You need to be ready to file taxes! The United
You need to be ready to file taxes! The United States has a highly stringent policy when it comes to the taxation of its citizens and permanent residents (i.e., those with a green card). The US government taxes all of its citizens based on worldwide income, which means it does not matter where the money is earned. US citizens and permanent residents may be able to exclude up to $100,800 in foreign earned income provided they meet certain qualifications. Given the high exclusion amount, most US expats end up not owing any taxes, although they are required to file a tax return. In countries with a higher income tax rate than in the US, it is often preferable to utilize the foreign tax credit, rather than the foreign earned income exclusion to eliminate US tax liability. The foreign tax credit addresses the issue of double taxation.
US persons (including entities) with an interest or signature authority over foreign financial accounts that have an aggregate balance exceeding $10,000 are required to file the FBAR (FinCen 114). The FBAR is separate requirement from your tax return. Failure to file the FBAR carries hefty penalties. Its important to note that with the implementation of FATCA (Foreign Account Tax Compliance Act), foreign financial institutions are providing the IRS with the details of foreign financial accounts held by US persons. As a result, non-reporting is an increasingly risky proposition.