November 14, 2024

Bucks Blog: Financial Lessons for American Expatriates

Paul Sullivan, in his Wealth Matters column this week, writes about the tax rules in the United States that can trip up Americans living abroad. The rules have become tougher as the United States tries to find secret overseas accounts. And the rules are also affecting more people as more Americans find job opportunities far from home.

The column offered several pieces of advice for American expatriates. One is not to buy a house in the United States with the goal of retiring there many years in the future. As happened to the client of one financial adviser Paul spoke to, by the time the client was ready to retire, he didn’t want to live in the house anymore.

A second point to remember has to do with Social Security contributions. Americans who work abroad for foreign companies rather than companies with American ties may not be required to contribute to Social Security, which can affect the benefits they are eligible for when they retire.

And as one longtime overseas worker pointed out to Paul, he quickly discovered that it was far more costly to live in the United States, and he had to rein in his spending accordingly.

Have you ever worked outside the United States? Please share with us any financial lessons you learned from your experience.


This post has been revised to reflect the following correction:

Correction: April 12, 2013

An earlier version of this post referred imprecisely to the responsibility of Americans working abroad to pay into Social Security. While American employees of foreign companies generally are not required to pay such taxes, American employees of United States companies, or companies affiliated with them, who work abroad generally do pay such taxes. It is not the case that Americans who spend their entire career working abroad cannot contribute to Social Security.

Article source: http://bucks.blogs.nytimes.com/2013/04/05/financial-lessons-for-american-expatriates/?partner=rss&emc=rss

Amnesty Program Yields Millions More in Back Taxes

The voluntary disclosure program, which was in effect from February until last week, is part of an initiative to deter tax evasion via offshore bank accounts. Since the I.R.S. began its previous amnesty program in 2009, more than 30,000 taxpayers have reported their secret overseas accounts, and the federal government has collected $2.7 billion in taxes and penalties.

The United States began its most recent offensive against offshore tax evasion in 2009, when the Justice Department reached a settlement with the Swiss bank UBS that required it to pay $780 million and reveal details about 4,500 clandestine accounts that were believed to hold undeclared assets of United States residents. Although the Swiss government has yet to authorize the release of information about those accounts, Douglas H. Shulman, the I.R.S. commissioner, said that the agency would continue to pressure tax evaders to come forward or face prosecution.

The I.R.S. has opened three international offices in recent years to help track overseas funds, and has been working more closely with Justice Department prosecutors to seek criminal charges in the most serious cases.

“The world has clearly changed,” Mr. Shulman said in a news conference on Thursday. “We have pierced international bank secrecy laws, and we’re making a serious dent in offshore tax evasion.”

Tax evasion by individual American taxpayers is estimated to cost the federal government tens of billions a year in lost revenue, according to various studies.

Many tax lawyers had been skeptical that the I.R.S. amnesty program, which imposes stringent penalties, would be enough to lure tax evaders out of hiding. In addition to requiring that taxpayers repay as much as eight years of back taxes, the I.R.S. also added a penalty equal to 25 percent of the highest balance of the overseas account from 2003 to 2010. But Mr. Shulman said that the number of people who came forward exceeded the agency’s expectations.

Many international tax lawyers agreed that the amnesty had been productive.

But George M. Clarke, a tax lawyer at Miller Chevalier, said that the amnesty had induced only a small fraction of those with unreported offshore assets to come forward.

“We know the UBS — one bank — had more than 4,500,” said Mr. Clarke, who has defended numerous clients accused of tax evasion. “So with all the other banks in Switzerland and all over the world, why didn’t the amnesty get 50,000, or 100,000?”

Though Mr. Shulman said that many Swiss banks no longer provided secret accounts, the disclosure program had indicated the breadth of the problem, revealing assets that American citizens had hidden in at least 140 countries. As the Justice Department has pressured UBS and other banks in Switzerland and Lichtenstein to disclose more information about American depositors, many citizens have moved their assets to Asia.

It is unlikely that the I.R.S. will offer any additional amnesty programs, but Mr. Shulman said that the government would continue to pursue offshore tax evasion aggressively.

“Not only are we bringing people back into the U.S. tax system, we are bringing revenue into the U.S. Treasury and turning the tide against offshore tax evasion,” Mr. Shulman said.

Article source: http://feeds.nytimes.com/click.phdo?i=2c3dd21c57319257369255f59274ac94