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New US tax rule could penalize Americans living abroad (and those who have lived abroad)


DeaconTheVillain

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http://www.windsorstar.com/sports/rules+could+penalize+Americans+here/5282418/story.html

"U.S. citizens, regardless of where they live, are still subject to the same taxation regulations as any other U.S. citizen," said Todgham-Cherniak. "This deadline is designed to encourage them to come forward and comply voluntarily."

Those who fail to meet the Aug. 31 deadline could face stiffer financial penalties if they haven't filed with the IRS in the past.

"Now, for those who have never filed, they can be hit with penalties dating back to 2003 just for complying with the deadline and coming clean with their bank account and investment information," said Lee

America...Land of the fee

Anyway, this article sparked a debate on a poker forum where many people who play for a living have left the US (for places like Canada, Mexico, Thailand) until online poker is legalized in order to continue making a living as to people wanting to give up their US citizenship for a couple of reasons

1. They are more free in many other countries than America

2. They believe America is sinking ship and going to sink fast

Others were stating how stupid it would be to give up citizenship because US citizenship is envied by "about 6 billion people," according to a couple posters.

A couple Europeans responded to that claim here is one:

Umm no, you wouldn't catch me dead in USA and I was born in probably the poorest country in Europe.

It looks to me like USA is just a third world country with like ~1% population of rich big shots trying to disguise that fact.

Just the other day I was watching Wolf Blitzer whining about the number of US citizens on food stamps, something like 45 mill+, shocking number, a thrid world country kinda %s.

I remember watching some interview with Ralph Nader where he actually called USA a third world country and claimed that ~70% of the work force works for Wallmart wages, etc.

TexasChuck, you need to travel more

Things don't look good here, but I think calling USA a sinking ship is a bit much.

Per the article, pretty messed up IMO. I think we have had several members here living and working abroad. Did they have to pay US taxes? Also, if you pay taxes in the country you are working in, there is no way you should have to pay anything to the US as well.

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Citizens living abroad are required to file a US tax return, but they get a dollar for dollar credit for foreign taxes paid and something like the first $90k of earned income is exempt.

That's like saying, "well we'll give you a credit on the limb that was already sawed off by Liberia, so we'll only take your index and middle finger from your left hand as well."

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That's like saying, "well we'll give you a credit on the limb that was already sawed off by Liberia, so we'll only take your index and middle finger from your left hand as well."

I'm not sure of your point. If, say your taxable income was $200k and you are living and working in a country that taxed you say $60k, you would only owe the Feds anything if your US Federal tax liability was greater than $60k. Typically US taxes are lower with other western economies (because they come with significantly fewer benefits and services :-) ) and so a US citizen living abroad will typically pay higher taxes locally and not owe the Feds anything.

Interestingly, the USA is just about the only country that taxes based on citizenship, not residency.

As for:

"1. They are more free in many other countries than America"

It depends what you are talking about. Alcohol and drug laws here are draconian compared to may places, but firearms laws are far more lax.

"2. They believe America is sinking ship and going to sink fast"

Expatriate online poker players are probably not who I'd look to for advice on economics and financial planning

"Others were stating how stupid it would be to give up citizenship because US citizenship is envied by "about 6 billion people," according to a couple posters."

Well that depends on the alternative. If you're from Somalia or Sudan, sure. Citizens of other Western economies typically would weigh it up against opportunity versus their particular situation. Given current trends, if my family was poor or lower middle class I think they'd be better off in most European countries. The upper middle class (and rich) here have it as good or better than most places on the planet.

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It was a not-so-clever quip against all income taxation, nothing more :)

Well if a government is going to "cut off your limb" you might as well have it done by a crazy European country. Because the USA won't tax you any more and you have the socialized healthcare to take care of what's left of your body. :)

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I lived in Australia from 2004 to last month. I filed my US taxes every year because I knew that when I wanted to come back - with my Australian wife, who would need a green card - they would demand evidence that I filed my taxes.

The first few years my foreign income was exempt. The last couple of years, because of FX variations and changes to my circumstances, I was above the threshold and had to claim the housing exemption and tax exemptions. Super onerous but not horrible. However, if I had made significantly more, I would have been in trouble because the Australian tax rate is lower than the US tax rate and the US doesn't consider that Australians pay national sales taxes and the like.

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