morpeth

Sorry why 6 years ?

Good point about the politics, and I suspect over time will get worse as US government struggles to get every source of politically acceptable revenue they can- I am still amazed about FACTA's long tentacles, let alone other annoying rules such as the 5471 form related to businesses. Recently I did some consulting for a small start-up hat had a few US investors- but had to tell them about all the forms and tax filings they needed to do, the fees alone would have wiped out their initial returns so they backed out.

theOAP

"The law defines a “'long-term resident' as any individual (other than a citizen of the United States) who is a lawful permanent resident of the United States in at least 8 taxable years during the period of 15 taxable years.” [bold mine]

Clarification is required as to whether a part year residence (even a matter of days) constitutes a full year for the purposes of 877A (this is tax law, not immigration law). If yes, then 6 years is the safest number.

Currently, there is a question mark over the "repatriation" section of the TAX CUTS and JOBS ACT, and it's yet to be clarified. US Persons who have a 10% share or more of a foreign controlled corporation (a US expat resident in the UK with a small business in the UK for example) may be subject to the "one time" charge,... which could be substantial in their case. You'll find varying opinions.

morpeth

As far as I can see the same form 5471 and other onerous forms required remain- thus for a company seeking to expand overseas, even just a sales office, a lot of reporting can be required. Looking at the initial summaries of the tax bill, I guess more analysis will need to be done because on the surface looks like the bill provides incentive to bring accumulated earning sin the form of cash back to USA, but at a cost of taxes that didn't exist before and it isn't clear at least to me about profits going forward. While it is beneficial to give companies incentive to bring cash back home, burdening US companies competing worldwide doesn't make much sense.

https://www.journalofaccountancy.com...201717829.html

The change in the de minimis regulations described in the link is rather interesting in terms of future effect, I wonder what was the specific reason for this change.

All in all, another round of what I call "tinker tax economics' - a tinker here , a tinker here, so in the end a complex and bloated system of tax regulations that cause a lot of expense to comply with let alone understand.

Who know what future regulation under a Democrat congress might bring for citizens and long term residents , or under either party as USA becomes more desperate to generate revenue and cash. Already in last Congress the moves to restrict passport issuance to those with tax liabilities was quite an exercise in expanding government power over citizens- already banks have to check many foreign transactions so the mechanism is in place to control foreign transfers fairly quickly should the rules change.

carcajou

This is false. US tax rules do take into account US expats. This is why things like the Foreign Earned Income Exclusion (form 2555) exist, which excludes a US expat's first $102,100 of foreign income from US income tax if they have resided overseas for 330 days. There are also ample treaties with other countries that prevent double taxation. As only 5% of US Citizens have an income over $100,000 per year - that covers the vast majority of US expats.

FBAR is also neither time-consuming nor onerous for the vast majority of people.

I have US Citizenship, have lived outside the US overseas for a very long time, and the only burdens I face are doing my tax return once a year (which doesn't take more than an afternoon) and renewing the passport every so often.

That it is onerous for you does not make that representative of US expats by any means.

A UK Citizen taking on US Citizenship, and then moving back permanently to the UK - in the vast, vast majority of cases - will not face double taxation whatsoever nor spend more than an afternoon per year on tax/financial issues.

I agree that jury duty is a bizarre reason not to become a citizen. However I can think of a few:

1. If you are intending to run for political office - dual citizenship could be an election issue (or you may have to renounce one).
2. There could be issues with working in the Foreign Service or other sensitive jobs on return to the UK.

durham_lad

Just to be clear. FEIE only applies to Earned Income so retired expats like myself and my wife do have a very onerous time with US taxes. With 2 US private pensions, 2 IRAs, 2 Roth IRAs, 2 UK private pensions, plus both having SS and OAP in the near future it is a mountain of paperwork for tax filing each year. Also the IRS does not recognise the tax status of ISAs or any UK equivalent of a mutual fund treating them all as PFICs (even those within an ISA). We can’t even invest in NS&I government income or growth bonds as USCs are not allowed to buy them. (The UK does not believe compliance with Fatca is a good use of tax payer funds for NS&I to have USCs as customers).

morpeth

For some such as yourself you may not consider the rules difficult or time-consuming to comply with, but for others simply they are and there is a cost involved- and even more so if something triggers correspondence in dealing with the IRS. Many Expats have to spend a fair amount annually to do the extra forms required, and I know from experience the Form 5471 can cause all sorts of issue if one has a business overseas or work for a company overseas in any financial capacity.

The majority of countries do not have tax agreements with the US that preclude double-taxation; plus the idiotic rule that one can't work more than 45 hours a month without jeopardizing one's social security payments.

Whatever the foreign earned income ( and as far as I know just earned income) exclusion there is, why should there be any extra tax on Americans who choose to live abroad-and keep in mind the main reason for this is not fairness towards Americans overseas, but lobbying from large corporations so they could attract American worker ( I worked for a company that had a history of lobbying for this very issue).

And now with FACTA and FBAR, many financial investments in UK may not be considered for US citizens , and many financial institutions shy away from opening accounts for Americans. And in any case, the limits are so low on the FBAR requirements that it creates a huge expense on monitoring and processing information.

The scary thing is given America's desire to impose such regulations and taxes, what next ?

theOAP

For our less informed members:

A United States House of Representatives subcommittee hearing on Reviewing the Unintended Consequences of the Foreign Account Tax Compliance Act (consequences for USCs residing abroad - underlining mine)

https://oversight.house.gov/hearing/...ompliance-act/

There are real jewels to be found in this video. On the timing bar (and not the clock displayed) the hearing starts at 14:45. There is a recess at 1:17:30 which lasts until 1:55:00. Well worth a watch.

