Taxes - Am I naive or just uneducated?

[LOL!]

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LOL! - Why would you assume that I am so poor that I cannot live in the US? What a rash and completely erroneous assumption to make! And Trust me, I know EXACTLY how much I pay in taxes right now and it is not something that I am happy about.

I'm sorry but you also wrote the following in your OP:

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So it would be better for me to keep my citizenship and pay the US taxes because I would have a lower rate than 30%.

I just inferred you were poor because your tax rate would be lower than 30%.

[Elspeth]

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Originally Posted by retire2india Not sure if you are aware of this, but the rules regarding taxation of expatriates changed in 2004. You may have to continue paying US taxes for 10 more years even if you renounce your US citizenship. It doesn't matter whether you gave up your citizenship for tax purposes or not. The following links have more details: Expatriation Tax weekly Nigel Retire To India

Your link talks about "U.S. citizens who have renounced their citizenship and long-term residents who have ended their US residency for tax purposes." Does that refer to intention or effect? I mean, if a long-term resident decides to retire back to the old country out of homesickness or something and not for tax purposes, I assume it wouldn't make any difference to the IRS.

[teejayevans]

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Originally Posted by bpp3 Would you be equally offended at the original poster hanging onto a US citizenship that is not really being "used," merely in order to "game the system"?

Actually I wasn't offended at all by original poster,
but more by your comment that we are in the
our position because our ancestors did the same thing many years ago
is not correct, I'm betting most US ancestors (with some obvious
exceptions: african americans, american indians) came here for a chance
at a better life. And I have great respect for them and others (even today's
immigrants) that come here to do that.
Those that come here to avoid paying taxes in their home country don't
get my respect.
TJ

[FinanceGeek]

One thing I've always wondered about - the rules on emigration tax seem to be tied to having a net worth which exceeds the Federal estate tax threshold. This number (I think $2m now) is scheduled be unlimited in 2010 I think, and then revert back to $1m afterwards.

Does that mean that 2010 provides a 1 year window of tax-free emigration?

[bpp3]

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Originally Posted by teejayevans Actually I wasn't offended at all by original poster, but more by your comment that we are in the our position because our ancestors did the same thing many years ago is not correct[...] Those that come here to avoid paying taxes in their home country don't get my respect. TJ

I didn't mean to suggest that anyone's ancestors were tax cheats. Sorry if I gave that impression. I was talking about the broader issue of expatriation, for whatever reason. Perhaps I had a mistaken impression that the mere idea of expatriation was rubbing some folks the wrong way.

[Mach]

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Originally Posted by rms977 I haven't lived in the US since 1994 and I have still paid a ton of US taxes. I was just a little surprised to find out that I would have to pay US taxes even if I was no longer a citizen. I certainly expect to pay taxes to the country where I will be living.

Hopefully any slamming is in jest. You should live precisely where you want to live. Every country has pros/cons.

That certainly is a kooky law...to pay taxes after you're no longer a citizen, and no longer on U.S. soil? Seems unethical.

-Mach

[bosco]

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Originally Posted by teejayevans My ancestors didn't come here to avoid paying taxes. Most people would NOT leave their country just to avoid paying taxes. It's the price of admission, most people understand that taxes are a necessary evil, and are willing to pay their share. TJ

oh c'mon....the whole country was founded on a reluctance to pay taxes, and chafing over having to send money to England despite the fact the English citizens were being taxed much worse. Boston tea party, stamp tax etc. Started a bloody war over it.

"taxation without representation is tyranny" and all that....

kind of funny that the US, and only one other country in the world tax you on citizenship, not residency. Sort of ironic--taxing someone who doesn't live there sounds a bit like taxation without representation.

That being said, I would not renounce my US citizenship to lessen the tax bill. Most of my savings and all of my pension were earned in the US, and the US has first rights to tax it, imo.

[teejayevans]

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Originally Posted by bosco kind of funny that the US, and only one other country in the world tax you on citizenship, not residency. Sort of ironic--taxing someone who doesn't live there sounds a bit like taxation without representation.

As long as you can vote, you have representation (as bad as it may be).

Now once you renounce your citizenship, and you leave the country (the
laws are written so you can't renounce your citizenship and keep living and
working in US and pay no taxes), then you don't have to pay taxes, seems
reasonable to me. The taxes you pay when you are not living in the country
are to support the country which it is assumed you will return to.

TJ

[teejayevans]

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Originally Posted by Mach Hopefully any slamming is in jest. You should live precisely where you want to live. Every country has pros/cons. That certainly is a kooky law...to pay taxes after you're no longer a citizen, and no longer on U.S. soil? Seems unethical. -Mach

You don't have to pay taxes if you renounce AND LEAVE the
country.

If that wasn't the case, I could renounce my citizenship, and stop paying
any taxes.
TJ

[lets-retire]

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Originally Posted by teejayevans As long as you can vote, you have representation (as bad as it may be). TJ

Unless you vote by absentee ballot. Then your vote only counts if the election is close and the sending post office puts a date stamp on it.

