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U.S. expat taxation

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zzm9980
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Postby zzm9980 » Fri, 17 Jan 2014 5:36 pm

FaeLLe wrote:Apply for an OCI, travel to India, Feel free to turn in your blue passport at the nearest embassy and obtain your Indian citizenship back after 15 years of residence.

Easy solution to not wanting to pay taxes on foreign income :evil:


Most of the Americans here aren't Indian though?

That's not even a real solution anyway. For one, you can't just easily renounce your citizenship to avoid taxes. If the government suspects that's the reason, you'll be denied. Furthermore, you have to pay an 'exit tax'.

Besides, if something is unfair or unjust, you don't just tell people to leave if they don't like it.

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Postby FaeLLe » Fri, 17 Jan 2014 5:41 pm

zzm9980 wrote:
FaeLLe wrote:Apply for an OCI, travel to India, Feel free to turn in your blue passport at the nearest embassy and obtain your Indian citizenship back after 15 years of residence.

Easy solution to not wanting to pay taxes on foreign income :evil:


Most of the Americans here aren't Indian though?

That's not even a real solution anyway. For one, you can't just easily renounce your citizenship to avoid taxes. If the government suspects that's the reason, you'll be denied. Furthermore, you have to pay an 'exit tax'.

Besides, if something is unfair or unjust, you don't just tell people to leave if they don't like it.


OP was, but in any case you probably are right I shouldnt comment anymore on this since I am not well versed with US income tax legislation and immigration.

But I dont think it is unjust... in fact I think its a wonderful idea that you repay the nation irrespective of wherever you are for the privilege of being a citizen of that nation.

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Postby GSM8 » Sat, 18 Jan 2014 6:19 pm

Citizenship based taxation has its origins in the Civil War - much has changed in the world since then and this form of taxation is not in keeping with the current economic structure. Besides, income tax rates alone are not a barometer of tax burden, and lower direct taxes are often made up for by higher indirect taxes. The same lawmakers who want to keep CBT and tax Americans living abroad, are also supporting retention of the provision that allows private equity and hedge fund billionaires in the US to pay just 15% tax rate on their income - politically convenient probably.

As I had alluded to earlier in the thread, I personally am not really affected by this after FEIE and housing exclusion, but just felt that residence based taxation is the correct way to go. I don't want to lead into a polarized debate here, so will exclude myself from any further postings on this thread, but here's a link to the recent RBT proposal submitted by ACA - again, as in the past, nothing may result from it, at least not right away, but for those interested, the url: http://americansabroad.org/issues/taxat ... committee/

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Postby PNGMK » Sun, 19 Jan 2014 3:11 pm

The problem with not paying nationality based taxes is that you end up like an expat Australian or Brit; you're not entitled to social security (old age pension), medicare (NHS) or any other benefits without re-establishing your residency (5 years I think in Australia - I need to find out soon).

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Postby Steve1960 » Sun, 19 Jan 2014 4:59 pm

PNGMK wrote:The problem with not paying nationality based taxes is that you end up like an expat Australian or Brit; you're not entitled to social security (old age pension), medicare (NHS) or any other benefits without re-establishing your residency (5 years I think in Australia - I need to find out soon).


Or they screw you even if you do qualify. I paid contributions for 32 years which entitled me to the full (but meager) UK old age pension then last year they changed the requirement to 35 years. Now I am only entitled to 50% of the weekly pension amount unless I pay another 3 years contributions :x

Add to that another rule change and now my Filipina wife is no longer entitled to the pension as she has never lived in the UK. I paid in for all those years and when I die that's it, nothing.

There is an argument that says my wife should not benefit but changing the requirement to pay in from 30 years to 35 was nasty!

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Postby zzm9980 » Sun, 19 Jan 2014 5:30 pm

PNGMK wrote:The problem with not paying nationality based taxes is that you end up like an expat Australian or Brit; you're not entitled to social security (old age pension), medicare (NHS) or any other benefits without re-establishing your residency (5 years I think in Australia - I need to find out soon).


You don't in the US either, as you're not paying into Social Security (completely separate from your income tax) while abroad.

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Postby PNGMK » Sun, 19 Jan 2014 6:42 pm

zzm9980 wrote:
PNGMK wrote:The problem with not paying nationality based taxes is that you end up like an expat Australian or Brit; you're not entitled to social security (old age pension), medicare (NHS) or any other benefits without re-establishing your residency (5 years I think in Australia - I need to find out soon).


You don't in the US either, as you're not paying into Social Security (completely separate from your income tax) while abroad.


Not quite true - you CAN choose to pay in SS while abroad as an expat and most of wife's US colleagues and mine (via our employer) do so in order to have SS benefits when returning. This is no available to an Aussie unless they remain tax resident. Furthermore the missionary organisation my mother was with did the same for their US missionaries - they just left the Aussies and Brits out in the cold of course.

