - lozenge 5y ago
    I can answer for the UK - the system is designed so that most people don't explicitly interact with the tax system. The only people that need to do so is the self-employed, running a business, or very highest earners. For everybody else, they can take advantage of tax breaks without filling in any forms, just by opening the right bank accounts/pensions or getting certain services from their employer. When they qualify for benefits, like Child Benefit, it gets paid separately into their bank account. A surprising number of tax benefits are possible this way - even the income tax deduction on charitable giving is done by getting the charity to do the paperwork instead of the individual taxpayer. So when it comes to taxing something that isn't going to be a significant tax stream and would require people to fill in declarations, the solution is-- just don't tax it. And the answer to your second question is, the payment would be "income" (defined as payment for completing work) and would fall under income tax. There's no exception in income tax for prizes because prizes aren't even income at all, as you don't work for them. But if you still tried it, it would fall under the General Anti-Abuse Rule.
    - throwaway287391 5y ago
      Right, that makes sense. Thanks for the answer. > And the answer to your second question is, the payment would be "income" (defined as payment for completing work) and would fall under income tax. There's no exception in income tax for prizes because prizes aren't even income at all, as you don't work for them. Is it really so clear cut? I'm thinking of things like programming competitions -- in a sense you "work" to win a prize at one of those, don't you? So then what stops my employer calling all of my work as a programmer a programming competition? You could say "the competition organizers can't profit off of the work", but is that always true? Netflix could've legally profited off of the entries in the Netflix competition (even though they didn't), right? Similar for Kaggle contests. Would prizes from those count as taxable income? And even on something like a game show, they're profiting (or hoping to) from your participation/appearance.
shry4ns 5y ago
Noob question -- what do you mean by harmonization trends in the EU? I couldn't quite understand from a google search or maybe even what exactly to search for.
- disabled 5y ago
  This is a good read: https://www.hklaw.com/en/insights/publications/2021/07/agreement-on-global-tax-reform-what-happened-and-whats-next https://www.hklaw.com/en/insights/publications/2021/07/agree... For example Control/Command + F = "Ireland"
- masklinn 5y ago
  Harmonisation in the EU context is the convergence of standards and legal systems, in order to increase pan-european consistency and facilitate the free movement of people, goods, and services. See « harmonisation of law » on the wiki.

academia_hack 5y ago

Some years are fine, just subtract the earned income exemption and move on. Others are nightmares. Unlike in America, where there are accountants lurking around every corner, the tax code here is very "simple" (the vast majority of people probably never fill out a tax return in their lives). This means accountants charge like you're some sort of multi-millionaire business owner (since that's who their clients typically are). My last quote to get US & domestic taxes filed here when I was a grad student was $6,000 on a total income of <$50k. My situation wasn't that complicated - I had 2 part time jobs, won a competition prize for $20,000 and sold some stock. I just did my best to file on my own. I probably got something wrong since it's crazy confusing. Prizes are tax-free here, but taxable in the US and not typically "earned income" but are maybe covered by the foreign income exemption or a dual taxation agreement (since I did have to report it to the taxman here, the tax rate was just zero). I literally couldn't afford to figure out how much tax I owed and to who - nevermind the taxes themselves! Hopefully the IRS doesn't care enough to seize me the next time I visit my family. I tried my best, but that doesn't necessarily mean much in court. I think a lot of the problem is with the American tax code in general, but American accountants know nothing about the tax code here so I can't just ring up H&R Block and ask them to file over zoom (I've tried). Meanwhile, the only accountants who know about American taxes over here are specialist catering to the millionaire expat market. An hour of their time costs more than I earn in a week.

throwaway287391 5y ago
> Prizes are tax-free here Off-topic but: this always seemed like the most bizarre thing to me. What's the rationale? Why do governments want to incentivize people winning "prizes" over "honest work"? (My HN engineer brain also wants to know what the distinction is that prevents companies from calling any payment for a one-time contract a "prize" for completing the work, but I'm sure there's some unsatisfying "you know it when you see it" or "laws are people not code" type answer.)
- lozenge 5y ago
  I can answer for the UK - the system is designed so that most people don't explicitly interact with the tax system. The only people that need to do so is the self-employed, running a business, or very highest earners. For everybody else, they can take advantage of tax breaks without filling in any forms, just by opening the right bank accounts/pensions or getting certain services from their employer. When they qualify for benefits, like Child Benefit, it gets paid separately into their bank account. A surprising number of tax benefits are possible this way - even the income tax deduction on charitable giving is done by getting the charity to do the paperwork instead of the individual taxpayer. So when it comes to taxing something that isn't going to be a significant tax stream and would require people to fill in declarations, the solution is-- just don't tax it. And the answer to your second question is, the payment would be "income" (defined as payment for completing work) and would fall under income tax. There's no exception in income tax for prizes because prizes aren't even income at all, as you don't work for them. But if you still tried it, it would fall under the General Anti-Abuse Rule.
  - throwaway287391 5y ago
    Right, that makes sense. Thanks for the answer. > And the answer to your second question is, the payment would be "income" (defined as payment for completing work) and would fall under income tax. There's no exception in income tax for prizes because prizes aren't even income at all, as you don't work for them. Is it really so clear cut? I'm thinking of things like programming competitions -- in a sense you "work" to win a prize at one of those, don't you? So then what stops my employer calling all of my work as a programmer a programming competition? You could say "the competition organizers can't profit off of the work", but is that always true? Netflix could've legally profited off of the entries in the Netflix competition (even though they didn't), right? Similar for Kaggle contests. Would prizes from those count as taxable income? And even on something like a game show, they're profiting (or hoping to) from your participation/appearance.

shry4ns 5y ago

Noob question -- what do you mean by harmonization trends in the EU? I couldn't quite understand from a google search or maybe even what exactly to search for.

disabled 5y ago
This is a good read: https://www.hklaw.com/en/insights/publications/2021/07/agreement-on-global-tax-reform-what-happened-and-whats-next https://www.hklaw.com/en/insights/publications/2021/07/agree... For example Control/Command + F = "Ireland"
masklinn 5y ago
Harmonisation in the EU context is the convergence of standards and legal systems, in order to increase pan-european consistency and facilitate the free movement of people, goods, and services. See « harmonisation of law » on the wiki.