This editorial was really on point about the tax troubles that American expats face. I have talked with many of my friends about what it is like to be an expat, and they were all shocked to hear that many like me have considered paying taxes TWICE. Why is that? Well, the US is the only major nation that taxes your income even when it was earned on foreign soil. So what does this mean for expats like myself, i.e. not tycoons?
This archaic policy, which according to this article, was put in place during the Civil War (to prevent Americans from fleeing to the UK to avoid taxes). So what has this situation done? It is essentially incentivizing expats to renounce their US citizenship. In the last year alone, 3,000 Americans gave up their citizenship. Yes, that is a minuscule percentage, but a trend that is soaring.
Now, to be fair, it is possible not to be taxed by the US if you make under 94k, and are taxed in the foreign nation. The problem is that the tax system is so complicated (that’s the understatement of the year) that you would need to pay a hefty accountant fee to be able to get the paperwork done correctly just so you don’t have to be taxed twice. So for expats not making a lot overseas (yours truly), it actually less of a hassle to pay the taxes than to make a mistake and have IRS looking for you. I have not done it, but I know of people who have paid it.
So then this begs the question? How much is your passport worth to you? How much would it take for you to give up your passport? How much hassle and money, I mean...