Re: Tax consequences of becoming a US citizen

[Ben Laurie]

Nomen Nescio wrote:
> On Tue, Jul 09, at 02:02PM, Tim May wrote:
> 
>>>Also, a person having extensive offshore (outside the U.S.)
>>>assets may well find his assets are now taxable in the U.S.
>>>And for those with capital assets not taxed in their home
>>>countries (e.g., Germany, Japan), this may be quite a shock.
>>
> 
> On 9 Jul 2002 at 18:40, Gabriel Rocha wrote:
> 
>>This applies wether he is a US citizen or not, green card holder
>>or not, Sealand citizen or not. Once the IRS sinkstheir claws
>>into you, you're screwed.
> 
> 
> Are you saying that if someone is legally resident in the US for a
> while, the US IRS will attempt to get his assets all over the
> world forever?  I find this hard to believe.
> 

Fascinating. Take it to taxpunks.

-- 
http://www.apache-ssl.org/ben.html   http://www.thebunker.net/

"There is no limit to what a man can do or how far he can go if he
doesn't mind who gets the credit." - Robert Woodruff

Re: Tax consequences of becoming a US citizen.

[Steve Furlong]

On Wednesday 10 July 2002 09:55, Trei, Peter wrote:

> So, to the subject of the original question: I don't think taking up
> US citizenship, then retiring abroad, makes a hell of a lot of
> sense from a tax point of view, unless the Social Security payments
> are important...

I wouldn't figure SS payments into my calculations unless I were to 
retire in the next few years. As the SS crunch looms nearer, watch for 
payments to people outside the US to go on the chopping block.

Not that I expect to get anything from SS myself regardless of whether I 
stay in the US. 29 years until retirement, even if the age isn't pushed 
back again.

SRF

-- 
Steve FurlongComputer Condottiere   Have GNU, Will Travel

Vote Idiotarian --- it's easier than thinking

Re: Tax consequences of becoming a US citizen

[Adam Shostack]

On Tue, Jul 09, 2002 at 07:22:30PM -0700, Tim May wrote:
| On Tuesday, July 9, 2002, at 06:30  PM, Anonymous wrote:
| 
| > On 9 Jul 2002 at 14:02, Tim May wrote:
| >> Unless one's stay is a short one (see below), income or other
| >> money earned while in the U.S. (and maybe earned outside the
| >> U.S. if the IRS can make a nexus case) is taxable.
| >
| > The question really is:  Suppose one becomes a US citizen, and
| > then resides outside the US.  Then is money on earned on assets
| > outside the US taxable by US authorities.
| 
| Yes, but under expat tax rates. Cf. the IRS site, tax regs, etc. for 
| details.

It seems that it may be similar to that for Green Card holders as
well:

http://www.techvisas.com/taxation.htm

Adam


-- 
"It is seldom that liberty of any kind is lost all at once."
   -Hume

RE: Tax consequences of becoming a US citizen.

[Trei, Peter]

> Greg Broiles[SMTP:[EMAIL PROTECTED]]
> 
> 
> At 11:52 AM 7/9/2002 -0400, An Metet wrote:
> >What are the tax implications of a US resident green card holder, with 
> >substantial assets both in his original nation and in the US, of becoming
> 
> >a US citizen?
> 
> Take a look at . Non-US citizens may be 
> classified as residents, nonresidents, or as dual status aliens; they also
> 
> frequently can choose whether they would prefer to file as residents or 
> nonresidents; this is an area where professional assistance is very
> helpful.
> 
> Subsequent replies to this question have, in an unproductive fashion, 
> confused US citizens living outside the US and former citizens living 
> outside the US; the 10-year rule applies to people who have given up their
> 
> US citizenship. People who remain citizens while living elsewhere are 
> subject to US tax on their worldwide income (but, some income is excluded,
> 
> and some income which is taxed by other jurisdictions won't be taxed again
> 
> by the US) for as long as they're alive.
> 
[I'm a US citizen who lived for many years abroad, so I have some awareness
of the issue].

Greg's pretty well got it spot on, but I'd like to refine things a bit. If a
US
citizen lives abroad, the USG will try to extract taxes from both his US
*and* foreign income, beyond certain minimums (the only other countries
which do this are the Phillipines and Egypt, both of which have large
numbers of citizens working in other countries (so they have an excuse, 
the US doesn't)). 

