So many people who speak out against this haven't a clue what they are talking about. Yes, there is an absolute requirement to file a US tax return for a US citizen, where-ever resident. But there may be no additional tax liability - or, if there is, it is generally not much more than citizens would have owed had they been resident in the US exclusively. For all but the wealthiest, it is much ado about nothing.
The fact is that the US has tax treaties with most countries so that US citizens/residents do not pay taxes on the SAME income for the most part. Where there IS taxation on the same income, US citizens receive credits for taxes they have paid to another country for that same income. There is also what most consider to be a generous exclusion for foreign-earned revenue and Form 4555 can actually increase that exclusion somewhat by adding in expenses attributable to residing abroad.
I'll admit that my own experience is limited, but it is real. I am a legal resident of Switzerland and, as such, am obliged to declare ALL revenue AND "wealth" (e.g., end-of-calendar-year values of bank accounts, stocks, real property, etc. of whatever origin and in whatever location) - to the Swiss tax authorities. As it happens, the tax authorities go through everything that I list and make adjustments to exclude most US-sourced revenue and US-based "wealth" for calculating the Swiss tax assessment. Because of the adjusted weighting, they generally find that I owe less tax than my original return shows!
One exception to the adjusted weighting is for IRA withdrawals (IRAs - as special pre-tax retirement savings plans - are also exceptions from the wealth value reporting; the Swiss have similar pre-tax retirement savings plans), but once amounts are withdrawn, they are considered fully taxable as revenue here in Switzerland even though the income originates in the US. US IRA withdrawals for Swiss residents are first taxed in Switzerland. But the tax paid for IRA withdrawals here offsets amounts owing in the US.
As an expat who fully believes that paying taxes is the price we pay for a civilized society, albeit not more than my fair share please, I have not found the process overly burdensome. To be sure, there were only a couple of years where I lived abroad and earned enough more than the generous exclusion to have to pay US taxes on it. But during those years, I was also an "International Civil Servant" and, as such, exempt from paying any Swiss taxes at all, so my tax treatment was certainly more than fair. Had I been subject to Swiss taxes, the Swiss taxes paid would have offset the US tax liability significantly.
Yes, it is a nuisance to have to file a FATCA report as well as a separate US tax return. But I have found tax authorities in both countries to be very professional and helpful, so long as they realize that one is not trying to hide income and that any advantage one wishes to receive is a legal one. Frankly, I am tired generally of hearing people "dis" public services (not that you are doing so, but too many do). Perhaps they have had bad experiences with some people but the overwhelming majority of civil servants anywhere whom I have dealt with have been hard-working people who take their jobs seriously and try to be helpful.
I also know people here in Switzerland who have renounced their US citizenship. In most cases it was not because of, or not principally because of, the tax issue. Practically speaking, it has generally become much more difficult for US citizens to open bank accounts here, especially in the smaller cantonal banks. As someone who has lived here for nearly 20 years, I was "grandfathered" in and my accounts are with one of the biggies, but even there, US citizens, wherever located here, are now lumped together and we must sign disclosure forms to show that we agree that our balances can be reported to the IRS, among other things. Another reason is that those US citizens who renounce are children of US citizens who have lived most of their lives abroad so that they have no familial, educational, cultural or other ties with the US and feel no affiliation whatsoever. Especially because of events since 2001, many of these have grown ashamed of ANY ties to the US and its wholesale unquestioning allegiance to questionable, even insane, foreign policy positions that make little sense to what we who are abroad see and hear for ourselves every day.
What I personally do NOT like is being tarred with the same brush as a tax evader, which I am most certainly not. I also hate having my taxes support military invasions/drone strikes, etc. with which I absolutely do not agree and seeing my once-proud role-model of a democracy being taken over by corporations, oligarchs, religious zealots and gun nuts. But I value my US citizenship and will not renounce it. I remain proud to be an American because of the America I grew up in that did aspire to be better and the many, many wonderful US citizens I know who believe, as I do, that we can - and must - be better.
Sorry for the rant! I didn't mean to go on for so long.
= new reply since forum marked as read
