[idontwantthis]

Yeah this article is really pointless because it doesn't mention this. I'm an American citizen living abroad (still digital, no longer nomadic). I only pay SS and Medicare tax to the US.

Do not give up your US Citizenship for tax avoidance unless you are earning > $200k per year or making a lot of unearned income outside of the US.

Or you are in some weird situation where you permanently want to be in the US more than 35 days a year, but you don't work in the US, and don't want to be a citizen for some reason.

[brobinson]

There's also FATCA, FBAR, and a bunch of other nonsense you still have to deal with. Lots of foreign banks won't do business with Americans. You're also paying for an unnecessary tax return preparation each year. Renouncing in light of all this stuff makes sense for a lot of people.

[gregjor]

TurboTax has the FEIE worksheet and forms.

If you make enough money that renouncing citizenship looks like a good option the cost of tax preparation and opening a foreign bank account are going to be trivial details someone else will handle for you.

It’s a hassle for Americans to open bank accounts in some countries because of IRS reporting, but if you have a few million dollars to deposit you won’t have any problems.

[toastal]

TurboTax lobbies to keep the taxes overly complex so they can sell their services, so actually screw them. Almost all of their competitors don't offer service to those without a US address and US filing so your other choice is hiring a CPA.

[gregjor]

Nomads and expats should keep a US address and bank account. It makes everything simpler. You don’t have to tell the IRS or your bank your moved overseas. No one comes looking for you, no reason to complicate your life with foreign addresses.

Intuit may be an evil company, that’s a different subject. But their TurboTax product does handle the FEIE, which is the point I meant to make. You don’t have to hire a tax pro for that, though it may be worth it for complex tax situations or if you have income over $200k/year.

[toastal]

Paragraph 1 & 2 are definitely relate though. I just want to pay the bill and TurboTax has a line that says something to the effect of "Yes! You can pay the service if you use a US-based bank" while you go to the next screen where credit card is the only option and they will not accept cards from US-based banks with a foreign address. I canceled my old credit card when it expired because I wanted to simplify my life having less accounts, to not support their business and the shoddy support on Firefox/Linux from them, and to just have less entities tracking me. Now I have to go beg for a favor from family in the US to borrow credit card details pay for the privilege to give the government money. I tried doing taxes by hand two years ago and it was such a mess and I couldn't verify correctness with my situation that I had to bow out to a service.

[beagle3]

How do you pay SS and Medicare? I know someone in your situation who was trying to and was told you can only do that if you have US income source (which they don’t have)

[silverpepsi]

I'm going to assume they didn't know what they were talking about as my employer is US based. And by legal definition, the income I'm getting from them is foreign sourced income at least 330-365 days of the year. I'm taking the FEIE deduction yearly.

Source doesn't mean what it does to the layman for intl taxes.

[beagle3]

I didn't ask "why", I asked "how". That someone wants to pay SS and Medicare in order to accrue rates (planning to come back and perhaps retire in the US at some point, keeping options open), but was advised there is no way to accrue those rights without US income, even if they pay out of pocket.

[silverpepsi]

That's what I'm confused about. It seems you were advised to engage in illegal tax evasion or something? If you do your US taxes, which is required until the day you die, those charges will simply come out of completing the forms properly. It's unavoidable. The reason I clarified about US income is that the way you described it doesn't exist as a concept in tax law. The money amounts you're going to write down on your taxes don't ask where the person who sent you the money was seated in the world.

[gregjor]

https://www.irs.gov/individuals/international-taxpayers/soci...

[gregjor]

You file quarterly tax returns and pay the IRS. If you have a full-time job in the US your employer normally deducts and pays those taxes as part of payroll processing.

[beagle3]

In context, the question is this:

Mr X is a US citizen who lives outside the US, files and pays US taxes (with deductions taken for locally paid taxes). Mr X wants to also pay into social security and medicare (and whatever other right accrual systems) so that, if they decide to go back to the US so that -- when they retire -- they are entitled to social security benefits and medicare coverage.

The question is: How does Mr X technically pay into these systems, without having any US based income. He knows how to pay income tax (and does), but can't figure out a way to pay SS/Medicare (and doesn't).

[gregjor]

https://www.irs.gov/individuals/international-taxpayers/soci...

If Mr. X has no US-source income and earns income in a country with no totalization agreement with the US he can save the money he’s not paying for Social Security and Medicare in a savings account, IRA, etc. it’s not like the government-run programs are paying high interest.

[plugger]

from my understanding the US is the only G20 country that taxes citizens living and working abroad. given that I'm not sure your statement makes sense about when you should give up your US citizenship, as you'll still be out of pocket if you earn less than $200k pa.

