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Thread: A question on emigration and ex-pat US tax liability

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    Default A question on emigration and ex-pat US tax liability

    I've started thinking about moving to Australia but then I realized that if I wanted to keep as much dancing money as possible by only putting a little in my bank account and keeping the rest in a safe, can I move to AUS and have it converted without raising suspicion? Or do I quit trying to pull one over on bitchass Uncle Sam and pay ALL my taxes):
    "That's the problem with drinking, I thought, as I poured myself a drink. If something bad happens you drink in an attempt to forget; if something good happens you drink in order to celebrate; and if nothing happens you drink to make something happen."
    - Charles Bukowski

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    Default Re: A question on tax evasion and emigration

    As a US citizen, even if you move to Australia the US IRS is still going to attempt to collect US income taxes on your Australian bank account / investment earnings as well as your Australian strip club earnings. There is an exclusion for the first US$ 91,500 of 'foreign earnings', though.

    Additionally, the US State Dep't and the IRS require that any foreign bank accounts, investment accounts, etc. held by US citizens be reported annually ( i.e. 'foreign earnings' ) even if that US citizen is residing in a foreign country.

    The IRS is increasing it's staff of auditors to nearly double the number of previous years as a direct result of ObamaCare legislation. The IRS is also aggressively investigating US citizens who have offshore bank / investment accounts. Since Australia is a signatory to the Terrorist Anti-Money Laundering Treaty, any cash deposits that are made at an Australian bank or investment firm by a US citizen will automatically be reported to the US IRS. It is certainly possible that, if your past US tax returns have listed comparatively low levels of income, and if the IRS receives an automatic report from Australia that you have opened an Australian account including a substantial cash deposit, that the IRS may wish to investigate further based on presumption of undeclared income.

    Also, as part of the same ObamaCare legislation, the IRS is opening new branch bureaus in major countries around the world ... from Panama to Australia to Hong Kong ... whose primary purpose is to investigate the US tax payments ( or lack thereof ) of US citizens living in / holding bank and/or investment accounts in those countries !

    Also, if you plan on taking / moving $10,000 or more in cash across the US border ( with recent reports that TSA has 'bagged' travellers with far less than $10,000 in cash showing up on the X-Ray machine), if you get 'bagged' by US customs you will be faced with the task of proving A. that the cash actually belongs to you, and B. proving that the cash isn't the result of illegal activities. If there isn't any US 'paper trail' identifying the money as legitimate income ( with appropriate IRS income reporting and payment of taxes due ), you may find yourself trying to prove the 'impossible' - as well as potentially finding yourself in custody for suspicion of illegal activities and/or tax evasion, as well as potentially having your cash siezed by the IRS until its 'legitimacy' can be proven, etc.

    Things were much simpler when I moved way south of the border two years ago !!!

    Obviously, deliberate evasion of US taxes via foreign bank accounts was always a serious matter. However, these days, the 'odds' of getting caught doing it are far higher than they used to be !

    For example ...

    (snip)"The American Civil Liberties Union (ACLU) has filed a lawsuit on behalf of Texas Congressman Ron Paul’s campaign treasurer after the man was detained and questioned by Transportation Security Administration (TSA) agents for carrying approximately $4,700 in cash at an airport.

    According to the ACLU, Rep. Paul’s campaign treasurer Steven Bierfeldt was detained and interrogated on March 29, 2009, at Lambert-St. Louis International Airport after he passed a metal box containing cash through a TSA security checkpoint X-ray machine. The cash had been collected at an event held for Campaign for Liberty, a political organization that grew out of Rep. Paul's 2008 presidential campaign.

    “I do not believe I should give up my constitutional rights each time I choose to travel by plane. I was doing nothing illegal or suspicious, yet I was treated like a potential criminal and harassed for no reason,” Bierfeldt told the ACLU. “Most Americans would be surprised to learn that TSA considers simply carrying cash to be a basis for detention and questioning.”

    Charging that “unconstitutional searches and detention by TSA agents have become the norm,” the ACLU’s lawsuit claims that “TSA agents are using heightened security measures after 9/11 as an excuse to exceed their search authority and engage in unlawful searches that violate the privacy rights of passengers.”(snip)

    ... and this guy and his $4700 in cash weren't even on an international flight !

    ~
    Last edited by Melonie; 02-28-2011 at 03:41 PM.

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    Default Re: A question on tax evasion and emigration

    Girl, you should be charging for all the financial advice you're always giving out! Okay, the US government is a bucket of dicks. I wonder how much you have to make before you're in the rich folk tax bracket where you get all the breaks and cuts

    What if I decided to just be an Australian citizen? Like a real expat. What are the cons of no longer being an American citizen?
    "That's the problem with drinking, I thought, as I poured myself a drink. If something bad happens you drink in an attempt to forget; if something good happens you drink in order to celebrate; and if nothing happens you drink to make something happen."
    - Charles Bukowski

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    Default Re: A question on tax evasion and emigration

    Becoming an Australian citizen is quite the lengthy process, so it's not really as easy as you just deciding to be one and then being one within a short span of time.

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    Default Re: A question on tax evasion and emigration

    What if I decided to just be an Australian citizen? Like a real expat. What are the cons of no longer being an American citizen?
    If you actually were able to obtain a second citizenship, Australian or any other country, you would then have the option of renouncing your US citizenship. In doing so, you would give up your 'rights' as a US citizen ( which these days are arguably as much of a liability as an asset ), but you would also free yourself of having to pay US taxes on your 'foreign income' no matter how substantial. Additionally, you would subject yourself to whatever tax and other laws govern the citizens of Australia or any other country - which in the case of Australia probably offers no real economic advantage.


