Year-end tax planning is slightly different this year due to the proposed changes to the tax system. Despite this uncertainty however, there is still plenty that expats can do before the holidays to make their lives easier in 2018. They can even save some money, too!
Americans living abroad are still required to file a US tax return, reporting their worldwide income, as well as obey the tax rules in the country where they live.
Many US expat have settled abroad permanently though, and they justifiably wonder why they must continue filing a US tax return every year, even if they don’t pay any US taxes because they claim one or more of the exemptions available to expats, such as the Foreign Earned Income Exclusion or the Foreign Tax Credit, when they file.
As a result, many US expats consider renouncing their American citizenship.
The United States Treasury Department is now actively working with more than 50 nations to share Americans’ personal financial data that will reveal who is tax compliant, including American expats living overseas. The effort is in support of new FATCA (Foreign Account Tax Compliance Act) laws that require foreign financial entities to report Americans’ account information to US authorities and to undertake mandatory withholding from them to assure compliance with American income tax laws.
The trade-off is that the United States will reciprocate with the data of partner countries’ own citizens with accounts in the States. The laws have been rolling out in varying levels since its enactment in 2010. The US has principal agreements with the 5 big sovereigns of Europe, including the United Kingdom, Germany, France, Spain and Italy, and has signed a “model agreement” with the United Kingdom …
The inception of, roll out and implementation of FATCA has been clever, if not masterful on the part of the US Treasury. The United States enacted FATCA and began by leaning, mostly, on foreign financial entities and mandating that they comply with certain new rules, including reporting of data on American clients and withholding of monies, to ensure Americans were compliant with US tax laws. Foreign financial interests, in turn, desperately sought relief from their own governments. The US mandates were burdensome and cost prohibitive for them to implement. The solution for financiers was for their own governments, many of whom already have the data the US Read More