FATCA (the Foreign Account Tax Compliance Act), made law in 2010, compels US citizens and green card holders to declare their foreign bank accounts, earnings and assets to the IRS each year. It also compels foreign banks and financial institutions that want to do business with the US (so basically all of them) to declare any accounts belonging to US citizens. The idea behind the law was to prevent super-rich individuals stashing wealth abroad to avoid paying tax on it, but in practice the law has affected the 8 million US expats living abroad in unintended ways. Some expats have for example reported encountering difficulty opening bank accounts and getting mortgages, as the burden of compliance for foreign banks has led to them resenting and sometimes denying US citizens access to financial services.
Every US citizen or green card holder is liable to pay US taxes, regardless of whether they are citizens of another country too. This is also true of foreigners born in the US, and children of US citizens born abroad, all of whom are technically US citizens (assuming that they have never officially renounced their US citizenship), even if they have never had or applied for a US passport, or if they haven't even lived in or visited the US in decades.
Boris Johnson, the Mayor of London, was born (to British parents) and lived in New York until be was 5. Never having renounced his US citizenship, over 40 years later he received a US tax bill on the capital gain he had made on a house in London he bought in the 1990s and then sold in 2009. After much deliberation, he ultimately paid up, so as to be able to visit the US again in the future. He later renounced his US citizenship, so as not to receive any more bills.
American expats can live incredible lives, and often have incredible stories to tell. New Yorker Caroline Calloway is a mature student studying History of Art at Cambridge, one of the UK's (and world's) oldest Universities. Her Instagram posts about her adventures in the bizarre "Harry Potter-esque" world of the university's antiquated traditions and rituals have gained her a social media following of hundreds of thousands, transatlantic press coverage, and a book deal. The following is an excerpt from ''I feel like I am in Harry Potter: a year in the life of an American studying at Cambridge", published in The Daily Telegraph.
In the 102 years since the US first introduced income tax, the tax code has 'blossomed' from 400 pages to... 75,000.
It was during the Second World War that the code first really ballooned, from 504 pages in 1939 to 8,200 in 1945. This was attributed to the complexity of funding the war effort.
The code had expanded to 26,000 pages by 1984, but the last 30 years have been another period of intense growth ...
One - Mexican Food
The only country on earth that can do Mexican food as well as the US, is... Mexico. And the further away you go, the worse it gets, if you can find it at all. Say goodbye to those huge, delicious burritos, endless tortilla chips, and fresh, fragrant salsas: the nearest things you are likely to find will be pale impersonations. Unlike the Chinese, who opened restaurants in almost every corner of the globe, Mexicans haven't roamed far enough and in sufficient numbers to have introduced their delicious cuisine to the wider world. As an American expat, there are times when your only option is to track down the ingredients and make it yourself.
Know your GAAPs from your FATCAs with our handy guide to some of the more commonly spotted IRS acronyms.
IRS - Internal Revenue Service. You probably knew that one, but you probably didn't know that the name was first used in 1918. It was previously known as the Bureau of Internal Revenue, and was established by Lincoln in 1862 to levy an income tax to help pay for the Civil War. This first income tax was 3%, or 5% if you earned over $10,000. Those were the days. Previously, the only federal taxes were on trade and property.
American expats can live incredible lives, and often have incredible stories to tell. Kristen Evelyn Rossi is a jazz singer on a mission to spread the Golden Age of Broadway / Jazz throughout Asia. The following is an excerpt from 'Falling in Love at the Metropole Hanoi' in Global Living Magazine.
Born on Long Island, New York, Kristen Rossi is currently living the American expat life in Bangkok, Thailand, where she is an active member of the performing arts scene. She has appeared in numerous stage performances, in Thai and international films, on television and commercial sets and even behind the doors of many voice-over studios. On March 31st, she concluded a four-month stint as the jazz 'diva' at the landmark Sofitel Legend Metropole Hanoi ...
If you are a US citizen, or you have a Green Card, and you earned more than about $10 thousand in the last tax year, then the answer is yes, you do need to file a US Federal Income Tax Return. You may also have to file a State Return, depending on which State you last lived in.
For your Federal Return, you need to file the same 1040 form as usual, as well as 2 more forms, the 2555 and the 1116, which are just for expats ...
Broadening our horizons
Whatever stage of life we are at when we decide to move from the United States, however well-traveled we are, and whatever our reasons for going, the experience is going to broaden our horizons. Seeing new places, experiencing another culture, and adapting to different surroundings and ways of doing things gives us a new sense of perspective on the world, our friends and family back in the States, and ourselves.
Recently the FBAR (Foreign Bank Account Report) and FATCA (Foreign Account Tax Compliance Act) filing requirements have generated quite a bit of controversy, as they pertain to the recent IRS crackdown on financial assets in overseas accounts. FATCA in particular has caused some uproar since going into effect in March 2010, as foreign financial institutions now have to report on American clients' accounts, causing some banks to turn away new US citizen clients or closing accounts currently held by US Citizens, to avoid the high cost of compliance.