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Foreign Assets? Working Abroad? The IRS Still Wants Your Money

  • 26 January 2016
  • Author: Cari Holbrook
  • Number of views: 2517
Foreign Assets?  Working Abroad?  The IRS Still Wants Your Money

More than 3,000 Americans each year give up their U.S. passports in order to work abroad. Why? It’s not because they don’t love America. It’s because tax complications make it too hard to work abroad while staying loyal to Uncle Sam. In fact, the U.S. is known to have the most onerous tax laws for citizens working abroad of any developed country in the world.

According to a CNN Money report, the U.S. is one of a few countries (the others are Libya, North Korea Eritrea and the Philippines) that tax citizens on all income no matter where it's earned, or where they live. This leads to complicated paperwork, often requiring sophisticated tax planning. The issue even has a trickle-down effect to children born to   an American parent. Anyone born on U.S. soil or to one American parent anywhere in the world is automatically a U.S. citizen, and therefore must file and pay U.S. taxes (even if they’ve never set foot on U.S. soil!). The Foreign Account Tax Compliance Act adds to the complication, even for those who don’t physically live or work overseas. The Act requires individuals to report certain foreign assets, and for banks to disclose all foreign accounts held by Americans.

Renouncing your U.S. citizenship isn’t cheap or easy. Those choosing to do so are billed a renunciation fee up to $2,350 as well as a hefty “exit fee.” Plus, you could still be liable for U.S. taxes for 10 more years. These and more exceptions and rules are listed on the IRS Expatriation Tax page. Additionally, it’s illegal to renounce U.S. citizenship on the basis of taxes alone and you’ll be interviewed by an official to ensure your intentions are lawful. 

If you work, do business or have assets abroad, contact us about your options and your rights when it comes to paying U.S. taxes.

Image Copyright:  gregory21 / 123RF Stock Photo

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