[Texas Proud]

As an add on to the taxation without representation....

Get arrested overseas.... call the Embassy... they will come and make sure your rights are taken care of... sounds like 'representation' to me..

[ladelfina]

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once you renounce your citizenship, and you leave the country ... then you don't have to pay taxes, seems reasonable to me.

It DOES sound reasonable. Too bad that's not the case.

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You don't have to pay taxes if you renounce AND LEAVE the country.

teejay, this is incorrect.


Expatriation Tax

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The American Jobs Creation Act (AJCA) of 2004 amends Section 877 of the Internal Revenue Code (IRC), which provides for an alternative tax regime for certain, expatriated individuals. Amended IRC 877 eliminates the tax avoidance criteria for imposition of the expatriation tax on certain types of income for 10 years following expatriation, and creates objective criteria to impose the tax on individuals with an average income tax liability of $127,000 for tax year 2005 (or higher amount for later years) for the 5 prior years or a net worth of $2,000,000 on the date of expatriation.

summary: Details of New Tax Laws Applicable to Expatriates - Offshore Services - USA - International Law Office - Legal Newsletters

more in depth:
http://www.cm-p.com/pdf/the_new_section_877.pdf
http://www.house.gov/jct/x-49-07.pdf


TexasProud.. yes, you can run to the US embassy IF you haven't renounced your US citizenship. We are talking about here, though is 10-years' US taxation of non-citizen, non-resident worldwide income, which one would be subject to with a NW of $2 million. One is now also required to fill out onerous yearly forms:
http://www.irs.gov/pub/irs-pdf/f8854.pdf

[bpp3]

Deleted: Ladelfina beat me to it.

[teejayevans]

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Originally Posted by ladelfina It DOES sound reasonable. Too bad that's not the case. teejay, this is incorrect.

INAL, but the way I read it is they are talking about taxes on US source
income. Again I don't see a problem, they tax resident aliens as well.

If you leave US, have no US income, you pay no US tax.
TJ

[bpp3]

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Originally Posted by teejayevans INAL, but the way I read it is they are talking about taxes on US source income.

They are not just talking about US source income.

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If you leave US, have no US income, you pay no US tax. TJ

That is what most other countries do, even if one retains citizenship of that country, but that is not what the US does.

[chinaco]

I would never consider giving up US citizenship.

Those tax laws were passed because very wealthy people were making that move to avoid taxes.

For the rest of us mere mortals... I have to ask myself why would you give up that which others are so desperately seeking.

Most stable (first world) democratic countries have higher taxes. The third-world countries... I will visit, but not make them a permanent home.

Of course, it is a personal choice.

[bosco]

maybe I'm just naive, but I feel that I owe taxes on money (whether pension or deferred income) earned in the US to the US government, even though I don't reside there. I don't feel that way about paying US taxes on Canadian-source income, however which is the stance the US government takes.

In my case, I was born Canadian. I never sought to become a US citizen (long story, don't want to go into it now, but if you are curious, check out http://www.lostcanadian.com/main.asp?3, the story is nearly the same as mine). But the US offered me a place to live and work at a time when Canada would not and for that I am grateful.

Although I now live in Canada, I feel that the terms of the treaty that gives the US first dibs on my US-source income is fair and appropriate, in my situation. I have my differences with the US government (and the Canadian government for that matter), but I have received services from both at various times and don't feel put upon to pay for them. I just don't like to be double-taxed on the same money since I can only live one place at a time. The US is one of only 2 countries that seems to believe that double-taxing a person is ok.

[nun]

I'm going to be moving back to Europe to retire and having dual citizenship is mostly a paperwork inconvenience. What I've found is that US Tax treaties mean that you end up paying tax at the rate of the country with the higher tax rate. You get credits for foreign taxes and pay the difference.

If you move somewhere with low taxes and renounce your US citizenship you'll still have to get your money out of US based investments and you'll get taxed as soon as you sell.

[Independent]

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Originally Posted by bpp3 They are not just talking about US source income. .

Are you sure about that?

Suppose I leave the US, take all my money with me, become a citizen of another country, surrender US citizenship, have no US income or assets.

How, practically, is the US going to collect US taxes from me?

[ladelfina]

At minimum, I can imagine that they would make life difficult should you Ever Want to Cross the US Border Again For Any Reason..

What could happen? You could end up like Bobby Fischer. US citizen; played chess in Yugoslavia when Bush the First said he shouldnt'a .. and now fugitive.. apparently now a "man without a country".

It's less a matter of collecting than making the rest of your life hell should you have ANY business or personal contacts in the US and a need to interact with them, I'd imagine. If that's not the case, go for it.

Edit: I see Fischer has managed asylum in Iceland. Seems like an anti-Semitic nut but last I heard that in itself was not a crime. Anyway, I imagine it is not comfortable living or traveling abroad when the US has a price on your head for tax evasion.