Douglas Tax Blog. U.S.A.
We sometimes get a call regarding American Expatriates Taxes, whether the person is overseas, or visiting relatives back here in the United States. The common theme among all the expats is confusion about what they are required to do, and then frustration once they learn the rules of what is required by Uncle Sam of Expats, in filing taxes and the requirements about whether they will owe or not. Sometimes they end up with a debt, usually for failure to file any return at all, and sometimes they need tax relief as a result.
Before making the decision, you need to know that if you leave, you may have to pay an exit tax. The tax is calculated by determining your assets and then figuring out what you could reasonably get for them if you sold them the day before you left the country. What you ow the IRS overall depends also upon the type of assets you have. If you have stocks or bonds,, the IRS can tax you up to 20% of those holdings. Other investments can be taxes up to the top tax bracket, which dropped after the Trump tax reform from 39.6% to the top rate of 37%.
Needing Tax Resolution because you failed to plan for such an exit can be avoided with some solid planning, but be advised and do it ahead of time. Most of the expats who call us failed to do just that, and that is why they are looking for Tax Resolution.
American Expatriates Taxes are complicated when it comes to estate and gift planning as well. Citizens of the United States are granted up to a five and a half million exclusion on taxes passed down in an estate. American Expatriate Taxes are rough in this area, as your relatives could face a forty percent tax on assets passed down in an estate. It is essential to plan ahead with a good financial planner so you can avoid needing Tax Resolution as a result of poor planning.