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Old 06-08-2015, 01:42 AM   #21
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That is exactly the issue for many.

Others have lived outside the US for their working lives, married foreign nationals and built lives in other countries, and have no desire to return. It happens to many expats of all countries. They simply do not want the tax or the reporting burden.
Except that most countries do not tax their expats or require them to report.
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Old 06-08-2015, 06:58 AM   #22
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If you retain your US citizenship and live in an EU country I expect that you can keep your large IRA and it will be treated as you would expect with no double taxation.

I can only speak for one EU country, the UK, but the US/UK tax treaty means that neither country will tax the IRA until distributions happen. If you are a USC living in the UK then the IRA distribution will be taxed as regular income and when you file your US taxes you apply the UK tax on that distribution as a tax credit so there is no double taxation.

The ROTH IRA distributions are tax free in both the UK and US. When doing ROTH conversions the taxes are only due in the US so I don't expect to ever pay any UK tax on IRA distributions as I will be converting to ROTH first.



The big picture: If we were truly free, one should be able to take their money and go live wherever they want without being punished.

But as it stands in the US, my IRA savings are held hostage (unless I withdraw the whole thing at the highest tax rate, renounce, and then I’m truly free). So by extension I’m held hostage too because wherever I go in the EU, I’l be taxable in both countries. Yes?

Roth is still a custodial account. If I were to convert the entire IRA to a Roth, would I not be taxed at the same rate for the conversion? Can I even convert to Roth all at once? It seems you can only convert so much every year, which would take me a lifetime to do.
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Old 06-08-2015, 07:03 AM   #23
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If you retain your US citizenship and live in an EU country I expect that you can keep your large IRA and it will be treated as you would expect with no double taxation.

I'm not clear on this one. Are not IRA distributions considered taxable income in both countries?
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Old 06-08-2015, 08:01 AM   #24
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I'm not clear on this one. Are not IRA distributions considered taxable income in both countries?
First, reading and understanding the relevant Double Tax Treaty between the US and "the other country" is imperative, provided one exists. No two treaties are exactly the same. The previous comments concerning how IRA, ROTH, etc. work in the UK may not apply to other countries. If a treaty exists, there will also be a "Technical Explanation". This is the treaty put in everyday english (to some degree), and may be easier to understand. It is also imperative to understand the "saving clause" contained in all US treaties. It comes about as the result of the US unique Citizenship Based Taxation. As a result, many of the benefits of the treaty do not apply to US citizens abroad. It is necessary to understand the limited number which may benefit the US citizen abroad, and if they apply to you.

For the UK double taxation of the IRA might be avoided by use of the resourcing basket of form 1116 where the US income is resourced as UK income in order to offset US tax by claiming the UK tax paid on the income.

Be aware that income primarily from US sources allows for the use of tax software. If the majority of income is foreign, and especially if it is retirement income possibly from more than one foreign country, tax software is useless.
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Old 06-08-2015, 08:39 AM   #25
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Originally Posted by Free_at_49 View Post
The big picture: If we were truly free, one should be able to take their money and go live wherever they want without being punished.

But as it stands in the US, my IRA savings are held hostage (unless I withdraw the whole thing at the highest tax rate, renounce, and then Iím truly free). So by extension Iím held hostage too because wherever I go in the EU, Iíl be taxable in both countries. Yes?
"Being held hostage" seems a bit overwrought, no? If you withdraw the (previously untaxed) money from the IRA, you're being asked to pay taxes on it (which you owed in the first place). The deal was always the same--when you take it out, you pay tax on it--if you choose to take it all at once, you'll pay tax at a pretty high rate. And if you get taxed by another country (in many cases you wouldn't, but look at the actual treaties to be sure), then your issue is with your "adoptive' country.
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Old 06-08-2015, 10:33 AM   #26
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Originally Posted by theOAP View Post
First, reading and understanding the relevant Double Tax Treaty between the US and "the other country" is imperative, provided one exists. No two treaties are exactly the same. The previous comments concerning how IRA, ROTH, etc. work in the UK may not apply to other countries. If a treaty exists, there will also be a "Technical Explanation". This is the treaty put in everyday english (to some degree), and may be easier to understand. It is also imperative to understand the "saving clause" contained in all US treaties. It comes about as the result of the US unique Citizenship Based Taxation. As a result, many of the benefits of the treaty do not apply to US citizens abroad. It is necessary to understand the limited number which may benefit the US citizen abroad, and if they apply to you.

