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Old 04-18-2012, 06:52 PM   #41
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FBAR and FATCA are just informational forms and you have to understand what foreign accounts need to be reported on each. FBAR is probably unavoidable as it has a $10k threshold, but FATCA has a $200k threshold for a single person living outside the US so careful account management should take it out of the picture.

My plan is particular to the UK and you'll have to adapt it for other countries in light of their domestic taxes and the tax treaty. I am also lucky that I have my assets in the US and HMRC (UK equivalent of IRS) deals with foreign assets in a far less complex way than the IRS.

The UK recognizes the tax deferral of US retirement funds and I will consolidate my US retirement funds into IRAs to make reporting and tracking easier and so that I'll only have 10% US withholding tax when I take income. I'll take this as a UK tax credit and pay the UK the difference of the 10% and the UK tax rate.

As ROTHs are also recognized by the UK I will make annual IRA to ROTH transfers taking into consideration the US and UK income tax brackets.
Thank you very much, Nun. This is very helpful.

By the way, I have checked several countries. Some countries recognize IRA's and ROTH IRA's. Some don't recognize them whatsoever and treat them as regular income in the year the gain was earned.
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Old 04-18-2012, 07:10 PM   #42
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Danmar, if your only exposure to the US is vacation home ownership, how does that expose your affaires to the IRS?
If I spend too much time down here, I need to file in US. Determining the requirement to file is a two step process 1) if the number of days in US for the current year, plus 1/3 of the days of the previous year, plus 1/6 of the days of the second previous year equal 183 or more, you must file unless you spent less than 183 days in the current year and can prove (IRS decides) you have a closer connection to another country(presumably in my case Canada). It's fairly complicated but nothing like the issues for US citizens outside US. I have been advised that you never want to rely on the IRS to agree you don't have to pay tax to the US.
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Old 04-18-2012, 07:17 PM   #43
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If I spend too much time down here, I need to file in US. Determining the requirement to file is a two step process 1) if the number of days in US for the current year, plus 1/3 of the days of the previous year, plus 1/6 of the days of the second previous year equal 183 or more, you must file unless you spent less than 183 days in the current year and can prove (IRS decides) you have a closer connection to another country(presumably in my case Canada). It's fairly complicated but nothing like the issues for US citizens outside US. I have been advised that you never want to rely on the IRS to agree you don't have to pay tax to the US.
Don't forget US estate tax.
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Old 04-18-2012, 07:18 PM   #44
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Thank you very much, Nun. This is very helpful.
+1

I'm in exactly the same situation so I appreciate you sharing the details should we decide to re-locate permanently in the UK. I am currently receiving a UK pension, will start collecting a 2nd one at age 65 and then UK SS also.

Our children have lived in the USA pretty well their whole lives so we have no plans to permanently re-locate, but it is our safety net if healthcare becomes prohibitively expensive.
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Old 04-18-2012, 07:24 PM   #45
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Don't forget US estate tax.
Oh yea. I did indeed forget about that. The house is owned by a Canadian cross border trust that solves many of the estate tax issues. I think estate taxes are really unfair. Don't have them or gift taxes in Canada. Deemed disposition of property at death with any resulting cap gains taxes paid at that time. This seems much more rational to me. The fact that estate taxes tend to change so much each year is also weird. Tough to plan. If I hadn't used a trust estate taxes could have been up to $500k if I had died the next day. Not sure what Uncle Sam did to deserve such a windfall?
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Old 04-18-2012, 07:51 PM   #46
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Reading this thread makes my brain hurt.
I have simple (he he) question. If I wanted to spend a couple of years living in a place like Costa Rica or Thailand how much of this crap would I have to worry about. Assume that almost all of my assets remain in the US and I just have checking accounts in the other countries.
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Old 04-18-2012, 09:42 PM   #47
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I will throw in a wrench just so some can think about what to do...

When I was in the UK, we had a temp employee who had an offshore corp which he was the sole employee... this corp rented him to the temp agency which is who we paid... he said it helped out a lot on taxes and reporting...

He was a citizen of Australia.... so might not help if you are a UK citizen...
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Old 04-18-2012, 10:13 PM   #48
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I will throw in a wrench just so some can think about what to do...

When I was in the UK, we had a temp employee who had an offshore corp which he was the sole employee... this corp rented him to the temp agency which is who we paid... he said it helped out a lot on taxes and reporting...