If you emigrate and give up your US citizenship, any assets you take
with you above a certain limit (?? $400k ??) are subject to a sort of 
'exit tax'. This is an idea the US adopted from the Soviet Union,
where it was used to harrass Jewish emigrants. What is more, 
the IRS will still claim to be able to tax your non-US income for 
10 years after you give up your citizenship (with caps, I think 
the same as an expat).

This law was put in place not too long ago, after there was a brief
storm in a teacup over certain multimillionaires giving up their
citizenships for tax purposes. In a populist stunt, the USG put in place
laws to punish these emigrants. In doing so they set the asset cap
so low that many people leaving for perfectly legitimate reasons were 
caught up in it. The political rhetoric around the issue was very 
nasty - it was clear that the congresscritters could not conceive 
that any person could have a legitimate, above-board reason to 
want to give up US citizenship.

Of course, at the moment the USG only occasionally chooses to flout
the sovereignty of foreign nations on issues of non-US citizens, and
it is still pretty rare for the USG to kidnap people abroad. Therefore, 
if you've given up your US citizenship, and are abroad, you have the
option of telling the IRS to pound sand before the 10 year limit is up.
If you do this, they will try to seize any US assets you may have,
and will arrest you for tax evasion if you ever set foot on US soil.

As Tim would say, check the archives. About 3 years ago, one or
two list members said they were giving up their US citizenship, 
and taking up Mozambiquian (sp?) citizenship, to enable them to
write and export cryptographic software without being subject to
US control. There was an extensive discussion of the topic at that
time.

So, to the subject of the original question: I don't think taking up
US citizenship, then retiring abroad, makes a hell of a lot of
sense from a tax point of view, unless the Social Security payments
are important, the total assets taken out are low, and the expected
non-US income falls below the minimum the US allows expats 
tax-free. There are a lot of other effects of US citzenship vs 
US citizenship, but those are my non-lawyer speculations on the
tax implications.

Peter Trei

Re: Tax consequences of becoming a US citizen

[Gabriel Rocha]

On Wed, Jul 10, at 03:30AM, Anonymous wrote:
| The question really is:  Suppose one becomes a US citizen, and
| then resides outside the US.  Then is money on earned on assets
| outside the US taxable by US authorities.

Yes it is. If you are a US citizen your income can be taxed anywhere in
the world. However, there is a trick here, there is a certain ammount (I
believe it to be around $80k) up to which you're exempt from taxation.

| If, on the other hand, after being a resident for a while, and
| paying taxes on money earned while in the US, one leaves the US
| and resides somewhere else, retaining some US assets, is the money
| earned on non US assets taxable?  Is income of a non US resident,
| on non US assets, earning non US income taxable?  Would it be
| taxable if that person had been so careless as to become a US
| citizen during his stay in the US?

As far as I know, all money made in the US (investments or otherwise)
are taxable as US income. Where the "owner" of the money resides is
irrelevant.

| So do I get eligible for imperial taxes anywhere in the world
| merely by staying in the US a while, having a green card and
| paying US taxes, or do I only get eligible for imperial taxes
| anywhere in the world by taking US citizenship?

This question has multiple parts. First off, you can't have a green card
and not be a US resident. The requirements for both go hand in hand, if
you stay out of the US long enough to not be taxed, you're also out of
the US long enough to lose your green card. Likewise, if you get US
citizenship, you're subject to being taxed anywhere in the world. (see
the paragraph above)

Re: Tax consequences of becoming a US citizen

[Tim May]

On Tuesday, July 9, 2002, at 06:30  PM, Anonymous wrote:

> On 9 Jul 2002 at 14:02, Tim May wrote:
>> Unless one's stay is a short one (see below), income or other
>> money earned while in the U.S. (and maybe earned outside the
>> U.S. if the IRS can make a nexus case) is taxable.
>
> The question really is:  Suppose one becomes a US citizen, and
> then resides outside the US.  Then is money on earned on assets
> outside the US taxable by US authorities.

Yes, but under expat tax rates. Cf. the IRS site, tax regs, etc. for 
details.

