6 ms·

> If you don't want to pay those taxes, then renounce your US citizenship once you have Haven't you heard of exit tax? If you renounce citizenship (or surrende

by xpl 2y ago

> If you don't want to pay those taxes, then renounce your US citizenship once you have Haven't you heard of exit tax? If you renounce citizenship (or surrender your 8+ year green card), you must pay 30% of your worldwide assets' value (as if you sold it for cash) to the IRS. And if you own something illiquid, you're deep in trouble! So no, people can't renounce their U.S. citizenship easily, the IRS has accounted for that...

wkat4242 2y ago
Wow I knew of the tax thing but not this. That's tough.
- saxonww 2y ago
  It's only if you qualify as a 'covered expatriate' though. I'm not a lawyer or an accountant but a plain reading of the standard suggests the vast majority of Americans would not be covered. https://www.irs.gov/instructions/i8854#en_US_2023_publink100046230 https://www.irs.gov/instructions/i8854#en_US_2023_publink100... I think the key would be how they arrive at the net worth numbers. If it's just a calculation of all your assets as if they were sold at FMV, ~90% of the US is below the net worth threshold. https://dqydj.com/net-worth-percentiles/ https://dqydj.com/net-worth-percentiles/ The average tax liability standard looks like it would take 5 years at $600K+ of adjusted gross income, too. Plenty of people would meet this standard. Most people would not.
  - ithkuil 2y ago
    You're a covered expatriate also if: " You fail to certify on Form 8854 that you have complied with all federal tax obligations for the 5 tax years preceding the date of your expatriation. " I agree you should pay up your taxes but this will not only recover the due taxes but it will take more.
  - xpl 2y ago
    So it basically says if you net worth is over $2 mil, you're need to pay exit tax, right? If a house and 401k also counted towards net worth, it could impact quite a few Americans. Besides, those who expatriate for tax optimization purposes usually have a significant amount of wealth.
    - duped 2y ago
      > If a house and 401k also counted towards net worth, it could impact quite a few Americans I have no sympathy for people who want to dodge taxes being forced to pay a tax on income that the government has deferred taxes on while they were a citizen making taxable income in the US, and presumably if you're abandoning your citizenship you're not keeping your home and would have already paid sales and capital gains taxes on it when you sold it.
Aeolun 2y ago
That doesn’t make any sense. I’m not a citizen any more, so clearly I’m not accountable for any tax.
- ithkuil 2y ago
  If you're no longer citizen you won't be accountable for any tax accrued after you're no longer a citizen. But you're still accountable for debt, so all they need is to frame this as taxes on earnings and property that you have accrued while you were a citizen and you keep to be accountable for your debts even after you renounce the citizenship. Now, what can the US government actually do to you while you're no longer a citizen depends a lot where you live and whether you care traveling or doing business with the US again https://www.irs.gov/individuals/international-taxpayers/expatriation-tax https://www.irs.gov/individuals/international-taxpayers/expa...
  - seszett 2y ago
    > Now, what can the US government actually do to you while you're no longer a citizen depends a lot where you live and whether you care traveling or doing business with the US again In most western country anything involving a (even local) bank will be a headache already when you're an American citizen. I can't imagine it would be easier if you're a former American citizen with a large debt towards the US.
    - jajko 2y ago
      In Switzerland, almost no bank wants to deal with you if you have US citizenship. Its easier to just avoid creating whole new department for that reporting, risk getting sanctions if you make a mistake etc. US in this case is a global bully, based on some talks with people involved in such processes also arrogant, very aggressive in enforcement, at the end punishing its own citizens just because they can. Their choice, but if I or my kids would ever be in the situation of potentially gaining citizenship or green card (that probably won't ever happen, life here is much higher quality overall for people like me), this alone is good enough reason to not do it.
madaxe_again 2y ago
That’s why you put everything into trust first. I know a few folks who gave up their US citizenship over tax, and both had to plan for about a decade to do so without paying exit tax - and their lives continue to revolve around being tax exiles - 89 days here, 44 days there, etc. etc. I’m glad to be a Brit, if only because the revenue doesn’t pursue me around the planet.

by xpl 2y ago

wkat4242 2y ago

Wow I knew of the tax thing but not this. That's tough.

saxonww 2y ago
It's only if you qualify as a 'covered expatriate' though. I'm not a lawyer or an accountant but a plain reading of the standard suggests the vast majority of Americans would not be covered. https://www.irs.gov/instructions/i8854#en_US_2023_publink100046230 https://www.irs.gov/instructions/i8854#en_US_2023_publink100... I think the key would be how they arrive at the net worth numbers. If it's just a calculation of all your assets as if they were sold at FMV, ~90% of the US is below the net worth threshold. https://dqydj.com/net-worth-percentiles/ https://dqydj.com/net-worth-percentiles/ The average tax liability standard looks like it would take 5 years at $600K+ of adjusted gross income, too. Plenty of people would meet this standard. Most people would not.
- ithkuil 2y ago
  You're a covered expatriate also if: " You fail to certify on Form 8854 that you have complied with all federal tax obligations for the 5 tax years preceding the date of your expatriation. " I agree you should pay up your taxes but this will not only recover the due taxes but it will take more.
- xpl 2y ago
  So it basically says if you net worth is over $2 mil, you're need to pay exit tax, right? If a house and 401k also counted towards net worth, it could impact quite a few Americans. Besides, those who expatriate for tax optimization purposes usually have a significant amount of wealth.
  - duped 2y ago
    > If a house and 401k also counted towards net worth, it could impact quite a few Americans I have no sympathy for people who want to dodge taxes being forced to pay a tax on income that the government has deferred taxes on while they were a citizen making taxable income in the US, and presumably if you're abandoning your citizenship you're not keeping your home and would have already paid sales and capital gains taxes on it when you sold it.

Aeolun 2y ago

That doesn’t make any sense. I’m not a citizen any more, so clearly I’m not accountable for any tax.

ithkuil 2y ago
If you're no longer citizen you won't be accountable for any tax accrued after you're no longer a citizen. But you're still accountable for debt, so all they need is to frame this as taxes on earnings and property that you have accrued while you were a citizen and you keep to be accountable for your debts even after you renounce the citizenship. Now, what can the US government actually do to you while you're no longer a citizen depends a lot where you live and whether you care traveling or doing business with the US again https://www.irs.gov/individuals/international-taxpayers/expatriation-tax https://www.irs.gov/individuals/international-taxpayers/expa...
- seszett 2y ago
  > Now, what can the US government actually do to you while you're no longer a citizen depends a lot where you live and whether you care traveling or doing business with the US again In most western country anything involving a (even local) bank will be a headache already when you're an American citizen. I can't imagine it would be easier if you're a former American citizen with a large debt towards the US.
  - jajko 2y ago
    In Switzerland, almost no bank wants to deal with you if you have US citizenship. Its easier to just avoid creating whole new department for that reporting, risk getting sanctions if you make a mistake etc. US in this case is a global bully, based on some talks with people involved in such processes also arrogant, very aggressive in enforcement, at the end punishing its own citizens just because they can. Their choice, but if I or my kids would ever be in the situation of potentially gaining citizenship or green card (that probably won't ever happen, life here is much higher quality overall for people like me), this alone is good enough reason to not do it.

madaxe_again 2y ago

That’s why you put everything into trust first. I know a few folks who gave up their US citizenship over tax, and both had to plan for about a decade to do so without paying exit tax - and their lives continue to revolve around being tax exiles - 89 days here, 44 days there, etc. etc. I’m glad to be a Brit, if only because the revenue doesn’t pursue me around the planet.