For the UK double taxation of the IRA might be avoided by use of the resourcing basket of form 1116 where the US income is resourced as UK income in order to offset US tax by claiming the UK tax paid on the income.

Be aware that income primarily from US sources allows for the use of tax software. If the majority of income is foreign, and especially if it is retirement income possibly from more than one foreign country, tax software is useless.



I’m thinking of splitting my time between Italy and the Greek islands. If I live on a boat, do I even have an address? Is one forced to have a permanent address for IRS purposes?

My ideal solution would be to keep my US citizenship, login to Vanguard once a year from wherever I happen to be, withdraw whatever $ I need for living expenses, have VG withhold the appropriate % in tax, and file my US tax return online just as I do now. That seems very compliant to me, because I’d be doing exactly what I do now, except I’d be living in whatever country I chose.

As a retiree, I will have no EU-borne income, only US income from mutual funds. To avoid tax evasion, Italy and Greece have a so-called imputed income, based solely on the fact that one owns/rents a home, has a car, and other types of “luxury”. There is a tax credit for US taxes paid, so even though there is no outright double-taxation, each EU country considers your financial life by its own rules, so compliance is a huge problem for those of us that are not tax geeks. In any case, renouncing seems to offer no advantage unless you can also take all your money with you and sever all ties?

As for healthcare, I can walk into any public clinic or hospital in EU, but I don’t like doing it. I’ve lived most of my adult life in Canada & US so I feel I’d be taking advantage of the EU’s universal system. So I intend to buy private insurance. Likewise, by leaving Canada I’m forfeiting (the best) healthcare to which I’ve contributed. Ideally there should also be healthcare reciprocity treaties, as already exist between EU countries.

Any ideas?
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Old 06-08-2015, 12:06 PM   #27
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Originally Posted by Free_at_49 View Post

Roth is still a custodial account. If I were to convert the entire IRA to a Roth, would I not be taxed at the same rate for the conversion? Can I even convert to Roth all at once? It seems you can only convert so much every year, which would take me a lifetime to do.
You can convert as much or as little from your IRA to your Roth so you can do it all at once or in stages to limit the amount of tax you pay each year. I have been converting every year since retiring and have another 10 years before RMD's take effect.

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I'm not clear on this one. Are not IRA distributions considered taxable income in both countries?
For the UK, yes, but then any tax paid on an IRA distribution is offset as a credit in the US tax return so the tax is only paid once.

For the UK, the treaty states that transfers between pension accounts are taxable in the country of origin so IRA conversions to a Roth are only taxable in the US.

At the end of the day taxes are due on the IRA's and for the UK/US the treaty details which country receives those taxes.
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Old 06-08-2015, 12:14 PM   #28
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Iím thinking of splitting my time between Italy and the Greek islands. If I live on a boat, do I even have an address? Is one forced to have a permanent address for IRS purposes?

My ideal solution would be to keep my US citizenship, login to Vanguard once a year from wherever I happen to be, withdraw whatever $ I need for living expenses, have VG withhold the appropriate % in tax, and file my US tax return online just as I do now. That seems very compliant to me, because Iíd be doing exactly what I do now, except Iíd be living in whatever country I chose.

As a retiree, I will have no EU-borne income, only US income from mutual funds. To avoid tax evasion, Italy and Greece have a so-called imputed income, based solely on the fact that one owns/rents a home, has a car, and other types of ďluxuryĒ. There is a tax credit for US taxes paid, so even though there is no outright double-taxation, each EU country considers your financial life by its own rules, so compliance is a huge problem for those of us that are not tax geeks. In any case, renouncing seems to offer no advantage unless you can also take all your money with you and sever all ties?