Something like the first $70K per year of income is not subject to taxes.

Companies routinely protect their overseas employees by tax-protecting 
their offshore earnings. (And the tax protection is protected, so the 
companies protect _that_, etc. Fortunately, simple formulas for infinite 
sequence limits are available.)

As this is not a tax forum, and I'm not going to do research for others, 
consult the Web. Google is your friend.


--Tim May
"As my father told me long ago, the objective is not to convince someone
  with your arguments but to provide the arguments with which he later
  convinces himself." -- David Friedman

Re: Tax consequences of becoming a US citizen.

[Gabriel Rocha]

On Tue, Jul 09, at 05:11PM, Tim May wrote:
| Mexico does not allow _any_ noncitizen to work!

Two point. I did not know that about Mexico (I did say it was made about
the countries I knew about.) Switzerland and Brasil both allow student
visa holders to work, albeit with restrictions. Likewise for other EU
nations.

| Except for folks of either a) substantial resources, b) connected with a 
| U.S. employer. But try visiting a Mexican city and applying for a job at 
| a restaurant, bookstore, whatever. This was a plot element in "The 
| Treasure of the Sierra Madre," more than 50 years ago, and it remains 
| true today. It is also difficult for non-citizens to work in many 
| European nations.

I would imagine that people with or without a work permit would be able
to find work at some mexican restaurants. That is the case the world
over, I don't see why Mexico would be different here.

| Meanwhile, like I said, see how long you live as an illegal alien in 
| Mexico or Nicaragua, and see if they will issue a work permit.

I wholeheartedly agree with you, but then again, not too many countries
have an economy that has as large a population of illegal workers as
ours.
 
| The U.S. is fucked up, to be sure, but talking about other countries 
| making it easier for foreigners to work is mostly nonsense.

It may well be nonsense. But my opinions are expressed as based on my
personal experience in other countries and this one.

Re: Tax consequences of becoming a US citizen.

[Tim May]

On Tuesday, July 9, 2002, at 06:40  PM, Greg Vassie wrote:

>> years after you leave the U.S." tax scheme. (Yes, any U.S. citizen who
>> moves anywhere in the world must, technically, file U.S. tax returns 
>> for
>> 10 years after leaving. And pay various kinds of taxes, though the
>> amount may be different from what he would have paid had he remained in
>> the U.S.)
>
> Where did you find the 10 year limit information?  AFAIK, US
> expatriates are subject to US taxes on their worldwide income as long
> as they remain US citizens, tax treaties and other exemptions
> notwithstanding.

You are incorrect. Renouncing citizenship does not relieve most people 
who need relief from the burden.

http://www.hcfa.gov/medicare/mip/full-kk.htm

"Health Insurance Portability Act of 1996"

Google is your friend.

--Tim May
"Ben Franklin warned us that those who would trade liberty for a little 
bit of temporary security deserve neither. This is the path we are now 
racing down, with American flags fluttering."-- Tim May, on events 
following 9/11/2001

Re: Tax consequences of becoming a US citizen

[Gabriel Rocha]

On Wed, Jul 10, at 03:20AM, Nomen Nescio wrote:
| Are you saying that if someone is legally resident in the US for a
| while, the US IRS will attempt to get his assets all over the
| world forever?  I find this hard to believe.

For a specific time period, this is absolutely true. Hard to believe,
sure, real anyway? Yes. But there is an income cap somewhere, it may
vary, but I suspect it to be like the $80k you get tax exempt.

Tax consequences of becoming a US citizen

[Anonymous]

On 9 Jul 2002 at 14:02, Tim May wrote:
> Unless one's stay is a short one (see below), income or other
> money earned while in the U.S. (and maybe earned outside the
> U.S. if the IRS can make a nexus case) is taxable.

The question really is:  Suppose one becomes a US citizen, and
then resides outside the US.  Then is money on earned on assets
outside the US taxable by US authorities.

If, on the other hand, after being a resident for a while, and
paying taxes on money earned while in the US, one leaves the US
and resides somewhere else, retaining some US assets, is the money
earned on non US assets taxable?  Is income of a non US resident,
on non US assets, earning non US income taxable?  Would it be
taxable if that person had been so careless as to become a US
citizen during his stay in the US?

