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As an American citizen, you are taxed globally. Now, you may think that you can simply renounce your US citizenship, burn your passport and call it a day, but

by numair 18y ago

As an American citizen, you are taxed globally. Now, you may think that you can simply renounce your US citizenship, burn your passport and call it a day, but as of 1986 the IRS is able to come after you for taxes for up to 10 years after renunciation of citizenship. In addition, tax information is now shared with INS, so you can be barred entry from the US or end up getting carted off to somewhere you don't want to go if you don't have all of your ducks in a row. Perhaps you're thinking of starting an offshore company, and keeping your money there. Well, you've got to file a special form each year with the IRS for each entity of this sort, as they are known as "Controlled Foreign Corporations." Failure to provide the IRS with this information once again causes you to run afoul of US laws, which once again puts you at risk of punishment from the country that is globally known as "the world's policeman." You have to remember that you are a citizen of the world's smartest country. They have pretty much thought of everything.

lionhearted 18y ago
Ah, I expected someone to make this comment eventually. It's true that the United States' tax code is the only one in the world that sets tax on its citizens living in foreign countries, transacting business in foreign countries, with foreign citizens, foreign suppliers, doing business with no connection to the United States. Brits in particular have a good laugh at our international tax code. They simply don't believe it when I try explaining it to them. Anyway, as someone that knows quite a few expats and international businesspeople - practically speaking, it doesn't always go down like you say.
- numair 18y ago
  There is a standard expat deduction -- I want to say it's something like $72,000 per year. If you make less than that, you don't have to pay anything. "Quite a few expats and international businesspeople" who make more money, and hide it, are constantly getting in trouble -- see, for example, the recent move with the US against UBS. It's becoming harder with every passing day to flout the rules, so it's really a lot better for people to design their lives with the rules in mind. And we're not the only country - there's always Bangladesh!
  - DanielBMarkham 18y ago
    It's becoming harder with every passing day to flout the rules, so it's really a lot better for people to design their lives with the rules in mind. For some reason that reminds me of the phrase "the tighter you squeeze your grip, the more that will slip from your fingers" E-gads! Now I'm quoting Star Wars! But really, countries can make all the rules they want. Getting every other country on the planet to enforce quirky U.S. Tax laws is more of a wet dream than reality. It reminds of Thomas Paine, who was put on trial in absentia by authorities in Great Britain who were also tightening their grip. They charged him with libel. ""If, to expose the fraud and imposition of monarchy . . . to promote universal peace, civilization, and commerce, and to break the chains of political superstition, and raise degraded man to his proper rank; if these things be libellous . . . let the name of libeller be engraved on my tomb"" As far as I'm concerned, you can say the thing about "unpatriotic" tax evasion by rich people choosing to move away. This country was founded on a tax revolt, and trying to tax people for leaving what they feel to be an overly burdensome system is the height of bureaucratic arrogance.
  - lionhearted 18y ago
    Good points Numair - also probably pretty useful to people who don't know the law, deductions, exceptions. I know a lot of it off the top of my head but I think we've built a better thread together. As for me, I've never tried to slough off my taxes because I've wanted to show the income to improve credit and be able to get bank loans and show track record later. I was putting the view out that higher taxes could equal lower yields, which is, like, a doubly bad thing. Certainly, the IRS/INS duo means something. An American renouncing and not paying taxes they know about means you really can't come back, which is ugly. If you don't like living here, there's still some really amazing places here worth coming back to every so often. I really root for our government, partially because I live here right now, and partially because of some latent patriotism going on. If taxes went up and yields went down, I'd really be shaking my head. Anyways, cheers for having the international tax discussion with me, hope everyone can learn a thing or two from it.
    - numair 18y ago
      Agreed, and I feel the exact same way. Hopefully some of what has been outlined here will help those who come across this thread and start thinking of strategies to "get out of it." You really can't, and I agree that you really shouldn't try. Love your country enough to openly criticize it, and try to find a way to make it better. We're still the best country in the world, which is plainly evident once you've spent enough time running around the world. Yeah, it's somewhat ridiculous that it costs 45% of your income (and rising) to have a California license plate and a US passport, but there's something enjoyable about the notion of being "too rich to care," which is likely to come into vogue if taxes go up; the highly-taxed wealthy in Sweden and Denmark are examples of what I'm talking about.
ckinnan 18y ago
The global taxation feature of the US code is a double taxation on income, as you typically pay taxes in the foreign jurisdiction as well (There are tax treaties that reduce this double taxation in many jurisdictions, but only to a certain amount). It also applies to US businesses that operate globally and is a major reason so many multinationals move their headquarters offshore. The US, I believe, is one of only two countries in the world that taxes citizens globally, the other being Israel.
- xiaoma 18y ago
  That's definitely not the case anymore. Canadians have to pay taxes on world-wide income unless they can demonstrate they have "severed ties" with their Canadian residence. Working abroad for a year or two in an expat job doesn't cut it. More and more countries are moving towards world-wide taxation, unfortunately.
jibiki 18y ago
> world's smartest country South Korea?
jbjohns 18y ago
>you may think that you can simply renounce your US citizenship, burn your passport and call it a day, but as of 1986 the IRS is able to come after you for taxes for up to 10 years after renunciation of citizenship. Actually, they can only do this if you give up your passport for tax purposes. If you have more than $2 million in assets then it is automatically assumed you are giving up the pass for tax reasons, otherwise it shouldn't be a problem. > In addition, tax information is now shared with INS, so you can be barred entry from the US or end up getting carted off to somewhere you don't want to go if you don't have all of your ducks in a row. This will be my biggest worry if I end up giving back my passport. Will the border patrol decide that anyone who is "stupid" enough to give up a US passport must be a terrorist? :) >You have to remember that you are a citizen of the world's smartest country. They have pretty much thought of everything. I hope this line is joking.
- ahoyhere 18y ago
  > Will the border patrol decide that anyone who is "stupid" enough to give up a US passport must be a terrorist? As an American who plans to give up her citizenship at the very first possible moment, that is my fear as well.