As for healthcare, I can walk into any public clinic or hospital in EU, but I donít like doing it. Iíve lived most of my adult life in Canada & US so I feel Iíd be taking advantage of the EUís universal system. So I intend to buy private insurance. Likewise, by leaving Canada Iím forfeiting (the best) healthcare to which Iíve contributed. Ideally there should also be healthcare reciprocity treaties, as already exist between EU countries.

Any ideas?
I think this is too specialized a problem for the expertise available on this site. (I may be wrong of course).

Once I started looking into moving back to the UK I found sites that focused on US/UK expats (in both directions) and found lots of good advice and resource references, not just on tax issues, but healthcare, retiree benefits etc.
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Old 06-08-2015, 01:43 PM   #29
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My SIL is a tax lawyer and spent hours looking into this issue for my brother (an "accidental american"). In the end I think she paid for professional help.

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Old 06-09-2015, 11:37 AM   #30
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That seems very compliant to me, because Iíd be doing exactly what I do now, except Iíd be living in whatever country I chose.
And therein lies the problem.

As Alan indicated, this is the territory of international tax experts and beyond the scope of a public forum. Nonetheless, some points are obvious as I would guess you've already established.

As a resident of a foreign country, you are subject to their tax legislation first. They will have the first go at your income. The US is second, but is and always will be present and will never go away if you are a US citizen. As a US citizen, you will always remain as resident in the US for tax purposes. If there is a treaty with the US it may offer some relief.

There seems to be three simple conclusions, and beyond those is the creativity of the international expert.

The first solution is to remain a US citizen, establish residence in a foreign country, and employ a dual (US/other country) tax specialist to best capitalise on filing both in the US and in the other country. Advice should be sought as to the best management of the funds in the US.

The second is to maintain a residence in the US, travel as you wish, never establish residence in any foreign country (you're always on the go and never in one place long enough to establish residence according to local rules, and always declare an ultimate return to the US), and maintain filing in the US as at present. Remember, you are always resident in the US for tax purposes no matter what, but you will not have the advantage of claiming tax concessions for physically being abroad. Your retirement income will be passive (not earned income), so the only offset for US tax is foreign tax paid, and you'll have none. This solution is aggressive tax wise, and would require the input of professional advisors.

The third is to renounce US citizenship and establish yourself abroad. There are two catches: the source of your income, and the exit tax. The US exit tax is quite punitive. Most get caught out on the $2 million threshold. $2 million sounds like a lot, but it encompasses all your assets. For example, if your current IRA will pay $50,000 a year on retirement, the exit tax will require the value of the total IRA funds to be determined at present, or by the amount needed to maintain that yearly amount for circa 30 years (there are actuarial charts to be computed for the exit tax), so that is $1,500,000. Add to that the value of any house, car(s), valuables, and ALL investments, and the $2 million threshold is easily breached.

As you've discovered, there are no easy answers.
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Old 06-09-2015, 03:45 PM   #31
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And therein lies the problem.

As Alan indicated, this is the territory of international tax experts and beyond the scope of a public forum. Nonetheless, some points are obvious as I would guess you've already established.

As a resident of a foreign country, you are subject to their tax legislation first. They will have the first go at your income. The US is second, but is and always will be present and will never go away if you are a US citizen. As a US citizen, you will always remain as resident in the US for tax purposes. If there is a treaty with the US it may offer some relief.

There seems to be three simple conclusions, and beyond those is the creativity of the international expert.

The first solution is to remain a US citizen, establish residence in a foreign country, and employ a dual (US/other country) tax specialist to best capitalise on filing both in the US and in the other country. Advice should be sought as to the best management of the funds in the US.

The second is to maintain a residence in the US, travel as you wish, never establish residence in any foreign country (you're always on the go and never in one place long enough to establish residence according to local rules, and always declare an ultimate return to the US), and maintain filing in the US as at present. Remember, you are always resident in the US for tax purposes no matter what, but you will not have the advantage of claiming tax concessions for physically being abroad. Your retirement income will be passive (not earned income), so the only offset for US tax is foreign tax paid, and you'll have none. This solution is aggressive tax wise, and would require the input of professional advisors.

