U.S. Income Tax Obligation while Living Abroad

As a U.S. expatriate residing abroad, you have a legal obligation to file U.S. tax returns each year on your worldwide income.

in numbers: (only as an example)


Married filing jointly      up to $14,300         10% Tax Rate
           $14,301-$58,100     15% Tax Rate



American expats angry over US tax
Members of an American expatriate group in Geneva are angry about the newly “initialed” by the US government, fearing the far-reaching, 'grim' consequences would have on overseas US citizens’ taxes, pensions and social security benefits.
Washington and Bern, agreed late last week to “administrative assistance” in tax matters and have initialed a double taxation agreement (DTA).
The move was a result of pressure put on Switzerland..... bilateral tax agreements before the end of this year.
such an agreement could have dire consequences for an estimated 20,000 US citizens living in Switzerland.
“It looks very likely that things could become much more grim and ugly for overseas Americans in the weeks and months to come,".
“For long-term American citizens in Switzerland, whose contributions to and payments from AVS and private Swiss pension plans are subject to taxation in both countries, this poses a serious problem,”.
Now the US expat community, which mostly supported Barack Obama during his bid for presidency in 2008, feels let down by the new administration.
“He had made several promises to overseas Americans during his campaign last year, and we believed him,”
“All of that fine talk is going nowhere right now,”
The Swiss government said in a statement that the initialed text is still confidential and “will only be published after being signed at ministerial level.”
But, as with many legislative decisions in Switzerland, the agreement could become the subject of a referendum, if 50,000 signatures are collected.

Now that we are soon to pay for the US government spending frenzy…. I am going
to have an opinion…. I am going to voice my opinion…. until now we have been
exempt from paying, and had no right to voice my opinion, I don’t pay, I can not
complain….
but now……. I am going to be all over!!!…… If the representatives would like to
spend money…..  on what ever dream ideas, let them justify it... not as ideology but as a necessity…. and provide a better way to fulfil that dream….. but to buy the way with
money they don’t have….. and seek money from outside the USA…. and it is not tax fraud money…. I worked for it in Switzerland – not in the USA, and declared it in the country I work and live…..
I am very disappointed….. to ask me to pay for a colossal system that provides benefits to questionable, doubtful beneficiaries......  
I work so other can collect...... something is wrong...... some thing is very wrong!
I am not going to be political per se.... but I will target any questionable legislation….. from my point
where I  am...... no way I will pay for colossal ideas with no clear and transparent explanation, other then politically motivated and ideologically justified dream plans.....


Michael

I guess I'm confused Michael - I thought you were a Swiss citizen not an American. I knew your wife was American, but ...

I'm not familiar with this law (when did they pass it?). We were expats for years but since Bill died I just haven't had that many clients who were so I just haven't kept up with the laws on it.

You're right - it doesn't sound right and I don't blame you for being angry if this is coming to pass. In the past if you were a US citizen working for a foreign gov, you were exempt from taxes (not social security) up to $XX (and no one I know ever went over this - who could prove it???? LOL).

I'm sure you're right on this, but I really haven't seen any bulletins come out on it, but will check. This just seems a little far fetched to me. Don't get your blood pressure up yet -- there are ALWAYS some loopholes somewhere.

Hugs BD :-*

Michael,

Isn't it great how the expats are so supportive of Obama until it hits them in the pocket book?

If you will recall, I predicted this before the election.

All those programs sound so great, so compassionate, so much better than leaving it up to personal responsibility.  That is, until you have to pay for it.  Then it's not so cool.

You might say I am comparing apples to oranges... your money is different because you earned it over there.  I submit it is no different than Obama coming after money I earned here that they have no right to seize.  

Americans need to wake up before they are cooked.

-Shawn

US citizens living abroad have long had to report foreign sources of income. I had to when I lived in Europe in the 1980s. There was (and still are) reciprocal treaties that usually mean that most earned income is not taxed by the home country if it is earned abroad.  The first $82,000 is usually exempted. President Bush did sign a law that increased the tax rate above the first $82K.  

Switzerland is a rather special case - due to actions by Swiss banks to help US citizens engage in tax fraud, the reciprocal treaties may fall apart. If so, then Americans living in Switzerland may not have the normal exclusions, and they might have to pay taxes in both countries. Of course, Switzerland could step up and give such people exemption from paying Swiss taxes, if they like.  

Offshore banking center Liechtenstein also had problems like this - Germany suspended the Double-Tax Exemption Agreement with Liechtenstein until that tax haven agreed that customer privacy should not extend to tax cheats.


