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Expat Tax Blog

Nov 30

5 Vital tax Tips to Consider Before Retiring Abroad

by julie

11252016When deciding to retire abroad, the factors most often considered include political stability, weather, quality of life and affordable healthcare. These are certainly important, but you also need to figure out a way to pay for this glorious next stage of your life. You’ve saved for retirement for years – don’t take your eye off the ball now that you’re finally there. Hint – not all countries are equal with regards to taxing American retirees. Let’s look at some key tax factors to consider when planning to retire abroad.

1. Will my U.S. pension be taxed?

A. Distributions from a U.S. employer pension and from Traditional IRA’s will remain fully taxable by the IRS regardless of the country you reside in. The good news – pension distributions will be exempt from U.S. state taxation. If you received those distributions while living in the US, then state tax rate would depend on the tax rules of the state where you live upon retirement, not by the state where you earned it.

I.E., if you earned pension in NY and moved to CA, you would pay state tax on pension in CA, based on your CA tax bracket. If you earned pension in CA and moved to FL your pension would not be taxable because Florida does not levy a state tax. Same exemption from the state taxation will take place if you live abroad. However, pension may be taxable by your new country of residency. Please consult a tax specialist in your new country of residency.

If your U.S. pension is taxed by the IRS and by the country where you live you will be protected from double taxation through the foreign tax credit mechanism.

B. Distributions from ROTH IRA will remain non-taxable by the IRS and by your new country of residency. ROTH IRA was funded with after-tax money and therefore will never be taxed again.

Whole Story at TFE.

Nov 23

If I move my retirement (IRA, ROTH IRA, etc) to/from the US – what tax impact will it have?

by julie

11202016The following article aims to answer the following questions:

1. Is there a penalty for moving retirement funds from the U.S. to abroad?

2. If so, how can these penalties be avoided?

3. Are there any cases where the penalty is waived?

4. How can TFX help me find out my cost of doing this?

Can I move funds between my U.S and non-U.S. financial accounts?

Technically, moving funds across border can be done in either direction – to and from the U.S. In general, there are no U.S. tax consequences or penalties associated with the actual cross-border funds transfer.

Cross-border transfer of retirement accounts is far more complicated

Withdrawal of funds from a U.S. employer retirement plan (i.e. 401K, 403b) or U.S. Traditional IRA is ALWAYS treated as ordinary income because Traditional IRA was funded with pretax money. If you are younger than 59 ½ then you will pay 10% early withdrawal penalty in addition to your regular tax rate.

Only a rollover (i.e. transfer of funds to another U.S. Traditional IRA account) is a tax-free and penalty-free event, regardless of the amount of funds transferred and regardless of your age. The best way to ensure the tax-free character of funds transition is to initiate a direct rollover.

If you accidentally made a withdrawal not knowing about the direct rollover option, you can deposit these funds to a new account or return it to the original account. However, take note that this must be done within 60 days avoid tax and penalties. The designated account must be a U.S Traditional IRA. Retirement plan established in any country outside of the United States does not qualify for a tax-free rollover to or from the U.S.

Original Story at TFE.

Nov 21

Obtaining Green Card for Non-Resident Spouse of US Citizen – Tax Requirements

by julie



Congratulations – you’re married! If you are a US citizen and your spouse is not, you may want to obtain a Green Card or Immigrant Visa for your new spouse.  In order to do so, you must certify that you are up to date with your US tax returns and attach transcripts to show proof.




Form I-864:




In addition to the tax transcripts, it is helpful to provide proof of current employment.  Either a summary of payslips or an employer letter stating your current position, salary, and how long you have been there should suffice.

How do I know If I was required to file a tax return?

All US citizens and GC holders are required to file a US tax return declaring their worldwide income (question 20 in the I-864 application above refers to worldwide income). Please see Minimum Filing Requirements to determine if you were not required to file.

Whole Story at TFE.

Nov 17

QROPS Tax Consequences For Americans Living Overseas

by julie

11152016Putting some earnings away to save for retirement is common throughout the world. But for US citizens, as well as
permanent residents, who live abroad, the world of retirement accounts and pensions is hard to navigate because of complicated Internal Revenue Service regulations. Any type of foreign account, including pensions and retirement accounts, can be either a significant benefit, or a tax nightmare.

Whole Story at TFE.

Nov 13

Former Business Professor Pays $100 Million Penalty in Tax Fraud Case

by julie
Technicians checking servers with laptop

Technicians checking servers with laptop

A 71 years old US, UK and Israeli citizen Dan Horsky pleaded guilty to his role in a financial fraud conspiracy involving a foreign bank account containing more than $200 million.  As part of his plea agreement, Horsky paid a civil penalty of $100 million to the U.S. Treasury for failing to file and filing false Foreign Bank and Financial Accounts.

According to the statement of facts filed with the plea agreement, Horsky was employed for over 30 years as a professor of business administration at a university in New York.  In approximately 1995, Horsky began investing in numerous start-up businesses through financial accounts at various offshore banks, including one bank in Zurich, Switzerland.  One of these start-up businesses was Company A.  Horsky’s investments in Company A ultimately resulted in approximately $80 million in net proceeds from the sale of Company A’s stock.  However, Horsky only disclosed and paid taxes on approximately $7 million.  By 2008, Horsky’s account contained nearly $200 million.  From 2008 through 2014, Horsky filed false individual income tax returns and failed to disclose his income from, beneficial interest in, and control over his Zurich-based bank accounts.

Horsky faces a maximum penalty of five years in prison when sentenced on Feb. 10, 2017.  The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as the sentencing of the defendant will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.

Original Story at US Department of Justice.