The third is to renounce US citizenship and establish yourself abroad. There are two catches: the source of your income, and the exit tax. The US exit tax is quite punitive. Most get caught out on the $2 million threshold. $2 million sounds like a lot, but it encompasses all your assets. For example, if your current IRA will pay $50,000 a year on retirement, the exit tax will require the value of the total IRA funds to be determined at present, or by the amount needed to maintain that yearly amount for circa 30 years (there are actuarial charts to be computed for the exit tax), so that is $1,500,000. Add to that the value of any house, car(s), valuables, and ALL investments, and the $2 million threshold is easily breached.

As you've discovered, there are no easy answers.

Thank you

So far Iíve only considered your Solution#1. I had a tax specialist do a hypothetical EU tax return for me. All my income is US-borne, so I get a credit for US income tax already paid (as I posted above). My total EU tax bill would be $400 to $1000 depending on how much I withdraw from my IRA. Living in EU means no US State tax or property tax (house sold), so overall it looks like a net saving!

Iíve considered your Solution #2, i.e. moving between Italy & Greece without spending long enough time to become permanent resident, and therefore not EU taxable. i.e. Iíd remain a permanent EU tourist, but it requires not owning a house or a car.

Solutions #1 and #2 would have to become very painful compliance-wise before I consider Solution#3. If the US punishes you so hard for living abroad that youíre forced to renounce, so be it.


Iím trying to keep everything simple and honest so as to minimize need for international tax lawyers. I only mentioned ďimputed incomeĒ which is a way they use to tax people that report little or no income but have a yacht on the Mediterranean and a villa on a Greek island. BTW Iíve met quite a few Americans living & working in EU for many years who simply have nothing to do with US.
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Old 06-09-2015, 05:24 PM   #32
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If the US punishes you so hard for living abroad that you’re forced to renounce, so be it.
This does seem somewhat overstated. Several posters pointed out reciprocal treaties, etc. that sometimes exist which dampen the tax bite. Although, it does sound like doing the taxes might be a challenge for the diy'er.
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BTW I’ve met quite a few Americans living & working in EU for many years who simply have nothing to do with US.
If they literally have nothing to do with the USA, the financial impact of being a USC must be minimal otherwise they'd renounce. Why keep the citizenship at a significant expense if you don't have, and intend to never have, anything to do with the USA?
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Old 06-09-2015, 05:39 PM   #33
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BTW I’ve met quite a few Americans living & working in EU for many years who simply have nothing to do with US.
FATCA is now making "nothing to do with the US" rather difficult these days and is likely the impetus for the large increase in renunciations.

There seems to be two diverse groups who are renouncing. The first are the super-rich; a very, very small number of those renouncing. They have the assets to pay the Exit Tax without sustaining a crippling blow to their finances.

The second seem to be either the "accidental Americans" or the Americans who have lived abroad for many years, and who have basic or minimal assets. It may be easier for them to escape the Exit Tax by being below the threshold, but they may also struggle with the $2,350 fee.

The silent majority (to use US political speak), and those feeling the brunt of the increased reporting burden, are likely those Americans who have lived abroad for many years, done reasonably well, and have pensions, savings, a home, investments (unfortunately, often local to them, but foreign to the US), etc. In other words, those who have planned for retirement. The most vociferous outcry usually comes from those in the 50 to 70 year old range. They often come very close to the Exit Tax threshold. Obtaining a date to renounce can require a 6 month to 1 year wait for an appointment, and exchange rates can vary from the time of planning to the day before the appointment (when your assets are valued). Most are just average people in local terms, but can be hit by the Exit Tax once their homes, pensions, and savings are included for US purposes. It then becomes a difficult decision. Most are waiting, suffering the US tax reporting, and hoping that reason will eventually prevail.

I enjoyed the recent thread on the variation of Euro rates when planning a vacation. Imagine trying to forecast the consequences when your entire assets are involved!