In November, when the House passed the original version of their Tax Cuts and Jobs Act, Congressman Holding made the following short comment with a response by Kevin Brady, Chairman of the House Ways and Means Committee. It contains comments about the 40% additional cost to hire USCs abroad due to US tax filing requirements.

https://www.c-span.org/video/?c46921...gs-comment-rbt

The ACA call to action post which contains:

"Many people on Capitol Hill and the Administration expressed support for changes in the tax rules. Ways and Means Chairman Brady was quoted in the press and, together with Representative Holding, spoke openly on the House floor about their continuing commitment to finding a solution to the tax problems affecting Americans overseas.

While differing on details, Republicans Overseas, Democrats Abroad, Americans for Tax Reform, the Heritage Foundation, several American Chambers of Commerce overseas, and other business groups, all support the movement towards change."

https://www.americansabroad.org/news...ricans-abroad/

From a front page article in the Financial Times (US expats given hope of lower tax bills) the following quote:

"Mark Mazur, who was the top tax official in Barack Obama’s Treasury department, said he supported the change, arguing that it was necessary to address the “inequity” of an expat paying tax on the same income to both the US and a foreign government."

Obviously, as with those physically resident in the US, those USCs abroad with simpler situations will not be burdened by complex US tax returns, but many USCs abroad do face onerous filing and reporting procedures.

I'll repeat, once again, the mantra - everyone's US tax filing and reporting situation is different. What applies to you will not apply to all others.

morpeth

true but doesn't change the fact that these rules are burdensome and sometimes costly to comply with for many.

ultimately all these rules the USA imposes on American individuals and companies abroad impose direct and indirect costs on the American economy.one of reasons growth has slowed, increasing regulation and related compliance cost, and capital employed maintaining an army of bureaucrats and a Congress unable to achieve anything substantive to turn the economy around because hey are in love with tinkering with the tax code and regulations and spending money that the government doesn't have.

iceflow

A very interesting thread. My thoughts have always centered around whether SS payments would be maintained for UK citizens who had allowed the GC status to lapse, so would it be better to get US citizenship before moving out of the US back to the UK.
However a more sinister possibility arose in this thread and that is the reference to the estate tax limits if passed to a non US citizen spouse ($149K). Does anyone know how that rule applies to:

House you both share. - Primary accommodation.
401 K assets in the deceased's name.
Joint Bank account savings.

iceflow

OK I think this answers it for me....I don't think I'll ever be that rich, I can never get more than one number up on the lottery. I don't know where the 149 K line came from? Is that some sort of cash gift amount that may be subject to tax? Anyone?

This is from Nolo:

Assets left to a surviving spouse are not subject to federal estate tax, no matter how much they are worth—IF the surviving spouse is a U.S. citizen. This rule is called the unlimited marital deduction. It is in addition to the individual exemption that everyone gets.
The marital deduction, however, does not apply when the spouse who inherits isn’t a U.S. citizen, even if the spouse is a permanent U.S. resident. The federal government doesn’t want someone who isn’t a citizen to inherit a large amount of money, pay no estate tax, and then leave the country to return to his or her native land.
Still, keep in mind you can leave assets worth up to the exempt amount (again, $5.49 million in 2017) to anyone, including your noncitizen spouse, without owing any federal estate tax. And if the noncitizen spouse dies first, assets left to the spouse who is a U.S. citizen do qualify for the unlimited marital deduction.

Steve_

The answer to this question is "no" because ultimately you can always renounce it if you live abroad and as far as the exit tax goes, it applies to LPRs as well so no difference really.

So really the only problem is the wait and the expense of renouncing it balanced against the advantages of having it, and the advantages clearly outweigh that.

mrken30

I think the $5.49 mn now nearer $10mn only applies to USC. In 2011 non USCs had an allowance of only $60,000.

According to this 2017 document, this is still the case for US situs assets.

http://www.clarkskatoff.com/files/No...art%202017.pdf

However, for a nonresident non-citizen (“nonresident alien” or “NRA”) the applicable exemption continues to be limited to $60,000. Thus, estate tax is due when a nonresident alien’s estate transfers U.S. situs assets above $60,000. This article provides a brief overview of the U.S. estate and gift tax laws as they impact our international clients who are nonresident aliens. I am not sure what, if any changes have been made in the current tax reform. However there is a strong anti-citizen sentiment in the current administration, so who knows what the future may hold.

U.S. Estate and Gift Planning for Non-Citizens – SGR Law

Steve_

Both Canada and the UK have estate tax treaties with the US, so in essence you're treated the same as an American for estate tax purposes. You file an 8833 with the 706 to claim the tax treaty treatment. Commonly done by Canadians for example who have vacation homes in the US as they're generally worth more than $60,000.

Not really relevant to an LPR as they're not non-resident aliens.

mrken30

Thanks for this, I had forgotten about the treaty. This is one of the reasons this is a great forum. If you had just gone to a CPA or a tax attorney, they may not be aware of the treaty.

US-UK Estate and Gift Tax Treaty (1980)

iceflow

So looking at the pdf it still looks to me that LPR decedent to LPR spouse estate transfer, the estate would still get the $5.49 million lifetime exemption against estate tax, or am I missing something here?

Thanks