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Comment by rayiner | Hacker News Reader

> And the US double taxes their citizens living abroad the same way.

The tax code has provisions to avoid "double taxes" on foreign income. You file Form 1116 to claim credit for taxes you paid to a foreign country as an offset against your U.S. tax liability.[1] That tax credit is separate from the income exclusion, which excludes the first ~$100k of foreign income from U.S. taxation.

Generally, your total tax liability will be your foreign liability on the first $100k, plus the greater of your U.S. liability or your foreign liability on the remainder. I don't see the big injustice, honestly. It's very similar to how state income taxes work in the U.S. where people are citizens of one state but work in another.

[1] Corporations file Form 1118 to claim similar credits.

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(Meta-comment:

Just jumping in here to voice my appreciation for you & @kspaans correcting a highly voted comment but very incorrect assertion, which is a dangerous combination because some people only read the first few comments and leave with that falsehood impressioned as fact.

Responding with a factual source and doing so in a graceful manner (i.e. not disrespecting the poster, but gently correcting them) is what makes HN great.

Meta-meta-comment: I've seen your posts for well over half a decade and you remark consistently with the quality of StravosK, patio11, grellas, pjmlp, et al. Never clicked on your profile but you're an engineer-turned-attorney, so that's from where the rigor and @grellas vibe originates. Anyways, thought I'd take the moment to say "hey, insightful stuff, keep it up.")

The f1116 (tax credit) only works well if foreign taxes are greater than US taxes. I revoked my f2555 (income exclusion) to make my taxes easier (I hit that point where it was just too much work). Everything was great until I got married abroad to a foreign national, then I had to file "Married filing separately" because my wife didn't have a SSN. This absolutely caused my tax filing to collapse, and now I have a bill from the IRS saying I owe a lot of money (really I don't, I screwed up on the math, but...damn).

It turns out I can get my wife a tax filing number so we can file jointly, and now I have to go back and revise a couple of years of taxes, and will ultimately wind up owing nothing (hopefully!). The IRS helpline really does help (I was incredibly distraught when I found out...getting a huge bill from the IRS for a tax filing 3 years ago is horrible), if you are an expat abroad, use it! But it is still a PITA!

I feel sorry for those in Switzerland, Hong Kong, or Singapore, where the exclusion only goes so far and you wind up paying tax beyond your credit, suffering high VAT and cost of living that those locales entail. You really need a professional accountant at that point to figure out how you can get relief (e.g. by using the Housing Exclusion). The big problem is that each country "works differently", and what is considered income tax in one country isn't the whole story (they might tax differently, like with a high VAT and usage fees, and what about taxes on health insurance and various social security fees you'll never be able to use?), you can still very well be exposed to double taxation.

It's perhaps not a big injustice as far as these things go, but it is not fair either.

I easily lost out on a thousand dollars of lost wages, accounting fees, and general hassle and stress doing my US taxes in Italy last year.

I think this is something that people who don't live abroad often have trouble grasping.

"Well, you left so you don't get to complain"

When I was abroad for Lucent, they generously "did my taxes for free", leaving out the fact that they took the "first $100k" deduction for the company rather than crediting it to me. Fortunately IRS caught such shenanigans and made them send me a check.

What! How can you not see the injustice in a US expatriate who has not set foot in the US for 20 years paying taxes to the IRS if they earn over $100K and their country of residence has a lower tax rate than America? That is exactly what happens today, no other country does this, and there is nothing just about it!

A "US expatriate who has not set foot in the US for 20 years" seemingly understands at some level that a US passport/citizenship confers benefits that are worth retaining. Those benefits are not without cost.

If you're an expatriate who hasn't set foot in the U.S. for 20 years and don't intend to return, maybe you shouldn't maintain your U.S. citizenship. But I don't think that's the typical case. I think the typical case is someone from the U.S. living abroad for a few years, regularly visiting and intending to return.

Try putting money in a retirement fund in the country you live in. The bizarre requirements the IRS puts on reporting will see your compliance costs exceed the yearly growth of the fund. Sorry, but if your foreign investments include a retirement fund or a family trust, you may well be shafted.

Do you know how it works for mandatory retirement accounts enforced by your host country? China started including foreigners in their SS system, and I have no idea how that money works...I've just been ignoring the contributions (treating them as straight income taxed in full) for now.

I think the big injustice is that people don't have a right to a jury in tax court.

Therefore judgments are enforced without the consent of the people.

Therefore taxation in the USA today is extortion.

All the quibbling about the ridiculous bureaucratic rules and forms just makes it even more clear just what a leviathan our tax system has become.

Many democratic countries have courts without juries. E.g. in France (and in many other countries in Continental Europe, because Napoleon) only the Cour d'assises, which has jurisdiction on serious crimes, has lay judges (not exactly the same as jurors, but close enough). All the other courts, including all the appellate courts, have professional judges only.

"Therefore judgments are enforced without the consent of the people."

That's not true in the least.

"Therefore taxation in the USA today is extortion."

That's even less true.

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