As was said in my first post, one cannot generalise on any of this. Each individual has their own unique situation. Once you have established yourself abroad, you'll have to make the judgement as to whether the burden becomes oppressive. Since your retirement income is US sourced, you already have an advantage over those above regards US tax reporting. I wish you good luck with your plans.
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Old 06-09-2015, 05:43 PM   #34
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And therein lies the problem.

As Alan indicated, this is the territory of international tax experts and beyond the scope of a public forum. Nonetheless, some points are obvious as I would guess you've already established.

As a resident of a foreign country, you are subject to their tax legislation first. They will have the first go at your income. The US is second, but is and always will be present and will never go away if you are a US citizen. As a US citizen, you will always remain as resident in the US for tax purposes. If there is a treaty with the US it may offer some relief.

There seems to be three simple conclusions, and beyond those is the creativity of the international expert.

The first solution is to remain a US citizen, establish residence in a foreign country, and employ a dual (US/other country) tax specialist to best capitalise on filing both in the US and in the other country. Advice should be sought as to the best management of the funds in the US.

The second is to maintain a residence in the US, travel as you wish, never establish residence in any foreign country (you're always on the go and never in one place long enough to establish residence according to local rules, and always declare an ultimate return to the US), and maintain filing in the US as at present. Remember, you are always resident in the US for tax purposes no matter what, but you will not have the advantage of claiming tax concessions for physically being abroad. Your retirement income will be passive (not earned income), so the only offset for US tax is foreign tax paid, and you'll have none. This solution is aggressive tax wise, and would require the input of professional advisors.

The third is to renounce US citizenship and establish yourself abroad. There are two catches: the source of your income, and the exit tax. The US exit tax is quite punitive. Most get caught out on the $2 million threshold. $2 million sounds like a lot, but it encompasses all your assets. For example, if your current IRA will pay $50,000 a year on retirement, the exit tax will require the value of the total IRA funds to be determined at present, or by the amount needed to maintain that yearly amount for circa 30 years (there are actuarial charts to be computed for the exit tax), so that is $1,500,000. Add to that the value of any house, car(s), valuables, and ALL investments, and the $2 million threshold is easily breached.

As you've discovered, there are no easy answers.
There is actually a fourth option, just never come to the the US and don't get a US passport. What countries extradite for us tax evasion? (The Swiss don't for example). Yes it might make some travel a bit more complex but it is a solution. Unless your fairly well off the US won't spend the money on extradition.
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Old 06-09-2015, 08:58 PM   #35
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There is actually a fourth option, just never come to the the US and don't get a US passport. What countries extradite for us tax evasion? (The Swiss don't for example). Yes it might make some travel a bit more complex but it is a solution. Unless your fairly well off the US won't spend the money on extradition.
TheOAP was actually responding to a direct question from free_at_49 who already has a US passport, and an IRA in the USA so his choices are limited.

However, you are correct that if you never have a US passport and never work in the USA there is little chance you will be affected.

DD's partner was born in Dayton, Ohio, to Australian parents and returned to Australia when he was 5. However, at age 35 he moved first to Canada for 2 years and then to the USA where has been working for the last 3 years as a US citizen and now is paying tax accountants to try and sort out his past tax filings as a US citizen for all the time he worked in Australia and Canada. It's unlikely that he'll owe any taxes but it is costing him a pretty penny to sort out plus he has more than $10k in his Australian superannuation accounts (similar to an IRA) and hasn't been reporting that to the Treasury either. (no tax due but potentially large fines for failing to report foreign financial accounts). He had no idea about this tax bombshell when he left Australia.
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Old 06-10-2015, 08:08 AM   #36
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FATCA is now making "nothing to do with the US" rather difficult these days and is likely the impetus for the large increase in renunciations.

There seems to be two diverse groups who are renouncing. The first are the super-rich; a very, very small number of those renouncing. They have the assets to pay the Exit Tax without sustaining a crippling blow to their finances.

The second seem to be either the "accidental Americans" or the Americans who have lived abroad for many years, and who have basic or minimal assets. It may be easier for them to escape the Exit Tax by being below the threshold, but they may also struggle with the $2,350 fee.