He was a citizen of Australia.... so might not help if you are a UK citizen...
That sound like an arrangement for UK tax purposes and as an Australian living in the UK he would not have had any Australian tax obligations on income earned in the UK. The difficulties with cross-border taxation are significantly more complex for the US expat just because of the US taxes on citizenship in addition to residence.
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Old 04-19-2012, 05:12 AM   #49
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Reading this thread makes my brain hurt.
I have simple (he he) question. If I wanted to spend a couple of years living in a place like Costa Rica or Thailand how much of this crap would I have to worry about. Assume that almost all of my assets remain in the US and I just have checking accounts in the other countries.
As long as you continue to file your US taxes and report your foreign bank accounts you would be fine. One hassle is you cannot file electronically when you have a non-US address.
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Old 04-19-2012, 06:29 AM   #50
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Reading this thread makes my brain hurt.
I have simple (he he) question. If I wanted to spend a couple of years living in a place like Costa Rica or Thailand how much of this crap would I have to worry about. Assume that almost all of my assets remain in the US and I just have checking accounts in the other countries.
Thailand offers a "retirement" visa that is renewable each year. If you are on that you can avoid becoming Thailand tax resident and you don't even pay tax on any money you bring into Thailand. Your US tax obligations would not change
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Old 04-19-2012, 07:58 AM   #51
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I personally have a cousin that was born in Texas but was taken to Mexico when he was abot 2 months old. I don't even think that he files any tax return technically he is breaking the law. He is probably not awared of all the requirements. As far as I know, he proabably does not want live in the states and proably will be a good candidate to renounce his US citinship.
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Old 04-19-2012, 09:29 AM   #52
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I personally have a cousin that was born in Texas but was taken to Mexico when he was abot 2 months old. I don't even think that he files any tax return technically he is breaking the law. He is probably not awared of all the requirements. As far as I know, he proabably does not want live in the states and proably will be a good candidate to renounce his US citinship.
The US won't let him renounce until he is up to date with his taxes. He'd also need another citizenship.
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Old 04-19-2012, 01:37 PM   #53
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Out of curiosity I looked over at a couple of expat boards that focus on Italy. Many of the regular posters are US/Italian dual citizens who work and live in Italy. I was specifically looking for complaints about the US tax filing requirements.

There were no rants and a pretty level headed discussion of the compliance.
Expats in Italy • View topic - 2011 US taxes and form 8938

I don't think it's a huge burden. It's just more forms to fill out.

(We've considered part of our retirement in Italy since hubby is a dual citizen and I'm in process of applying under juri-matrimoni)
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Old 04-19-2012, 02:09 PM   #54
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Out of curiosity I looked over at a couple of expat boards that focus on Italy. Many of the regular posters are US/Italian dual citizens who work and live in Italy. I was specifically looking for complaints about the US tax filing requirements.

There were no rants and a pretty level headed discussion of the compliance.
Expats in Italy • View topic - 2011 US taxes and form 8938

I don't think it's a huge burden. It's just more forms to fill out.

(We've considered part of our retirement in Italy since hubby is a dual citizen and I'm in process of applying under juri-matrimoni)
I think the thread you link to shows the lack of knowledge most US expats have about their US tax filing responsibilities. There is some confusion between FATCA and FBAR and there is no conversation about how to deal with PFIC, foreign pensions, insurance policies or mortgages of various types etc. I seldom see a thread where someone talks about FATCA and also says that it doesn't change how you should be already reporting your foreign assets and pensions. My suspicion is that the FATCA form will lead to many realizing that they need to make treaty claims and file foreign trust and PFIC forms.

What type of income do you have in retirement? Is it a state plan, and employer plan or a personal pension? How is it dealt with in the US/Italian tax treaty?
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Old 04-19-2012, 02:37 PM   #55
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I think the thread you link to shows the lack of knowledge most US expats have about their US tax filing responsibilities. There is some confusion between FATCA and FBAR and there is no conversation about how to deal with PFIC, foreign pensions, insurance policies or mortgages of various types etc.

What type of income do you have in retirement? Is it a state plan, and employer plan or a personal pension? How is it dealt with in the US/Italian tax treaty?
Either a lack of knowledge or they are only concerned with issues that affect shorter term stays abroad. Either way, it is critical for individuals and couples looking forward to longer term stays to fully understand the tax obligations and liabilities before committing themselves. This is especially so for people with multiple residencies and citizenship.
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Old 04-19-2012, 03:14 PM   #56
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Out of curiosity I looked over at a couple of expat boards that focus on Italy. Many of the regular posters are US/Italian dual citizens who work and live in Italy. I was specifically looking for complaints about the US tax filing requirements.

