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Expatriation

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June 23, 2017

How to Not Pay U.S. Social Security Tax While Working Abroad

Americans who move abroad to work face a particularly difficult job in preparing tax returns. Let’s cheerfully ignore income tax problems today, and instead look at Social Security taxes.

Technically, I am talking about FICA1 taxes: the taxes you pay to fund your old-age pension, survivor’s pension, disability insurance, and Medicare benefits. But for simplicity’s sake–and to match the way normal people talk about these taxes–I will refer to these taxes as “Social Security” taxes.

Let’s look at the semi-established digital nomad. You are a U.S. citizen who owns an operating U.S. business, formed as a corporation. You plan to move abroad and travel for a few years.... continue reading

June 20, 2017

Taxation of MSAs and HSAs after Expatriation

This is another piece of the rewrite project for The Exit Tax Book.


Specified Tax-Deferred Accounts After Expatriation: Generally

Distributions from specified tax-deferred accounts after expatriation are unremarkable: an expatriate (covered or not) is treated like any nonresident alien, and taxed accordingly. The only difference will be for covered expatriates: since they are taxed when they expatriate, they are not taxed a second time when they receive distributions of money that was previously taxed.

This chapter discusses distributions from every type of specified tax-deferred account except IRAs:

  • Health Savings Accounts (HSAs);
  • Archer Medical Savings Accounts (MSAs);
  • Section 529 education savings plans; and
  • Coverdell education savings plan.
... continue reading
June 15, 2017

Is My Retail Super Fund a PFIC?

Is my pension fund a PFIC?

This is a question we get frequently through email:

I have a pension fund. Is that a PFIC?

Unfortunately, there is no easy answer to this question, because every country has a different pension system, and they can be classified wildly differently depending on how the country’s pension works.

For this post, I will pick on the retail Australian super fund again, because I happen to see a lot of them. This post merely illustrates one process I use to determine if there is a PFIC problem.

What is a super fund?

It is a retirement savings schemes.... continue reading

June 9, 2017

Income Tax Return Filing Deadlines for Americans Abroad

Answers In a Hurry

Here are the answers in a hurry:

When You Must File Your Income Tax Return

  • April 15. If your “tax home” or “abode” is in the United States, your filing deadline is April 15. This is the default rule.​
  • June 15. If your “tax home” or “abode” is outside the United States, your deadline for filing your income tax return is June 15. This is automatic and you do not need to do anything to get it.
  • October 15. Anyone can file Form 4868 to make extend the filing deadline to October 15. File before April 15 or June 15 (whichever applies to you).
... continue reading
June 6, 2017

Canadian Treaty Relief from Double Taxation

Covered expatriates risk being taxed twice: once by the United States on assets they own when when they expatriate, and a second time by their home country when they sell assets or take pension distributions.

The double taxation problem has been largely solved for expatriates who live in Canada, but not (as far as I know) for other residents of countries.

What’s a Double Taxation Problem?

Let’s talk first about what a double-taxation problem is. It occurs because two countries want to tax you, and neither country cares that the other country taxed you.

Two Countries Claim You

If you are a taxpayer in two different countries, both countries will impose their domestic tax laws on you, and insist on the right to force you to pay tax on your income.... continue reading

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Events

Featured Event

CalCPA: Foreign Investment Series

When: July 13, 2017 8:30AM – 2:30PM
Where: Webcast hosted by CalCPA

Foreign Investment: Choosing a Holding Structure for Foreign Investment in U.S. Real Property
Presenter: Phillip Hodgen
When: 8:30AM – 9:30AM

Foreign investors can own U.S.

International Tax Lunch

July: International Tax Lunch

Form 8621: Mark-to-Market and QEF Basics Webcast

Passive foreign investment companies (PFICs) have a notoriously punitive tax treatment. Fortunately, there are two different elections that may be made to reduce tax.

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