Doubts about becoming US Citizen because expats taxation

C

Charles Gutti

New Member
Hello,

After waiting for a long, long time, my wife and myself will have very soon the oath ceremony. During the long period of time that the naturalization process lasted (11 months!) we've changed plans and will like to give it a try to our country.

The thing is that I have recently discovered that every american living abroad has to file us taxes and inform about any worldwide income and bank accounts. And according to many americans this is a pain and very, very expensive. Only hiring an expert to file every year's taxes costs an average of $3,000-$5,000. And that's something we can't afford!

I would like to ask if anyone has had any experience about this matter. Is this as complicated as many people say? There are many americans living abroad renouncing to their citizenship because of this situation.

I really would like to become american, who knows if we decide to return in the future, but if this is as terrible as many think, I will stop the process.

Any advice would be appreciate it.

Thanks,
charles
 
You only recently discovered that US citizens have to report their worldwide earnings to the US!?

Unless your taxes and business dealings are very complex, which it sounds like it isn't if you can't afford to pay a tax professional $3-5k, then the filling out of your US taxes is straight forward and turbo tax can walk you through it.

As for others "renouncing" their US citizenship because of this tax requirement, it's because they don't want to pay tax on the millions of dollars they are earning. So all their life they benefitted by the US economy/infrastructure etc. to put them in the place they could make money, both in the US and overseas, and now they are in the place of having a tax obligation to the country they are indebted to, they want to shirk their responsibility.

Always remember when someone complains about having to pay taxes, it means you made money if you owe taxes - don't forget that point.
 
djh said:
You only recently discovered that US citizens have to report their worldwide earnings to the US!?

Unless your taxes and business dealings are very complex, which it sounds like it isn't if you can't afford to pay a tax professional $3-5k, then the filling out of your US taxes is straight forward and turbo tax can walk you through it.

As for others "renouncing" their US citizenship because of this tax requirement, it's because they don't want to pay tax on the millions of dollars they are earning. So all their life they benefitted by the US economy/infrastructure etc. to put them in the place they could make money, both in the US and overseas, and now they are in the place of having a tax obligation to the country they are indebted to, they want to shirk their responsibility.

Always remember when someone complains about having to pay taxes, it means you made money if you owe taxes - don't forget that point.
Click to expand...

The bit in bold is, frankly, ridiculous. There are a few people who have famously avoided US tax in this way - but that is not the norm. If you actually take the time to find out who these people are, it is largely people who are long time residents of other countries. Those people generally comply with the tax regimes of the countries of their residency but find the additional burden of this almost unique world wide income tax reporting stance as too much. They generally would not have to pay additional tax as they are often living in countries with higher tax rates than the US and tax reciprocity rules and US foreign income exemptions mean there is little or no tax to pay. The tax reporting paperwork costs for someone that intends to live out their days abroad are just a waste of money (that NO other country would expect in the reverse scenario).

Also, you comment on Turbo Tax isn't really a solid suggestion. The tax position for a non US resident is somewhat different to a resident and TT won't necessarily cope with that.

And again, lastly it isn't people complaining about paying taxes, it is the tax reporting that is being discussed as the issue.
 
Charles Gutti said:
Hello,

After waiting for a long, long time, my wife and myself will have very soon the oath ceremony. During the long period of time that the naturalization process lasted (11 months!) we've changed plans and will like to give it a try to our country.

The thing is that I have recently discovered that every american living abroad has to file us taxes and inform about any worldwide income and bank accounts. And according to many americans this is a pain and very, very expensive. Only hiring an expert to file every year's taxes costs an average of $3,000-$5,000. And that's something we can't afford!

I would like to ask if anyone has had any experience about this matter. Is this as complicated as many people say? There are many americans living abroad renouncing to their citizenship because of this situation.

I really would like to become american, who knows if we decide to return in the future, but if this is as terrible as many think, I will stop the process.

Any advice would be appreciate it.

Thanks,
charles
Click to expand...

You are right to stop and think. However, to be clear as a LPR you already have the tax reporting obligation you are discussing. So - you can choose to give up your LPR status and avoid the tax reporting, but a future return to the US will be harder as a returning LPR (which is a status you can lose) as opposed to a returning citizen (which is a status you cannot, generally, lose) .

You should weigh carefully your options and decide how certain you are that you would not want to return.
 
Thanks very much for your comments.

To put things worse, I have found that the "foreign income exclusion", that you can apply to compensate taxes paid in the other country, does not apply to self-employment, which is what I plan to do in the foreign country. Really difficult decision...

Thanks again,
charles
 
Charles Gutti said:
Thanks very much for your comments.

To put things worse, I have found that the "foreign income exclusion", that you can apply to compensate taxes paid in the other country, does not apply to self-employment, which is what I plan to do in the foreign country. Really difficult decision...

Thanks again,
charles
Click to expand...

