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Resources For Filing Taxes As An American Abroad

28 Sep
A desk with laptop, glasses, calculator, and euros

Tax Help In The Nick Of Time

The Oct. 15 final deadline for every American who asked for an extension for filing his 2016 U.S. tax return is racing toward us… and I still need to complete mine. Kathleen and I return to Paris this weekend… and I know how I’ll be spending my first two weeks back in the City of Light.

Friends and colleagues who prepare taxes for a living are incommunicado at this point as they wade through the reporting paperwork for all their clients who, like me, have waited until the last minute to file.

We Americans living and investing outside the United States face significantly greater reporting requirements than our brethren with only U.S. income activity.

That is, we have way more forms to complete, depending on our particular circumstances.

As I say often, being an American abroad doesn’t mean you pay any more in total U.S. tax… but it does mean spending more time preparing your U.S. tax return.

To help Americans wade through the forms and meet the requirements, tax expert Vincenzo Villamena has written a new guide that my publisher will begin selling in October just in time to help you prepare for the 2018 tax season starting in January. Vincenzo boils down the basics into understandable pieces.

I share an excerpt from his guide in my current issue of Simon Letter, out this week. If you’re a Simon Letter subscriber, you should have received it by now. If you’re not a Simon Letter subscriber, I have to ask: Why not? Sign yourself up here now.

Taxing Citizens Based On Citizenship

Taxing citizens based on citizenship is an American thing. Americans can move to another country, but they take their U.S. tax filing requirements with them.

Canadians don’t have that problem.

That makes Canada a good option for an American looking to pick up a second citizenship as part of a plan to renounce his U.S. citizenship. Canada is a straightforward and easy place for a U.S. citizen to gain residency with an eye toward a Canadian passport and the ultimate goal of giving up his U.S. passport.

That’s why I asked Editor Matt Clark (himself, coincidentally, a Canadian) to walk us through the options and requirements for an American thinking about moving north as part of a tax-minimization strategy. Matt’s complete report is also featured in the current Simon Letter issue.

Of course, I don’t recommend executing any plan solely for the purpose of reducing your tax burden.

Not to appear callous, but recent events in Puerto Rico are underlining this point.

Since 2012, Puerto Rico has been offering tax incentives under its acts 20 and 22. Simply put, an American can move to Puerto Rico, a U.S. territory, and reduce his tax burden. The key is that you have to actually move to Puerto Rico… and spend at least half the year there.

With the island now devastated by Hurricane Maria, those Americans who made a move there solely for tax purposes may now be regretting the strategy.

Your go-offshore plan should begin with the answer to this question:

Where In The World Would I Like To Be Able To Spend Time?

Organize your global diversification strategy in that context. If you like the Caribbean, fair enough. You understand that reality comes with risks—bugs on the beach and hurricanes in season.

But don’t base yourself somewhere you don’t really want to be simply so you can pay less tax. Life’s too short to spend it someplace you don’t really want to be.

Especially when you’ve got lots of options for mitigating, managing, and reducing your overall tax burden.

I’ll keep them coming.

Lief Simon