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No escape from IRS for US expats
| Published: | 29 Apr at 6 PM |
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Since the coming of FATCA, any chance US expats had of minimising their contact with American bureaucracy has vanished.
You can take the American out of America, but there’s no escaping the US taxman, wherever in the world you’ve hung your Stetson. It’s a common misconception that once you’ve brushed American dust off your cowboy boots, that’s all there is to it. Sadly, misconceptions can land you in boiling-hot water courtesy of your compulsory annual tax returns.
Admittedly, the US of A is one of two countries ( the other is Eritrea) which tax citizens wherever they are on the planet and however long they’ve been there. In the land of the brave and the free, there’s no such thing as a nil return, even if you’ve nothing at all to report. In other words, even if you have nothing to tell them, they’ll fine you for not giving that essential – to them – piece of information.
You’ll also have to file that oddly-initialled FBAR form in order to make it easy for USA tax officials to ferret out any FATCA reports from overseas which might just indicate you’ve been slightly less than honest in completing your return. The balances in your foreign accounts could be close to zero, but your aggregate ‘accounts’ include your pensions, savings, business accounts, trusteeships and checking accounts. It’s one of those ‘rose by any other name’ situations.
So you thought your savings contributions and pension don’t count as they are tax-deferred? Wrong – your friendly IRS doesn’t recognise deferrals, leaving you open to taxes on employer contributions to savings accounts as well as to pensions. Credits on tax paid whilst overseas can be offset, but there’s no more good news on that issue.
The worst possible nightmare scenario haunts US expat citizens whose tax affairs haven’t exactly been a high priority for a good few years. Yes, the Sword of Damocles-style obligation to file still hangs over your head, but it might not be all bad news. New streamlined procedures have resulted in thousands of US expats who’ve had six years of FBARS plus a minimum three years’ filing not having to pay any penalties.
You can take the American out of America, but there’s no escaping the US taxman, wherever in the world you’ve hung your Stetson. It’s a common misconception that once you’ve brushed American dust off your cowboy boots, that’s all there is to it. Sadly, misconceptions can land you in boiling-hot water courtesy of your compulsory annual tax returns.
Admittedly, the US of A is one of two countries ( the other is Eritrea) which tax citizens wherever they are on the planet and however long they’ve been there. In the land of the brave and the free, there’s no such thing as a nil return, even if you’ve nothing at all to report. In other words, even if you have nothing to tell them, they’ll fine you for not giving that essential – to them – piece of information.
You’ll also have to file that oddly-initialled FBAR form in order to make it easy for USA tax officials to ferret out any FATCA reports from overseas which might just indicate you’ve been slightly less than honest in completing your return. The balances in your foreign accounts could be close to zero, but your aggregate ‘accounts’ include your pensions, savings, business accounts, trusteeships and checking accounts. It’s one of those ‘rose by any other name’ situations.
So you thought your savings contributions and pension don’t count as they are tax-deferred? Wrong – your friendly IRS doesn’t recognise deferrals, leaving you open to taxes on employer contributions to savings accounts as well as to pensions. Credits on tax paid whilst overseas can be offset, but there’s no more good news on that issue.
The worst possible nightmare scenario haunts US expat citizens whose tax affairs haven’t exactly been a high priority for a good few years. Yes, the Sword of Damocles-style obligation to file still hangs over your head, but it might not be all bad news. New streamlined procedures have resulted in thousands of US expats who’ve had six years of FBARS plus a minimum three years’ filing not having to pay any penalties.
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