by numair 18y ago

lionhearted 18y ago

Ah, I expected someone to make this comment eventually. It's true that the United States' tax code is the only one in the world that sets tax on its citizens living in foreign countries, transacting business in foreign countries, with foreign citizens, foreign suppliers, doing business with no connection to the United States. Brits in particular have a good laugh at our international tax code. They simply don't believe it when I try explaining it to them. Anyway, as someone that knows quite a few expats and international businesspeople - practically speaking, it doesn't always go down like you say.

numair 18y ago
There is a standard expat deduction -- I want to say it's something like $72,000 per year. If you make less than that, you don't have to pay anything. "Quite a few expats and international businesspeople" who make more money, and hide it, are constantly getting in trouble -- see, for example, the recent move with the US against UBS. It's becoming harder with every passing day to flout the rules, so it's really a lot better for people to design their lives with the rules in mind. And we're not the only country - there's always Bangladesh!
- DanielBMarkham 18y ago
  It's becoming harder with every passing day to flout the rules, so it's really a lot better for people to design their lives with the rules in mind. For some reason that reminds me of the phrase "the tighter you squeeze your grip, the more that will slip from your fingers" E-gads! Now I'm quoting Star Wars! But really, countries can make all the rules they want. Getting every other country on the planet to enforce quirky U.S. Tax laws is more of a wet dream than reality. It reminds of Thomas Paine, who was put on trial in absentia by authorities in Great Britain who were also tightening their grip. They charged him with libel. ""If, to expose the fraud and imposition of monarchy . . . to promote universal peace, civilization, and commerce, and to break the chains of political superstition, and raise degraded man to his proper rank; if these things be libellous . . . let the name of libeller be engraved on my tomb"" As far as I'm concerned, you can say the thing about "unpatriotic" tax evasion by rich people choosing to move away. This country was founded on a tax revolt, and trying to tax people for leaving what they feel to be an overly burdensome system is the height of bureaucratic arrogance.
- lionhearted 18y ago
  Good points Numair - also probably pretty useful to people who don't know the law, deductions, exceptions. I know a lot of it off the top of my head but I think we've built a better thread together. As for me, I've never tried to slough off my taxes because I've wanted to show the income to improve credit and be able to get bank loans and show track record later. I was putting the view out that higher taxes could equal lower yields, which is, like, a doubly bad thing. Certainly, the IRS/INS duo means something. An American renouncing and not paying taxes they know about means you really can't come back, which is ugly. If you don't like living here, there's still some really amazing places here worth coming back to every so often. I really root for our government, partially because I live here right now, and partially because of some latent patriotism going on. If taxes went up and yields went down, I'd really be shaking my head. Anyways, cheers for having the international tax discussion with me, hope everyone can learn a thing or two from it.
  - numair 18y ago
    Agreed, and I feel the exact same way. Hopefully some of what has been outlined here will help those who come across this thread and start thinking of strategies to "get out of it." You really can't, and I agree that you really shouldn't try. Love your country enough to openly criticize it, and try to find a way to make it better. We're still the best country in the world, which is plainly evident once you've spent enough time running around the world. Yeah, it's somewhat ridiculous that it costs 45% of your income (and rising) to have a California license plate and a US passport, but there's something enjoyable about the notion of being "too rich to care," which is likely to come into vogue if taxes go up; the highly-taxed wealthy in Sweden and Denmark are examples of what I'm talking about.

ckinnan 18y ago

The global taxation feature of the US code is a double taxation on income, as you typically pay taxes in the foreign jurisdiction as well (There are tax treaties that reduce this double taxation in many jurisdictions, but only to a certain amount). It also applies to US businesses that operate globally and is a major reason so many multinationals move their headquarters offshore. The US, I believe, is one of only two countries in the world that taxes citizens globally, the other being Israel.

xiaoma 18y ago
That's definitely not the case anymore. Canadians have to pay taxes on world-wide income unless they can demonstrate they have "severed ties" with their Canadian residence. Working abroad for a year or two in an expat job doesn't cut it. More and more countries are moving towards world-wide taxation, unfortunately.

jibiki 18y ago

> world's smartest country South Korea?

jbjohns 18y ago

>you may think that you can simply renounce your US citizenship, burn your passport and call it a day, but as of 1986 the IRS is able to come after you for taxes for up to 10 years after renunciation of citizenship. Actually, they can only do this if you give up your passport for tax purposes. If you have more than $2 million in assets then it is automatically assumed you are giving up the pass for tax reasons, otherwise it shouldn't be a problem. > In addition, tax information is now shared with INS, so you can be barred entry from the US or end up getting carted off to somewhere you don't want to go if you don't have all of your ducks in a row. This will be my biggest worry if I end up giving back my passport. Will the border patrol decide that anyone who is "stupid" enough to give up a US passport must be a terrorist? :) >You have to remember that you are a citizen of the world's smartest country. They have pretty much thought of everything. I hope this line is joking.

ahoyhere 18y ago
> Will the border patrol decide that anyone who is "stupid" enough to give up a US passport must be a terrorist? As an American who plans to give up her citizenship at the very first possible moment, that is my fear as well.