IRS changes for Expat Americans

[Semaphore Sam]

Well, now, not only is the USA the only developed country that taxes its overseas citizens, it has just changed the rules, which could result in two to three times the old tax levies. Changes:
1. Rules for assessments for housing provided by employers are more onerous
2. Above $82.5K, income is taxed at its actual rate; you do not start at the rate of zero income.
The papers are covering US citizens who are weighing the idea of giving up the US passport, if they are dual citizens.
I guess we knew this would happen...and it was supposed to be the Democrats that envied expat tax rules...again, the Republicans have shown they're worse in almost every way. Even more disgusting...they snuck it in legislation at the last minute, in mid-December, and it applies from the beginning of 2006; of course our friend George signed it immediately. (Lucky he didn't issue a 'signing statement' seizing all income!)

[metro301]

Sam, alone the same line, what is a good offshore bank to use for an overseas contractor?

[Semaphore Sam]

Hi Metro
Don't know if such animals exist anymore...after 9/11, the IRS has insisted to Europeans and others that ALL bank accts. (not just US citizens) must be subject to perusal by its agents. Gotta pay for the war, ya know. They say it's to monitor terrorist money, but they've been trying for 40 years to 'get the goods' on US citizens with assets protected overseas. 9/11 has given them the opening, and I'd be loath to trust bankers, who know where their political bread is buttered. Ya pays yer money, ya makes yer choices, and ya takes the results. Good luck! Sam

[Wangja]

Well, now, not only is the USA the only developed country that taxes its overseas citizens, it has just changed the rules, which could result in two to three times the old tax levies. Changes:
1. Rules for assessments for housing provided by employers are more onerous
2. Above $82.5K, income is taxed at its actual rate; you do not start at the rate of zero income.
The papers are covering US citizens who are weighing the idea of giving up the US passport, if they are dual citizens.
I guess we knew this would happen...and it was supposed to be the Democrats that envied expat tax rules...again, the Republicans have shown they're worse in almost every way. Even more disgusting...they snuck it in legislation at the last minute, in mid-December, and it applies from the beginning of 2006; of course our friend George signed it immediately. (Lucky he didn't issue a 'signing statement' seizing all income!)
Does the housing part apply if the pay is below 82,500 USD? Or can the housing benefit take the "package" over the threshold?

[metro301]

Thank you for the response Sam, not the answer I was hoping for, but it is the answer I expected. The money goes back in the jar under the bed.

[Jason GFX]

Thank you for the response Sam, not the answer I was hoping for, but it is the answer I expected. The money goes back in the jar under the bed.


lol, yep i thought the same

[Dan Winterland]

Here in Hong Kong where wages are necessarily high and the cost of living astronomical, a couple of US citizens have become Hong Kong passport holders. As this means renouncing your former country and taking up sole citizenship of Hong Kong - officially part of the People's Republic of China, I should think that is really going to p!ss off Uncle Sam.

[411A]

For those that have been in SV for a very long time, may well not realise that these changes to section 911 of the Internal Revenue code, which governs these things, were made a very long time ago (12 years actually) and publication 54, which explains all this was also updated some time ago.

In short, old news.

PS. Remaining in SV, as well as other ME locations for too long tends to mask the real world...eh boys?:ugh:

[acebaxter]

Speaking of the IRS. Does anyone know of a good international tax attorney or international CPA?

My taxes are going to be a mess this year. Income from the states, two Irish companies, plus two llc's in the states.

Should be fun!

[metro301]

For those that have been in SV for a very long time, may well not realise that these changes to section 911 of the Internal Revenue code, which governs these things, were made a very long time ago (12 years actually) and publication 54, which explains all this was also updated some time ago.
In short, old news.
PS. Remaining in SV, as well as other ME locations for too long tends to mask the real world...eh boys?:ugh:

411, are you saying there is life outside of SV?:uhoh:

There was a recent change to the tax code in the last few months. I believe in summary, that now, any dollar of income over the exclusion of $82,400 will be taxed as though you made $82,401.

Originally, before this recent change, any dollar over the annual exclusion was taxed as though it was the first dollar that you earned.

The difference now meaning that you are automatically taxed in a much higher tax bracket on any excess earnings.

That change can cost someone alot of money.

[Semaphore Sam]

Well, 411 A, the following paragraphs are under 'New' for 2006, on the Form 54 Internet edition:
--------------------------------
What's New

Exclusion amount. The maximum foreign earned income exclusion is now adjusted annually for inflation. For 2006, the maximum exclusion has increased to $82,400. See Limit on Excludable Amount under Foreign Earned Income Exclusion in chapter 4.

Figuring tax on income not excluded. If you claim the foreign earned income exclusion, the housing exclusion, or both, you must figure the tax on your nonexcluded income using the tax rates that would have applied had you not claimed the exclusions. See the instructions for Form 1040 and complete the Foreign Earned Income Tax Worksheet to figure the amount of tax to enter on Form 1040, line 44. If you must attach Form 6251 to your return, use the Foreign Earned Income Tax Worksheet provided in the instructions for Form 6251.

Housing expenses—base amount. The computation of the base housing amount (line 32 of Form 2555) has changed and is now tied to the maximum foreign earned income exclusion. The amount is 16 percent of the exclusion amount (computed on a daily basis), multiplied by the number of days in your qualifying period that fall within your 2006 tax year. For 2006, this amount is $36.12 per day ($13,184 per year). See Housing Amount under Foreign Housing Exclusion and Deduction in Chapter 4.

Housing expenses—maximum amount. The amount of qualified housing expenses eligible for the housing exclusion and housing deduction is now limited. See Limit on housing expenses under Foreign Housing Exclusion and Deduction in chapter 4.
---------------------------------------------
411A, are you saying these rules have been in effect the last 12 years? Interesting, if true.

[411A]

In short, Sam, yes, with minor exceptions.
And especially with the excluded income amount.
Yes, it has gone up over the years, however the first dollar earned over the excluded amount has been taxed at the then higher bracket (IE: as though the exclusion did not exist) for quite some time.

Look on the bright side, guys.
At least the exclusion is still in effect, and not abolished, as when Carter was president.:}

[tom775257]

Excellent. I'm really looking forward to this year's US tax return....hows about this: American/British dual citizen born in England, taxed by U.S. (U.K. on the remittance basis), working as an airline pilot in mainland Europe....

My tax return will be quite comedy I think....