Job Discussion Forums

[Sashadroogie]

I understand the rules. My point is that the very notion of a government feeling entitled to tax income based in another country is fundamentally flawed and unfair. Even returning forms to say you don't need to pay anything seems to be a basic infringement of rights...

[spiral78]

I expect that the basic assumption is that most expats ultimately return to their home countries and will expect some payments in terms of health care and retirement. I guess governments have some legit right to a degree of info under these circumstances, as social systems are basically predicated upon the notion that people will not move abroad to work in great numbers, but will stay 'home' and contribute to their home systems throughout their working lives...

[Sashadroogie]

Spiral, I might accept that if the US actually had anything like the social care available in the EU. I do not pay taxes on my income earned abroad, yet I still have more in the way of a social net than my American friends. There is a contradiction there somewhere, don't you think?

[spiral78]

While I, like most Americans, don't expect any support from the US government in my own old age (not that I'll be in the US anyway), our parents and grandparents actually DO get some support.

My own parents were missionaries and obviously didn't amass much of a personal fortune in their working lives. With careful and frugal living and a reasonable plan, they have been able to live independently through their (long) retirement years (they're near 90 now) without any support from my brother or I. Social Security and Medicare have in fact been vital in their situation - each has a very small pension from their jobs, but it's really minimal.

I totally agree that European systems are far better (and more likely to survive over the coming decades), but the US system used to be at least minimally supportive if one planned well.

While it may seem apparent to many of 'us' that the US system is inadequate in comparison to that of most other developed countries, and that what system it does have is in jeopardy, that's obviously not the premise that current policy is made upon.....

[HLJHLJ]

[MotherF]

I know several expats, who through filing every year, upon return to the US were eligible for social programs because their tax returns proved they had been living under the poverty line for the previous five years. Three got grants (no loans) for grad school and one got food stamps on top of that to help ease their reverse culture shock. The government wants to know how much money you make and have made--in order to know what services you are or are not entitled to. If there is no record of income during your time abroad--how can they know that.

[spiral78]

[Matt_22]

I'm not positive, but I think the rule for US taxation of overseas income has more to do with income tax evasion than simple money-grubbing. It may have served a good purpose at one point in time, but there are so many damn loopholes in the US tax code that those with means will inevitably be one step ahead. That's just the way things work in this political system.

One nice thing about the exclusion is that it's fairly progressive. It doesn't hit the pocketbook of middle class incomes, and is only progressively structured again once over the threshold. The nice effect here is that it deters multinational corporations from evading US income taxes by paying executives and employees in countries targeted for their low tax rates. It also enforces this by applying a bonafide residency test.

I think this was initiated with the right intentions, but like many government regulations, it often gets twisted into something counterproductive.

[choudoufu]

don't forget that after you pay income tax on your foreign income
(if over the threshhold), your state also has claims. (excepting
some states like florida, texas, and alaska with no personal
income tax.)

also, if you have a government-related job.......like a defense
department contractor or state department employee or serving
in the military overseas, you don't always get that exemption.
(that may have changed since i was there.....) there are combat
pay exemptions, but the average gi joe stationed in europe is
paying us income tax and state income tax.

[Matt_22]

[naturegirl321]

For the US, you're allowed something like 91,500 that's earned from your MAIN job. And you also have to declare perks like flights, housing, food, etc. So if you have private lessons, then you're supposed to declare that. There's two ways around paying taxes to the US: the easiest is the 2555 and then there's the 1116.

they change stuff all the time as well.

I know on the 2555 they have room for ONE employer. So I'm guessing that if you work one job during the week and then another on the weekends, then the weekend one would go on the 1116.

And then if you earn money from property, stocks, bonds, etc overseas, that's another issue. It makes my head spin.

At this point in time, it's worth getting an accountant: at least for me.

For the majority of EFL teachers, we're not making anywhere near the 90K ish limit and the IRS have bigger fish to fry that us teachers.

I agree with spiral78: FBAR is a bit too much. Supposedly the IRS is hiring a lot of new peopel as well with the intent on chasing all us bad people overseas down. most Americans overseas don't file taxes, 60% or something like that. The IRS wants all your bank info. They've threatened overseas banks as well, not sure exactly how, but something to the tune of you must provide info about Americans who have accounts with you or we won't do business with you. Very mature

[Mike_2007]

Well, don't know anything about US taxation, but I can give you the figures for Romania:

Firstly, all salaries here are quoted net, so if you're job hunting in Romania, the offer a company makes can be assumed to be your monthly take home - if you're on the books, you don't need to worry about tax.

The gross salary is just under double the employee's net salary, and is divided such that one part of it is paid on behalf of the employer (insurances and so forth), and the rest on behalf of the employee (benefit contribution, and so forth).

If we take a gross salary of 10'000 Euro, the employer would pay (no idea what some of these are called in English):

Pension fund (20.80%)
Health insurance (5.20%)
Protection again firing (0.85%)
Unemployment fund (0.50%)
Salary guarantee (0.25%)
Accident at work fund (cc. 0.4%)

At the end of which, the employee is left with 7813 Euro, which is the employee's gross salary. The employee then pays (or has paid on his behalf by his employer):

Pension contributions (10.50%)
Health insurance (5.50%)
Unemployment fund (0.50%)
Personal deductions (0%*)
Income tax (16%)

*personal deductions kick in, I believe, when you have dependants.

So, after all that, the employee is left with 5480 Euro.

Alternatively, you can work as a PFA (persoana fizica autorizata), which is basically being self-employed. In this case, you only pay the employee's contributions and you can also make deductions (pentrol, some clothing, some food, bills, materials, travel costs, etc.)

Typical tax scams in Romania include:

1. Working cash in hand - pretty much the case for the majority of manual labourers, peasants selling produce in towns, day workers, household staff, construction workers, etc.

2. Working for a company full-time, but being employed as a PFA so the company can avoid paying some of their taxes. In the example above, the employee gets 5480 Euro, this costs the company 10'000 Euro, so they'll employ him as a PFA, pay him 9000 Euro gross, which means that save 1000 Euro, and the employee makes a bit more too.

3. Paying employees minimum salary on the books and then giving them the rest in cash. Means the company saves money, and the employee gets a little extra, but employees aren't so keen on this anymore as it affects their contributions and it also means that when you go for a new job, you appear to have been earning less that you really were and so it's harder to negotiate a higher salary.

[Mike E]

[Ixchel]

[johnslat]

Dear HLJHLJ,

Well, there IS this option:

"How do I give up British citizenship or another form of British nationality?

This section explains when it is possible to give up (renounce) your British citizenship or other British nationality and how you can do so.

You may wish to give up (renounce) your citizenship so that, for instance, you can become a citizen of another country that does not allow dual nationality. However, it is not always possible to give up your British citizenship or nationality. The links below give more details."

http://www.ukba.homeoffice.gov.uk/britishcitizenship/givingupcitizenship/

Regards,
John