The idea of living in another country can be an exciting one for many people. The process of acquiring visas, housing and then exploring an entirely new area of the world can be liberating especially over the long term. What many people forget to look into is their responsibilities for tax on earning to their home country however.
If you are planning on traveling for an extended period or living in a brand-new country, you may be interested to know that you could be responsible for paying taxes not only in the country that you're staying in but also in your birth country as well. Citizenship-based taxation is something that can affect almost every Expat, and a failure to prepare for it could leave you with a massive bill when you arrive home.
Personal income tax can change significantly especially if you are a US citizen living abroad. In the United States, if you are a United States citizen there is a personal income tax applied to all citizens whether you're living in the country or not. All citizens of the United States will be taxed under the same system and this means that if you are an expat, you'll be responsible for submitting a report of your income every year as well as paying taxes on that income.
Only the United States and Eritrea are countries of the world that will actually tax their residents after they move. US tax law has been revisited many times over but citizenship based taxation has continued even as many other countries have dropped out of the citizenship -based tax requirements. The original reason for this taxation levy was during the Civil War in which Americans abroad were taxed because they were unable to join into the war effort. The laws have only continued to require citizenship based taxation and the United States still continues to generate a large amount of its taxation revenue through this system. There is no sign that it's going to change anytime soon.
If you are a United States citizen living abroad and you want to be well informed when the time comes to submit your taxes to the IRS, please do not hesitate to reach out. Our taxation experts help expats every year with the process of filing their taxes to the IRS. We want to make sure that you can have an easy process with declaring your income, paying the tax that is required under US citizenship law and more. Citizenship based taxation is a rarity worldwide but if you are a US citizen it's very important that you take this into consideration during tax season.
By working with our taxation experts we can also highlight certain areas where you can save money on your return or satisfy the needs of your return without having to pay an extensive amount in United States taxes. Contact us for help at any time.
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