There are a lot of reasons to invest overseas for US citizens, almost all of which are dollar bills. Nonetheless, Uncle Sam will hunt you down. You can go anywhere in the world, but you can’t outrun the taxman. There are clear tax obligations for American citizens living and earning beyond the Land of the Free. You need to be aware of them. Color inside the lines of the law, and you can avoid paying a hefty cost. Let’s get into the basics.
Tax Reporting Obligations for U.S. Citizens
First, if you’re a US citizen, you need to declare all foreign accounts if they total more than $10,000. You must report all foreign assets valued above $50,000.
There are more forms to be filed of course, lots of them and they need to be filed annually. The bureaucracy is a thick fog that conceals many rocks for you to dash your financial ship against. The government will beat you down with forms, so file carefully and stay on top of your paperwork.
U.S. Federal Income Tax For Citizens Living Abroad
You are also required to pay federal income tax on foreign income you receive. The US taxes the income that you earn, even if you earn every penny abroad. If you pay taxes in the country where you are earning income and there is a tax treaty with the US, you’ll receive a credit in the US for foreign taxes paid.
All US citizens are subject to federal income tax regardless of where they live or do business. Uncle Sam wants his money. Even if you no longer earn income in the US, Uncle Sam wants his money. Even if you renounce your citizenship, which is expensive and has a whole host of tax repercussions, Uncle Sam can and will get his money.
These are just the basics. Every country has its own tax dilemmas. There are special rules and numerous exceptions to the examples provided here. The bottom line is that if you are holding money outside of the US, you need to find out what you are obligated to report. Uncle Sam gets testier than Don Corleone when he isn’t paid, and he’s harder to escape than the Terminator. With a legion of equally robotic accountants on his side. Make sure that a move made to save you money is worth it.
If you’re investing or moving abroad, contact Royal Legal Solutions today. Our attorneys and other experts can help you keep your ship upright in these rough (and paperwork-riddled) waters. Set up your consultation to ensure smooth sailing.