US Citizens and Income Taxes

Or multiple accounts that in total add up to $10,000.

SawMan wrote:

Or multiple accounts that in total add up to $10,000.

yes

Median family income in Canada is $76,000, Statscan survey shows

Read more: http://www.ctvnews.ca/canada/median-fam … z2yFpKpxKy

Me thinks you greatly inflate   all things Canada. The median home sale, and the median income seem to be  pretty much in line. In the US, you will not find folks living in million dollar homes with a combined income of 76 K, nor will you see many multi millionaires that got there with that type of household income. You must have some magical formula there.
Matter of fact, it sounds so great, I'm amazed that you took your million's and left it!!

Think what you wish, all you need to do is navigate to some of the online real estate sites and see with your own two eyes the listings. They speak for themselves. Again with the "average" figures for wages now. Well since the Minimum Wage is $10.25 (CDN) and a lot of people work for Minimum Wage, you can see that THEY certainly wouldn't be earning anywhere near $76,000.00 per year, in fact, based on a 40 hour work week they earn $21,320.00...... so what does that tell you? It tells you that there are a Hell of a lot of folks in Canada earning much more than 76 grand to bring the "average" up to that high a figure. Duh! Just like in the good ol' USA where the "average" income includes everybody from Bill Gates and Warren Buffett to the itinerant farm workers picking grapes in the Napa Valley or apples in New York State.

For example a couple working both at Minimum Wage jobs would have a family income of just under $43,000.00. The "median" family income also doesn't account for the economically depressed areas of the country or people who work seasonally such as fishermen, loggers, farmers, etc.

BTW, what's the "median" Grade Point Average for Americans?

"BTW, what's the "median" Grade Point Average for Americans?"

Moot point what the  Grade Point Average is in the US.  It is also a moot point what the average income in the US is.     < if that is what you meant to compare> I'm not interested in getting into a pissing match over countries, I only questioned some of your statements regarding costs and net worth's in Canada.. I thought that your numbers were inflated and did a simple search and came up with numbers that were, in my mind, not supporting your claims. I've been wrong in the past, and will be in the future. If the majority of citizens in Canada are multi millionaires, good for them. I stand corrected.
End of discussion for me. This has gone far off topic of the original post, and for that,  I apologize for my part in it.

Good, you at least admit the possibility you may be wrong.

I'll let you have the last word on this subject, since it was you who started it drifting off topic with your comment.

Google is a wonderful thing you should try it sometime, but exercise great caution when relying on "average" figures, especially that come from governments or agencies that represent big business, since "average" figures can be skewed to say exactly what they think people want to hear, which more often than not,  are not exactly true. As an American, I would suspect that you already know that little gem of wisdom.

Google? What ever could that be?
Your facetious comments are noted.
Have a great life.
I'm out.... to enjoy mine.

wjwoodward wrote:

I'm sure you would find that the average Canadian wouldn't have to try too hard to fit into that over $2 million net worth category. In many cases one's house alone would almost put them there. Add to that, cars, bank accounts, investments, businesses if any, etc., and that surely would put many Canucks over the top. As far as an EXACT percentage goes, since I'm not a statistician I can't give you a figure, but the number would be way up there for sure, probably in the over 50 year age bracket it would be upwards of 25 percent or maybe even more.

First you say the average Canadian easily has a net worth of over two million dollars, then you say, probably, that 25% of Canadians over the age of 50 are worth two million dollars, maybe.

A close friend of mine lives in Vancouver.  He and his wife are debt free and own a nice three bath, five bedroom home three blocks from the water in a trendy neighborhood.  She's a psychologist, he's an educator.  They consider themselves successful, and so do I, but if they sold everything they owned, it wouldn't amount to two million dollars.

I'm a big fan of Canada and wish the USA was as progressive, but I think you are over-stating the facts.

Every piece of information that I could find on the percent of Canadians with a liquid net worth of over 1 million dollars has consistently been in the 2-3% range. If anyone else can point me in the direction showing otherwise, then will gladly look.

Hi all,

I think we are drifting off topic here.
Comparisons with Canada are not helping this thread we guess.

Regards
Armand
Expat.com Team

Armand wrote:

Hi all,

I think we are drifting off topic here.
Comparisons with Canada are not helping this thread we guess.

Regards
Armand
Expat.com Team

Lot of guessing on this topic.

Mugtech: Also a lot of folks trying to engage in a battle of wits with an unarmed man, who shall go nameless in the interests of good decorum.

