Uncle Sam Wants Your Foreign Address, and Your Money

US Tax filing for citizens and greencard holders living internationally is onerous and complex


There has been a lot of attention lately on the complex tax situation of Americansand US Green Card holders (legal residents) living overseas. Let’s say you have moved abroad, either for work or personal reasons, did you know that you are still a US tax resident? This is true even if you aren’t a U.S. citizen, for as long as you maintain a U.S. Green Card. Your status as a U.S. tax resident living abroad brings with it some very unique and cumbersome tax and disclosure laws , the responsibility to comply with which lay squarely on your shoulders.


The IRS imposes a secondary tax on all citizens and legal tax residents living abroad,which means that they must file US tax returns every year. In addition to paying tax in whatever country in which they reside, they must also satisfy ole Uncle Sam. In many cases, this can mean taxes are due over and above whatever taxes are owed internationally – subject to a complex method of foreign tax credits, deductions, and income exclusions.


And know this, the United States is one of the very few countries to tax on their citizens’ and residents’ worldwide income. No other major nation taxes this way. So don’t think that you simply pay tax in the U.S. on U.S.-sourced income, and internationally on foreign-sourced income. It doesn’t work that way.


Furthermore, new laws are coming into place which tighten the rules on disclosure of foreign bank accounts, and force foreign financial institutions to provide the IRS with more personal financial data on Americans and U.S. legal residents living overseas.


The Foreign Bank Account Reporting, or FBAR, now requires expats to report all foreign financial assets and the balance of all foreign bank accounts (above $10,000) to the U.S. government every year. Do so annually, or risk facing potentially harsh penalties, including fines, possible confiscation, and even criminal prosecution.


In addition, the Foreign Account Tax Compliance Act, or FATCA, is currently getting a lot of attention around the world. It essentially requires any international financial institution doing business within the U.S. (read: all large firms) to monitor their individual clients for U.S. connections, and to report to the U.S. Treasury on those clients’ financial dealings. As you can imagine, this isn’t winning many friends at international banks, as compliance requires a tremendous amount of new investment in process and technology. However, most foreign governments are happily joining in on the reciprocal protocol – they will now get more information on their citizens abroad.


I think the conclusion here is that we are becoming a much more connected world,where one’s personal financial dealings are ever more available to various governments and authorities. There will be both good and bad outcomes as a result, but no doubt the complexities of living a cross-border lifestyle are increasing – it’s just the cost of doing “global” business.