The silent majority (to use US political speak), and those feeling the brunt of the increased reporting burden, are likely those Americans who have lived abroad for many years, done reasonably well, and have pensions, savings, a home, investments (unfortunately, often local to them, but foreign to the US), etc. In other words, those who have planned for retirement. The most vociferous outcry usually comes from those in the 50 to 70 year old range. They often come very close to the Exit Tax threshold. Obtaining a date to renounce can require a 6 month to 1 year wait for an appointment, and exchange rates can vary from the time of planning to the day before the appointment (when your assets are valued). Most are just average people in local terms, but can be hit by the Exit Tax once their homes, pensions, and savings are included for US purposes. It then becomes a difficult decision. Most are waiting, suffering the US tax reporting, and hoping that reason will eventually prevail.

I enjoyed the recent thread on the variation of Euro rates when planning a vacation. Imagine trying to forecast the consequences when your entire assets are involved!

As was said in my first post, one cannot generalise on any of this. Each individual has their own unique situation. Once you have established yourself abroad, you'll have to make the judgement as to whether the burden becomes oppressive. Since your retirement income is US sourced, you already have an advantage over those above regards US tax reporting. I wish you good luck with your plans.

I have a feeling that the IRS is being very accommodating to Boris Johnson. Because he’s famous if he were to renounce the worldwide publicity would sting?

There are huge numbers of naturalized Americans retired in EU birth country collecting Social Security, simple workers, unaware of International treaties, and they seem to be doing OK, probably because SS (pensions in general) are not double-taxable in EU? There was recent news item: Social Security agents physically visited a 100+ year-old to verify that he’s actually alive. Indeed he’s alive and well, they found him working in his olive grove.

(Re my posts above and your Solution#1) When you’re retired on US income only it’s easier to be a permanent EU “tourist”? i.e. compliance is vastly simplified? Most online tax preps allow you to file a Federal return with a foreign address. You can then use the $ income from your US return to file your local EU tax return with credit for US tax already paid. My hypothetical return was based on that scenario. That seems very compliant to me. I’m not asking for qualified advice, just thinking out loud, shooting the breeze…
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Old 06-10-2015, 11:07 AM   #37
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I have a feeling that the IRS is being very accommodating to Boris Johnson. Because heís famous if he were to renounce the worldwide publicity would sting?

There are huge numbers of naturalized Americans retired in EU birth country collecting Social Security, simple workers, unaware of International treaties, and they seem to be doing OK, probably because SS (pensions in general) are not double-taxable in EU? There was recent news item: Social Security agents physically visited a 100+ year-old to verify that heís actually alive. Indeed heís alive and well, they found him working in his olive grove.

(Re my posts above and your Solution#1) When youíre retired on US income only itís easier to be a permanent EU ďtouristĒ? i.e. compliance is vastly simplified? Most online tax preps allow you to file a Federal return with a foreign address. You can then use the $ income from your US return to file your local EU tax return with credit for US tax already paid. My hypothetical return was based on that scenario. That seems very compliant to me. Iím not asking for qualified advice, just thinking out loud, shooting the breezeÖ

If Boris renounces it will not be for the hassle or cost of filing US tax returns if will be because he is going to make a run for Prime Minister and being a US citizen would give his opponents to much ammunition to attack his loyalities. (David Cameron has already announced that he will not run another term and has named Boris among several potential successors).