Although Ecuador has not signed (or committed to signing such as Panama) an intergovernmental agreement to comply with IRS reporting requirements, quite a few Ecuador banks have registered as Foreign Financial Institutions with the IRS, thereby agreeing to identify U.S. accounts and report as required, when required.  (I am intentionally avoiding trying to give guidelines for their doing so with all the uncertainty that remains).  Nonetheless, here is the current list of the 22 "financial institutions" (broader than simply retail banks) registered with the IRS:

DELBANK S.A.    ECUADOR
AFP Genesis Administradora de Fondos y F   
ContiSea Holdings Cia. Ltd.   
Banco Internacional S.A.   
Akaoasesores Cia. Ltda.   
Banco de la Produccion S.A. Produbanco   
Banco Promerica S.A.   
BANCO PICHINCHA C.A.   
Banco de Loja S.A.   
Banco General Ruminahui S.A.   
Diners Club del Ecuador S. A.   
INTERDIN S. A.   
Banco ProCredit S.A.
Banco Bolivariano C.A.
BANCO DE MACHALA S. A.
Banco del Pacifico SA   
PACIFICARD SA COMPANIA EMISORA Y ADMIN   
BANCO DEL PACIFICO S.A.
CORPIFEXSA Corp de Inversiones y SA   
Cititrading S.A. Casa de Valores   
VectorGlobal WMG Casa de Valores, S.A.   
Banco de Guayaquil S.A.

Wiring funds to these institutions from the U.S. should be free of the 30% withholding tax for U.S. citizens.

Here's a link to the search tool (I imagine the list will change over time):

http://apps.irs.gov/app/fatcaFfiList/flu.jsf

The FFI List Search and Download Tool available on the IRS FATCA website was confirmed today by Accounting Today.
One would think more financial institutions will sign up to avoid any withholding on transfer of funds, but only time will tell.  If your bank is not on the list, I would ask why not

New list available today has 27 institutions on the list for Ecuador.  Since it is now after 07/01/14, the 30% withholding rule is in place for all but these 27 institutions.

mugtech wrote:

New list available today has 27 institutions on the list for Ecuador.  Since it is now after 07/01/14, the 30% withholding rule is in place for all but these 27 institutions.

Link?

Link same as Sawman #93

A post called Why Does Uncle Sam Hate American Expats? on the subject of FATCA and FBAR. I thought it might be of interest to many here.

http://taxprof.typepad.com/taxprof_blog … xpats.html

BobH wrote:

A post called Why Does Uncle Sam Hate American Expats? on the subject of FATCA and FBAR. I thought it might be of interest to many here.

http://taxprof.typepad.com/taxprof_blog … xpats.html

Nothing new here, just the usual complaining about being a citizen of the USA.
The writer is a law school prof, overstates how hard it is to do the proper reporting.
Sure the taxes are more complicated if you ever have $10,000 or more in a foreign account, but your money is safer in a USA bank, just transfer what you need.
If you were living out of the USA more than 270 days you are exempt from ObamaCare penalties even if you have no health insurance, a break right there.
Like the one commenter said, 3,000 giving up citizenship out of 7 million living abroad is nothing.
My wife and I will receive $30,000/year SS benefits and $16,000 in other retirement benefits and will not owe any federal taxes, won't even have to file form 1040.  If you are living in Ecuador and your numbers are larger than that, then you can certainly afford to file income tax returns.

I have a question about taxes and Obama care. I may have asked this before but I have yet to find a workable answer. I have heard if you are out of the US for 270-330 days you have no problems. However, how does the IRS know, I am and have been out of the country?
Yes, my return shows my EC address but that's it. Are there any forms to be filed or any other proof of this I need to provide?

As I understand it, the magic number is 330 day's out of the US. As to how they would go about catching you for not being enrolled, I don't have a clue.< if you don't meet the exemption > This is my second year out of the states, and have yet to be questioned. I would think your best proof of absence would be your passport. I am enrolled in IESS here in Cuenca, and have saved my receipts if I should ever be questioned should I return to the US. Thinking ahead, after I get my Passport for Ecuador, I might choose to split my time equally between Ec. and US.
My thinking is I should be exempt seeing as I have met the criteria of the 330 days. Of course, the limit only allows you to visit the US annually for 35 day's, which is pretty limited. I'm thinking I'll have to enroll if I go the split year deal.
http://yucalandia.com/living-in-yucatan … ng-abroad/

Thanks for the info. I have been out of the US for over 365 days, and will in the event of travel back to the US monitor my days for sure. I am just trying to cover all the bases and would rather meet a requirement now, rather than deal with the IRS later. I'm not out to "Beat the System" or anything close to it, I just want to avoid any US related problems. All the red tape, and hoop jumping was a reason to vacate to start with.

