3 ms·

One especially bizarre part of US citizenship is you can "accidentally" be a citizen without knowing and be required to pay income tax to the US regardless of w

One especially bizarre part of US citizenship is you can "accidentally" be a citizen without knowing and be required to pay income tax to the US regardless of where you live/work. What's more is it costs money to give up your US citizenship and you can only do it if you have no outstanding tax to pay.

User23 3y ago
Worldwide taxation is practically an operational necessity for the worldwide reserve currency issuer.
- FpUser 3y ago
  I see zero basis for such claim
- zlg_codes 3y ago
  The US has no moral right to ask for tax for people who haven't stepped inside its borders all year.
  - User23 3y ago
    Of course it does if they have willingly chosen to participate in its ledger game and use its services.
seanmcdirmid 3y ago
> be required to pay income tax to the US regardless of where you live/work. While technically true, you are only really required to file, and then exempt your income via the foreign earned income exemption or the foreign tax credit. This one simple trick means 95% of all Americans working abroad pay no US tax.
- OfSanguineFire 3y ago
  Apparently if one is a sole proprietor in a country that does not have the respective tax treaty with the US, one can be obliged to pay US Social Security and Medicare out of foreign income. I lack any expertise in this domain, but friends of mine who have returned to Romania (which lacks a treaty) after living in the US long enough for citizenship, have complained about having to set up a corporate structure and pay themselves via annual dividends in order to avoid this taxation.
  - seanmcdirmid 3y ago
    > Apparently if one is a sole proprietor in a country that does not have the respective tax treaty with the US, one can be obliged to pay US Social Security and Medicare out of foreign income. China lacks a treaty with the USA, which means Americans working in China pay to Chinese social security/medical and they are not transferred to the American equivalents. But ya, you pay SS/medicare on your stock dividends and even your sales to pay taxes (consequently, which you might also pay Chinese payroll taxes on).
  - junar 3y ago
    Just clearing up some terminology: You're talking about Social Security "Totalization Agreements" [1], which are separate from tax treaties. Romania, for example, does have a tax treaty with the US [2] but not a totalization agreement. Setting up a corporation suggests that the business should pay the worker "wages" or a "salary". [3] One key difference is that wages are considered earned income, allowing the taxpayer to use the foreign earned income exclusion, while dividends are not. [1] https://www.irs.gov/government-entities/federal-state-local-governments/totalization-agreements https://www.irs.gov/government-entities/federal-state-local-... [2] https://www.irs.gov/businesses/international-businesses/romania-tax-treaty-documents https://www.irs.gov/businesses/international-businesses/roma... [3] https://ustax.bz/how-to-structure-your-non-u-s-business-or-profession/ https://ustax.bz/how-to-structure-your-non-u-s-business-or-p...
- MandieD 3y ago
  It also means that we Americans working* abroad are radioactive for anything financial beyond a simple bank account or mortgage. Absolutely no one in Germany wants to deal with a brokerage account for me. Though my husband was all for adding me to his accounts, I’ve carefully kept our finances separate to prevent the nightmare scenario of a bank deciding its American customers are no longer worth the trouble and neither of us being able to get at our money, which happened to some Americans when FATCA was first introduced, and also so at least one of us can buy ETFs in an uncomplicated manner. * As in, not wealthy enough to be well beyond having to work
  - seanmcdirmid 3y ago
    > Absolutely no one in Germany wants to deal with a brokerage account for me. I lived outside for 11 years, but in Switzerland before the crackdown on American accounts. China was no problem, even with FACTA, they just didn't care much, even for investments. If your husband has a USA permanent resident or on an immigrant visa, the same that applies to you applies to him as well, FACTA applies to all US citizens as well as residents.
    - MandieD 3y ago
      Neither is the case for him... when we were first talking about the long term, he was willing to consider living in the US for at least a few years, since he's always enjoyed his visits. Then I talked to enough acquaintances who had Green Card drama for German citizen spouses who had only ever lived in Germany that I dropped the idea. People complain about German bureaucracy, but I've found the residence permit process to be relatively straightforward and well-documented, and reasonably priced. They were clear about what documents they needed from us and when, and even helped me out when I nearly got stuck here because I applied for a renewal a bit too close to a trip to the States.
      - seanmcdirmid 3y ago
        US green card for a spouse to come over as an immigrant is also pretty easy, we didn't even need a lawyer for it, just one trip to Guangzhou.
orangepurple 3y ago
Limit on excludable amount The maximum foreign earned income exclusion amount is adjusted annually for inflation. For tax year 2022, the maximum foreign earned income exclusion is the lesser of the foreign income earned or $112,000 per qualifying person. For tax year 2023, the maximum exclusion is $120,000 per person. If two individuals are married, and both work abroad and meet either the bona fide residence test or the physical presence test, each one can choose the foreign earned income exclusion. Together, they can exclude as much as $240,000 for the 2023 tax year. https://www.irs.gov/individuals/international-taxpayers/figuring-the-foreign-earned-income-exclusion https://www.irs.gov/individuals/international-taxpayers/figu...
mtmail 3y ago
And some German banks refuse to work with you if you have a US passport because of the taxation requirements. When I opened my last bank account I had to confirm I'm not a US citizen.
bdw5204 3y ago
That's why Boris Johnson renounced his US citizenship.[0] He's a British politician who was their Prime Minister from 2019 to 2022 but he was actually born in New York so he was a natural born US citizen. The US really should adopt a territorial tax system for individuals like the rest of the world but it might be reasonable to apply the system we currently use for individuals to corporations that do business in America to stop them from stashing cash overseas to dodge taxes. [0]: https://americansoverseas.org/en/news/boris-johnson-american-citizenship/ https://americansoverseas.org/en/news/boris-johnson-american...

