I'll be filing in two countries, yoohoo! And I'm a SAHM!

I do have some income, though. I think I have about $150.00 coming to me from investments. Maybe even $200.00! It is VERY IMPORTANT that the IRS know about this and totally worth the hundreds in international filing fees.

NicoleK,

I don't pretend to be a tax expert or anything... but I am somewhat confused why it would be difficult or complicated to file taxes for an income level of 200 dollars (even considering that you live abroad).

The standard deduction alone should wipe out your taxable income if that is all you have.

Can you please explain what is so complicated about this process for someone in your low personal income situation that I am missing here?

It seems like it should be a relatively pain free process.

Because I have to report the maximum amount that is in each one of my bank accounts in the year. We have a bucket system here, which means several small accounts, say, one for car repairs, one for the mortgage, one for savings, one for household expenses. None of them have much, but if the total is over 10k you have to report them.

First of all, the bank doesn't give me the info, I have to look through the bank statements month by month. Which means wading through lots of online statements. Once I've found it, I have to figure out what the highest USD value is, which is hard because the statements are in Swiss francs, not USD. So the maximum value in CHF might not be the maximum value in USD, depending on the exchange rate on any given day. So I have to figure that out.

They keep changing the laws on what you're required to report (I know once your husband's income hits a certain amount you're required to report it, even if he isn't a citizen, how fucked up is that, that the US is demanding to know about non-citizens taxes, I don't think I'm there yet), so you need to worry about that. It's a minefield.

If I hire someone to do my taxes, we're looking at a grand, minimum.

I usually do Turbotax and figure out the bank statements myself. The rate doesn't change THAT much so I look at the top few values of a given month, calculate for those days, and pick the top but it is very time consuming and tedious.

Then the banks harass me and make me fill all sorts of extra paperwork and send them my tax returns because they're getting shit from the US. This whole thing is pretty much laying a heavy burden on foreign banks because the US is afraid of the free market and doesn't want competition. Some banks won't take you at all if you have any connection to the US and aren't a billionaire, even if you're a Swiss citizen, because the agreements with the US have placed such a heavy burden on them that it isn't worth their while.

But even if it was easy and took 5 minutes, why the hell should I have to file in a country I don't live in when I already file here? Other countries don't do it, only the US.

NicoleK,

Thank you for indulging my curiosity on this issue. I didn't realize that total assets was something that needed to be reported, but I can understand how fluctuating exchange rates over the course of the year can significantly complicate things.

One further question I have is that in the US you would have the opportunity to select the married filing separately option which would allow you to file with respect to only your income.

Is this a possibility for someone who is abroad?

Since your husband isn't a US citizen, presumably he doesn't have a SSI to even identify him in any official sense so far as the IRS is concerned.

Again, your particular situation is outside of my own personal experience so I am curious why you can't simply file separately from your husband and only report your own income (possibly being required to include all dividend income, capital gains,taxable interest from things like bank accounts etc...)

As for this question:

"But even if it was easy and took 5 minutes, why the hell should I have to file in a country I don't live in when I already file here? Other countries don't do it, only the US."

Because as a US citizen you are guaranteed certain protections and rights abroad that require money to secure for you.

If you find the mere possibility of being taxed by your country of citizenship to be overly burdensome you always have the option to expatriate and relieve yourself of both the security of those protections and the cost of the taxes.

Presumably you find the $1000 price tag to be worth the benefits you are afforded by virtue of your US citizenship. If you didn't, you would have likely expatriated long ago.

One additional thing.

To suggest that it is only the United States that taxes people who do not live within their boarders is demonstrably false.

I own several investments in foreign companies and whenever I receive dividends from those investments I have foreign taxes deducted.

I do not live in those nations, I am simply investing in companies that function within those countries and every quarter I have a chunk of my dividend removed to go to that nation.

This tax is in addition to the capital gains rate afforded to qualified dividends in the United States.

It seems to me that many countries like to get a slice of the tax pie as it were and that the US is not at all unique.

You're being taxed on money you earned there. Are you filing taxes there? That would surprise me.

I have to file whether I earn money in the US or not. Other countries don't tax their ex-pats.

I do file separately, so as of now my husband's assets aren't reported. But as I mentioned, if he were to earn above a certain amount I'd have to report them anyways, though. I'm not sure what the threshold is, I think it's around a million. That's not us. But regardless, he's not a citizen, if he becomes a millionaire why should the US government know about it?

