Are You An American For Tax Purposes?
The U.S. law has different classifications of who and what is considered to be an American(officially, a U.S. person) for tax purposes and it’s important to check if you fall into any of the categories below, hence obliged to report your worldwide income to Uncle Sam.
The Official Term Is “United States Person” And It Includes:
1. A U.S. citizen by birth:
- You were born in the United States
- You were born outside of the United States with at least 1 parent who is a U.S. citizen*
2. A resident alien of the United States if you meet one of the two tests:
- A Green Card test
- The substantial presence test for the calendar year
The U.S. citizenship comes with all the arduous requirements and liabilities, hence why more people than ever started to question whether the benefits outweigh the costs. Thought of renouncing a U.S. citizenship may pass through your mind if you are already a dual citizen, have no ties with the U.S. and don’t want to carry the U.S. tax burden anymore. Some people fall into the category of “Accidental Americans” and they have never even considered themselves being Americans, so it’s the only way to free themselves from the IRS and stop playing their tax game. Read More
As the tax reform debate rages on currently, I do not see much in the proposals changing for US citizens living abroad. As this story unfolds, I think it is a good thing that US citizens/ resident aliens living abroad are not affected. We shall wait and watch. For all the latest news-stay tuned!
As it happens many times for those US citizens who have moved abroad and married someone who is a citizen of their resident country, when times comes to file a tax return, they have to use the “Married Filing Separately” or the “Head of Household” filing status. Both of these may not be as advantageous as the “Married Filing Jointly” filing status tax-wise.
(This is Part 2 of my post discussing the South Africa tax situation. Part 1 is here.)
This is a follow up to my post exploring whether South Africa is moving to a tax system that is based on “citizenship-based taxation” or (in the case of the United States of America) “taxation-based citizenship”. That post was the result of a “special request”. The response from that first post included: Read More
There have been a number of suggestions in various blogs that South Africa is somehow taxing on the basis of citizenship. American citizens (whether by accident or design) are most sensitive to any discussion of “citizenship-based taxation”. After all, U.S. tax policies combined with FATCA (which is part of the Internal Revenue Code) are destroying the lives of those who have entered the U.S. tax system.
I recently received an email that asked:
They’re talking about SA expats, people who no longer live in SA, being taxed by SA. Like us, these people are residents and earners in countries other than their country of origin (and, I would assume, citizenship). http://www.internationalinvestment.net/regions/south-african-expats-hit-tax-exemption-removal-plans/ If this is not CBT, on what basis are they being taxed? If SA is just wanting to expand its definition of tax residency on what basis do they feel they can apply this to someone who no longer lives in their country? Read More
Well he won the lottery. Specifically he won the “Green Card” lottery. He and his wife came all the way from an Asian country to “Live The Dream” – specifically the dream of living in the United States of America.
He spoke English. His wife did not speak English. He believed in strict compliance in the law. His wife relied on him to ensure her compliance with the law. Read More
As I write this post, my mind goes back to one of my very first posts about U.S. compliance issues. This post was called “What you should consider before contacting a lawyer.” Since that time I have written hundreds of post describing the problems faced by Americans abroad.
In this first post of this series, I explained the importance of the Canada U.S. tax treaty and how it provides “some protection” to Canadian citizens from U.S. tax debts.
In the second post, I explained some of the characteristics of the OVDP program and how Mr. Dewees got caught in it.
In this post, I am suggesting some possible lessons that can be learned from the story of Donald Dewees. Read More
In a recent submission to Senator Hatch, I argued that what the United States thinks of as “citizenship-based taxation”, is actually a system where the United States imposes U.S. taxation on the residents and citizens of other countries. That submission included:
On August 2, 2017 posts at the Isaac Brock Society and numerous other sources, reported that that there were 1759 expatriates reported in the second quarter report in the Federal Register. The number of people renouncing U.S. citizenship continues to grow. Read More
Two questions that I frequently receive from people who have renounced U.S. citizenship are:
I. An immigration question: What if I attempt to travel to the United States during the period of time between my actual renunciation of U.S. citizenship and actually receiving my CLN (which is my proof of having renounced U.S. citizenship)? Read More
This is part of a series of posts on: (1) tax residency, (2) the use of treaty tiebreakers when an individual is a tax resident of more than one jurisdiction and (3) how to use treaty tiebreakers to end tax residency in an undesirable tax jurisdiction.
Open Letter to President Trump, Treasury Secretary Mnuchin, House Speaker Paul Ryan, House Ways and Means Committee Chairman Kevin Brady, and Senate Finance Committee Chairman Orrin Hatch
The United States taxes individuals on the basis of citizenship. In other words, it taxes American citizens on their worldwide income regardless where they reside, the source of their income, whether they are or ever have been present in the US – in short, regardless of anything.
The advent of the OECD Common Reporting Standard (CRS) has illuminated the issue of tax residency and the desire of people to become tax residents of more tax favorable jurisdictions. It has become critically important for people to understand what is meant by tax residency. It is important that people understand how tax residency is determined and the questions that must be asked in determining tax residence. Tax residency is NOT necessarily determined by physical presence.