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New US FACTA law. A MUST READ for Americans overseas.

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Contrarian Expatriate
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Post by Contrarian Expatriate » July 3rd, 2014, 7:14 pm

I've written on FATCA in previous posts and it is not new. It is 4 years old and this month marks the final phase of the delayed full implementation for foreign financial institutions. The reporting requirements for individual US persons has been in effect for years.

For anyone who deigns to use dual citizenship as cover, you would be committing a felony and you would be toast. FINCEN and the US Treasury's Banking Secrecy Act tracking databases will flag you as a likely dual national and you will have your funds seized and be subject to prosecution. The only escape is renouncing US citizenship or voluntarily ending US Residency (Green Card) Status.

All that is necessary is complying with the yearly FBAR and Tax Form 8938 filings and you are fully in compliance.

FATCA enforcement of these filings is nothing short of draconian. Rand Paul has a FATCA repeal bill submitted but it has no chance of passing until Obama and the Democratic Senate are out of power. It will sit in committee until after the mid-terms at the earliest.

FATCA is nothing to screw around with. Public and political sympathies are nil to low for offshore holdings so comply if you plan on staying off of the chopping block. They will know if you are not in compliance. There are even Canadians who did not know they were "US persons" via birth or marriage that have been snagged by this law.

You've been warned.........

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eurobrat
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Post by eurobrat » July 3rd, 2014, 8:13 pm

Contrarian Expatriate wrote:All that is necessary is complying with the yearly FBAR and Tax Form 8938 filings and you are fully in compliance.

You've been warned.........
What's the income threshold for both $50k and $10k? If so for now I'm below both but I might find a better job soon in Germany that will put me above that.

Dude the IRS is ran by a bunch of monkeys. I'm not shaking in my boots at all. If anything this stupid law will take years and years to perfect. Also I read it's up to the banks to ask for your social security number. How else will they know?

It might be worthwhile to travel to a country that hasn't signed an agreement yet and get in quickly and grandfathered in.

Contrarian Expatriate
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Post by Contrarian Expatriate » July 3rd, 2014, 8:39 pm

eurobrat wrote:
Contrarian Expatriate wrote:All that is necessary is complying with the yearly FBAR and Tax Form 8938 filings and you are fully in compliance.

You've been warned.........
What's the income threshold for both $50k and $10k? If so for now I'm below both but I might find a better job soon in Germany that will put me above that.

Dude the IRS is ran by a bunch of monkeys. I'm not shaking in my boots at all. If anything this stupid law will take years and years to perfect. Also I read it's up to the banks to ask for your social security number. How else will they know?

It might be worthwhile to travel to a country that hasn't signed an agreement yet and get in quickly and grandfathered in.
Aggregate of 10k total in foreign financial institutions triggers the FBAR requirement, and 50k triggers the 8938. If you are under those, you are safe for the moment. According to the below prosecutions have already begun in earnest and those sent to jail likely thought they would never be caught. SSNs are simply one way to track people, they also track by name and dob.

http://www.jdsupra.com/legalnews/crimin ... -im-47501/

Rock
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Post by Rock » July 4th, 2014, 5:23 am

Contrarian Expatriate wrote:I've written on FATCA in previous posts and it is not new. It is 4 years old and this month marks the final phase of the delayed full implementation for foreign financial institutions. The reporting requirements for individual US persons has been in effect for years.

For anyone who deigns to use dual citizenship as cover, you would be committing a felony and you would be toast. FINCEN and the US Treasury's Banking Secrecy Act tracking databases will flag you as a likely dual national and you will have your funds seized and be subject to prosecution. The only escape is renouncing US citizenship or voluntarily ending US Residency (Green Card) Status.

All that is necessary is complying with the yearly FBAR and Tax Form 8938 filings and you are fully in compliance.

FATCA enforcement of these filings is nothing short of draconian. Rand Paul has a FATCA repeal bill submitted but it has no chance of passing until Obama and the Democratic Senate are out of power. It will sit in committee until after the mid-terms at the earliest.