Quote:

Prosecutors say UBS managed $20 billion for U.S. customers. Earlier this year, UBS agreed to pay a fine of $780 million, admitted that it helped U.S. citizens evade taxes and agreed to cooperate with U.S. investigators. But now it is balking at turning over its clients’ names. UBS says it would violate Swiss financial privacy laws if it complied. In that case, UBS (and its government) should be faced with a simple choice: continue its policy of strict secrecy, in which case UBS should forfeit the right to do business in the U.S.; or compromise, aligning its banking laws with those in the rest of the civilized world. START PRINTPAGEMultimedia File Viewing and Clickable Links are available for Registered Members only!!  You need to or END PRINTPAGE

Quote:

Isn't it great how the expats are so supportive of Obama until it hits them in the pocket book? If you will recall, I predicted this before the election.

I predict that people who don't understand a situation will tend to misinterpret in terms of their biases. This has little to do with Obama - it is part of a disagreement between the US and Switzerland that started long before Obama took office. It is a disagreement that Switzerland has with other countries as well.  

I miss those days when those Swiss bank accounts used by those ugly rich Americans were a staple of comedians and columnists.

My guess is that it's not cut and dried.

Better not be....that's a threat!

Charlie

Yes my wife had field for many years the forms for tax (and a few years my self).
and we had been exempt from paying........!!
But with the new agreement (if the reports are correct) we, my wife and my self
report a joined tax report for the Swiss, that is communal, Cantonal and state tax.
and if we have it right it will be the base for the US authorities for Tax payment as well
and that puts us with in the paying group.......  even if I my self am not a USA citizen!
only wife and kids....  
we still need to sort out the information.... but if the reports are
correct.... well then we pay.... don’t know how much, but still we pay.....
The fact is that for years the situation was quite and no one complained.....  only in late
2008 the IRS and justice department started to put heavy pressure on the Swiss, and now both
governments have apparently struck a deal, and it is apparently very punishing...... from
initial reports......

My wife (and even I) would not mind paying tax in the USA......  but I do not think I should
pay for colossal plans, half way backed..... to support very sketchy and mostly  political interests and ideology forged (motivated)…… plans
that from the outside seem to be somewhat a day dream…… and disconnected from reality…..

Yes! I would like to see a strong USA….. a prospers USA……  and a socially balanced
USA….. (if that is possible,  it is nice believe in a just world, utopia)  but the nature of things is that some are better of then the other…..
and I believe that the system in the USA had made people try hard to achieve the better….. work harder and try to prosper…… the American way!
But if you (the government) hands out (free) money….  to balance the social in balance….
they (the government) take the incentive…. the challenge away….. and most likely creates
a new generation of socially dependent…….. with out the interest, or desire to  achieve to
strive……….. for better life, for the American way……..

Michael

wildhaus wrote on Jul 18^th, 2009 at 2:37am:

But if you (the government) hands out (free) money….  to balance the social in balance…. they (the government) take the incentive…. the challenge away….. and most likely creates a new generation of socially dependent…….. with out the interest, or desire to  achieve to strive……….. for better life, for the American way…….. Michael

I wish more people would see it this way!

Exactly. Life isn't about the path of least resistance, it's about the struggle, about the highs and lows.

Not about being fed like a veal calf.

I agree with the premise up to the point where our society sits aside and lets insurance companies kill people by denying serious medical care even to those with their shitty insurance.

Charlie

So much better to let governments decide who dies...

What baffles me is the premise that government is the answer to every problem.

Medicare is government and is about the best thing there is for us geezers. It's not rationed. We love it.

Congress loves its government coverage too.

The real rationing is done by insurance companies.

Charlie

When our Political leaders send their kids to public school, live in public housing and use the same medical coverage they have set aside for me. I will give credence to what they have to say on the subject. Until then they can bite me! :P

Edited to add: that they should use public transportation as well  - Got to go green you know.

Michael,
There are loads of Ex pats from the UK and isn't it surprising they have the annual ex pat ball, ex pat sing along competition,guess the tax avoid er,want my say but immigrated to get away.
Lets sit on the fence and complain if it comes my way competition
The injustice of it all.
If you want the rights and security that a country gives, don't complain if you don't live there, because there's plenty that do
Pass me that martini.
Not another tax return

I work so other can collect...... something is wrong...... some thing is very wrong!

That's why we're changing our name to the United Socialist States of America. Anyone who voted for Obama......well...you're getting exactly what you asked for. ;)

Joe

Every system has its advantages, every system has its flaws.....
and every system has to be monitored and corrected or adjusted
with the time, demand and needs of society.......

