IT Pilgrimage

A Journey From IT to Freedom

Posts Tagged ‘Expatriates’

If You’re Born Here You’re Here Forever

Posted by IT Pilgrim on June 11, 2008


Taxes. We all love to hate them, but this one seems like the straw that broke the camel’s back. I came across an article written for the Sovereign Society, entitled The U.S. Wants to Keep the Slaves on the Plantation – Including You.. Seeing this I had to do a little research on my own.

As an IT worker, jobs overseas are not that uncommon. It is not uncommon to become an expatriate for anywhere from 6 months to several years. Here’s the kicker, you have to pay taxes in both countries. I looked up the Expatriate tax code on the IRS’ site, and here are a few choice excerpts:

The expatriation tax provisions (prior to the AJCA amendments) apply to U.S. citizens who have renounced their citizenship and long-term residents who have ended their US residency for tax purposes, if one of the principal purposes of the action is the avoidance of U.S. taxes. You are presumed to have tax avoidance as a principle purpose if:


  • Your average annual net income tax for the last 5 tax years ending before the date of the action is more than $124,000, or
  • Your net worth on the date of the action is $622,000 or more.

So if you happen to be a high-income earner, it is assumed that the reason you would want to leave the US is to avoid their income taxes. Well, they’ve got me there. It turns out, you cant even request to terminate your citizenship without being subject to an exit tax. Now there’s the Heroes Earnings Assistance and Relief Tax Act of 2008. Billed as tax relief for veterans, the writers slipped in a few more little gotchas such as:

Section 301 - Sets forth additional rules for the tax treatment of high-income individuals who relinquish U.S. citizenship or residency to avoid U.S. taxation (expatriates). Treats all property of expatriates as sold for fair market value on the day before the expatriation date and includes gain (over $600,000) or loss from such sale in their gross income. Allows expatriates to elect to defer payment of any tax resulting from expatriation if adequate security for payment of such tax is given.

  • Requires 30% withholding of tax for certain items of deferred compensation payable to expatriates.
  • Imposes a separate tax on gifts and bequests from expatriates exceeding $10,000, payable by the recipient of such gift or bequest.

Well, that was nice of them. Turns out this is not just for the super-wealthy, this applies to any expatriate has a net tax income liability that exceeds $139,000. To be fair, if you are working abroad, you can exclude the first $80,000 of your income. There are various other exclusions, depending on the country, and the tax treaty they have, or dont have with the US. I believe that the only countries in the world that tax their citizens living abroad are the US and Libya. Its good company we keep.

After reading all that, I have to admit to feeling a little trapped, a bit like a dog wearing one of those electric barrier collars. Please don’t get me wrong, I am not anti-government in any way, I just dont appreciate the realization of ownership. While the guards at the gate will let you out, you better not let them catch back up to you. It seems that the new penalties include $10,000 fines and prison terms. The United States already has one of the highest prison populations in the world, what’s a few more right?  The end result is much the same … If you’re here, you’re here forever.

Photo Credit: o2ma


Posted in Finance, Taxes | Tagged: , , | 2 Comments »