User23 3y ago

Worldwide taxation is practically an operational necessity for the worldwide reserve currency issuer.

FpUser 3y ago
I see zero basis for such claim
zlg_codes 3y ago
The US has no moral right to ask for tax for people who haven't stepped inside its borders all year.
- User23 3y ago
  Of course it does if they have willingly chosen to participate in its ledger game and use its services.

seanmcdirmid 3y ago

> be required to pay income tax to the US regardless of where you live/work. While technically true, you are only really required to file, and then exempt your income via the foreign earned income exemption or the foreign tax credit. This one simple trick means 95% of all Americans working abroad pay no US tax.

OfSanguineFire 3y ago
Apparently if one is a sole proprietor in a country that does not have the respective tax treaty with the US, one can be obliged to pay US Social Security and Medicare out of foreign income. I lack any expertise in this domain, but friends of mine who have returned to Romania (which lacks a treaty) after living in the US long enough for citizenship, have complained about having to set up a corporate structure and pay themselves via annual dividends in order to avoid this taxation.
- seanmcdirmid 3y ago
  > Apparently if one is a sole proprietor in a country that does not have the respective tax treaty with the US, one can be obliged to pay US Social Security and Medicare out of foreign income. China lacks a treaty with the USA, which means Americans working in China pay to Chinese social security/medical and they are not transferred to the American equivalents. But ya, you pay SS/medicare on your stock dividends and even your sales to pay taxes (consequently, which you might also pay Chinese payroll taxes on).
- junar 3y ago
  Just clearing up some terminology: You're talking about Social Security "Totalization Agreements" [1], which are separate from tax treaties. Romania, for example, does have a tax treaty with the US [2] but not a totalization agreement. Setting up a corporation suggests that the business should pay the worker "wages" or a "salary". [3] One key difference is that wages are considered earned income, allowing the taxpayer to use the foreign earned income exclusion, while dividends are not. [1] https://www.irs.gov/government-entities/federal-state-local-governments/totalization-agreements https://www.irs.gov/government-entities/federal-state-local-... [2] https://www.irs.gov/businesses/international-businesses/romania-tax-treaty-documents https://www.irs.gov/businesses/international-businesses/roma... [3] https://ustax.bz/how-to-structure-your-non-u-s-business-or-profession/ https://ustax.bz/how-to-structure-your-non-u-s-business-or-p...
MandieD 3y ago
It also means that we Americans working* abroad are radioactive for anything financial beyond a simple bank account or mortgage. Absolutely no one in Germany wants to deal with a brokerage account for me. Though my husband was all for adding me to his accounts, I’ve carefully kept our finances separate to prevent the nightmare scenario of a bank deciding its American customers are no longer worth the trouble and neither of us being able to get at our money, which happened to some Americans when FATCA was first introduced, and also so at least one of us can buy ETFs in an uncomplicated manner. * As in, not wealthy enough to be well beyond having to work
- seanmcdirmid 3y ago
  > Absolutely no one in Germany wants to deal with a brokerage account for me. I lived outside for 11 years, but in Switzerland before the crackdown on American accounts. China was no problem, even with FACTA, they just didn't care much, even for investments. If your husband has a USA permanent resident or on an immigrant visa, the same that applies to you applies to him as well, FACTA applies to all US citizens as well as residents.
  - MandieD 3y ago
    Neither is the case for him... when we were first talking about the long term, he was willing to consider living in the US for at least a few years, since he's always enjoyed his visits. Then I talked to enough acquaintances who had Green Card drama for German citizen spouses who had only ever lived in Germany that I dropped the idea. People complain about German bureaucracy, but I've found the residence permit process to be relatively straightforward and well-documented, and reasonably priced. They were clear about what documents they needed from us and when, and even helped me out when I nearly got stuck here because I applied for a renewal a bit too close to a trip to the States.
    - seanmcdirmid 3y ago
      US green card for a spouse to come over as an immigrant is also pretty easy, we didn't even need a lawyer for it, just one trip to Guangzhou.

orangepurple 3y ago

Limit on excludable amount The maximum foreign earned income exclusion amount is adjusted annually for inflation. For tax year 2022, the maximum foreign earned income exclusion is the lesser of the foreign income earned or $112,000 per qualifying person. For tax year 2023, the maximum exclusion is $120,000 per person. If two individuals are married, and both work abroad and meet either the bona fide residence test or the physical presence test, each one can choose the foreign earned income exclusion. Together, they can exclude as much as $240,000 for the 2023 tax year. https://www.irs.gov/individuals/international-taxpayers/figuring-the-foreign-earned-income-exclusion https://www.irs.gov/individuals/international-taxpayers/figu...

mtmail 3y ago

And some German banks refuse to work with you if you have a US passport because of the taxation requirements. When I opened my last bank account I had to confirm I'm not a US citizen.

bdw5204 3y ago

That's why Boris Johnson renounced his US citizenship.[0] He's a British politician who was their Prime Minister from 2019 to 2022 but he was actually born in New York so he was a natural born US citizen. The US really should adopt a territorial tax system for individuals like the rest of the world but it might be reasonable to apply the system we currently use for individuals to corporations that do business in America to stop them from stashing cash overseas to dodge taxes. [0]: https://americansoverseas.org/en/news/boris-johnson-american-citizenship/ https://americansoverseas.org/en/news/boris-johnson-american...