> Becoming a U.S. citizen exposes a person to not only the
> _current year_ tax scheme but also the "for ten years after you
> leave the U.S." tax scheme. (Yes, any U.S. citizen who moves
> anywhere in the world must, technically, file U.S. tax returns
> for 10 years after leaving. And pay various kinds of taxes,
> though the amount may be different from what he would have paid
> had he remained in the U.S.)

So do I get eligible for imperial taxes anywhere in the world
merely by staying in the US a while, having a green card and
paying US taxes, or do I only get eligible for imperial taxes
anywhere in the world by taking US citizenship?

Re: Tax consequences of becoming a US citizen.

[Greg Vassie]

> years after you leave the U.S." tax scheme. (Yes, any U.S. citizen who 
> moves anywhere in the world must, technically, file U.S. tax returns for 
> 10 years after leaving. And pay various kinds of taxes, though the 
> amount may be different from what he would have paid had he remained in 
> the U.S.)

Where did you find the 10 year limit information?  AFAIK, US
expatriates are subject to US taxes on their worldwide income as long
as they remain US citizens, tax treaties and other exemptions
notwithstanding.

-- 
[EMAIL PROTECTED] // RSA Key: 0x1606F91D // DSS Key: 0x83BB5BE4

"When liberty is taken away by force it can be restored by force. When
it is relinquished voluntarily by default it can never be recovered."
-- Dorothy Thompson

Tax consequences of becoming a US citizen

[Nomen Nescio]

On Tue, Jul 09, at 02:02PM, Tim May wrote:
> > Also, a person having extensive offshore (outside the U.S.)
> > assets may well find his assets are now taxable in the U.S.
> > And for those with capital assets not taxed in their home
> > countries (e.g., Germany, Japan), this may be quite a shock.

On 9 Jul 2002 at 18:40, Gabriel Rocha wrote:
> This applies wether he is a US citizen or not, green card holder
> or not, Sealand citizen or not. Once the IRS sinkstheir claws
> into you, you're screwed.

Are you saying that if someone is legally resident in the US for a
while, the US IRS will attempt to get his assets all over the
world forever?  I find this hard to believe.

Re: Tax consequences of becoming a US citizen.

[Tim May]

On Tuesday, July 9, 2002, at 03:40  PM, Gabriel Rocha wrote:
> The US is one of the few countries that I know of (or about) that do not
> allow people ona  student permit to work.

Mexico does not allow _any_ noncitizen to work!

Except for folks of either a) substantial resources, b) connected with a 
U.S. employer. But try visiting a Mexican city and applying for a job at 
a restaurant, bookstore, whatever. This was a plot element in "The 
Treasure of the Sierra Madre," more than 50 years ago, and it remains 
true today. It is also difficult for non-citizens to work in many 
European nations.

It's always hilarious for me to watch Mexicans screaming "Dat be 
racist! " (whoops, wrong language, but same idea) about how the tens of 
millions of illegal Mexicans who were given permanent residency under 
Simpson-Mozzoli were not enough, that the _new_ flood of Mexicans and 
Salvadorans and Guatemalans and. should be given "amnesty."

Meanwhile, like I said, see how long you live as an illegal alien in 
Mexico or Nicaragua, and see if they will issue a work permit.


The U.S. is fucked up, to be sure, but talking about other countries 
making it easier for foreigners to work is mostly nonsense.

--Tim May


--Tim May
"The great object is that every man be armed and everyone who is able 
may have a gun." --Patrick Henry
"The best we can hope for concerning the people at large is that they be 
properly armed." --Alexander Hamilton

Re: CDR: Tax consequences of becoming a US citizen.

[F. Marc de Piolenc]

Basically, none. A US resident is taxed just like a citizen. In fact,
even if you are not a green card holder, but have a "substantial
presence" in the US, you are still taxed like a citizen.

Marc de Piolenc

An Metet wrote:
> 
> What are the tax implications of a US resident green card holder, with substantial 
>assets both in his original nation and in the US, of becoming a US citizen?

-- 
Remember September 11, 2001 but don't forget July 4, 1776

They that can give up essential liberty to obtain a little temporary
safety deserve neither liberty nor safety. - Benjamin Franklin

Re: Tax consequences of becoming a US citizen.

