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Tax Reform Proposed For US Expats
Source:
tax-news.com
- Nov 9, 2012
by Mike Godfrey, Tax-News.com, Washington
08 November 2012
In a new tax reform proposal issued in November 2012, American Citizens Abroad (ACA) has proposed a ‘win-win solution’ that streamlines United States tax law and raises additional tax revenue, by recommending that Americans residing abroad have the option to elect to be taxed on the same basis as non-resident foreign nationals.
ACA calls this option Americans Abroad Taxation (AAT), which would, it says, resolve the current incompatibilities between citizenship-based taxation and the Foreign Account Tax Compliance Act (FATCA) that is intended to ensure that the Internal Revenue Service (IRS) obtains information on financial accounts held by US taxpayers.
ACA believes that current IRS practices are “creating more problems than they are solving”. As a general rule, Americans abroad pay taxes to their local country of residence, and they are also subject to US taxation. It points out that the combination of US taxes and the onerous filing requirements under the Report of Foreign Bank and Financial Accounts (FBAR), as well as the “extremely complex and burdensome” FATCA legislation “is a lethal model, making life for Americans residing overseas extremely difficult”.
It adds that tax reform is necessary as recent US tax policies now prevent an increasing number of Americans abroad from opening and maintaining a local bank account, signing mortgages or insurance contracts, obtaining employment, and entering joint-ventures and partnerships with foreigners. "These policies are forcing increasing numbers of Americans to renounce their US nationality in order to function in a global society,” the ACA warns.
AAT would allow Americans abroad, if they so elect, to be taxed by the IRS on the same basis as the US currently taxes non-resident aliens.
Under the ACA’s proposal, US source income would thereby be taxed through withholding taxes determined by US tax law and US income tax treaties. This would include withholding taxes on all US source unearned income (including dividends, interest, royalties, pensions and passive rents from US properties).
On the other hand, income earned in the US by Americans abroad, income from participations in US partnerships and compensation for self-employment services performed in the US would be taxed, as the case may be, either by a withholding tax at source or by reporting income under the same rules that apply to non-resident aliens who have 'effectively connected' income.
READ MORE:
http://www.tax-news.com/news/Tax_Reform_Proposed_For_US_Expats____58172.html
Category: IRS
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