Thanks for your input.

Please see my edit.
Good Luck !
I'd heard 280 days just recently, so who knows. I think the thing is in such flux right now, we'll see other changes coming down the pike.

ZenSPIKE wrote:

Please see my edit.
Good Luck !
I'd heard 280 days just recently, so who knows. I think the thing is in such flux right now, we'll see other changes coming down the pike.

Hey Zen, I believe you had said you were going to keep medicare parts A & B.  If so, you have coverage for IRS purposes no matter where you go when.  As for the 280 days, if your gap in coverage is less than 3 months and you only have that one gap, then you are not subject to penalties.  So if you leave before the end of March and are gone all the remainder of the year you are ok.  Make photo copies of your passport pages to show when you were in and out of the USA each year and keep it with your tax documents.  You do not have to send anything to the IRS with your return, the copies are for if a question arises after you file.
Check this out:  I heard that the penalties for lack of coverage can only be taken out of withholding taxes, if you file, only owe penalties but no tax and you had no federal withholding you can ignore the payment.  Can't wait to see if someone does that what happens.  Stay tuned

Actually, I'm not of age to be on Medicare as yet. Perhaps I will make it though.
This was very good info, and I'm sure will benefit many others. I know I'll file it away for when it pertains to me.
Thanks for the heads up !
ZenSPIKE

"Senate Finance Committee Says Time to “Rethink” Tax Rules for Americans Overseas"

The article goes to pdf format, so will just leave the website link.

https://americansabroad.org/

j600rr wrote:

"Senate Finance Committee Says Time to “Rethink” Tax Rules for Americans Overseas"

The article goes to pdf format, so will just leave the website link.

https://americansabroad.org/

It sounds good in theory, but for retired expats most of the income is from social security and any pension, 401k, IRA etc retirement programs which were earned and funded in the USA with pretax dollars, so it would all be taxable as USA income.  Foreign earned income as of 2015 gets to exclude the first $100,000 of earnings.  It appears the only real break would be for people with large non-USA investments and investment income, which presents its own set of problems security wise and insurance wise.

mugtech wrote:

It sounds good in theory, but for retired expats most of the income is from social security and any pension, 401k, IRA etc retirement programs which were earned and funded in the USA with pretax dollars, so it would all be taxable as USA income.  Foreign earned income as of 2015 gets to exclude the first $100,000 of earnings.  It appears the only real break would be for people with large non-USA investments and investment income, which presents its own set of problems security wise and insurance wise.

Bummer. I just took a quick glance at the article. Probably should of looked closer, but that's where your expertise comes in. You understand all the rules, implications, and everything else much more than I do. For that matter, probably much more than anyone else on this forum.

j600rr wrote:

Bummer. I just took a quick glance at the article. .

Who can say what laws congress will or will not pass and when?
If they ease up on the reporting of USA citizens overseas, all kinds of big money people will become legal resident of a foreign country, move all their assets out of the USA, and be tax free forever.
As stated previously, most all retired expats will depend on SS and retirement savings.  I really doubt the IRS or congress would want to allow anyone to receive retirement benefits earned in the USA tax free.  The employee gets a tax break when he has money withheld for a qualified retirement account, and he is not taxed on the employer matching amount nor on the income while in the retirement account.  The IRS would much rather double tax (dividends) than not tax at all.  If all it took to not pay income taxes on IRA, 401(k) and other retirement accounts was to establish foreign residence, then all kinds of people would move out of the USA, drain their retirement accounts tax free, then move back to the USA.
So any law change to have any significant change for most expats would be very technical and complicated to prevent people from pulling the 366 day expat routine.  Most economic refugees are already paying little or no tax, so any benefits would be minimal..

