# MUST READ before moving to the US



## jimmyjam (Jan 9, 2012)

Anyone planning on getting a work or student visa, a green card, or just being physically present in the USA for more than 3 months (183 days over 3 years), should be aware of new legislation that could have life-altering impact on you.

You will not be told explicitly about these facts when applying for your green card or visa.

Moving to the US, even for as little as 3 months any given year, will result in you being considered a full US taxpayer by the IRS. All of your bank accounts, assets, real estate, retirement funds, etc that you hold in your original country will be brought under the jurisdiction of the IRS.

You will have to declare to the US authorities, and pay tax on, any financial transactions you have back home. If you rent out your apartment for example you will have to declare the rent, file, and pay taxes on it. If you sell your house when you are already in the US you will have to pay US capital gains taxes on the sale of your foreign house. If you have a retirement fund, even a tax-free or tax-advantaged fund in your home country, the US will consider it taxable income and you will be taxed on it.

If you own shares of a small business or have signing power or decision power over any business or company, you will have to fulfill extensive, confusing and very costly reporting over all aspects of that business to the IRS and pay income tax on it even if it has no income sourced in the USA.

If you do not report these things, the US authorities have set up an infrastructure of punitive leglislation that can confiscate your life savings 3 times over and/or put you in jail for a criminal offense.

The US will continue taxing you on your worldwide income even if you move back to your home country. Green card holders will have to pay an exit tax in order to return to their home country and stop filing. The exit tax applies to people who are successful and have more than 2 mio dollars net worth (this INCLUDES all your real estate, retirement etc. in your home country, and it is not indexed). The exit tax considers that you sell everything (even your real estate and retirement plans you had in your home country) and imposes a 15% capital gains on your entire net wealth, whether this wealth comes from your stay in the US or not.

The US is setting up strict enforcement of the taxation of foreign assets through the new law FATCA. Under FATCA, your bank in your home country will have a compliance officier who must search out "US persons". You are a US person if you meet any of the criteria mentioned above, including simple presence on US soil for more than 183 days over 3 years.

Your bank in your home country will be required to search for "indicea" of your US connections; do you transfer money to the US? do you fly frequently to the US? does your account mail go to a PO box, a c/o adress, or worse an adress in the US? If you bank finds any of these indices they will be required to denounce you to the IRS and report your balances and eventually individual transactions to the IRS.

If the IRS finds out about accounts you have not reported, there is a 10,000 minimum penalty per account per year, even if they money is not yours (for example if you had signing power over your parents account and forgot to declare it); maximum penalties go up to 300% the value of the account and a prison sentences, for not declaring the account even if no taxes are due.

Many green card holders, visa holders, long term and temporary residents wished that they had known this before making the move to the USA. Many more will find out the hard way next year when banks in their home country start reporting to the IRS.

This is not a reason NOT to move to the US. If you have no money, no assets, and low earning potential none of this should affect you. If however you aspire to middle class or more, if you already have any investments, bank accounts, retirement savings in your home country you must get full information on this aspect of life in the USA before moving there. Hire an international US tax lawyer for 2 hours to find out what things you should be aware of, in your specific case, before making the move.

Some people may ask me to prove what I am saying is true. Besides surfing on the ACA American Citizens Abroad website, you can have a read through the IRS Taxpayer Advocacy Service annual report which is published on the IRS website, look at the "international" section.

Please note in the below quote, "US Taxpayer" means not only US citizen in the US, but any foreign greencard holder in the US or back at his homeland, any person on a work, student or tourist visa who has been present in the US more than three months, etc...

"the complexity of international tax law, combined with the administrative burden placed on these taxpayers, creates an environment where taxpayers who are trying their best to comply simply cannot. For some, this means paying more U.S. tax than is legally required, while others may be subject to steep civil and criminal penalties. For some U.S taxpayers abroad, the tax requirements are so confusing and the compliance burden so great that they give up their U.S. citizenship"


http://www.irs.gov/pub/irs-utl/2011_arc_internationalmsps.pdf


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## Bevdeforges (Nov 16, 2007)

The big question I have is where you have gotten the information that "just being physically present in the USA for more than 3 months (183 days over 3 years)" will subject you to all this oppressive international taxation stuff? 

That the US taxation rules are ridiculous and getting worse is pretty much common knowledge. Though there are limits to how aggressively the IRS will (or even can) move against foreign residents who are considered to be "US persons."

And I'd be wary of getting too worked up about "proposed legislation" - particularly in the current environment. Congress can barely pass any sort of legislation these days with all the "tea party" and "coffee club" or whatever the various factions call themselves. Lots of stuff gets proposed, but it isn't law until it gets passed by both houses of Congress. For those who have a vote, writing letters to your Congresscritters is highly advised when they are considering some of the more idiotic ideas that come up.
Cheers,
Bev


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## twostep (Apr 3, 2008)

"Hire an international US tax lawyer for 2 hours to find out what things you should be aware of, in your specific case, before making the move."
Discrete advertising?

No matter which way you try to sell your point - there is no double taxation. Getting all worked up about information without appropriate links and/or proposed legislation is a waste of time,


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## eucitizen (Dec 8, 2011)

*There IS double taxation*



twostep said:


> No matter which way you try to sell your point - there is no double taxation. Getting all worked up about information without appropriate links and/or proposed legislation is a waste of time,


Dear two-step, could you please provide some backup information, to your statement that double taxation does not exist? Especially for people on the USA forum, this issue is very important as they should be aware of the implications if they get a green card. It would be a shame to mislead people into thinking that double (or excess or additional or whatever you want to call it) taxation does not exist.

US citizens - and green card holders returning to their homes - are subject to double taxation as soon as they set their foot out of the USA.

