Skip to main content Skip to search

Archives for April 2016

locus tax return

What Actually Happens When I Don’t File Taxes as an Expat?

If you are not aware by now, Americans are taxed on their worldwide income, meaning your income from abroad is considered taxable income to the U.S. government. Through a number of exclusions, many expats usually end up paying no taxes to the IRS, but the “filing” portion of a tax return is required of most all expat individuals- unless your income is less than the standard deduction which is $10,300 for single and $20,600 for joint filing. To simply put, even though you live outside the U.S., you still need to file tax return even though you may not owe any tax. Expats also are required to disclose international financial holdings which could range from a day-to-day bank account to a retirement fund.

The IRS collects around 55 billion USD in addition to tax revenue from back taxes and penalties through rigorous policing, and the discovery, auditing, and prosecution of delinquent expat taxpayers are made much easier through enforcement laws such as FBAR and FATCA. It’s becoming harder and harder to “lay low.” When caught with the delinquent status, the U.S. government will take drastic measures to force you to come current and make you pay what you owe. Till you comply with the strict rules set out by the IRS, the following consequences may make your life unnecessarily difficult.

  1. Withheld paychecks
  2. Possible imprisonment
  3. Denied application for the Foreign Earned Income Exclusion
  4. Penalties and interest accruement
  5. Liens placed on physical properties
  6. Seizure or freezing of financial accounts often w/o prior notice
  7. Increased statute of limitation for audit
  8. Loss of unclaimed tax refunds
  9. Passport revocation or denied renewal
  10. Automatic imposition of 30 percent withholding on transfers between financial institutions
  11. Non-dischargeable IRS-assessed taxes in case of bankruptcy
  12. Automatic tax filing by the IRS with an unfair calculation for owed taxes
  13. Massive time and energy loss to remedy

The system may seem unfair, but rules are rules. The consequences for the delinquent status can be severe.  It has become far more difficult to escape the IRS’ reach, and it is encouraged that all expats to consult with international tax experts to figure out the filing requirements and deduction opportunities.

Are you concerned about filing tax return as an American expat?

Contact us right away! We assign a personal CPA to your case, so you can receive a personalized tax filing service.

Read more

Financial Considerations before a Foreign Assignment

Soon-to-be-expats or current expats through foreign assignment, when it comes to personal finances, should be aware of current and long-term impacts of the international relocation.

 

A. Generally speaking, what are financial factors I should look into?

Immediate expenditures such as the cost of relocation, housing, taxes, transportation, and education should be reviewed carefully. Before making the decision to move abroad, you must consider if the offered financial package would satisfy your financial obligations, maintain your living standard, and continue to meet your financial objective. One important step to take is carefully examining duplicate expenses that would incur at your home location as well as the foreign assignment country (health insurance, rent, and etc.)

As for the long-term financial goals, see if the foreign assignment would affect your retirement benefits at all.

 

B. How would my expatriate compensation package compare to my current package?

The compensation package offered to an ordinary American employee is generally different than the one offered to an international assignee. The three most common approaches for international assignees are:

  1. Home-based: Based on the living standard of home country peers
  2. Host-based: Based on the living standard of host country peers
  3. Headquarters: Based on the living standard of the organization’s headquarters

Multinational organizations choose a different approach, but generally, an international assignee will receive the home-based compensation. However, with the fluctuating exchange rates, different tax systems, and costs-of-living, it is important to note that the compensation will be inevitably different.

 

C. Would my foreign assignment affect my equity in the company?

Unless told by the employer, your equity should not be affected; however, equity compensation is taxed differently in other countries when it involves vesting or sale. It is encouraged that you consult with your tax advisor to see how your equity would be affected in your destination country.

 

D. What about by my health insurance?

To be covered abroad, you may need to apply for extra coverage.  Most likely you will continue to contribute to the company’s health insurance and still be covered abroad. For specific health conditions that need extra attention, you are encouraged to speak to the relocation manager to find out the available medical services and even recommended doctors. In some countries, you may even be covered under their state-run health system.

 

E. How about my retirement plan?

This one heavily depends on the organizations’ retirement plan structure. You may or you may not be able to stay in your current retirement plan during your foreign assignment abroad. In case you can’t stay in the program, you discuss with a financial expert to find out other ways you can continue to contribute to your retirement.

Read more