A Massachusetts Tax Lawyer for U.S. Expatriates
In a close-knit world, more Americans than ever are finding homes and employment abroad.
Many will one day return to the United States while others will choose to remain abroad forever, relinquishing U.S. citizenship in favor of their new homes.
It is possible to surrender one’s citizenship in the United States. The process is well-defined and can be accomplished essentially by filling in all the correct forms and swearing an oath. By itself, the act can be a trying and emotional process. But often overlooked are the tax consequences that befall those who renounce the homeland. Their assets, whether left in place within the United States or moved abroad, are subject to exit taxes that must be paid before the renunciation is complete.
For those who retain their U.S. citizenship while working abroad there are still U.S. tax returns to prepare. These require special treatment, and the rules permit large exclusions of income from federal taxation. The well informed may also take advantage of the direct foreign tax credit for foreign taxes paid or accrued.
Equally important, though, is that U.S. state residency continues in much the same way as does U.S. citizenship while the taxpayer is abroad. This means that expatriates may well be liable for Massachusetts taxes even though they haven’t set foot in the Commonwealth for years or decades. Worse still, Massachusetts taxes all the expatriate’s income, ignoring the federal exclusions and allowing no offset for foreign taxes paid. These local rules, and the nebulous concept of state residency, can expose the unwary to significant tax liability.
If you are currently working abroad, or planning to one day, Tom can provide you the assistance you need to manage all your tax responsibilities, as a top tax lawyer for expatriates.
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Did You Know?
Foreign tax credits come in two flavors: Direct and Indirect.