There are certain measures put in place to try to alleviate this, but they are impartial and not working. The bottom line is, as a US citizen (or green card holder or long term resident) you are at risk for double taxation when you no longer live in the USA. You will always pay MORE tax than either US citizens in the US and other countrymen in your new country.

(1) Double taxation treaties DO NOT APPLY TO US PERSONS. 

US persons who are double-taxed by the US may not use the treaty for relief. The true purpose of these treaties from a US point of view is to ensure that other governments help the IRS when they decide to attack someone who does not live in the US. 

See http://www.aca.ch/taxtreat.htm

(2) Alternative Minimum Tax: 

"The AMT disallows a portion of the foreign tax credit, creating some degree of double taxation for the more than 8 million American citizens living abroad. Some modest income families owe AMT solely because of currency fluctuations." from Alternative Minimum Tax - Wikipedia, the free encyclopedia

also US Alternative Minimum Tax | Economy Watch

and http://*****************.ca/2012/06...with-the-united-states-essentially-worthless/

(3) Estate and inheritance tax are not subject to the tax treaties and are applied on US persons abroad including green card holders. A green card holder who returned to his country without terminating his green card may have to pay 40% to 80% local estate taxes, PLUS go through US probate and pay US taxes on his foreign house, foreign savings, foreign investments...

(4) Idem for gift taxes

(5) The IRS itself admits that US persons (yes including green card holders who returned home) pay higher taxes than legally necessary in the US. What it doesn't say is that a US person abroad will always pay higher taxes than his US counterpart at home AND his fellow countrymen where he lives. The US will always top-up his tax to come up to US rates. Since many kinds of tax are not deductible, this makes for double taxation. I can give you some concrete examples if you wish.

"For some, this means paying more U.S. tax than is legally required, while others may be subject to steep civil and criminal penalties." from http://www.irs.gov/pub/irs-utl/2011_arc_internationalmsps.pdf

(6) That extract from the IRS TAS itself brings us to penalties. The penalties imposed on international people who have US ties but also assets in other countries, are draconian. No other country on earth treats its citizens (and green card holders who have gone home) in this way. Minimum 10,0000$ per account per year, up to 350% of the highest amount in the account now (regardless if that was taxable income, or money that did not even belong to the person signing the account....) Now there is even a new and complicated form that has a 10,000 penalty that increases by 10,000$ every 90 days of late filing. 
These penalties can be imposed whether you even owe any US tax or not; by definition they would come on top of any other tax you paid in your local country so => double tax again.

(7) US persons (including green card holders who have left the states) must continue to hire expensive international tax preparers to file US taxes for the rest of their life even after they have gone back home. Compared to other citizens of their country, they must file 2 returns, keep aware of 2 sets of regulations, pay twice for their tax preparation... that is a form of double taxation.

(8) Finally if a green card holder wishes to terminate his ties with the US, he will have to go through the exit tax procedure and pretend to liquidate his worldly savings, and pay a capital gains tax on the part above a certain limit. The US therefore takes a pre-emptive capital gains tax, on people who move away, ad who will be taxed in the future in their future company when, for example, they cash in their retirement plan. This is clear and blatant double taxation.

http://www.robertsandholland.com/siteFiles/News/604article.pdf

(9) Expiry of tax credits: When you are living and working outside the US (thats right, even if you have NO US source income, doesn't matter, you will still taxed by IRS if you hold a green card or are a US person) the US lets you deduct SOME of your locally paid taxes from your US taxes. Usually, for earned income in Europe, taxes are higher so you pay no US taxes during your working career. But lets say you work for 30 years in England, you never paid US taxes, and now you retire and your retirement plan is assimilated, by the IRS, to an "offshore fund" and you have to pay AMT on it, you have to pay US capital gains, etc... Your tax credits from your exorbitantly taxed working career will expire after 10 years. From then on you will be paying US tax on things you have, in fact, paid UK tax on during your working years.


Now, I am anticipating Bev's comment that "these things only apply to rich people who can pay for it anyway" (except perhaps for the 150% inheritance tax can result in some countries and situation which no matter what your wealth I think is a bit steep) and "the IRS is not going after middle class families". She may be right but that all remains to be seen. 

Thousands of middle class Canadians who emigrated to the US are now fearing having their Canadian RRSP retirement plan confiscated from them by the IRS for simple reporting omissions see Fixing Problems with Canadian RRSPs Held by US Taxpayers | AG Tax Services, Surrey BC. Will the IRS actually confiscate retirement plans from unsuspecting hardworking grandmas? That remains to be seen, but those people are having a lot of sleepless nights I guarantee you. So far the IRS has not been very forthcoming in trying to reassure these thousands of poor hardworking people.


Dear Twostep, if you have some qualifications, experience, articles or anything at all to support your statement that "double tax doesn't exist", I would be very glad to hear about them.


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## Bevdeforges (Nov 16, 2007)

I had left the original post in this thread up as a sort of a courtesy to the OP. Yes, there is a tax issue to be considered for those considering a permanent move to the US. And there is a significant tax issue for those US citizens looking to move FROM the US to any other country.

The US system of both citizenship and taxation is (to put it politely) somewhat unique in the world. 

It is the responsibility of anyone looking to change their country of residence to look into the matter of taxation and how it will affect them in their own personal set of circumstances.

There is a further issue with the so-called "accidental Americans" - those who fall under the US citizen category due to the "accident" of being born in the US to non-citizen parents, or having one US parent while being born overseas. This seems to come into play when an "accidental American" looks to take advantage of their US citizenship. And again, in those circumstances, it's up to the individual to check out the tax or other risks they may be taking by making their decision to benefit by their US citizenship.

All further discussion of this issue should take place over in the Expat Tax section. 
Cheers,
Bev


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