ALL countries protect their citizens. As a Swiss citizen living in the US I was subject to the protections of the Swiss government... yet didn't have to file taxes there. Protecting your citizens isn't some special US-only thing. When that Swiss guy got arrested and held hostage in Libya as revenge for Khadafi Jr's arrest one of the options on the table was a military rescue. Luckily it didn't come to that and was resolved diplomatically. ALL countries help their citizens, usually through diplomatic means.

The line to give up your citizenship is 2 years long. I haven't joined it, because while it's a PITA it's not so bad as long as I'm a SAHM. Also, I'm sentimental. Of course the flip side is if you're rich enough, even when you give up your citizenship, there's an exit tax which if I remember correctly is 10% of all your assets. So giving up your citizenship isn't exactly a piece of cake, not everyone can just afford to drop 10% of everything they own, even rich people, especially if the value of their house is where most of their money is. Also, it is technically illegal to give up your citizenship for tax reasons, you can't say that's the reason you have to make up some other reason.

I've heard of people who gave up their citizenship, didn't pay the exit tax because they would have had to sell their house to have the cash, and can now never go to America. So they don't.

I think of all of this is unfair theatre. They're trying to look like they're doing something against the billionaires hiding their money, but fact is, the billionaires are still hiding their money and it's the littler fish who are being hassled in their place.

The USA is one of only two countries that have citizen based taxation. The other is Eritrea. So every US citizen abroad has to file US tax returns. That in itself is not an issue. The big problem is that if one lives overseas, then one has bank accounts, etc., that have to be reported to the IRS. And if the accounts are in joint names, or you have control over a foreign business account, they too have to be reported - that is when non-US citizens have data reported to the IRS. And if one makes a mistake, say not reporting an account because the exchange rate used says it does not need to be reported, but it turns out you made error then the IRS fine you 50% of the account value for every year of the mistake (up to 6 years). Some would say 300% is an unreasonable penalty.

Of course this all comes about because of FATCA - a law intended to catch tax cheats, but unfortunately causes distress to normal working Americans who just happen to live abroad. I am not sure how this catches the biggest tax cheats living stateside.

Oh, and one other thing; if a US citizen lives overseas, while some can register to vote, not all of us can as we don't have a home state or US address, therefore we cannot register to vote. I have heard it is supposed to be possible to vote for the POTUS, but I doubt he would be interested in representing a non party fund contributor who lives abroad.

NicokeK,

You are correct that I don't have to file taxes in those foreign countries... they simply take the tax out regardless of how much or how little I earn with respect to those investments.

Personally I don't see how one system is universally better than the other in this case.

Your previous statement of:

"why the hell should I have to file in a country I don't live in when I already file here?"

Could be turned around into the following:

"why the hell should I have to pay taxes in a country I don't live in when I already pay taxes on those earnings here?"

The type of logic utilized in each of these statements is the same.

The rationale is that in some sense your taxes should be determined solely by your physical location and not things like citizenship.

"I do file separately, so as of now my husband's assets aren't reported. But as I mentioned, if he were to earn above a certain amount I'd have to report them anyways, though. I'm not sure what the threshold is, I think it's around a million. That's not us. But regardless, he's not a citizen, if he becomes a millionaire why should the US government know about it?"

I agree with you here... but seeing as how it doesn't affect you, I fail to see how this complaint is anything other than theoretical for you.

Yes... in the hypothetical scenario that your husband were to earn one million dollars I don't see why that should be the United States governments business since he is not a US citizen.

I suppose I'd have to hear the flip side argument for why the United States believes they are entitled to this information to really give it fair consideration... but given the information available, since you are choosing to file separately his income should not matter.

"Other countries don't tax their ex-pats."

Again this is a broad brush statement that as far as I can tell is false.

Even Swiss citizens are taxed abroad so far as my limited research into this can show... it just isn't based upon their earned income. Securities and investments are taxed however.

You said that your income was based upon investments... so it wouldn't be different for a Swiss citizen in your exact same situation living in the United States as far as I can tell.

"ALL countries protect their citizens. As a Swiss citizen living in the US I was subject to the protections of the Swiss government... yet didn't have to file taxes there. Protecting your citizens isn't some special US-only thing."

So maybe ALL ex-pats should be subject to taxes.

Your assumption that Switzerland is doing things correctly and the United States is doing things incorrectly in this case is predicated upon an argument from popularity.

My point is that your citizenship costs the United States government money... it isn't free.

It simply isn't fair for you to assume that all of the tax payers within the United States boarders should entirely foot the tax bill for your protections abroad while you pay nothing into the system.