Just saw a FBAR case reported 12/29 in accountingtoday.com.
A man and his son prepared false tax returns and did not disclose the clients' foreign financial accounts nor the income earned from them.
The co-conspirators incorporated offshore companies in Belize and other places and helped clients open secret bank accounts at the Luxembourg locations of two Israeli banks.
The co-conspirators then facilitated the transfer of client funds to the secret accounts, falsely reporting the money sent offshore as a false investment loss or false business expenses.
The co-conspirators also failed to file their own FBAR reports for their Belize nominee corporation which held over $300,000 in one of the Israeli banks in Luxembourg.
They will be sentenced 3/16/15.
In another non-FBAR case, a tax preparer in Conn. had 11 of his clients tell the IRS he falsified their returns.
The IRS sent an undercover agent to drop off his W-2, gave the preparer his identification info and left.  The agent was entitled to a refund of $632, but the preparer filed a false return with a $3,235 refund.  He pleaded guilty to filing a false return and agreed to restitution of $240,196 in back taxes, penalties and interest for false returns from 2007 to 2011.  He could get 3 years in lockup, will be sentenced 2/26/15.
Seems the IRS is just getting started on the FUBAR, I mean FBAR cases, as they wind their way through the courts.

Hi folks,
I'm brand new to the Expatblog so am just exploring.  I see from the discussion I landed upon here that all you US expats seem to be aware of FATCA and FBAR (plus all the other "gifts" that the IRS has given to US-citizens living abroad over the past few years).  I just found out about FATCA last spring and, with +++++ reading since then, continue to have lots of OMG moments. 

I live in Canada so most of this reading/learning has come from the Isaacbrocksociety.ca (it's an open blog site and there are lots and lots of participants from all over the world).  Many of the articles that are mentioned on the site here parallel the same articles noted on the IBS site (tho IBS is ++++++ active - - lots of webpage articles shared by posters and LOTS of commentary - - after 3 years running, and having made presentations to the US Congress and the Canadian Parliament as well as a Human Rights submission to the UN, there is a well developed perspective but newbies are welcomed and all questions are answered).

My sending a message here is not only to encourage you expats to check out IBS (a great source of info and question-answering) but also to share that in Canada there is an actual already-mounted federal court constitutional challenge against FATCA and the Canadian Government for signing an IGA which has created legalized 2nd class citizenship for all people in Canada who have a "US taint" (and contravenes the Canadian Charter of Rights and Freedoms which disallows discrimination based on nationality or parentage).   Indeed, from what I understand, this Canadian Charter Challenge is, presently, the only active anti-FATCA litigation in the world.    Please take a moment to check out
adcs-adsc.ca/ and, if you can, support our effort in even a small way.  If we are successful (and our lawyers and other involved experts have assured us that the IGA is on the wrong side of the law), then other countries may look more closely at whether it is possible to reconsider and stand up to the US and say "NO to the world-wide FATCA extortion"

Happy New Year all
PS  please share this information broadly among the US Expat community

So you have been living "many moons" in Canada and are retired there, but you never became a Canadian citizen?
Never gave up your US citizenship?
Reminds me of the Sha Na Na song  "I'll be spending my Canadian money".

LLGM:

Interesting. I had heard some joking talk among expats that someone ought to sue the US government for human rights violations as a result of FATCA, etc. Looks like it was not entirely a joke.

I doubt it will go very far, but nonetheless, I wish them well.

Human rights violation?  No one is forced to maintain their USA citizenship when moving out, never to return.

BobH wrote:

LLGM:

Interesting. I had heard some joking talk among expats that someone ought to sue the US government for human rights violations as a result of FATCA, etc. Looks like it was not entirely a joke.

I doubt it will go very far, but nonetheless, I wish them well.

Hi BobH: 
Republicans Overseas have hired a highly respected US constitutional lawyer (Jim Bopp) to challenge FATCA within the US given that FATCA violates several basic Constitutional/Bill of Rights sections, particularly freedom from undue search and seizure without judicial oversight.  This litigation is currently on hold awaiting the raising of sufficient funds.  I'm sure they would appreciate any financial support they can get from US expats , even if they are not typically Republican voters.

The lawsuit in Canada is against the Canadian govt for passage of the IGA which, in effect, has placed US law in a superior position to sovereign Canadian laws, especially the part of the Canadian Charter of Rights and Freedoms which holds that all in Canada will have equal rights and not be discriminated against based on nationality or parentage.  Financial privacy is a well established legal right in Canada, something that has been undermined for US Persons living in Canada by this IGA - - thus, 2nd class citizenship.  I'm sure the Alliance for the Defence of Canadian Sovereignty, which is raising money for this Constitutional challenge, would appreciate any inanccial support they can get from US expats outside of Canada; already there are many non-Cdn donors/supporters.

