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Filing A Tax Return When You Live Outside The United States
The long arm of the tax code does not stop at the U.S.
border.
If you live abroad and have income, you will still have to
file a tax return. You must also either have taxes withheld
from your paycheck or pay quarterly estimated taxes if you
are working abroad.
However, the tax bite may be substantially reduced if you
qualify for a foreign earned income exclusion of $91,400 per
year (in 2009), and the foreign housing exclusion and
deduction. (See IRS Publication 54, Tax Guide for U.S.
Citizens and Resident Aliens Abroad. You can download this
from the IRS website at http://www.irs.gov.)
But renouncing your U.S. citizenship to beat the IRS won't
work, at least at first. You remain subject to U.S. tax laws
for ten years after renunciation!
There is one bit of good news. While you are subject to U.S.
tax laws, it is very difficult for the IRS to grab wages or
assets located outside of the United States. Some countries,
mostly in Europe, have treaties with the U.S. in which their
tax agencies can cooperate with the IRS to collect from U.S.
citizens, but most governments place a very low priority on
working these kinds of cases.
You may also owe taxes to the government of the country
where you reside. Some countries give you credit for taxes
you pay to Uncle Sam; others won't. Also, estate and
inheritance tax laws vary widely across the globe.
© 2010 Nolo
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