[Gabriel Rocha]

On Tue, Jul 09, at 02:02PM, Tim May wrote:
| Why do you think a person without a green card is exempt from IRS 
| jurisdiction?

I should have been clearer. I was speaking for his specific case, but as
it was pointed out, it applies to people who don't come here to work.

| Unless one's stay is a short one (see below), income or other money 
| earned while in the U.S. (and maybe earned outside the U.S. if the IRS 
| can make a nexus case) is taxable. Illegal aliens are supposed to file 
| tax returns...and they certainly don't have green cards!

Nor do they have Social Security numbers, or worker's rights, but that's
another issue.

| There are some exemptions, for student visa persons and athletes 
| competing in games, but basically the idea is that you owe tax on money 
| earned in the U.S., regardless of citizenship, green card, or other 
| status.

The US is one of the few countries that I know of (or about) that do not
allow people ona  student permit to work.

| I think this is terrible advice. Becoming a U.S. citizen exposes a 
| person to not only the _current year_ tax scheme but also the "for ten 
| years after you leave the U.S." tax scheme. (Yes, any U.S. citizen who 
| moves anywhere in the world must, technically, file U.S. tax returns for 
| 10 years after leaving. And pay various kinds of taxes, though the 
| amount may be different from what he would have paid had he remained in 
| the U.S.)

Well, going back to his specific case. His options are slim. He already
holds a green card, that makes him a US citizen as far as tax laws are
concerned. (note that you cannot legally keep a green card and not meet
the tax residency requirements)
 
| Also, a person having extensive offshore (outside the U.S.) assets may 
| well find his assets are now taxable in the U.S. And for those with 
| capital assets not taxed in their home countries (e.g., Germany, Japan), 
| this may be quite a shock.

This applies wether he is a US citizen or not, green card holder or not,
Sealand citizen or not. Once the IRS sinkstheir claws into you, you're
screwed. Even if you give up your green card, you are still subject to
them for awhile. (A friend in Switzerland had a great deal of fun after
giving up his green card and still being contacted by the IRS)

| A U.S. passport buys almost no protection. The U.S. will not defend its 
| citizens, only its imperialist interests.

More so now than ever, I do have a tendency to agree with you. But, as
someone whose passport is not the pretty blue book that yours is, I
disagree. "Protection" is a relative term, show up in Russia and you're
kinda screwed one way or another, but show up in Genneva, Switzerland
and get stopped by the police, (or any other first world country) and
start speaking something other than English (or the local language) and
you will have a hard time. Specially in Europe, they have massive
profiling of foreigners and even if US Citizens may get a hard time just
fr being American, by far and alot, that blue passport will most
certainly get you out of a jam or keep you from being thrust into it.
Like it or not, the US passport is well respected throughout the world
("respect" also being very relative.) I have had a few occasions where I
would have been very screwed as a Brazillian, but got off well because
people thought I was American. It matters, even if the .gov won't come
to your rescue lance ablaze sitting on a white horse. 

Re: Tax consequences of becoming a US citizen.

[Duncan Frissell]

On Tue, 9 Jul 2002, Tim May wrote:

> Why do you think a person without a green card is exempt from IRS
> jurisdiction?