    Becoming an Australian citizen is quite the lengthy process, so it's not really as easy as you just deciding to be one and then being one within a short span of time.
    As ironic as it may seem, outside the USA most countries take very seriously the question of whether a (new) citizen will be a net positive contributor to their society / economy, versus being a net burden on their social welfare system. They also ask the question of whether or not a new citizen bringing something positive to their country will actually be doing so at the 'expense' of a native born citizen.

    In the case of Australia, before one can even file an application for citizenship, one must be a legal permanent resident of Australia for four years. For an American citizen who is not the child of an Australian citizen parent, this means either studying in Australia on a student visa, or having the necessary skills and credentials to be granted a work visa ( 'stripper' doesn't officially qualify ).


    Girl, you should be charging for all the financial advice you're always giving out!
    No real effort involved on my part, since I live this ex-pat stuff every day down here way south of the border. However, my chosen 'adopted' country's path to citizenship is significantly shorter and straighter than the path to citizenship in a 'major' country like Australia. The trade-off of course is that in a 'major' country like Australia there is a real possibility of having a career and earning money in the local economy - as opposed to my 'adopted' country not really having an economy ( meaning that you must have previously earned and saved all the money you will ever need before making the move ).


    I wonder how much you have to make before you're in the rich folk tax bracket where you get all the breaks and cuts
    Well, keep in mind that even as an American citizen living outside the USA, the IRS still gives you a 100% US income tax exemption on the first $91,000 of your annual 'foreign' income. Given typical US federal and state tax brackets for a single person, that exemption is worth about $30,000 a year in US income tax savings. And in certain foreign countries ( example down here way south of the border ) one can live like a queen on a $90,000 a year annual income that is not subject to any 'local' income taxes !

    In a country like Australia, one can live pretty well on a $90,000 income, but as a legal resident Australia is going to tax away about the same $30,000 amount that the IRS exempted you from. And if you're lucky enough to earn more than $91,000 a year without Australian citizenship ( i.e. without being able to renounce US citizenship), both the US IRS and the Australian Tax agency will try to claim their own slice of your additional income. Thus if you're still in 'work' mode ( as opposed to being retired with a previously accumulated 'nest egg' that provides passive income ), there really isn't any financial advantage for a US citizen to expatriate to Australia or any other 'first world' country that has similar or higher income tax rates than America does.

    As to being 'rich enough' to take advantage of 'tax breaks', the vast majority of these do NOT help where 'ordinary income' from a paycheck or a business are involved. Instead these 'tax breaks' typically involve investing money in certain types of investments that are incentivized by the gov't. The obvious examples in America these days are the purchase of tax free municipal bonds ( minimum buy-in price of $50,000 ) and the purchase of 'production tax credit' producing green energy partnerships ( typical buy-in price of $1 million ). With muni bonds, all of the interest income is free of federal, state and local income taxes regardless of one's total amount of annual earnings. With green energy partnerships, every kilowatt-hour of solar electricity or every gallon of corn ethanol produced results in X dollars worth of tax credits which can in turn be used to reduce tax liabilities on other annual earnings from a paycheck or a business.

    PS I edited the thread title for the sake of potential search engine results

    ~
    Last edited by Melonie; 03-01-2011 at 12:47 AM.

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    Default Re: A question on tax evasion and emigration

    Quote Originally Posted by plasticks View Post
    Girl, you should be charging for all the financial advice you're always giving out! Okay, the US government is a bucket of dicks. I wonder how much you have to make before you're in the rich folk tax bracket where you get all the breaks and cuts

    What if I decided to just be an Australian citizen? Like a real expat. What are the cons of no longer being an American citizen?
    You really need to talk to a tax expert on this, because it is really complex. I've done research for clients, but each case depends on the particular facts.

    If you work abroad and maintain your US citizenship, you may be able to avail yourself of the Foreign Earned Income Exclusion, which may allow you to exclude up to $92,900 of your foreign earned income in 2011.

    Also, if you pay income taxes in a foreign tax jurisdiction, you could claim Foreign Tax Credits on your U.S. return to avoid double taxation.

    There may be a tax treaty that applies and this would control.

    See IRS Publication 54
    http://www.irs.gov/pub/irs-pdf/p54.pdf

    For expatriation, there is an Expatriation Tax that applies to high net worth taxpayers
    See IRS comments:
    http://www.irs.gov/businesses/small/...=97245,00.html

    Tax breaks -- there's so many of them; you have to be more specific. The home mortgage interest deduction is considered a tax break, deductions for a home office is another, qualified retirement accounts are another... If you own a business or commercial real estate, you get to deduct "paper losses", such as depreciations and bonus depreciations and you can capitalize certain assets, getting an immediate deduction (even though you haven't paid them off yet). If instead of getting a salary from your business, you borrow money from it, you pay no taxes on that, because it is a "debt", and not "income". Granted, you have to pay back the debt, but you decide the terms. If you invest in real estate, you can defer your income until you die using Section 1031 like-kind exchanges. Then, when you die, that real estate gets a "stepped up basis", so no one ever has to pay the taxes.

    Do what Hugh Hefner does - have your corporation buy you a big expensive mansion to live in and deduct all your housing expenses, by claiming that your house is necessary to throw lavish business parties.

    Then, there are a number of tax credits available to certain industries, like oil and gas, alternative energy, low income housing, porn (just kidding), etc.

    Then, there is also the generous "welfare" packages that developers and corporations get from states and muncipalities if they re-locate to those states and municipalities and/or if they develop commercial projects and create jobs. If you have a respectable professional sports team, you might get a city to build you a stadium using taxpayer money.

    Another way to get great tax breaks - start a church or non-profit organization. Keep your salary reasonable, but give yourself nice perks.
    Last edited by jack0177057; 03-08-2011 at 12:19 PM.
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