As for option 1 above, I have done the permanent tourist thing in the UK for several years and as long as you keep track of the residency rules and your days present then it is indeed very doable. After 6 years of this we are going to set up a permanent house in the UK which changes things. (I keep a spreadsheet of nights in the UK to make sure I didn't fall foul of things)
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Old 06-10-2015, 11:19 AM   #38
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Originally Posted by Alan View Post
If Boris renounces it will not be for the hassle or cost of filing US tax returns if will be because he is going to make a run for Prime Minister and being a US citizen would give his opponents to much ammunition to attack his loyalities. (David Cameron has already announced that he will not run another term and has named Boris among several potential successors.
Agreed. That's why Ted Cruz recently renounced his Canadian citizenship, though there was no economic incentive to do so.
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Old 06-10-2015, 11:41 AM   #39
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Originally Posted by Free_at_49 View Post
I have a feeling that the IRS is being very accommodating to Boris Johnson. Because he’s famous if he were to renounce the worldwide publicity would sting?
It's a lose/lose for both sides. Boris was recently elected to Parliament for a second time (as well as being Mayor of London). During the campaign, a past strategist for one of the opposing parties tried to make an issue of Boris being a tax cheat due to the US situation. Johnson's UK tax record is admirable (doesn't take loopholes), so the mud slinging soon stopped.

Also a sticky wicket was the Mayor's job. Does Boris have signature authority over the City of London accounts? If so, they all must be reported on an FBAR to the US Treasury - Financial Crimes Enforcement Network (as with all US citizens abroad). Boris is also not short of a bob or two, so the Exit Tax will also rear its head. Maybe a reason why Boris settled and has yet to renounce.

There's also some bad press in the UK regards financial customers who are British citizens only being forced to pay for yearly FATCA searches (@$600 a time) concerning certain trusts. In addition, normal banking accounts have been denied to a group of Boy Scouts and a group of church bell ringers due to them being unable to answer the now routine questionnaire about "US Person" status of all members when opening the accounts.

Tina Turner's renunciation was so much simpler.

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Originally Posted by Free_at_49 View Post
There are huge numbers of naturalized Americans retired in EU birth country collecting Social Security, simple workers, unaware of International treaties, and they seem to be doing OK, probably because SS (pensions in general) are not double-taxable in EU?
It very much depends on the country and if they have a Totalisation Agreement with the US. In the UK, for example, the US Social Security payment to a US Person resident in the UK may only be taxed by the UK, and never by the US.

No other country on the face of this earth has citizenship based taxation besides the US. (I disregard Eritrea's 2% diaspora tax and its one page tax return.) All others have residence based taxation which allows all this difficulty to go away since expats are generally not taxed on income generated outside the home country.

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Originally Posted by Free_at_49 View Post
(Re my posts above and your Solution#1) When you’re retired on US income only it’s easier to be a permanent EU “tourist”? i.e. compliance is vastly simplified? Most online tax preps allow you to file a Federal return with a foreign address. You can then use the $ income from your US return to file your local EU tax return with credit for US tax already paid. My hypothetical return was based on that scenario. That seems very compliant to me. I’m not asking for qualified advice, just thinking out loud, shooting the breeze…
That sounds a very US orientated response.

Again, US citizens resident in a foreign country have a primary tax responsibility to that other country. As a result, the normal procedure is to pay the other countries tax bill first and then offset tax on the US return using the foreign tax paid.

Much can be made of treaties, offsets, and exemptions, but in the end it is quite possible to owe tax on a US return. Most other countries can impose a certain type of tax on its residents which is not recognised as a tax by the US (that type of tax doesn't exist in the US). Therefore, no tax offset. An example: the council tax in the UK is not equivalent to US property tax on your home, and thus not allowed as an itemised deduction on a US tax return. Other countries may also allow residents any number of "tax free" advantages. Since these don't occur in the US, the US will tax them. Therefore there are no foreign tax credits available to offset US tax due. Example: UK tax free cash ISA accounts. It may not happen often as one may go for ten years and owe the US nothing, but due to some activity, they may owe tax in the eleventh year, but none for the five years thereafter. Again, every situation is different.

Which is a long winded way of my getting to your tax on "imputed income". Such a tax, by a foreign country, may or may not be allowed as a foreign tax credit by the US. You'll need to check this out.
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Old 06-10-2015, 02:01 PM   #40
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Boris is also not short of a bob or two, so the Exit Tax will also rear its head. Maybe a reason why Boris settled and has yet to renounce.
May I correct an error I made in a previous post.

Boris was born a dual national and currently resides in the country of his other birth citizenship. Therefore, he is not subject to the US Exit Tax.

Apologies.
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