Sunday, January 26, 2020

US citizens living abroad

Starting this thread as a place to post important information specific to American citizens who are living abroad.

 Topics covered:
FBAR's - forced manual reporting of your bank accounts overseas. Failure to comply has very high penalties, and ignorance of this law is no excuse.
Taxes Problems for US citizens getting overseas bank accounts
Report of birth abroad

 FBAR = Report of Foreign Bank and Financial Accounts This is a requirement of the treasury department (financial crimes divison) that needs to be filed once a year for anyone that had $10,000 USD in foreign bank accounts at any time during the year. This filing was required by the end of june, but it looks like the due date is being pushed forward to mid Apr in 2017. Filing can be done online. It requires bank account numbers, bank address, and highest bank account balance for the year (in USD) for each account that you have. For business people that may have signature access to non-personal accounts, this could apply to that as well. Penalties for failing to file are quite high and they say ignorance is no excuse. "Willful" violation is at least a 6 figure penalty. Online filing in the past has been problematic as they required some ancient version of adobe acrobat to fill out their pdf form. This last year it seems a bit better.
  IRS Details
Where to file


As an American citizen, you can be congratulated as being subject to the most oppressive tax system in the world. I won't get into much detail on this topic as I'm sure we're all aware that the tax laws of the US are so complicated that most IRS people don't even know half of them. Legal disclaimer, I'm not a tax professional and this is not tax preparation advice.

If you're an American working overseas and paying foreign tax, don't get comfortable thinking you don't have to file in the states. You do have to file just like everyone else. The difference can be in what income is taxable. If you have been outside of the US for 330 days out of the calendar year, you should be tax exempt up to around 97,000 USD. So for many, you may not have to pay any tax, but you will still need to deal with filing (including the problems of you not getting the right tax forms from your employer and overseas banks). Things like selling property, having overseas investments, etc may be a big mess and cause you double taxation. After being away long enough, you might be able to avoid state filings, but check with a tax advisor on that to be sure.

If you're not savy in the tax system, you may want to find a good professional. Finding one that knows expat rules may be difficult. There is one that advertises a lot (Greenback expat tax services). I haven't tried them yet, so I'm stuck paying anywhere from 400-700 per year to get a professional to do my taxes. Greenback has flat fees (which have dramatically increased in the last few years) and are specialized in expats. So if anyone has experience with them, please share.

Lately there has been some legislation to revoke passports of anyone owing the IRS $50,000 or more.

Some articles on the tax system for expats and how it sucks

Bank account issues:

In relation to FBAR's, there is the FACTA law. This law requires foreign banks to open up to the IRS. If they don't, they can be restricted in international banking and face other fees. This has caused some banks to just give up on US citizen customers and they refuse to take them due to all the extra regulatory hassle involved. Others may require you to fill up IRS forms with some basic information for them to store in order to help comply with it. Some banks may just be unaware and don't seem to care. In any case, if you look around on the IRS site, there is yet another form (8938 to send with your tax filing) to fill out regarding your overseas banks if the value of your accounts goes over 50,000. This is in addition to the already mentioned FBAR requirement for 10k and higher.

Report of birth abroad:

When you have a child, you will likely end up dealing with the US embassy at some point. If you want the child to be a US citizen, you can go to the embassy and apply for the birth cert, social security number and a 5-year child passport. If you don't want the child to be a US citizen, you may still get stuck applying for it anyways.

Some of the important things to note, or things you will need:
1) If only one parent is a US citizen, they will need to be able to prove they were living in the US (I think it must be for 5 years) somewhere between their birth and the birth of the child they are registering. So you will need to ensure you have some records to help prove this, such as: DD214 (for ex military), school report cards/transcripts, W-2's from employment, pay statements, passport stamps, etc.
2) Hospital records. You will need records of prenatal check ups, hospital admission/delivery receipts or records, and even post natal vaccination records and the like. The more you can provide, the better.
3) The embassy may massacre your kids names on the US documents. Muslim names are especially confusing to them (bin/binti). We did this process for 4 kids, and I think all 4 of them have unique naming standards and honestly nothing clearly shows what they put in as middle name and last name.

Check the local US embassy site for that country to see if there is any variation. There are more documents required, but the ones above are just some personal experience points were we had problems. If you have documents in languages other than English and the primary language of the country that you are applying in, you probably need official translations of those. Lately in our country, the embassy has an appointment system which seems to have almost 0 available appointments for report of birth. This can change from day to day as they bother to update their calendars or people cancel. So you may need to check the site once a day if you are trying to get an appointment. Same goes for passports, but there should be more available slots for those as they take less time.

As I mentioned before, you may be stuck applying for citizenship even if you don't want it. In our case, we stay in Malaysia with one US citizen parent, one Malaysian citizen parent. Malaysia doesn't allow dual citizenship, so we just wanted to stick to having that alone. Around 8 months of age with our first child, we decided to go visit the relatives back in the states. I emailed the embassy and gave them the details of my wife and our child, and asked what type of visa we needed to apply for. They told me the appropriate visit pass to apply for, and we had to pay in advance of the submission. When we showed up at the embassy, they approved my wife and rejected my son's application (not refunding the application fee of course). The reason given: he is a potential US citizen. So what? Potential should be "potential". In any case, we couldn't get the visa, and they made me apply for the report of birth and a US passport (a few more fees to pay). So we're stuck dealing with all the added expenses of the report of births, maintaining passports, and the eventual problem of dual citizenship or possible renunciation of citizenship (which I hear can cost over $400 and doesn't really have a clear process). I couldn't find any details about this whole "potential US citizen" thing being a problem for visit passes. This happened in 2004, so the event is a bit old. For all of our subsequence children, we just went through the same process for each and didn't bother checking to see if things had changed.

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