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Thread: Expats & taxation - NYTimes Article

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    Default Expats & taxation - NYTimes Article

    The subject of residing outside of the U.S. at least 330 days/yr has come up before as an effective way to reduce your tax burden (thanks to Melanie for your many informative posts). The many convoluted rules and regulations, never mind the unfairness of double-taxation have prompted a growing number of people to give up their citizenship. I personally know of a few that have already done this, and a number more who have been considering it.

    Looks like there will be no end in sight -- with the astronomical national debt, the IRS/gov't will most certainly won't relinquish their strangle-hold on your neck or hard earned dollars. Oh, and the comments at the end of the article are very insightful as well. Read it and weep.

    http://www.nytimes.com/2013/04/06/your-money/rules-aimed-at-tax-evasion-abroad-trip-up-average-americans.html?_r=0&gwh=907838A7731D719289FA5F662D 15C781
    Last edited by JudyO; 04-08-2013 at 03:26 PM. Reason: sp.

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    Default Re: Expats & taxation - NYTimes Article

    Basically, there isn't anything really new in regard to tax laws in this NY Times piece. In order to maintain eligibility for the 'foreign income' tax exemption, the US citizen cannot spend more than 35 days per year inside US borders. The US citizen must report the existance of all bank / financial accounts in foreign financial institutions with a balance greater than $10k. And the size of the 'foreign income' tax exemption is limited to $106k per year.

    What IS new is the level of IRS enforcement efforts against US citizen ex-pats. Thanks to ObamaCare the IRS has expanded it's staff by some 16,000 additional auditors ... who don't yet have active provisions of ObamaCare to enforce. Thus the IRS has recently established offices in many foreign cities for the express purpose of investigating the finances / bank accounts of US ex-pats.

    Also, ex-pats can avoid US taxes on any amount of foreign income if they renounce their US citizenship. This is easy to do if you're worth millions, but very difficult if you are only worth tens of thousands.

    While not yet in effect, the scariest change in ex-pat taxation revolves around the enactment of a 'provisional income tax' on any assets that a US citizen attempts to move outside the USA in the future. As discussed, this would amount to the US citizen having to pay a 30% estimated tax on the market value of assets before they were allowed to permanently leave the country. If you're talking about a stock or a retirement investment, this essentially forces the sale of that stock or retirement invesment in order to come up with the 30% in cash with which to pay the tax. It is this proposal which has prompted a record number of Americans to make their move to ex-pat status with renounced US citizenship last year.

    As far as future 'projections' of the personal tax burden on rich and upper middle class US citizens, between tax increases on investment income the federal level, LARGE income tax increases by some states, skewed future costs of health insurance coverage ( with premiums being inversely proportional to income level ) etc., the handwriting is plainly written on the proverbial wall that rich and upper middle class Americans are 'fair game' for additional future tax increases. This runs the risk of getting even worse, with the newly introduced 'cap' of $3 million total dollars being contributable to the sum total of all tax advantaged gov't sanctioned retirement accounts. Thus, at this moment, potential ex-pats are faced with a decision of leaving the US now and taking their assets with them, versus not being allowed to leave in the future unless they are willing to 'sacrifice' 30% of their existing assets - and being to required to pay much higher future tax rates if they stay.
    Last edited by Melonie; 04-09-2013 at 04:24 AM.

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    Default Re: Expats & taxation - NYTimes Article

    Quote Originally Posted by Melonie View Post

    What IS new is the level of IRS enforcement efforts against US citizen ex-pats. Thanks to ObamaCare the IRS has expanded it's staff by some 16,000 additional auditors ...
    No they didn't.

    http://www.factcheck.org/2010/03/irs-expansion/

    Q: Will the IRS hire 16,500 new agents to enforce the health care law?

    A: No. The law requires the IRS mostly to hand out tax credits, not collect penalties. The claim of 16,500 new agents stems from a partisan analysis based on guesswork and false assumptions, and compounded by outright misrepresentation.

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    Default Re: Expats & taxation - NYTimes Article

    ^^^ speculation aside, if you look at the official IRS budget at you'll see that the IRS has requested / received nearly 1 billion dollars of additional funding. $462 million dollars worth of that IRS budget increase was specifically allocated to increased enforcement. Now maybe it's possible that the IRS did something else with that $462 million of additional 2012 budget besides hiring additional agents. However, if you take perhaps $400 million, and divide it by a $50,000 annual salary, you get 8,000 potential new agents on the payroll. If a similar IRS budget increase is implemented in 2013 as has already been implemented in 2012, by pure coincidence that would translate into 16,000 new IRS agents when ObamaCare takes full effect in 2014.

    As usual, everybody is free to form their own opinion. However, the added ~$1 billion IRS overall budget increase for FY 2012, and the added $462 million specifically earmarked for increased IRS enforcement ( as opposed to new computers, other IRS functions etc. ), is not opinion it is fact. Can it be positively proven that the IRS has already added 8,000 new agents, with another 8,000 new agents to follow when the new FY kicks in a few months down the road? - no it can't. But that $462 million in additional 2012 IRS enforcement funding went somewhere !!!
    Last edited by Melonie; 04-09-2013 at 11:35 AM.

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