Americans who move abroad to find themselves or escape student loans or pretend they're digital nomads discover the U.S. tax code has a longer reach than their trust fund. You can flee to Portugal. You can buy a villa in Thailand. You can post Instagram stories about how much cheaper healthcare is in Costa Rica. The IRS still wants its forms.
This isn't about paying taxes. Most expats owe nothing after deductions and credits. This is about filing paperwork to prove you owe nothing. It's like showing up to jury duty just to be dismissed. Except if you skip it the penalties start at ten grand.
The Foreign Account Reporting requirement kicks in if you hold more than ten thousand dollars overseas at any point during the year. Not ten thousand in income. Ten thousand in an account. A checking account. Your rent deposit sits in escrow for three weeks and congratulations, you're a person of interest to FinCEN.
Every other country on earth uses residence-based taxation. You live there, you pay there. Done. The United States and Eritrea are the only two nations that tax based on citizenship. We share this policy with a country the State Department warns Americans not to visit. That's the company we keep.
Young expats think leaving solves their problems. They think geographic arbitrage means freedom. What it means is hiring an accountant in Kansas to file forms about a Romanian bank account that holds eight hundred euros. The hourly rate for the accountant exceeds the balance in the account. But you file anyway because the alternative is a federal crime.
You can renounce your citizenship. Costs twenty-three hundred dollars and requires an exit tax calculation. Even leaving has a cover charge.
Photo by Tiffany Tertipes on Unsplash
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