IRS tax (and other) myths of Americans Living Overseas

Watch this video as we dispel some of the top myths surrounding the current taxation (pre-2017 reform) of Americans Overseas.

1. Foreign Earned Income Exclusion allows USD 100,000 to be tax free.

That money, along with any other monies earned is taxed in the American overseas country of residence. While there are some exceptions --- Dubai, for example has no income tax, the fact is most US persons in income tax-free jurisdictions exceed the approx. 100,000 exclusion.
 
2. US tax treaties eliminate double taxation.

The US and the countries’ tax systems are not the same hence many income taxes in the American overseas’ country of residence is not recognized by the IRS hence double taxation. And savings clause undoes most tax treaties. Savings, investment, retirement accounts are not recognized by the IRS as well hence double taxation

3. Americans living overseas are renouncing because they do not want to pay taxes.
•         Many Americans who renounce are US tax compliant though one does not have to be tax compliant to renounce.
•         Americans living overseas do pay taxes: in their respective countries of residence.
•         Americans living overseas are renouncing because they are unpatriotic.
 

4. Accidental Americans must enter the US tax compliance system.

NOTE: As tax professionals we are bound to advise tax compliance.

5. The IRS will come after you in your country of residence and chase you down.
As tax professionals we don’t make any guarantees - there will be exceptions to this rule.
 
6. If you are not US tax compliant, you will be treated as a criminal and the IRS will put you in jail. Criminal charges require intent… risk is not high for most, but there is risk.
 
7. If you are not US tax compliant, you cannot renew your US passport.
 
8. If you are not US tax compliant, you can be arrested at the border when entering the United States.

9. Citizen Based Taxation means the Marines “have to” come rescue you. Yes, but you have to sign a promissory note to reimburse them.
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Видео IRS tax (and other) myths of Americans Living Overseas канала IRS Medic