FATCA is nothing to screw around with. Public and political sympathies are nil to low for offshore holdings so comply if you plan on staying off of the chopping block. They will know if you are not in compliance. There are even Canadians who did not know they were "US persons" via birth or marriage that have been snagged by this law.

You've been warned.........
1. The new reporting requirements on taxpayer side only took effect in 2013 (for 2012 tax year).

2. If you hold a second passport, you can escape future US reporting and tax requirments by renouncing US citizenship, getting your Certificate of Renunciation, then formally logging out of US tax system (there is special paper work for this too). That's what I suggested that Eurobrat might wanna consider.

3. FBARs have been technically required by US persons with non-US accounts for decades. But material enforcement actions on these laws only began following UBS case of 2009.

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eurobrat
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Post by eurobrat » July 4th, 2014, 9:09 am

Rock wrote:
Contrarian Expatriate wrote:I've written on FATCA in previous posts and it is not new. It is 4 years old and this month marks the final phase of the delayed full implementation for foreign financial institutions. The reporting requirements for individual US persons has been in effect for years.

For anyone who deigns to use dual citizenship as cover, you would be committing a felony and you would be toast. FINCEN and the US Treasury's Banking Secrecy Act tracking databases will flag you as a likely dual national and you will have your funds seized and be subject to prosecution. The only escape is renouncing US citizenship or voluntarily ending US Residency (Green Card) Status.

All that is necessary is complying with the yearly FBAR and Tax Form 8938 filings and you are fully in compliance.

FATCA enforcement of these filings is nothing short of draconian. Rand Paul has a FATCA repeal bill submitted but it has no chance of passing until Obama and the Democratic Senate are out of power. It will sit in committee until after the mid-terms at the earliest.

FATCA is nothing to screw around with. Public and political sympathies are nil to low for offshore holdings so comply if you plan on staying off of the chopping block. They will know if you are not in compliance. There are even Canadians who did not know they were "US persons" via birth or marriage that have been snagged by this law.

You've been warned.........
1. The new reporting requirements on taxpayer side only took effect in 2013 (for 2012 tax year).

2. If you hold a second passport, you can escape future US reporting and tax requirments by renouncing US citizenship, getting your Certificate of Renunciation, then formally logging out of US tax system (there is special paper work for this too). That's what I suggested that Eurobrat might wanna consider.

3. FBARs have been technically required by US persons with non-US accounts for decades. But material enforcement actions on these laws only began following UBS case of 2009.
Rock I really don't know if it's worth renouncing US citizenship over 1 to 2 forms. I'm not wealthy and trying to hide money. If I ever found a better job in the US or had to move back for whatever reason then it could deem useful.

Now if I was wealthy then I would have a reason to renounce it and it wouldn't be worth the trouble.

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eurobrat
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Post by eurobrat » July 4th, 2014, 11:05 am

Contrarian Expatriate wrote:
eurobrat wrote:
Contrarian Expatriate wrote:All that is necessary is complying with the yearly FBAR and Tax Form 8938 filings and you are fully in compliance.

You've been warned.........
What's the income threshold for both $50k and $10k? If so for now I'm below both but I might find a better job soon in Germany that will put me above that.

Dude the IRS is ran by a bunch of monkeys. I'm not shaking in my boots at all. If anything this stupid law will take years and years to perfect. Also I read it's up to the banks to ask for your social security number. How else will they know?

It might be worthwhile to travel to a country that hasn't signed an agreement yet and get in quickly and grandfathered in.
Aggregate of 10k total in foreign financial institutions triggers the FBAR requirement, and 50k triggers the 8938. If you are under those, you are safe for the moment. According to the below prosecutions have already begun in earnest and those sent to jail likely thought they would never be caught. SSNs are simply one way to track people, they also track by name and dob.

http://www.jdsupra.com/legalnews/crimin ... -im-47501/
I doubt they're going after people that have €2000-3000 in an account and only had €20,000 touch their account in a calendar year.

If they are than that's just pathetic and it probably cost them more in tax payer money and resources to catch those people than it was worth.

