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US Expat Taxes: FEIE, FBAR, and FATCA

Transcript of the above video:

This video is going to briefly delve into issues associated with American expat taxation matters, dealing with one’s tax obligations in the United States etc.  The video as it’s titled is the 3 F’s. FBAR, FEIE and FATCA. Again I am an American attorney; I am licensed in United States tax courts.

Basically, the FBAR is foreign bank account reporting. American who have signatory authority over an account or multiple accounts with an aggregate balance of US$10,000 have to disclose that account to the United States Treasury Department, also known as FINCEN and that needs to be disclosed.  It is a sort of different filing from one’s main tax filings, but it has to be done pursuant to US law. The other thing to think about with respect to FBARs is FATCA, the Foreign Account Taxation Compliance Act which has been passed, I believe in the most recent presidential administration that came into effect. FATCA, basically, it’s sort of an enforcement mechanism, whereby, this actually happened here recently here in Thailand, there was an inter-treasury to finance ministry memorandum that came into effect, whereby American citizens who have bank accounts here in Thailand, that information will be disclosed back to the Treasury Department and presumably the IRS as well in the United States. The same goes for Thais who hold bank accounts in the United States; that information I believe is now going to be transmitted back to Treasury’s counterparts over here in Thailand. But that being said, basically FATCA shines a light where lights in the past were not shone before and as a result of FATCA it is not particularly easy, and I would actually go out on a limb and say it is nearly impossible now to “hide” money from the United States tax man via bank accounts, especially bank accounts that are in one’s name. So FATCA is extremely important, it’s extremely important with respect to the FBARs.

The next thing to think about is the FEIE, the Foreign Earned Income Exemption. Foreign Earned Income Exemption is basically the exemption one gets on their Foreign Earned Income. If an American citizen resides outside of the United States for a statutorily specified period of time and after a certain point, the exemption maxes out if one stays outside the United States for 335 days, you get the maximum exemption; that’s in a given calendar year.  One must be abroad for 335 days or more in a given calendar year in order to max out their exemption status under the FEIE.  The FEIE is one of the nice things about the foreign earned income exemption is that it has a sort of cost of living adjustment. It goes up with inflation over time so the actual amount that one will be exempt under, will raise year by year as things progress. The FEIE, like any exception, one has to file their taxes, their tax returns, in order to claim the exemption so until the return is filed, the exemption, for a lack of a better term, does not “kick in”. So one needs to go ahead and get their taxes filed in order to gain an exemption such as the FEIE. Most Americans will find that it is a fairly painless endeavor, most Americans who are working abroad. Things like teachers here in Thailand are not going to have any major issues as far as the tax authorities go back in the United States but in order to get their exemption status, they need to file their taxes. And that goes for any individual out here; you need to file your taxes in order to get your exemptions. So, something to think about, these are all extremely important matters moving forward as I mention on another video regarding American expatriate taxes on this channel. In January 1 of 2016, United States Federal Code was amended to basically allow the rescission or rescindment of an American citizen’s passport if that American citizen was in arrears to the IRS for more than US$ 50,000. So now these tax matters, really have a day to day, actually an extremely significant impact on the American citizen residing abroad because failure to being compliant with the tax code, to have paid up ones tax obligations, could result in the cancellation of one’s passport even if one is abroad. So it’s something to think about and moving forward it’s going to be even more significant because as does not look like this 50,000 number has a sort of cost of living adjustment, much like the FEIE. That number, I believe, is going to stay static so with inflation and sort of just simply the way things seem to progress in the system in which we live, $50,000 in a few years owed to the IRS, might not be as much capital as it currently is. So things to think about, getting, sort of, your tax situation straightened out, if you are living abroad, is probably best done sooner rather than later.