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Three Taxation-Related Issues for U.S. Persons to Look Out for When Working or Retiring Overseas

There are several important tax considerations that affect U.S. persons when living overseas.

First, it is typical, and often economically necessary, to keep money in foreign bank accounts when living abroad. Individuals and families may need such funds for daily use. However, for many people, keeping money abroad will often result in aggregate balances exceeding $10,000.00 U.S. dollars. Additionally, many U.S. persons do not realize that this triggers reporting requirements to the U.S. government. U.S. persons must report balances in foreign accounts if the aggregate value exceeds $10,000.00 at any time during a given year. This information is reported by electronically filing the FinCEN Form 114, Report of Bank and Financial Accounts by June 30 of the following year on.

Second, U.S. income taxation does not stop at the U.S. borders. Many may not realize that the U.S.'s taxing jurisdiction extends to any income earned by U.S. persons, anywhere in the world. Thus, absent the effect of international treaties regarding income, the default rule is that U.S. persons must also report income wholly earned abroad on their tax returns.

Third, there is the issue of state income taxation. Many persons assume that their obligations to pay state taxes end upon moving out of that particular state. However, some states, such as California and New York, insist on the payment of taxes for up to two years after the Taxpayer moves out of the state. This can even apply after moving out of the U.S. entirely.

In conclusion, U.S. persons may face special challenges when living and working abroad when it comes to issues of taxation. However, foreknowledge and advance planning may be used to mitigate the worst effects of such issues. To properly plan, it may be useful to talk to an attorney experienced in issues of international taxation.

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