Friday, April 15, 2016

Beware the Ides of April

If you are an American living abroad, or considering doing so, you should be aware of your obligation under U.S. law to file tax forms, even if you owe no tax in the U.S. The usual deadline for filing is today, April 15, though this year it is extended to April 18 because of an Emancipation Day holiday in the District of Columbia.

Those who live outside the U.S. and Puerto Rico can take an additional two months to file taxes without sending in a form requesting an extension. However, if you owe any tax, interest on what you owe starts accumulating as of the April filing date.

For those with regular employment income only, an earned income exemption often means they owe no U.S. tax. Those with other types of income may not be so lucky. The foreign tax credit also allows some people to escape double taxation. However, if you have substantial investments in the U.S., you are likely to end up owing U.S. tax in addition to tax in the country where you live.

In recent years the U.S. has begun enforcing provisions of the tax code that add to the filing burden of overseas Americans. Now we are required to report foreign bank and investment accounts above a certain dollar amount, and banks in some countries are refusing to do business with American citizens because they too are being asked to supply information on their clients to the U.S. goverment. For those with investments abroad that exceed a fairly modest level, there is an additional requirement to file an online form with the Financial Crimes Enforcement Network of the U.S. Treasury.

Young people considering moving overseas seldom have enough money to worry about considerations like these. However, if this is your situation, I would advise you to consider your options very carefully. And if you already live abroad, contact your Congressional representatives or the local chapter of Republicans Abroad or Democrats Abroad, which can supply you with more information. The latter organisations are active in trying to get this legislation amended in order to ease the regulatory burden on Americans who happen to live abroad.

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