Potential bad tax news for USA expats.

johnsr

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Some House Republicans reacted angrily to the idea of raising any taxes. "Any kind of tax increases now are wrong, and they wouldn't make it through the House," said House Rules Committee Chairman David Dreier (R-Calif.).
 

Timex

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May 9, 2002
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Sh*t

OMFG!

Thanks, for the heads-up Rob.

Tim H.:confused: :confused: :disappoin :disappoin :angry: :angry:

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COPY & PASTED FROM MY POST, moving to the DR.
This is what Rob, is talking about- for those of you wondering.



Since I mentioned it before, I have received allot of request's about this. Below is a portion of the IRS 593, (2555-EZ)exemption. At the bottom is a link for the full publication. As always, consult a professional for your tax advice, I did this, just out of courtesy.

A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.
Amount excludable. If your tax home is in a foreign country and you qualify under either the bona fide residence test or physical presence test for the entire tax year, you can exclude your foreign income earned during the year up to the maximum amount shown in the schedule below.
Year: Maximum Exclusion
1997: $70,000
1998: $72,000
1999: $74,000
2000: $76,000
2001: $78,000
2002 and after: $80,000

Beginning in 2008, the $80,000 amount will be adjusted for inflation.


Full Text
Scroll down to Publication 593

http://www.irs.gov/formspubs/lists/0,,id=101466,00.html

Thanks
 
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Escott

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Jan 14, 2002
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Tim, instead of 330 days out of the country you can get your residency in a Foreign country and get the exemption for income derived from overseas.

Scott

Edited to add:

It is an either or kind of thing
 

Timex

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May 9, 2002
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I do.

I have Dual, Citizenship.:cool:
But as bad as the Taxes were back home.
It's still a bargain compared to paying DR Taxes on my full income here.

I have my income split, 80% U.S. & 20% D.R.


Tim H.
A man who HATES, paying for Government Programs, supporting Drug Addicts Squirting out baby's:angry: :angry: :angry:
 
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getonwithit

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Robert said:
Word of warning, if this turns into a "nasty" political thread regarding USA politics I will remove it.

well then.....what was the point of opening the thread in the first place?
 

Timex

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May 9, 2002
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To let us Americans

Know our lives in the DR, might be affected.

Americans working overseas would be hit the hardest: the bill would no longer allow them to exclude $80,000 in income from federal taxes. That provision alone would amount to a $32 billion tax increase....

Just because it's not popular, does not mean it should have not been posted.:confused:

IF every American overseas took the full exemption, that would mean at least 2,100,000. of us are out there.

And what the Fed's do away with, you can bet the States will do the same.:( :( :(

Not that it will mean much, I just spent 2 hour's preparing a letter, to all my Congressman, Senators, and State Repesentitives. I was able to e-mail some, the rest will go UPS Monday.:angry:

Thanks
Tim H.
 
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Robert

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Re: Re: Potential bad tax news for USA expats.

getonwithit said:
well then.....what was the point of opening the thread in the first place?

When you have been around on the board for over 6 years you get to know the way things "can" evolve.

Plus this is the "Living" section and the DR has many US expats and many read this site. For many, DR1 is their only source of local news.

And what Timex said...
 

Chris

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Oct 21, 2002
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A good friend sent me these links -

for the bona fida residence test
http://www.irs.gov/businesses/small/international/article/0,,id=96960,00.html

and
http://www.irs.gov/pub/irs-pdf/p54.pdf - where I found interesting stuff about resident and non-resident aliens - which could be dominican spouses of those who live here, or like me, a resident alien married to a U.S. citizen, neither of which live in the U.S.A.

I cannot for the life of me figure out if my grammer is correct in this last sentence - comes from reading all this IRS stuff.
 

Timex

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Thank God!!!

The final version of the Bill, that is being sent to Bush does not have the repeal in it!!!!!

Cool!!!!

Tim H.
 

Amicus

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Dec 25, 2002
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The long arm of the IRS

The sad fact of the matter is that US tax law, along with other measures as well, is "extra-territorial". Laws should be not only applicable but also enforceable solely upon national territory.