Does your home country have a tax treaty with the USA?

http://www.irs.gov/Businesses/International-Businesses/United-States-Income-Tax-Treaties---A-to-Z
 

Right - so really this is about tax reporting, not additional tax burden. So - before you go, you could figure out how to do the tax reporting (and don't forget FBAR!) and you would not need to spend the sort of money you have seen reported to file. And again - this is not to do with taking citizenship or not...
 
Britsimon said:
Right - so really this is about tax reporting, not additional tax burden. So - before you go, you could figure out how to do the tax reporting (and don't forget FBAR!) and you would not need to spend the sort of money you have seen reported to file. And again - this is not to do with taking citizenship or not...
Click to expand...

One more question...

I'm thinking about going to my country, expending there no more than 6 months to see how we adapt to our new life, and if we are not happy, will return back to US and will .

Is there a way to postpone the oath of allegiance several months?

Thanks
 
Charles Gutti said:
One more question...

I'm thinking about going to my country, expending there no more than 6 months to see how we adapt to our new life, and if we are not happy, will return back to US and will .

Is there a way to postpone the oath of allegiance several months?

Thanks
Click to expand...

I don't know - perhaps someone else will answer that.
 
Charles Gutti said:
Thanks very much for your comments.

To put things worse, I have found that the "foreign income exclusion", that you can apply to compensate taxes paid in the other country, does not apply to self-employment, which is what I plan to do in the foreign country. Really difficult decision...

Thanks again,
charles
Click to expand...
You're wrong about this. The Foreign Earned Income Exclusion applies to regular income tax on self-employment income as long as you otherwise satisfy the requirements for using the exclusion. However, the exclusion does not apply to self-employment tax on self-employment income. You may be confusing these two things.

Postponing your citizenship oath (if this is even possible; I've never tried) will not change your tax position, since you are currently an LPR, and therefore you currently are already subject to the worldwide tax requirement. You would have to voluntarily relinquish your LPR status, and this would rule out citizenship entirely. I recommend that you go ahead and take the oath. You can always renounce US citizenship later.

I live abroad and file my taxes by myself every year. I don't hire anyone to do it. Yes, it's a pain.
 
Harry Callahan said:
You're wrong about this. The Foreign Earned Income Exclusion applies to regular income tax on self-employment income as long as you otherwise satisfy the requirements for using the exclusion. However, the exclusion does not apply to self-employment tax on self-employment income. You may be confusing these two things.

Postponing your citizenship oath (if this is even possible; I've never tried) will not change your tax position, since you are currently an LPR, and therefore you currently are already subject to the worldwide tax requirement. You would have to voluntarily relinquish your LPR status, and this would rule out citizenship entirely. I recommend that you go ahead and take the oath. You can always renounce US citizenship later.

I live abroad and file my taxes by myself every year. I don't hire anyone to do it. Yes, it's a pain.
Click to expand...


Thanks for the advice,
charles
 
Britsimon said:
The bit in bold is, frankly, ridiculous. There are a few people who have famously avoided US tax in this way - but that is not the norm. If you actually take the time to find out who these people are, it is largely people who are long time residents of other countries. Those people generally comply with the tax regimes of the countries of their residency but find the additional burden of this almost unique world wide income tax reporting stance as too much. They generally would not have to pay additional tax as they are often living in countries with higher tax rates than the US and tax reciprocity rules and US foreign income exemptions mean there is little or no tax to pay. The tax reporting paperwork costs for someone that intends to live out their days abroad are just a waste of money (that NO other country would expect in the reverse scenario).

Also, you comment on Turbo Tax isn't really a solid suggestion. The tax position for a non US resident is somewhat different to a resident and TT won't necessarily cope with that.

And again, lastly it isn't people complaining about paying taxes, it is the tax reporting that is being discussed as the issue.
Click to expand...


Totally agree, Britsimon.

Charles, you are definitely right to stop and think about all this, especially since the FATCA law has been implemented. It's definitely up to you, but yes, you will have to file taxes and most likely won't have to pay anything if you make under $90k in your country. With the FBAR that Britsimon mentioned you will have to let the IRS know about any accounts that have more than $10k in them.

As I am planning to relocate abroad myself, I have done research and also read about banks that are reluctant to open bank accounts to customers with US citizenship (I have read stories about US citizens in France, Switzerland experiencing issues notably) or banks only opening basic accounts (checking and savings, but no retirement or investment accounts for example). This is definitely something to think about. I am not too worried myself at this stage of my life since I am not particularly wealthy, but I have heard/read stories about American citizens having banking issues, not sure how common it is though.

EDIT: correction
 
Last edited:
It's FATCA, not FACTA. I don't know about Europe, but here in Canada the banks know US law and are happy to do business with Americans.
 
Harry Callahan said:
It's FATCA, not FACTA. I don't know about Europe, but here in Canada the banks know US law and are happy to do business with Americans.
Click to expand...


The banks know US law in Europe as well, but some of them just realized they didn't want the hassle of having American customers.
 
I have, so far, avoided being denied services in the Netherlands and Germany. They asked for information for the IRS, but AFAIK, that's only for reporting. I also don't have much money, so that might help.
 
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