If you accrue benefits from the system it is a reasonable expectation for you to have some obligations.

Your rights as a citizen come with responsibilities... one of those responsibilities is to file taxes.

To the extent that the filing process is burdensome or onerous I agree it can and should be streamlined.

However your argument is that "even if it was easy and took 5 minutes, why the hell should I have to file".

This argument is unreasonable. If it was very simply and took very little of your time to complete... it shouldn't be a major issue for you assuming you value your citizenship.

If you don't value your citizenship and would like to never have to file taxes again you have a way out.

"The line to give up your citizenship is 2 years long. I haven't joined it, because while it's a PITA it's not so bad as long as I'm a SAHM. Also, I'm sentimental."

Right, you have done the personal calculus and come to the rational conclusion that your citizenship is worth filing some paper work each year.

As you said "it's not so bad" for you.

The benefits you receive are apparently greater than the costs.

"They're trying to look like they're doing something against the billionaires hiding their money, but fact is, the billionaires are still hiding their money and it's the littler fish who are being hassled in their place."

This is a separate issue. Billionaires hiding assets is a significant concern for a variety of reasons but doesn't have to be involved in justifying why US citizens who live abroad should file a form and contribute to the system.

The question I have for you is the following.

If a US citizen lives abroad and earns significant income, and they receive the full benefits and protections of the US, why shouldn't they contribute financially to those benefits?

You seem to be suggesting that those benefits should be paid for by other citizens, but not the ones who benefit from them.

Why should I for example pay to financially support an embassy and diplomats you can go to at any time for legal support and who primarily serve US ex-pats like yourself when you don't believe you should contribute one cent to the upkeep of these benefits.

It is ex-pats who are the citizens that primarily benefit from these services... yet you don't believe they should be expected to pay anything for them.

Since you are on the subject of "fairness", how exactly is it "fair" to expect all the other US citizens to pay for the benefits of your citizenship?

"I have heard it is supposed to be possible to vote for the POTUS, but I doubt he would be interested in representing a non party fund contributor who lives abroad."

Posted by: Mark at February 26, 2014 3:36 AM

I thought those were the only people the incumbent represented. Oh, you're a citizen? Nevermind.

Mark,

To the extent that the US government requires foreign citizens to report their assets to the IRS I agree that this seems to be overstepping their authority.

Things like marriage unfortunately complicate these issues because when a couple get's married their assets become intermingled so it becomes a bit muddy.

That being said, when someone marries a US citizen they gain enhanced ability to become a citizen.

Furthermore, if the foreign spouse dies, all of the assets become the sole property of the surviving US citizen spouse.

As for voting, why should someone who resides abroad on a permanent basis be able to vote in local and state elections?

I can't for example vote in any state or location I want. I must vote in my district and state of residence.

Being restricted to vote in presidential elections seems like a reasonable restriction.

@Artemis I have been unable to register to vote for anyone. And as the House and Senate make laws regarding taxation, I should be able to vote for the members otherwise I am being taxed without representation.

And as I mentioned before, the USA is one of only two countries that have citizen based taxation. The other is Eritrea. Everyone else uses residence based taxation (on all global income) which seems fairer as one uses the facilities locally to where one lives. And yes US citizens have to pay tax locally when overseas as well as US tax if it is more then the foreign earnings allowed by the IRS. So most of us abroad file US taxes, owe nothing, but end up paying hundreds (and sometimes thousands) for an accountant to help file the forms. The US government gain zero for this, so it is rather pointless.

I don't think US citizenship costs the government a cent, as they charge for the passport, they charge if you renounce, and like most governments, charge for any repatriation if stranded overseas without the means to get back to the US (exceptions may be war zones when Uncle Sam decides to invade.)

Here's the stupidest idea in all the whole world: Fewer tax brackets.

Fewer brackets mean bigger jumps -- and margins of people just below the jump being favored and above the jump being penalized.

A very smooth increase in rates as income rises is fairer because it is a relatively uniform load all the way up and all the way down.

Mark,

I am uncertain why you aren't able to vote for anyone including the president... it seems like you should be able to vote on the national level.

The point you bring up suggests that there should be a voting representative in the house for ex-pats.

You have no business voting for state representatives within states that you do not reside in. However, you should have representation.

I would support the addition of a representative for citizens living abroad on a permanent basis.

"I don't think US citizenship costs the government a cent, as they charge for the passport, they charge if you renounce, and like most governments, charge for any repatriation if stranded overseas without the means to get back to the US (exceptions may be war zones when Uncle Sam decides to invade.)"

