Will American Expats Get a Tax Break in the Future?
Proposed tax changes could benefit American expats. There is a strong push by expats to include language that would address the United States’ current tax system and how it handles expats.
How do U.S. taxes work for expats? Currently, the system uses a citizenship based system as opposed to a residence based system. This results in tax obligations even when an American is residing within another country. A residence based system would reduce the requirements for those who live in another country to pay taxes to the United States. In the current system, the only way to avoid these tax obligations is to renounce citizenship.
Will this change in the near future? The current proposal continues to undergo amendments. As such, there is plenty of time for Congress to make additional changes that would include the residence based system.
The current administration has pushed for simplification of the tax system. This could further support the change as the current citizenship based system of taxation requires a good deal of paperwork. As noted in a recent piece by International Investment, current paperwork to meet this requirement often includes completion of Form 8938 the Statement of Foreign Financial Assets and the Report of Foreign Bank and Financial Accounts (FBAR) as well as documents pertaining to corporations, partnerships and trusts as needed.
How should I handle my taxes if I am an expat? Navigating international tax issues is not an easy task. As such, those who are attempting to navigate this system are wise to seek legal counsel. An experienced international tax attorney can review your situation and provide guidance on how to come into compliance with tax obligations.