Rock
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Post by Rock » July 4th, 2014, 1:39 pm

eurobrat wrote:
Rock wrote:
Contrarian Expatriate wrote:I've written on FATCA in previous posts and it is not new. It is 4 years old and this month marks the final phase of the delayed full implementation for foreign financial institutions. The reporting requirements for individual US persons has been in effect for years.

For anyone who deigns to use dual citizenship as cover, you would be committing a felony and you would be toast. FINCEN and the US Treasury's Banking Secrecy Act tracking databases will flag you as a likely dual national and you will have your funds seized and be subject to prosecution. The only escape is renouncing US citizenship or voluntarily ending US Residency (Green Card) Status.

All that is necessary is complying with the yearly FBAR and Tax Form 8938 filings and you are fully in compliance.

FATCA enforcement of these filings is nothing short of draconian. Rand Paul has a FATCA repeal bill submitted but it has no chance of passing until Obama and the Democratic Senate are out of power. It will sit in committee until after the mid-terms at the earliest.

FATCA is nothing to screw around with. Public and political sympathies are nil to low for offshore holdings so comply if you plan on staying off of the chopping block. They will know if you are not in compliance. There are even Canadians who did not know they were "US persons" via birth or marriage that have been snagged by this law.

You've been warned.........
1. The new reporting requirements on taxpayer side only took effect in 2013 (for 2012 tax year).

2. If you hold a second passport, you can escape future US reporting and tax requirments by renouncing US citizenship, getting your Certificate of Renunciation, then formally logging out of US tax system (there is special paper work for this too). That's what I suggested that Eurobrat might wanna consider.

3. FBARs have been technically required by US persons with non-US accounts for decades. But material enforcement actions on these laws only began following UBS case of 2009.
Rock I really don't know if it's worth renouncing US citizenship over 1 to 2 forms. I'm not wealthy and trying to hide money. If I ever found a better job in the US or had to move back for whatever reason then it could deem useful.

Now if I was wealthy then I would have a reason to renounce it and it wouldn't be worth the trouble.
Agreed. It only makes sense to consider for those US persons who have significant investment income from offshore sources year after year OR those who have very high salaries as expats. If you income is derived mainly from a more standard type offshore job with just 5 figure pay, you can deduct all or virtually all of that from your US taxes via foreign sourced earned income exclusion.

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eurobrat
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Post by eurobrat » July 4th, 2014, 3:57 pm

Rock wrote: Agreed. It only makes sense to consider for those US persons who have significant investment income from offshore sources year after year OR those who have very high salaries as expats. If you income is derived mainly from a more standard type offshore job with just 5 figure pay, you can deduct all or virtually all of that from your US taxes via foreign sourced earned income exclusion.
You're probably the only one rich enough here to do so. No one knows what you do, so I'm assuming your independently wealthy :lol:

Rock
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Post by Rock » July 4th, 2014, 4:32 pm

eurobrat wrote:
Rock wrote: Agreed. It only makes sense to consider for those US persons who have significant investment income from offshore sources year after year OR those who have very high salaries as expats. If you income is derived mainly from a more standard type offshore job with just 5 figure pay, you can deduct all or virtually all of that from your US taxes via foreign sourced earned income exclusion.
You're probably the only one rich enough here to do so. No one knows what you do, so I'm assuming your independently wealthy :lol:
Haha, that would be nice. But actually, it's possible to make a living managing a very modest asset base if you do it in certain ways while keeping expenses low by living in cheaper Asian countries like Taiwan, Phils., and Thailand. You see, when your earnings are predominately investment gains and incomes you get no earned income exclusion. So your US taxes kick-in from a very low level (just a few thousand US$).