If an expat meets the 330-day rule they should be purely and simply exempt from any income tax whatsoever. And, if they want to live in a place where there is no income tax - Monaco, for instance - then that should be surely their business as well. In all likelihood, expatriates working abroad are being paid for working for companies that are also generating their revenues abroad.

Furthermore, US tax dollars are doing very little in terms of assistance to expats, and certainly far less than the local taxes they pay which offer them, in some instances, far more social assistance (schools, hospitals, etc.) than would be obtainable stateside.

Extra-territoriality of its income tax is unique to the US. (I think.) I cannot imagine another country that taxes their citizens if they are bona fide residents of another country.

Finally, and the saddest part of it all, taxing expatriates is tantamount to "taxation without representation" - one of the foremost inequities that generated sufficient animosity against the English throne to spark a revolution in 1776, which gave birth to the USA.
 

Chris

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Re: The long arm of the IRS

Amicus said:
Extra-territoriality of its income tax is unique to the US. (I think.) I cannot imagine another country that taxes their citizens if they are bona fide residents of another country.

A good friend (and I have not confirmed the info) told me that the US and Libya are the two countries that do this... Not sure of the facts at all, but he is a reliable source.
 

Amicus

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As long as Libya is the only "other" country, then expats needn't worry ... for the moment.

Anyway, I repeat, this scare comes up everytime the US congress talks taxes. What they should better occupy themselves with is a complete reform of the tax code, which is archaic.

The US has one of the lowest total tax rates of the western world, and still the Republicans are bitching and moaning about "excessive tax rates". With ostriches like these in power, I see no change in the political outlook for taxation in the US. (Which is good for the DR .... )

PS: I don't see any ground-breaking ideas regarding taxation emanating from the Democrats either, btw.
PPS: Here's an interesting article regarding the matter: www.iht.com/ihtsearch.php?id=97644&owner=[/url](NYT)&date=20030529142709
 
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Amicus

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PS: About Taxation

The only way that a country can pursue someone for tax liability (if that person is physically resident in another nation, but remains one its citizens) is by means of a tax treaty between the two countries.

Meaning this, tax evasion must be contrary to existing law in both countries. So, does the DR have an existing tax treaty with the USA?
 

Keith R

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Re: PS: About Taxation

Amicus said:
The only way that a country can pursue someone for tax liability (if that person is physically resident in another nation, but remains one its citizens) is by means of a tax treaty between the two countries.
Amicus,
I'm not a tax lawyer (are you a lawyer, as your moniker implies?), but it seems to me that this is not entirely true. What about a US citizen resident in the DR, but paid salary by a US-based MNC that already withholds US taxes and social security from the citizen's salary? [For example, this is done to all US citizens working at Citibank-DR.] Couldn't the IRS seek to garnish part of that citizen's salary to recover tax it claims to be owed?

What about a US citizen residing in the DR but who still possesses, on US territory, property, bank accounts, trust funds or other assets that the IRS can seize or freeze in pursuit of tax it argues is owed?

Regards,
Keith
 

Jan

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So, if your an American citizen and Dominican resiident and make Dominican pesos only you have to pay tawes on that income? What do they use as transfer rate when changing pesos to dollars so they can charge taxes. Also, if you only make pesos, would the USA take payment in pesos? Maybe we who have to pay taxes in USA need to start paying in pesos and see what happens!
 

Amicus

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Jan said:
So, if your an American citizen and Dominican resiident and make Dominican pesos only you have to pay tawes on that income?

All revenues beyond the $80K exclusion minus whatever local taxes you have paid on the income are liable to taxation at US rates.

Jan said:
What do they use as transfer rate when changing pesos to dollars so they can charge taxes.

Expatriate taxes (US, that is) are handled all in the same way. Your peso revenue will be converted, if need be, at the average exchange rate for each pay period during the year. If the local currency is appreciating, and you pay taxes in the following year, you will pay fewer tax dollars. That is not the present circumstance, however. So, you pay more tax dollars when the local currency falls.

Jan said:
Also, if you only make pesos, would the USA take payment in pesos? Maybe we who have to pay taxes in USA need to start paying in pesos and see what happens!

