Even If You Don’t Live in The U.S.
Uncle Sam has long arms. And he’s quite demanding.
“As an American, you’re expected to pay all your taxes irrespective of whether you live in the United States or not. This is a direct application of the US government’s policy to tax US citizens wherever they may live and not just the residents. This means that if you’re born to parents in the US or were born in the US and left—you need to pay taxes even if you haven’t lived in the US for the past twenty-five years.” – Original Source: escapeartist.com
FATCA – Taxing US Citizens All Over the World
The United States is one of only two countries (the other being Eritrea) in the world that tax your income no matter where it’s from or where you live.
It doesn’t matter to the US Government if your earnings are derived completely in a foreign country. Or that you are not benefiting from any services in the States. They want their (your) money.
FATCA – The Foreign Account Tax and Compliance Act is the legislative hammer that forces expats to file and pay income tax wherever they reside.
And they have the authority (just or not) to freeze your funds – even if they are in a overseas account – and fine you hundreds of thousands of dollars if you don’t comply.
And recently the US has been wielding its enormous pressure to force foreign banks to help them find out who has how much money – and to require the account holders to file a FBAR (Foreign Bank and Financial Report) or risk having their assets seized.
The foreign banks are bullied into assisting this confiscatory scheme by threats of crippling fines.
Is US Citizenship Worth it?
All patriotism aside, living in the United States has major downsides – high cost of living, over-regulation, high taxes and obscene healthcare costs. Many Americans are attracted to moving abroad to escape to a simpler life with access to good healthcare without an overbearing government looking over their shoulder and into their bank account.
And the blatant unfairness of FATCA is causing many US expats to consider renouncing their citizenship to escape Uncle Sam’s long reach.
One bright side to all this is that the US gives a $105,000 exemption on foreign earned income if you remain out of the United States for 350 days of the calendar year.
The point is that if you are considering a move overseas, you are required to file your 1040 along with FBAR so Big Brother knows exactly how much money you have – and how much they can grab.