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eurobrat
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Post by eurobrat » July 4th, 2014, 7:54 pm

Rock wrote:
eurobrat wrote:
Rock wrote: Agreed. It only makes sense to consider for those US persons who have significant investment income from offshore sources year after year OR those who have very high salaries as expats. If you income is derived mainly from a more standard type offshore job with just 5 figure pay, you can deduct all or virtually all of that from your US taxes via foreign sourced earned income exclusion.
You're probably the only one rich enough here to do so. No one knows what you do, so I'm assuming your independently wealthy :lol:
Haha, that would be nice. But actually, it's possible to make a living managing a very modest asset base if you do it in certain ways while keeping expenses low by living in cheaper Asian countries like Taiwan, Phils., and Thailand. You see, when your earnings are predominately investment gains and incomes you get no earned income exclusion. So your US taxes kick-in from a very low level (just a few thousand US$).
Only if you report them :lol:

Rock
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Post by Rock » July 4th, 2014, 8:19 pm

eurobrat wrote:
Rock wrote:
eurobrat wrote:
Rock wrote: Agreed. It only makes sense to consider for those US persons who have significant investment income from offshore sources year after year OR those who have very high salaries as expats. If you income is derived mainly from a more standard type offshore job with just 5 figure pay, you can deduct all or virtually all of that from your US taxes via foreign sourced earned income exclusion.
You're probably the only one rich enough here to do so. No one knows what you do, so I'm assuming your independently wealthy :lol:
Haha, that would be nice. But actually, it's possible to make a living managing a very modest asset base if you do it in certain ways while keeping expenses low by living in cheaper Asian countries like Taiwan, Phils., and Thailand. You see, when your earnings are predominately investment gains and incomes you get no earned income exclusion. So your US taxes kick-in from a very low level (just a few thousand US$).
Only if you report them :lol:
Well, if I don't report them, then my tax bill will be very low. Great solution. Thanks. Why didn't I think of that one?

Given the new FATCA reporting requirements, it's likely the IRS receive conflicting information from my financial institutions and would quickly put 2 and 2 together, say within 1-3 years. That would be great. Interesting new expats who happen to work for the IRS field offices would be getting in touch with me and showing a very keen interest in certain aspects of 'my life'. Wow, it's really nice to be cared for. I've been meaning to meet more Americans anyway. Since we'd all become fast friends, I'm sure they would waive the penalties, interest, and original taxes due and never refer me to their criminal investigation side. Hmm, it's nice to dream sometimes. I think I'll just stick with the tedious and unexciting straight and narrow path of being a 100% honest US taxpayer just as I always have.

Contrarian Expatriate
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Post by Contrarian Expatriate » July 4th, 2014, 11:55 pm

Rock wrote:If you income is derived mainly from a more standard type offshore job with just 5 figure pay, you can deduct all or virtually all of that from your US taxes via foreign sourced earned income exclusion.
Correct, but the IRS does not consider investment income to be "earned" income. Our researching and taking the risk of investing is earning by most peoples' measure, but since it is considered "passively" earned income, the IRS makes it is still fully taxable.

This double taxation (by local country and the US government) is a huge penalty for the expat that has earned the right to have his money work for him.

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Post by OutWest » July 5th, 2014, 5:00 am

Contrarian Expatriate wrote:
Rock wrote:If you income is derived mainly from a more standard type offshore job with just 5 figure pay, you can deduct all or virtually all of that from your US taxes via foreign sourced earned income exclusion.
Correct, but the IRS does not consider investment income to be "earned" income. Our researching and taking the risk of investing is earning by most peoples' measure, but since it is considered "passively" earned income, the IRS makes it is still fully taxable.

This double taxation (by local country and the US government) is a huge penalty for the expat that has earned the right to have his money work for him.
Your warnings may fall on deaf ears for some, but at their own peril.

US citizens with close family ties abroad who are NOT US citizens likely put that to work to their
advantage. And further, there are quite a few cleaning ladies and gardeners who would be SHOCKED
to find out they are in fact worth millions. All they know is that they routinely sign some papers for
a good employer who tips them very generously every time they do so.

