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Expat IRS escape routes
How to put 1040's and FBARs in the rearview mirror
Are you an American citizen living abroad and known to the IRS? If so, you face the yearly chore of preparing a US tax return and FBAR.
Tired of those hassles? As someone who’s been filing for more than 40 years, I feel your pain.
Actually, there are a few ways to extract oneself from those burdens. I know of exactly 4 escapes, all legal. They are:
Uncle Sam metaphorically frowns on those who choose to renounce their US citizenship, so the process is neither easy nor cheap. Here’s why:
You’ll have to be up-to-date on US income tax returns and FBARs before you can apply.
The process will then take many months and require a personal interview at a US embassy or consulate.
Moreover, if you and your spouse have assets of over $2 million, you’ll have to pay a big “exit” tax based on a percentage of your total net worth.
Finally, in a farewell gesture of a raised middle finger, Uncle Sam will dox you by listing your full name on a quarterly US Government shame website list of people who’ve renounced.
Move back to the US
Re-establish your permanent residence in the US and close all your foreign financial accounts. Of course you’ll still have to file US tax returns, but FBARs will be a thing of the past.
Stay abroad and live very low
Always have less than $10K in your combined non-US financial accounts and earn less than your US income tax filing threshold (~$13K for a single person). This option might work for a few people, but it would be extremely difficult. For one thing, inflation would keep moving you toward or above those filing thresholds.
A self-explanatory, but little-favored option.
None of these options are appealing, but all are legal (note: I’m not a lawyer).
The details for some of the options may change, which is a good reason to subscribe to my free newsletter 😀. In this regard, my next post will be about proposed reductions in the renunciation fee.
Take no action, and you will eventually escape via the Die option. 🤥