Is it true that you have to pay U.S. taxes if you leave the country and go to live somewhere outside the U.S.? I heard Jim Rogers say that he still pays his U.S. taxes even though he doesn’t do business here. Can someone tell me what law this is?
Yes.
If you an American and you move to Canada and earn only Canadian income then at end of year you file both an American tax return and Canadian tax return. Canada already deducted taxes from your pay. You owe taxes to Canada. On your US tax return you are taxed on your “world” income, meaning the USA taxes you on your Canadian income also.
However, the USA has a tax treaty with Canada, as it does with many other countries. This treaty avoids double taxation on the income. If Canada taxes you 25% on income and USA would tax you only 24% on that same income then you won’t owe anything to the USA. If the USA were to tax you 27% on that same income then you will have to pay that extra 2% to the USA at the end of the year.
There is also a maximum amount of income that you can claim on the tax treaty. I can’t remember the limit.
Can you link me to the law?
I just updated my last post.
I think if you make below a certain amount, maybe as much as $85,000 or so, you don’t have to pay US taxes while abroad. Anybody know if this is true or not?
Do you believe you have to pay U.S. taxes? And what will you do if a person you do not have a contract with tells you that you must pay?
if you make below a certain amount, maybe as much as $85,000 or so, you don’t have to pay US taxes while abroad
Is that the new law? I made about $40K abroad 15 years ago and still had to pay US taxes.
I believe if you move out of the US, AND you also formally renounce your US citizenship, then you don’t have to pay US taxes.
Any other country have similar laws like this?
I believe if you move out of the US, AND you also formally renounce your US citizenship, then you don’t have to pay US taxes.
This guy has renounced his citizenship and I’m pretty sure he stated somewhere on his blog that the state expects him to pay taxes for another 10 years or so. Can’t find the post, but if you have questions, he’s your man.
Can he enforce it?
Can who enforce what?
That you have to pay him.
Search for “8854” on my blog. That’s the IRS form tied to the expatriation/tax regulation.
I don’t know all the details. My impression is that a “non-exempt” ex-American is expected to file returns (including reports on worldwise assets) and pay taxes on worldwide annual income exceeding some threshold (the social security tax cutoff level?) for 10 years following expatriation. One becomes “non-exempt” by answering “no” to at least one of the questions on a section of the form. The one I answered “no” to was of the form: “Do you swear, under penalty of perjury, that you have complied with all of your US tax obligations for the past five years?”
The neat thing that I’m quite certain of in my case is that the law says that willful failure to file the annual income&assets returns will be punished with a $10,000 fine per year.
Here’s the bit from my post, actually:
The final item, not previously known to me, is to fill in and submit an IRS Form 8854, a delightful document entitled “Initial and Annual Expatriation Information Statement”. The IRS wants a full accounting of my situation for the past five years, a statement of assets and liabilities and an income statement. According to the instructions to the form, because I will answer “no” to the question “Do you certify under penalty of perjury that you have complied with all of your tax obligations for the 5 preceding tax years?”, I will become subject to “section 877″, which among other things will require me to file an updated copy of Form 8854 every year for the ten years following my expatriation. The “Penalties” section of the instructions contains this gem:
If you are subject to section 877 and required to file Form 8854 for any tax year, and you fail to file or do not include all the information required by the form or the form includes incorrect information, you will owe a penalty of $10,000 for that year, unless it is shown that such failure is due to reasonable cause and not willful neglect.
I will have to answer “no” to that question, and thus I will be subject to this penalty, because since 2005 I have not filed a US income tax return. Even though I have had no income subject to US taxation in the last several years, the filing requirement still exists. By the sound of things, and since I do not plan on ever filing an IRS form again after this one, it looks like that by 2019 I will have accumulated $100,000 in penalties, simply for failing to do government-mandated paperwork. A blog doesn’t really allow one to communicate a sense of profound indifference to the fullest extent. Is it possible, grammatically, to be highly willfully neglectful?
Guess I have just 2 weeks or so left to file my first 8854… or was one due last April 15? Shrug
Thanks for the links. I also found this…http://www.quatloos.com/taxscams/federal_income_tax_system.htm
This is the first time I’ve heard of this, and it’s honestly one of the dumbest things I’ve read in a while. Do other countries do the same?
Statements are often made along the lines of “The US is one of only two countries to do this”. Suriname is the only one I can remember as being the other one, but certainly there are others (alleged or real).
Goes to show just how coercive this government is.
I think I heard about this before (even though I do not live in US) but thanks for reminding me again. It is indeed one of the most idiotic things ever imaginable, period.
You can renounce your citizenship without moving out.