Rock
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Post by Rock » July 5th, 2014, 6:03 am

Contrarian Expatriate wrote:
Rock wrote:If you income is derived mainly from a more standard type offshore job with just 5 figure pay, you can deduct all or virtually all of that from your US taxes via foreign sourced earned income exclusion.
Correct, but the IRS does not consider investment income to be "earned" income. Our researching and taking the risk of investing is earning by most peoples' measure, but since it is considered "passively" earned income, the IRS makes it is still fully taxable.

This double taxation (by local country and the US government) is a huge penalty
for the expat that has earned the right to have his money work for him.
Of course earned income is not investment income or gains! That's been my whole point. It's treated differently. That's why I start paying taxes from a very low level (tax kicks-in for me at just a few thousand in annual income). Cus I'm an investor as opposed to being a wage earner. I've been making this distinction for several years on this forum already. Isn't it clear enough by now?

But also, there is no double taxation. Some of the countries I've lived in don't even tax investment gains and/or incomes. But when they do, you can claim full credit for those third country tax charges on your US taxes. For example, Taiwan exempts a high level of dividend and interest income. But they do tax capital gains earned in say the stock market. So if I buy then sell a stock and am lucky enough to say earn $10,000 on that transaction, I will be taxed on that gain in Taiwan. Assuming I pay 20% on that gain ($2,000) to Taiwan's National Tax Authority when I file my Taiwan taxes the next year, I can claim that $2,000 as a foreign tax credit on my US taxes for the same tax year. THERE IS NO DOUBLE TAXATION AT PLAY. That's a misconception held by some. Double taxation is not the problem, even in most cases where a given country has no tax treaty with USA.

The problem is, US person expats have a disadvantage relative to expats from other developed nations when working and investing in third countries. Cus latter do not have to pay any tax to their home governments the way US persons do. As I mentioned, many countries do not tax on investment gains and incomes at all. An non-US person expat can generate those types of monies tax free whereas the US person will have to pay tax on them back to his home government.

Likewise, a high salaried expat in HK will pay just 15% on his earned income to HK Inland Revenue and be done whereas his US person expat counterpart working same job and earning same amount will not only pay 15% to HK but will also have to pay some tax on portion of his income which exceeds expat earned income and housing exclusion.

At the net level, US person expat usually makes a lot less than equal (at gross level) non-US person expat in following cases: 1. money is made through investing as opposed to earning; 2. earned income is in a high enough bracket to significantly exceed the sum of earned income exclusion + housing allowance for US expats.

If you don't generate significant investment gains and/or incomes or you are a 5 figure man, it really makes little if any difference whether or not you are a US person.

Finally, there still is a way to reduce your US tax bill a lot as a US person expat investor - rental real estate, especially overseas properties. There's all kinds of deductions and expenses you can apply and for many of them, they can be stretched out 30 years. Just don't ever sell your highly depreciated property after you've taken advantage of these over many years or you'll be in for a huge one-off capital gains tax. Just hold it to death and whoever inherits it will get an automatic reset to current market on the tax basis (cost) I believe. That's one of the little known benefits of how the US estate and inheritance tax system works.

Rock
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Post by Rock » July 5th, 2014, 6:22 am

OutWest wrote:
Contrarian Expatriate wrote:
Rock wrote:If you income is derived mainly from a more standard type offshore job with just 5 figure pay, you can deduct all or virtually all of that from your US taxes via foreign sourced earned income exclusion.
Correct, but the IRS does not consider investment income to be "earned" income. Our researching and taking the risk of investing is earning by most peoples' measure, but since it is considered "passively" earned income, the IRS makes it is still fully taxable.

This double taxation (by local country and the US government) is a huge penalty for the expat that has earned the right to have his money work for him.
Your warnings may fall on deaf ears for some, but at their own peril.

US citizens with close family ties abroad who are NOT US citizens likely put that to work to their
advantage. And further, there are quite a few cleaning ladies and gardeners who would be SHOCKED
to find out they are in fact worth millions. All they know is that they routinely sign some papers for
a good employer who tips them very generously every time they do so.
That's a dangerous game I would never play. Can you really trust your professional advisers, bank managers, etc. not to collude with your humble staff not to screw you out of your assets?

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