While the details of the tax reform passed last year are still being unpacked, are US expats facing a tax increase as a result of tax reforms passed last year? The United States is one of the only countries in the world who taxes US taxpayers based upon global income, no matter where they live or generate an income. Most US expats living and working in foreign countries pay taxes in their countries of residence. Expats are still required to file a tax return and are taxed on earnings which exceed the threshold established by law or if the US tax exceeds the taxes owed in their country of residence.
Many US expats were hoping tax reform would replace the global taxation model with a “residence-based system” where US expats would be taxed much in the same way as the US currently taxes foreigners with income which is generated in the United States or based upon US assets. Many believed a residence based tax system would simplify the tax reporting of US expats and bring a more fair and equitable solution to the table. These ideas were scrapped during the reconciliation of the house and senate bills and did not make it into the final version of the bill signed into law.
There are still questions regarding the structuring of income and purported incentives to structure income as pass-through business income versus regular wages. It may be months before the particular tax code and IRS regulations surrounding US expats is finalized. US expats, like all US taxpayers with offshore bank accounts and investment accounts, are still required to file FBARs to disclose any accounts which exceed $10,000 at any point in the tax year or meet other requirements of offshore account and income reporting requirements. The cost for failure to comply with FBAR requirements for US expats and taxpayers alike is draconian, and the international tax experts at Allen Barron are prepared to guide you through your questions to make sound decisions to minimize your taxable profile while ensuring compliance with all reporting and filing requirements.
Are US expats facing a tax increase as a result of tax reform or is it business as usual? Are there opportunities to restructure your affairs and the nature of your business an how and where you realize income to minimize tax exposure? We invite you to contact Allen Barron or call 866-631-3470 for a free consultation today.