There were no rants and a pretty level headed discussion of the compliance.
Expats in Italy • View topic - 2011 US taxes and form 8938

I don't think it's a huge burden. It's just more forms to fill out.

(We've considered part of our retirement in Italy since hubby is a dual citizen and I'm in process of applying under juri-matrimoni)
If all of your investments, pensions, life insurance, etc. are US sourced, you'll be over the major problems of filing for the US. As nun said, this may not be true for Italian taxes. When you are in Italy, try to limit any financial accounts to a basic checking and savings account. In this situation, even if you must file FBAR and FATCA, they'll not cause much of a problem.

I'm unfamiliar with Italian offerings, but as nun and MichaelB said, you'll have to be on your guard at all times.

I'll use the UK as an example. In the UK, you can invest in some basic tax free (for the UK, but not the US) accounts at all banks and the UK equivilant of Savings and Loans. They're called ISAs. They basically come in two flavours, a cash ISA and a Stocks and Shares ISA. If you have a traditional cash ISA, filing for the US is not complicated as it takes the form of a savings account or CD. If you have a Stocks and Shares ISA, you'll have all the major problems that nun has spoken of, and you're US tax return will be a nightmare.

To add to the confusion, some companies offer what they name as a cash ISA, but in fact it's a Unit Trust (pooled), and again, you've problems. When living abroad, for either a short term or permanent stay, you must interrogate every financial account you come into contact with.

Things have become a bit easier this year. If you can sign a check for the accounts from the neighborhood bake sale, unlike previous years, this year you may not have to report that on your FBAR. And....that was not a joke.
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Old 04-19-2012, 03:23 PM   #57
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Things have become a bit easier this year. If you can sign a check for the accounts from the neighborhood bake sale, unlike previous years, this year you may not have to report that on your FBAR. And....that was not a joke.
Wow that's a relief, but I hope you remembered to include your UK Government heating allowance, that is tax free in the UK, on your 1040 so the IRS can tax it! along with other UK tax free benefit payments like attendance allowance.........

If you are a US citizen living on UK tax free benefits you can't use FEIE or FTC on your US taxes and so will have to pay US tax on them. I think this is an area where the treaty needs to be modified!
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Old 04-19-2012, 04:18 PM   #58
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Wow that's a relief, but I hope you remembered to include your UK Government heating allowance, that is tax free in the UK, on your 1040 so the IRS can tax it! along with other UK tax free benefit payments like attendance allowance.........

If you are a US citizen living on UK tax free benefits you can't use FEIE or FTC on your US taxes and so will have to pay US tax on them. I think this is an area where the treaty needs to be modified!
You forgot to remind me about the (UK tax free, but not US) 10 Christmas bonus on the UK State Pension! And don't forget the prepaid 'Oyster' travel card for the London underground on the FBAR. I still haven't decided about the seniors bus pass! (I still haven't used it, just in case.)
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Old 04-19-2012, 04:26 PM   #59
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Not retired yet - but it will all be US based funding. Small (microscopically small) pension, SS, taxable accounts, and IRA/401ks.

It's probably not going to happen, because we don't want to give up our home here... and maintaining a second home (either rental or purchase) hits the budget too hard. But we've got my husband's cousins clamoring for us to repatriate to Sicily. LOL. And they make great food and offer us great wine - so it's enticing.

If we do go - it might just be extended visits. Summer breaks for example (school age kids).
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Old 04-19-2012, 06:11 PM   #60
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If all of your investments, pensions, life insurance, etc. are US sourced, you'll be over the major problems of filing for the US. As nun said, this may not be true for Italian taxes. When you are in Italy, try to limit any financial accounts to a basic checking and savings account. In this situation, even if you must file FBAR and FATCA, they'll not cause much of a problem.
I hope you are right. According to this article, they make it sound like you could be in big trouble just for filing these forms incorrectly.

http://www.nytimes.com/2012/04/16/bu...pagewanted=all

International tax experts worry that even accidental discrepancies on the new form will expose filers to big penalties. And if examiners do end up comparing information on the FBAR and Fatca forms, which have different filing deadlines and are sent to different offices, they say, it could open the door to more trouble. Its going to be a mass of confusion, at least for the first year, said Edward Tanenbaum, an international tax lawyer at Alston & Bird in New York.
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