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Postby zzm9980 » Sun, 19 Jan 2014 6:53 pm

Oh, interesting to know. I haven't, and don't regret it.

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Postby sundaymorningstaple » Sun, 19 Jan 2014 7:26 pm

I paid in my required quarters for SS before I expatriated myself 30 years ago. Haven't started drawing yet, however, as I'll wait till 70 as I'll get an additional 8% per year for every year I leave it up till the age of 70. May as well the the most then as I'm still full times employed.

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Postby PNGMK » Sun, 19 Jan 2014 8:55 pm

sundaymorningstaple wrote:I paid in my required quarters for SS before I expatriated myself 30 years ago. Haven't started drawing yet, however, as I'll wait till 70 as I'll get an additional 8% per year for every year I leave it up till the age of 70. May as well the the most then as I'm still full times employed.


For aussies a similar benefit applies if they delay drawing the OAP..... of course my mother didn't believe me.

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Postby Strong Eagle » Mon, 20 Jan 2014 3:53 am

zzm9980 wrote:
PNGMK wrote:The problem with not paying nationality based taxes is that you end up like an expat Australian or Brit; you're not entitled to social security (old age pension), medicare (NHS) or any other benefits without re-establishing your residency (5 years I think in Australia - I need to find out soon).


You don't in the US either, as you're not paying into Social Security (completely separate from your income tax) while abroad.


Not exactly accurate. You must have paid in 40 "credits", and can get as much as 4 credits per year, in order to be eligible. A credit is earned when you earn a minimum amount of money, right now $1,120. So, in 10 years you can qualify for a social security benefit but the actual amount you receive is a function of how much you paid in.

Even though I was in Asia for 8 years and did not pay SS tax, I am still eligible because of my earlier work history. Now that I am back, if I earn more than earlier years, I will kick up my monthly benefit... for example, a 100K for two years would add 35 per month to my benefit. The benefit paid is based on the top 35 years of earnings, normalized to current real dollars. If less than 35 years of work history, those years get a 0.

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Postby zzm9980 » Mon, 20 Jan 2014 8:58 am

Yeah, my bad. But at least it isn't required if you don't want to contribute. :)

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Postby GSM8 » Mon, 20 Jan 2014 6:15 pm

Actually, its not your decision whether or not to contribute. If you are self employed you have to mandatorily contribute 15.3% self employment tax. And if you happen to work for the subsidiary of a US company abroad you most likely have to pay 7.65% just like an employee in the States. On the other hand, if you work for a non-US company you don't have the option of contributing even if you want to. But at least if one contributes, there is a semblance of legitimate ownership of the future benefits (actually, I contribute and am neutral about it). Unlike citizenship based taxation which summarily brands any American who just happens to live in a low income-tax country (only) as a tax scammer that must be punished - and in most cases (including mine) the reporting requirements and obligation to file are a bigger hassle than a minor tax liability.

Another note for people who have qualified for SS but worked bulk of their career after that outside the US - Windfall Elimination Provision may ensure that your SS benefits are effectively zero (googling gives a slew of results on this change which was introduced in the early 80's)

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Postby Brah » Wed, 02 Jul 2014 12:12 am

I'm not familiar with thus poster but after searching their posts I see there are some useful threads I missed, so I have some reading to do re taxes.

Not to derail this thread but a discussion of FACTA is in order, here or elsewhere.

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Postby GSM8 » Wed, 02 Jul 2014 12:46 am

I fully concur on the FATCA discussion. But the fact is that FATCA was originally well intentioned, to catch tax cheats living in the US who are stashing their money away in foreign bank accounts. To that extent I feel it is justified. However, it is us expats who are caught in the crossfire because of citizenship based taxation. Do away with citizenship based taxation, and switch to residence based taxation like every other developed country in the world, and the FATCA issue is resolved. FATCA can stay, but US expats won't potentially be shunned by banks anymore.

The point I had been trying to make in this thread is that every other country (save Eritrea and North Korea) follow residence based taxation, which is fair, as well as from a holistic perspective better for the US economy. Just look at our colleagues here, from EU, Canada, Australia, India - all of them are subject to taxes only in Singapore, not by their country of citizenship. Our (US) government speaks of "leveling the playing field" but it couldn't be any further from the truth in terms of tax treatment of expats. However, there just doesn't seem to be any collective concerted effort on our part (or political compulsion on the part of our elected lawmakers) to push this through.

@Brah, many on this board are probably not familiar with my posts because I moved from the US to Singapore just this year (so none of these issues affect me for 2013 taxes). But I am in general familiar with tax issues, both as part of work and outside of it. All of what posted is accurate and there is more that I wanted to share but didn't because there wasn't much interest to the original thread.


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