Our social system in Switzerland is not with out flaws..... one
might say big flows (regardless of political point of view).....
be it the AHV (the equivalent to social security – SS) or the IV
(Invalidenversicherung ) (the equivalent to Disability Insurance)
running rapidly out of money.....  the AHV for natural reasons – ageing,
the IV due to (seems like) abuse and lack of proper control...... an more,
our health Insurance, as good as it might be, suffers from ever growing
costs, that seem to spin out of control…
I am not going to list all the social “masterpieces” and the advantages or
flaws….. but any modern democratic society needs the social systems, we
like it or not…..
but this social systems should not turn into a free ride systems….. supported
by the system it self….. on the cost of the general population….. or guided by
political and ideological point of view…..
Michael

Quote:

That's why we're changing our name to the United Socialist States of America.

When I was a kid, it was called "creeping socialism."

Since about 1900, we have accepted some borderline social programs in order to keep afloat. The free market is wonderful but when run-of-the-mill larcenists or out right criminals are all that's running the thing, it's not good. Witness the wonderful job the completely unfettered market did last fall. It happened in the 1920s as well. Nothing is new.

Also witness what this same crowd is doing now: Some paid back their loans after dumping toxic assets and are using the money not for lending but to buy more shit for the bank, not the country.

Wonderful.

The least they can do is sign on to health care to keep well enough so we can bail them out again.

Charlie

Charlie wrote on Jul 21^st, 2009 at 5:11pm:

Witness the wonderful job the completely unfettered market did last fall.

What a crock... unfettered?  Seriously?  You keep spouting this as if it were fact but I know you are not an idiot Charlie.  Congress forced banks to issue loans they knew would not ever be paid.  How in the world is that 'unfettered'?

-Shawn

edited to add:  The banks that paid back their loans paid them back with interest.  The people made money ($10B) on that one until Barney Frank decided that wasn't actually the people's money.

Quote:

What a crock... unfettered?  Seriously?  You keep spouting this as if it were fact but I know you are not an idiot Charlie.  Congress forced banks to issue loans they knew would not ever be paid.  How in the world is that 'unfettered'?

Since Ronald Reagan's administration Wall Street and the financial wizards had become so unfettered and even more so with Bush who made it a point to pay no attention to anything Wall Street did. People who knew what was happening in the Madoff mess were banging on the doors about it but never mind. Horrible government has no need to know about such things.

The Street is still happy. The people that got us in the mess are the first to get back on their feet. Okay. It would make sense if they had a shred of good will. They don't of late.

If you want to blame Congress, you're ridiculous starting only since this decade. Try 1980s

Charlie

Charlie, you blame free markets but free markets do not exist.  It is a drum beat by the democrats to push through more socialist programs in every sector.

Capitalism is evil.
Free markets are evil.
Profit is evil.
Rich people are evil.

Repeat as necessary until there is no more capitalism, no more free markets, no more rich people and no more profit.

Michael, michael, michael---Come back to us babe---IT IS CALLED THE OBBA-NATION!!! However as far as Switzerland, and the Swiss---They have been protected for years and years---Now it is pay up time---Welcome to the OBBA-NATION!!!

Quote:

Capitalism is evil. Free markets are evil. Profit is evil. Rich people are evil.

Nothing in my playbook, Shawn. Rich is good.

You're too far gone though. The biggest friends of captalism are those that question it enough to keep it from destroying itself.

Charlie

Charlie, I'm not the one who is too far gone.  At least I have enough common sense to admit that Republicans are as much of the problem as Democrats.  You can ever get off the Bush Derangement Syndrome mantra, and I've never heard you question any expansion of the government unless it was driven by Republicans.

But, since you're basically on the dole, I can see your reasoning.  I'm truly glad you are well taken care of while I am being bled to death by ever-increasing taxes on actual work I do.  You're welcome.  We live in different worlds.

Charlie, you only went as far back as Regan.  Why am I not surprised, LOL.

zwibbs-Scott wrote on Jul 21^st, 2009 at 7:20pm:

Michael, michael, michael---(....) However as far as Switzerland, and the Swiss---They have been protected for years and years---Now it is pay up time---(....) !!!

in my first post I mentioned....

Quote:

But, as with many legislative decisions in Switzerland, the agreement could become the subject of a referendum, if 50,000 signatures are collected.

we do still poses the right to determine our way.....
and I think it is good so.....

Michael

Quote:

You can ever get off the Bush Derangement Syndrome mantra,

There ya go.....


Quote:

But, since you're basically on the dole, I can see your reasoning.  I'm truly glad you are well taken care of while I am being bled to death by ever-increasing taxes on actual work I do.  You're welcome.  We live in different worlds.

And I have been since October of 2008.

Sucks

Charlie

We are very quickly reaching the point where a small percentage of taxpayers are footing the bill for entire population.  The top 50% of wage earners already pay over 96% of all the taxes in the USA.  The top 5% of wage earners paid an astounding 53% of all taxes in the USA, and that was in 2001.  