The Human Rights Complaint to the UN was not in reference to FATCA but to the US practice of Citizen Based Taxes, which fuels FATCA.  The US is only one of two countries in the world that taxes it's citizens on world-wide income when they live outside the homeland; the other is Eritrea and Eritrea has been severely sanctioned for this practice at the UN level (including a vote of sanction by the US - - do you see the irony here????)  If anyone is interested in reading this UN submission, I can direct you to a webpage where you can request access and review (it is not published yet as the UN has not yet replied).  This complaint has been received by the UN but the next time when Human Rights Complaints will be reviewed by them is not until April 2015.

In relation to FATCA, here is a very recent article about FATCA (and the Philipines) which explains the current issues/situation very well.       

www.businessmirror.com.ph/fatca-a-breac … vereignty/

mugtech wrote:

Human rights violation?  No one is forced to maintain their USA citizenship when moving out, never to return.

Yes, Mugtech, you are right.  But I think it is rare that folks who head out of the US are doing so thinking, immediately, that they are "moving out never to return".  So expats keep their US citizenship while trying out a new home; it is only years later, when they are well connected and attached to this new home, that they begin to consider giving up that US citizenship which holds many emotional (and tax filing) ties. 

Up until a few years ago, renunciation was a free service at a US Embassy or Consulate.  Then it moved to $450.  Then, this last September, the service cost to the Embassy/Consulate jumped (with only 2 weeks notice) by over 400% to $2,350 (which is very significantly above the average $100-300 charged by all other first and second-world countries - - and for many of these other countries, the deed can be done by mail, not having to travel possibly 500-1000 miles to get to a Consulate to complete the process face to face TWICE).  Have to go now but  will add later points about the other definite and possible costs of renouncing which can add up to 10s of thousands.........  So, one is not forced but there sure seems to be an economic Berlin-Wall there keeping taxpayers inside the fence.

LLGM wrote:

.

In relation to FATCA, here is a very recent article about FATCA (and the Philipines) which explains the current issues/situation very well.         http://www dot businessmirror dot com dot ph/fatca-a-breach-of-philippine-sovereignty/

http://www.businessmirror.com.ph/fatca- … vereignty/

If a USA citizen does business with a non-compliant foreign bank, then 30% of a transfer will be withheld as taxes.  In every non-compliant country there are lists available, updated monthly, on the IRS website as to which banks are compliant.  If USA citizen chooses to deal with a non-compliant bank, then 30% withholding will appear as a credit on their tax return.  Since all citizens must file form 1040 anyway, if no tax is owed, then the withheld taxes will be returned in the form of a tax refund.  So the only real consequence is giving the IRS an interest free loan until you receive your refund.  Best to do your big transfers in December, get the withholding returned a few months later.  IRS announced that e-filing and paper filing for 2014 should start on 1/20/15.

LLGM wrote:

So, one is not forced but there sure seems to be an economic Berlin-Wall there keeping taxpayers inside the fence.

The administrative fees are nothing compared to the so-called "exit tax" that may be due.

In general, "covered expatriates" are treated as if they had liquidated all of their assets on the date prior to their expatriation. The taxpayer's net gain is computed as if he or she had actually liquidated their assets, that is, the difference between the fair market value (theoretical selling price) and the taxpayer's cost basis (actual purchase price). Once net gain is calculated, any net gain greater than $600,000 will be taxed as income in that calendar year. The tax applies whether or not an actual sale is made by the taxpayer, and regardless when the unrealized gains arose.

mugtech wrote:

If a USA citizen does business with a non-compliant foreign bank, then 30% of a transfer will be withheld as taxes.  In every non-compliant country there are lists available, updated monthly, on the IRS website as to which banks are compliant.  If USA citizen chooses to deal with a non-compliant bank, then 30% withholding will appear as a credit on their tax return.  Since all citizens must file form 1040 anyway, if no tax is owed, then the withheld taxes will be returned in the form of a tax refund.  So the only real consequence is giving the IRS an interest free loan until you receive your refund.  Best to do your big transfers in December, get the withholding returned a few months later.  IRS announced that e-filing and paper filing for 2014 should start on 1/20/15.

I bet the IRS will also check and make sure the account to which the funds were transferred was disclosed by the taxpayer in his or her FinCEN 114 (formerly FBAR) filing and send a "friendly" inquiry if it wasn't!