There's no double-taxation, since you can 100% deduct any foreign taxes paid. I paid no U.S. tax in the years I lived in Denmark for this reason; I wasn't double-taxed. Since the U.S. has one of the lower federal tax rates of developed countries, and expats don't have to pay state or local taxes, really only people who live in tax havens end up having to pay U.S. taxes (by raw number, I would guess the largest number are expat oil-company employees living in one of the low-tax gulf states). So it mainly boils down to a tax headache, which is significant. I didn't pay any U.S. tax, but I had to file a whole bunch of documents.
I'm not an ex pat, but I have dual citizenship. I've never lived or earned money in the US but I still have to offer my income and declare my bank balances to the IRS every year - the principle is enough to make me want to return my passport, never mind the paperwork.
Are you thinking of the Foreign Earned Income Exclusion? That one lets you exclude foreign income up to $100k from even being computed for U.S. income purposes. But the Foreign Tax Credit, which lets you take a 1-for-1 credit of foreign taxes actually paid against U.S. taxes owed, has no maximum. The distinction only really matters if you're in a country which has lower taxes than your U.S. federal tax rate. If, like me, you're in a country with higher taxes, the Foreign Tax Credit completely wipes out your U.S. tax liability with no maximum.
Ah, right. See, it's not all that simple, and like you write elsewhere, you need a competent accountant.
For instance, part of the US-Italy tax treaty says that as a US person working as an independent contractor in Italy, I needed to pay into Social Security rather than the Italian equivalent. I'm not sure I would have figured that one out on my own.
Same here. My US accountant told me about the paperwork I needed to get to tell the IRS that I was covered under the US/Sweden totalization agreement for Social Security.
> The agreement with Italy represents a departure from other U.S. agreements in that it does not include a detached-worker rule. As in other agreements, its basic coverage criterion is the territoriality rule. Coverage for expatriate workers, however, is based principally on the worker's nationality. If a U.S. citizen who is employed or self-employed in Italy would be covered by U.S. Social Security absent the agreement, he or she will remain covered under the U.S. program and be exempt from Italian coverage and contributions.
You're wrong, and while it might seem harsh, I'm going to have to say you just don't know what you're talking about.
My non working US wife has completely jeopardised my family's financial well being, purely through being american. She has been out of the country for 10 years, and she would be expected to pay 125% of our life savings as for over 5 years our joint bank account held the deposit for our house? She has no income, and didn't file. No FBAR -> 25% of the balance in fines per year for 5 years == 125%.
An incredible number of american's come out of the woodwork saying "there is no problem", because it wasn't hard for them. You don't prove a negative result with one data point!
Yes, not filing an FBAR is a major pitfall, in part because it's not that well known among the general public. But I don't see how this is a response to my comment. I was simply pointing out that there's no double-taxation on income. A fine for failing to declare a foreign bank account is an entirely different question than double-taxation.