No, I seriously doubt that. I suggested that once, not in the DR, and the person who prepares my taxes choked on his cigar in laughter. Still, if you want to pay your taxes in pennies, it is legal currency and the IRS must accept it. Of course, they might ask you to stick around until it was all counted ... ;)

As an American, you have the $80K dollar exclusion. If you are making more than that in the DR, well, lucky you. Your company will work out a tax compensation arrangement for the added loss due to a declining exchange rate. (Which should be reported as income, and become part of your tax liability the following year ...)

If your total income, from all revenues including equities, bonds and savings, is more than $80K, then it is as sure as the setting sun that you are going to get hit on the amount over $80K.

God Bless the IRS.
 

Amicus

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Re: Re: PS: About Taxation

Keith R said:

I'm not a tax lawyer (are you a lawyer, as your moniker implies?), but it seems to me that this is not entirely true. What about a US citizen resident in the DR, but paid salary by a US-based MNC that already withholds US taxes and social security from the citizen's salary?

Surely, you jest. Few lawyers are my friends, despite the name. No, I am not a member of that august body of the legal profession.

If you work more than 330 days of the year outside the US, then regardless of how your salary may be deducted for tax liability (pay as you go, for instance), the liability wil be calculated on a basis net of the exclusion and net of the local DR taxes paid. (I am sure you understand this, but am simply repeating it for clarity.)

If your salary is in pesos, it will be exchanged at the current rate for tax liability calculations. If it is in dollars, well, no sweat. Still, when it comes to making the declaration, the $80K will apply.

Keith R said:
Couldn't the IRS seek to garnish part of that citizen's salary to recover tax it claims to be owed?

Oh, yes, the IRS will smell it out like a shark scents blood from five kilometers.

Keith R said:
What about a US citizen residing in the DR but who still possesses, on US territory, property, bank accounts, trust funds or other assets that the IRS can seize or freeze in pursuit of tax it argues is owed?

Yes, indeed, they will seize it with a court injunction until your taxes are settled. If you do not respond within the alloted time, they will simply sell the property up to the amount necessary to pay the taxes. If insufficient, the interest rate clock will continue ticking on the remainder.

It is unwise to dicker with the IRS, particularly if you have property in the US. But, if you are working for an MNC, I am sure that they have a contract with local tax consultants, who will merrily handle the tax maze on your behalf.

It is the individual who does not have that expert support who may be in for a hassle. I am sure, however, there is sufficient talent in the DR to handle US tax declarations for one and all in this category. KPMG might do them for a fee, though I am not sure how much they charge. There are 80,000 Americans estimated to be living year-round in the DR, so the market is significant, wouldn't you think?

PS: Neither do I work for the IRS. I am a mere mortal like the rest when it comes to paying US taxes as an expat - which is why I first posted regarding this peculiar situation that I find very unfair.
PPS: Annnnd, I am not a tax consultant, I am a tax payer and the above has been my experience as an inveterate expat.
 
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Keith R

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Re: Re: Re: PS: About Taxation

Amicus said:
PS: Neither do I work for the IRS. I am a mere mortal like the rest when it comes to paying US taxes as an expat - which is why I first posted regarding this peculiar situation that I find very unfair.
Dear Amicus,
Thanks for the response.
Yes, I too thought it all very unfair when I was living in the DR 1995-99. I was resident in the DR & earned less than the exclusion (a bit lower than $80,000 at that time), but every year had to file extensive paperwork with the d*mn IRS just to prove I did not have to pay them taxes on any "active" income earned. Plus since we still had bank accounts in the US, 2 rental properties (one our house, so we could move back if we chose!), mutual funds, we earned "passive" income -- although small, Uncle Sam (& Commonwealth of Va) still wanted taxes on it and we had to file reams to show it was offset by deductables.... I even had to prove to the State of Florida that I owed them nothing in services taxes! I had switched the address of record on all my accounts to my Business Mail PO box in Miami, so Florida concluded that I resided in Florida and owed them services tax! Had to show that I did not reside in Fla, so keep the greedy fingers off! :mad:
Best Regards,
Keith