Copied to me from Just Me:
We are on a roll. WSJ has just posted another story under the heading…
The new year is shaping up better than 2011 for a conversation in the public forum on US citizenship taxation/reporting issues.
UPDATE: Just Me sent me the following email:
I hope you all are reading those comments on the WSJ opinion piece.. Boy there are some good ones, and right on point… A lot of good education there on the practical impacts if US taxation policies. I could have sworn that many of them were written by Daniel.. LOL
I especially direct your attention to this one, as it had a reference to ACA…
- Bruce Taylor Replied:
It is true that US expats may exclude a portion of income earned overseas from US income tax, and that some foreign taxes paid can be credited against US taxes owed. But this does not make the situation faced by expats “pretty fair”. There are many other ways that the US tax code disadvantages American expats.
For example, only foreign income taxes can be credited against US income taxes. Some countries raise revenue through taxes on wealth rather than (or in addition to) income. US expats subject to these wealth taxes cannot claim a credit for them against US income tax. Nor can expats claim credit for VAT paid to their country of residence, although US residents have the option of taking a deduction for state sales taxes paid..
Equally serious is the unavailability of tax-advantaged retirement plans for many US expats. If an expat participates in a 401(k)-style plan offered by a foreign employer, his or her contributions are from after-tax income, not pre-tax income as with 401(k)s. There is no option of deferring tax on the expat’s contributions to the plan. Worse, the employer’s contribution to the plan is taxable as current income to the expat – no matter that it may only be accessible on the expat’s retirement or death, maybe 20-30 years in the future.
A US resident can claim an itemized deduction for contributions to, say, a church, or an animal welfare society, or a shelter for abused women in his or her home town. An expat can almost never claim a deduction for a contribution to similar organizations in his/her country of residence.
My nomination for the most inane regulation affecting expats is the requirement for to report to the US Treasury on the “FBAR” form the details of any bank account over which an expat has the authority to disburse funds via his or her signature – no matter whether the expat owns the account or not, or has any claim at all to the funds in it. Some years ago I was the Treasurer of a community singing group located in a city outside the US. If I held that position now, American law would require me to report each year the account details, including bank name, account number, and highest balance during the year, of that minuscule account to the US Treasury. If I failed to do so I, personally, could be penalized $10,000, despite the fact that the group never earned any income from the US. What possible law enforcement purpose is served by this ridiculous requirement?
For readers who want more information on the impacts of the US tax code on American expats, I highly recommend the Web site of the organization American Citizens Abroad (http://www.aca.ch).