On the flip side currently if you renounce your US citizenship it immediately triggers a 5 year back tax audit by the IRS and you have to clear your bill before they'll let you renounce.

[idontwantthis]

No you're not really if you know what the FEIE is. You don't get taxed on the first $112,000 of earned income this year. It's one extra page you need to file with your taxes. That means no income tax on any earned income up to that amount.

"Income tax" on "earned income" does not include Social Security, medicare/caid tax so you still pay some. It also doesn't cover "unearned" income like capital gains or rent.

I said earn > $200k because I'm sure citizenship is worth at least $88000 per year to most people. You would also need to be very confident that that income level is never going to to go away.

Further, most developed countries where you would be more likely to be earning that much money have tax reciprocity treaties with the US that cover the rest of your earned income.

[plugger]

I understand what FEIE is. but as you said, it's the first $112k. BUT, you still have to file every year, which incurs a time and financial penalty. W2 forms aren't designed for mere mortals to fumble their way through, so most outsource it to a tax accountant at a financial cost. Also, tax accountants abroad that specialise in US tax law are both rare and expensive.

> medicare/caid tax so you still pay some

exactly. You're still 'on the hook' annually to pay for subpar services you'll most likely never use, assuming they exist when you're eligible for them.

> I'm sure citizenship is worth at least $88000 per year to most people.

I'm sorry, but that makes me laugh HARD. By your math I would have paid approximately $1.9 million dollars in the past 21 years just to hold the US passport I might have used 10-15 times in that timeframe to gain entry to the US. Do you honestly think the right to visit the US 15 times over 2 decades is worth $2 million USD? Especially when you can visit the US without a US passport fairly easily (assuming you're not a cryptobro acting like a fool?).

Full disclosure, I'm a US expat who's lived in Australia for over 20 years and was granted Australian Medicare YEARS before I was a permanent resident.

[idontwantthis]

That’s great you’ve found a home in a country with similar security and stability to the US. None of what I’m saying matters to you because you found a new home to pay taxes to.

There’s no good reason for you to keep your US citizenship just like there’s no good reason for the average Australian citizen to gain US citizenship.

This is in the context of digital nomads who probably aren’t seeking citizenship in Australia or a similar country.

Ending US citizenship purely for tax avoidance without considering FEIE (like this article does) aimed at a target audience of young people who probably don’t know much about where they are going or how taxes work (digital nomads) is not smart.

[gregjor]

If you make more than $100k a year a few hundred dollars a year for professional tax prep shouldn’t be a big deal. And the cost of tax preparation and advice is deductible.

US citizenship has benefits beyond the passport. What that is worth depends on the individual. People from all over the world wait years for US visas and work permits, so there’s some value and demand implied.

I have children and family in the US, so I don’t put a price tag on my passport. Any place desirable enough for me to get citizenship there and renounce my US citizenship is going to tax me too.

[anonymoushn]

If it cost "a few hundred dollars a year" and less than 1 day of my time I would be ecstatic. That is nothing like what it actually costs.

[gregjor]

I don’t know your situation. I pay around $250 for professional tax prep (CPA and IRS enrolled agent). TurboTax costs about half that. It takes me much less than a day every year, maybe two hours. People who have high incomes and complex tax situations can probably afford to have someone else deal with their taxes. Tax advice and preparation, either by a person or software, is deductible on your tax return.

Your mileage may vary, but for most people considering the digital nomad thing taxes are not complex or expensive. Very few nomads I met in six years traveling made a lot of money. Their main hassle was self-inflicted: not setting up a US address and keeping a US bank account before they went traveling.

[mschuster91]

You should not be forced to file taxes for a country you do not live in. Even if there are reciprocity agreements in place.

[gregjor]

Yeah there’s always a difference between how the world actually works and how each of us think it should work. The advice here is for the reality-based contingent who want to minimize their tax obligation. For the rest there’s Cryptoland.

[anonymoushn]

Sure yes. Those people should definitely renounce.

[gregjor]

When Cryptoland or some other libertarian fantasy country actually exists and issues usable passports. Until that happens, most likely never, US citizenship is not terrible.

Renouncing citizenship requires finding another country that will give you citizenship, preferably a country with a strong passport and lower taxes than the US. That option really only makes sense for the wealthy.

[anonymoushn]

Because the U.S. prefers to penalize market participants who provide services like market making and reward market participants who speculate for periods of at least 1 year, all of my income is taxed at income tax rates but none of it is "earned income."