The vast majority of dual-citizens owe 0 in additional tax.
That's not the point. It's about all the paperwork you have to do. I live in the US, but I am not sure I would want to become a US citizen for this reason.
That's not the point. It's about all the paperwork you have to do. I live in the US, but I am not sure I would want to become a US citizen for this reason.
I'm curious -- is there actual paperwork, or is it possible to do it electronically? If yes, why aren't there programs that do it for you? Would like to hear comments from a US expat.
I wonder if there's an opportunity in simplifying this. I'm guessing most expats would rather pay, say $50 for a company to do this paperwork on their behalf? Or do H&R / Intuit have that market cornered as well?
This cost me $300 last year when I spent the entire year in Italy and did not have much US income, plus a half a day to go see the accountant and make sure everything was squared away correctly.
Not worth giving up my citizenship for, but a big PITA nonetheless. The US is the only country in the world to do this BS.
Although annoying, it's also way down the list of annoyances and expenses involved in being an expat. I don't think "regular" expats like me are renouncing their citizenship over the hassle/expense of paying a CPA $200, especially because renouncing your citizenship is also a considerable hassle (and reduces your future employment options). I'm almost certain this is mainly much wealthier people.
I would say it's most likely people who don't have strong ties to America like people born in the US to foreign parents who moved back to their home countries.
I do know a few Denmark-U.S. dual citizens (by birth, never lived in the U.S.) who renounced their U.S. citizenship, but that was because of Danish rather than American laws. Until September 2015, Denmark had a public policy against dual citizenship, which among other things required children who were born as dual citizens to choose one when they turned 21, and renounce the other one. Since that requirement was just abolished, I would guess renunciations of U.S. (and Canadian) citizenship by Danes are now going to drop.
Every foreign bank account or financial instrument over some trivial amount ($500?) must be reported. Foreign banks must report your holdings and gains using forms more burdensome than the usual American ones. Good luck owning a company: if Americans have controlling interest in a foreign corporation, their books must be open to the US or the corporation's income will be included in your own. The last time I saw one, the form to describe your foreign corporate holdings had a Paperwork Reduction Act notice declaring it expects it will take 2 weeks to fill out.
I think the absolute simplest case would be a 1040 (not 1040-EZ), along with the extra form for the FEIE. The FEIE has a 'bona fide resident' determination section which is up for interpretation. Two examples are given in the instructions, but the IRS will not tell you if you count as a bona-fide resident in advance (I have tried to get a determination here, and they just won't make one). There is, thankfully, a 330/365 days out of the country exclusion; just carefully fill out the form that lists all of your travel days to any country for the year.
If you live abroad, your 16 year old kid is responsible for serious fines if they don't do this for their first McJob (in theory; I've never heard of it prosecuted that way).
This was all a few years ago; some details may be inaccurate. But it's a serious amount of work, and it's enough hassle that a lot of foreign banks and financial institutions simply won't do business with Americans (which is yet another hassle).
https://www.irs.gov/Businesses/Small-Businesses-%26-Self-Emp...
This used to be self reported on form TD F 90-22.1, which has been superseded by the new FinCEN Form 114:
https://www.treasury.gov/services/Pages/TD-F-90-22.1-Report-...
Note, there may be, and likely are, additional forms to be filed, but these are the ones that I recall for reporting foreign assets.
And, by the way, the whole system is bullshit. To give another example of how this hurts Americans abroad, the lack of banks willing to work with Americans means that some places it's technically illegal to obtain an apartment lease, though some sort of side deal can normally be worked out. For example, in Norway, the deposit money for an apartment must be held in a joint interest bearing account between the landlord and the tenant. This protects both parties and is generally a good idea. However, if a bank won't work with an American, these accounts become impossible. Yes, both parties can just ignore the law and that often happens, but it's another example of how these kind of banking and reporting laws hurt Americans in less known ways.