Ah, social justice.  Serves them damn wage earners right.

It stands to reason, when people have the choice between achievement and sloth with no penalty for choosing sloth, the majority will choose sloth.  This is why your system is doomed to fail, Charlie.  And when it does, I fully expect you to blame Bush.

Quote:

This is why your system is doomed to fail, Charlie.  And when it does, I fully expect you to blame Bush.

Even I will have a hard time with that. My guess is that he slowed the tax rate increase on the upper end for several years.

From my experience the whole country benefited in the 50s when rates were really hard on everybody. Percentages mean more to the lower end as far as effect.

Warren Buffett says that it's nuts that he has the same or and some cases lower rate than some waitress making $20,000 per year.

Charlie

Shawn wrote on Jul 22^nd, 2009 at 7:00pm:

...  The top 5% of wage earners paid an astounding 53% of all taxes in the USA, and that was in 2001.

Not so astounding when you consider the fact that the top end of the population makes more. A lot more. The person making $15,000 a year (or $30,000)  doesn't have much left after paying for things like food, housing, a car, etc ...  it makes sense for the people on the bottom to pay less, and the people at the top to pay more. But the shift is not as much as you suggest, since the top 5% are already making far, far more than 5% of the income.

The top 5 percent owns over 60 percent of the wealth in the US. Over the past 3 decades, the tax structure has been changed to benefit the wealthy, than you very much.  In the late 1970s, the top one percent of the US population held 13 percent of the wealth; in 1995 it held 38 percent.

Your reference to 'wage earners' above is interesting ... the typical capital gains tax rate (for investments) has dropped to 15%, which is less than many working people pay on their wages.  Inherit money and do nothing for a living ... 15% tax. Work hard for a middle class living ... pay 20% to 30% in taxes.  That doesn't sound like the wealthy getting soaked to me.

monty wrote on Jul 23^rd, 2009 at 11:23am:

(...........) The top 5 percent owns over 60 percent of the wealth in the US. Over the past 3 decades, the tax structure has been changed to benefit the wealthy, (............)

Monty,
you make it sound like the rich steal the money.......
many of them do work very hard for it...... and have to sacrifice
a lot for the wealth!

To be rich is not a crime! ........
nor should it seem like birth defect......

BTW, most of the (top) rich are entrepreneurs that provide a work
place for many individuals.......  Allen, Paul Gardner or Gates, William Henry III
and the list is very long......
if they get rich in the process we all win!
and I am happy for them....... and envy (in a positive way) them and respect them.......

How much tax should they pay..... (?) I don’t know,

I dont like to pay tax.... why should the be defferent?

I only know that we should support them and learn from them, they are
the ones that are the engine of the economy...... the force that provides jobs.......
not like governments that use money..... and have no economical
responsibility......  the tax payer will pay..... and cover the hole....
or simply let the hole get bigger..... the next generation will pay (or not)
This phenomena / attitude is not only a USA phenomena / attitude.....
it is all over the western world!!!

Michael

wildhaus wrote on Jul 23^rd, 2009 at 12:13pm:

Monty, you make it sound like the rich steal the money.......

I didn't say that at all - my point is that that if the top 5% makes 35% or 40% of the income, then a fair system might start with them paying 35% or 40% of income taxes. If the system is adjusted to give people on the bottom a break, then shifting the load for the top group from 40% to 50% is not horrific as Shawn made it sound.  They are still managing to accumulate more wealth than the bottom 95% combined, so they are clearly not being stripped of the fruits of their labor in a punitive tax system ... they are prospering over the past decades (unlike the majority of hardworking people in the middle, who see their real income stagnant).  

Quote:

The top 50% of wage earners already pay over 96% of all the taxes in the USA.  The top 5% of wage earners paid an astounding 53% of all taxes in the USA, and that was in 2001.

Apart from the genie's "I told you so" website, other info:



 



($ = billions)  source: IRS



Adjusted Gross Income


2001


top 5%       $1,996

top 50%      $5,379

bottom 50%   $862





2006

top 5%       $2,978     +49%

top 50%      $7,106     +32%

bottom 50%   $1,016     +18%

-----------------------------

% share of AGI

2001

top 5%      31.99%

top 50%     86.19%

bottom 50%  13.81%



2006

top 5%      36.66%     +4.67%

top 50%     87.49%     +1.3%

bottom 50%  12.51%     -1.3%

------------------------------






monty wrote on Jul 23^rd, 2009 at 1:24pm:

the top 5% ... are still managing to accumulate more wealth ...

If AGI is too narrow, a much larger diverging between top and bottom has been reported using marketable wealth and financial wealth.