Of course it costs money.

The recent construction of an embassy in Iraq just cost the tax payers a cool 750 million dollars.

That embassy provides more services to citizens living in Iraq than it does to citizens living within the contiguous united states. It is structurally fortified since it is located in a volatile region.

If civil unrest breaks out in Iraq, US citizens located there will go to the fortified embassy to wait things out in relative safety as we then have to spend money to try and extract them.

Our embassies cost us billions and billions of dollars primarily for the benefit of protecting citizens who live outside of our boarders.

If you don't want to contribute to these protections financially you have no business using these services.

They don't come cheap and I am happy to help pay for them if the people they service are also willing to pony up some money.

If on the other hand you don't believe you have any financial responsibility to support the billion dollar expenditures that secure your safety abroad, then I have little interest in paying for them either... you can be on your own when shit hits the fan.

Alan,

I am curious what you mean when you say this:

"Fewer brackets mean bigger jumps -- and margins of people just below the jump being favored and above the jump being penalized."

This type of a statement seems to suggest that you are buying into a common misconception about taxation... but I'm not certain if that is the case.

Could you please clarify.

Alan,

Your logic fails if there is one bracket and one rate.

That would the entire Congress moot, because the main function of the tax code is graft - the solicitation of campaign contributions in return for tax breaks.

The real problem here is the incentive trap that controls the present system. Congress will enact any tax bill the bribe-payers^H^H^Hlobbyists want. (The bribes are the lion's share of all campaign funds, so no one who won't take them gets re-elected.) Since the law (for obvious reasons) refuses to recognize that all contributions by lobbyists are bribes, and since the Supreme Court fears "packing" if it tried to shut down the whole racket by enforcing the list of enumerated powers, -- the result is that we waste a large percentage of our GDP on the resulting game of "rent seeking."

(Those confused by these terms should read the works of David Friedman, many of which are free on his web site, daviddfriedman.com .)

Any solution must therefore start by attacking this vicious circle at one of its vulnerable points. Either take away Congress' ability to hand out favors, or don't allow anyone to raise funds for a future election while in office. Either will require constitutional change, and good luck getting there from here.

"don't allow anyone to raise funds for a future election while in office."

I have always favored a solution like this one because our representatives currently spend a majority of their time fund raising instead of legislating.

If office holders could not raise funds while in office they might actually get more accomplished.

"don't allow anyone to raise funds for a future election while in office."

The lawmakers write the rules, and they are structured to favor incumbents for a reason.

The more rules you have, the harder it will be for an underfunded outsider to have a real shot at election.

If you want to limit your candidates to people who are already independently wealthy, and have no need to raise any cash, this would be a good way to go about it.

Isab,

I'm not sure I follow your reasoning here.

Are you suggesting that rules that are structured to favor incumbents is in someway a good thing?... or simply that people in office are likely to generate rules that give them personal benefit as a matter of course?

Also, I fail to see how preventing fund raising while in office will prevent an "underfunded outsider" from having a real shot.

By definition an outsider would be someone who isn't on capital hill.

By preventing those on capital hill from fund raising while in office, this would actually offer an advantage to "underfunded outsiders" precisely because while on the outside they can raise money for a campaign while the person on the inside cannot.

@Artemis

US Embassies aren't built for the prime purpose of supporting 'local' US citizens. They are built to foster international relations. Having local US citizens is a side issue.

As for voting, to register you have to register in a State. If you have no home state, then you can't register. And no one to complain to except bulletin boards on the web :-)

At the end of the day it would be better all around if the US went to residence based taxation like all the other countries except Eritrea (which the US condemns for having citizen based taxation - go figure)

Mark,

While I agree with you that embassies are important for fostering diplomatic relations... I disagree with you entirely that services for local US citizens is a "side issue"

The following information from the University of Notre Dame demonstrates this pretty clearly:

http://riskmanagement.nd.edu/international-travel/international-travel/safety/what-does-a-u-s-embassy-do/

Embassies provide emergency services for US citizens in the case of natural disasters, health emergencies, legal issues including things like arrests, notifying next of kin and sending your body home in the event of your death, providing support and services in case you go missing in a foreign country, etc...

These are not trivial activities and they come with a cost.

If you aren't willing to pay for these services then you shouldn't have access to them.

As for being able to vote, I suggest you familiarize yourself with the "Uniformed and Overseas Citizens Absentee Voting Act". It may provide you with information that is useful for correcting the problem you are dealing with.