I assumed that he meant a US non-resident.  Obvi


>
> Unless one's stay is a short one (see below), income or other money
> earned while in the U.S. (and maybe earned outside the U.S. if the IRS
> can make a nexus case) is taxable. Illegal aliens are supposed to file
> tax returns...and they certainly don't have green cards!
>
> Here's what Uncle Sam says:
>
> "You will be considered a U.S. resident for tax purposes if you meet the
> substantial presence test for the calendar year. To meet this test, you
> must be physically present in the United States on at least:
>
> 1.31 days during the current year, and
> 2.183 days during the 3-year period that includes the current year
> and the 2 years immediately before that, counting:
> * All the days you were present in the current year, and
> * 1/3 of the days you were present in the first year before the
> current year, and
> * 1/6 of the days you were present in the second year before the
> current year.
>
> --end IRS quote--
>
> There are some exemptions, for student visa persons and athletes
> competing in games, but basically the idea is that you owe tax on money
> earned in the U.S., regardless of citizenship, green card, or other
> status.
>
> > or
> > get a US citizenship since you're already in their jurisdiction anyway.
> >
>
> I think this is terrible advice. Becoming a U.S. citizen exposes a
> person to not only the _current year_ tax scheme but also the "for ten
> years after you leave the U.S." tax scheme. (Yes, any U.S. citizen who
> moves anywhere in the world must, technically, file U.S. tax returns for
> 10 years after leaving. And pay various kinds of taxes, though the
> amount may be different from what he would have paid had he remained in
> the U.S.)
>
> Also, a person having extensive offshore (outside the U.S.) assets may
> well find his assets are now taxable in the U.S. And for those with
> capital assets not taxed in their home countries (e.g., Germany, Japan),
> this may be quite a shock.
>
> A U.S. passport buys almost no protection. The U.S. will not defend its
> citizens, only its imperialist interests.
>
>
>
> --Tim May
> "That government is best which governs not at all." --Henry David Thoreau

Re: Tax consequences of becoming a US citizen.

[Tim May]

On Tuesday, July 9, 2002, at 01:19  PM, Gabriel Rocha wrote:

>   On Tue, Jul 09, at 11:52AM, An Metet wrote:
> | What are the tax implications of a US resident green card holder, 
> with substantial assets both in his original nation and in the US, of 
> becoming a US citizen?
>
> Well, think positive because you're already screwed. If you have a
> greencard, you're tax implications are the same (or have been for me
> thus far) as a US citizen. if you have a green card, you can either give
> it up (for the loss of legal tax juridsdiction of the IRS over you)

Why do you think a person without a green card is exempt from IRS 
jurisdiction?

Unless one's stay is a short one (see below), income or other money 
earned while in the U.S. (and maybe earned outside the U.S. if the IRS 
can make a nexus case) is taxable. Illegal aliens are supposed to file 
tax returns...and they certainly don't have green cards!

Here's what Uncle Sam says:

"You will be considered a U.S. resident for tax purposes if you meet the 
substantial presence test for the calendar year. To meet this test, you 
must be physically present in the United States on at least:

1.  31 days during the current year, and
2.  183 days during the 3-year period that includes the current year 
and the 2 years immediately before that, counting:
*   All the days you were present in the current year, and
*   1/3 of the days you were present in the first year before the 
current year, and
*   1/6 of the days you were present in the second year before the 
current year.

--end IRS quote--

There are some exemptions, for student visa persons and athletes 
competing in games, but basically the idea is that you owe tax on money 
earned in the U.S., regardless of citizenship, green card, or other 
status.

> or
> get a US citizenship since you're already in their jurisdiction anyway.
>

I think this is terrible advice. Becoming a U.S. citizen exposes a 
person to not only the _current year_ tax scheme but also the "for ten 
years after you leave the U.S." tax scheme. (Yes, any U.S. citizen who 
moves anywhere in the world must, technically, file U.S. tax returns for 
10 years after leaving. And pay various kinds of taxes, though the 
amount may be different from what he would have paid had he remained in 
the U.S.)

Also, a person having extensive offshore (outside the U.S.) assets may 
well find his assets are now taxable in the U.S. And for those with 
capital assets not taxed in their home countries (e.g., Germany, Japan), 
this may be quite a shock.

A U.S. passport buys almost no protection. The U.S. will not defend its 
citizens, only its imperialist interests.



--Tim May
"That government is best which governs not at all." --Henry David Thoreau

Re: Tax consequences of becoming a US citizen.

[Gabriel Rocha]

On Tue, Jul 09, at 11:52AM, An Metet wrote:
| What are the tax implications of a US resident green card holder, with substantial 
|assets both in his original nation and in the US, of becoming a US citizen?

Well, think positive because you're already screwed. If you have a
greencard, you're tax implications are the same (or have been for me
thus far) as a US citizen. if you have a green card, you can either give
it up (for the loss of legal tax juridsdiction of the IRS over you) or
get a US citizenship since you're already in their jurisdiction anyway.

Tax consequences of becoming a US citizen.

[An Metet]

What are the tax implications of a US resident green card holder, with substantial 
assets both in his original nation and in the US, of becoming a US citizen?