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Old 09.02.2009, 10:16
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EU / US Dual Citizenship and Taxes

It’s that dreaded time of the year in the US where we have to report on our income to the government. I have a tax questions for you guys.

I am a dual citizen of the United States and Spain. I relocated to Zürich from the US last year and I need to file taxes in the US, since I worked there for several months in 2008. I am here in Switzerland as a Spanish citizen for obvious reasons, I have my B permit (which I got with my Spanish passport) and I get taxed at source.

I understand that US citizens have to pay the Internal Revenue Service (IRS) the difference between Swiss taxes and US Federal taxes due to a tax agreement that both countries have. But I am here as a Spanish citizen, so I don’t have to declare my income to the IRS nor they can check whether I’m making money outside the US.

So what I’m doing is filing taxes in the US this year as ‘self-employed’ and as if I was living with my parents in Florida. I am probably doing the same next year so I can avoid being double taxed.

I was wondering if anybody has had the same experience and done this before and if there is any implication in doing this. Please share your thoughts about this. Thanks!
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Old 09.02.2009, 10:44
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Re: EU / US Dual Citizenship and Taxes

You can do what you want to do or you can do it the correct way. Are you getting paid cash under the table or do you put your money in the bank? The US has ways of finding out where you live and where you have money. My suggestion would be to be up front about it and file your taxes the correct way: pay your Swiss taxes and then fill out your US tax forms and apply for the foreign tax credit.
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Old 09.02.2009, 13:20
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Re: EU / US Dual Citizenship and Taxes

I have a B permit and a legitimate work contract. to tell you the truth I don't even make much more money than I did back in the US. but it would be nice to pay lower taxes. Otherwise what was the point moving here?
From what I read I probably won't have to pay much anyways. But in the future when I make more money I'd like to know what would be the best and correct way to do it. Are you a dual citizen?
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Old 09.02.2009, 13:51
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Re: EU / US Dual Citizenship and Taxes

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From what I read I probably won't have to pay much anyways. But in the future when I make more money I'd like to know what would be the best and correct way to do it. Are you a dual citizen?
My wife is a Spanish/US citizen. US citizens are required to file tax forms annually. If you want to avoid filing US taxes, I suggest you renounce your US citizenship but even that won't stop the US from coming after you for many years.
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Old 09.02.2009, 13:57
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Re: EU / US Dual Citizenship and Taxes

The IRS website is full of information and I always find what I need when I have a question.
www.irs.gov
Pbulication 54 is the Tax Guide for U.S. Citizens and Resident Aliens Abroad
http://www.irs.gov/pub/irs-pdf/p54.pdf

While living in the U.S. I did my taxes online with Turbotax. It made it painless and saved me more money than when I used an accountant.
I think it has an option for people living abroad, too.
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Old 09.02.2009, 16:08
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Re: EU / US Dual Citizenship and Taxes

Unfortunately, you have and obligation as a US citizen to file taxes... Even if you renounce your citizenship Uncle Sam will come after you for up to 5 years - particularly if you renounce it simply to avoid paying taxes and regardless of your dual citizenship.

You can take a chance, and if you do not plan on visiting the US or moving back there you may get away with it. (not that I would recommend that option)

I used Taxcut last year which worked fine, but unfortunately could not e-File because I do not get W2s and you have to file a foreign income statement - just meant I had to print all the documentation and mail it.

On the positive side found that because of the US tax treaty with Switzerland - with the rental cost allowance and because the first 83k USD of income is tax exempt I did not end up owing anything to uncle Sam - since I got a tax credit for the taxes I paid in Switzerland.

Of course YMMV

Disclaimer: I am not a tax advisor or lawyer and all of the above is just based on my personal experience and opinion... and therefore should not be taken to constitute tax or legal advice.
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Old 09.02.2009, 16:48
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Re: EU / US Dual Citizenship and Taxes

Gusilu,

I've told this story before, but... several times, when returning to the US for a visit, I've handed my passport to the nice man in the booth - who swipes it, looks at his screen, and says:

"Thanks for paying your taxes, Mrs. MC. Welcome back."

One wonders if, had one fallen afoul of the IRS, might one now be sporting an orange jumpsuit?

Given the exclusion and credit for taxes paid to the host country, and depending on your individual situation, it's not really double taxation. As others have advised, run through any good tax preparation software - I think you'll find that it isn't that bad.

Don't mess with the IRS. Seriously. You could be letting yourself in for a world of trouble.
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Old 09.02.2009, 17:04
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Re: EU / US Dual Citizenship and Taxes

As an expat, you can file an extension for up 6 months( i.e. your
return would be due October 15)

You have to file a return if you are a US citizen.

As a person living outside the US, you can either take

1. Foreign tax credit for taxes paid in Switzerland.
2. Exclude 87000 of foreign income from your US return.

I did option 2 because I live in Canton Zug, and taxes are lower there.
The option to pick depends on your tax situation.
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Old 09.02.2009, 19:06
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Re: EU / US Dual Citizenship and Taxes

Hi Gusilu,

I can only agree with the answers you've already received: if you file, you may not end up owing much - if anything - because of the foreign tax credit. Last year I even got a refund, so who knows? It could work out in your favour.

If you don't fancy preparing the return yourself there are plenty of good accountants who can do it for you. Worth their weight in restful nights!
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Old 10.02.2009, 12:36
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Re: EU / US Dual Citizenship and Taxes

I would second everything HollidayG said (first thing you should do is file an extension, establish foreign residency, then you can either take the foreign tax credit or exclude part of your income on your 1040) and Meloncollie and others about not messing with the IRS. I had dealings with them in the past (when I ran a business and my accountant made an error on my returns) and it was not a pleasant experience. They're brainless, unreasonable idiots who use intimidation and bullying to try to strong-arm people, even if you're not guilty of any wrongdoing, because they rely on people not knowing their rights. I got tired of going in circles with them and handed the matter over to a tax attorney who'd once worked at the IRS. They backed off right away, became much more conciliatory and the matter was resolved quickly.

I would recommend hiring an accountant who's familiar with both the US and Swiss tax codes and treaties, at least for your first time filing, to get an idea of what forms you need to fill out and what to expect in terms of liabilities, deductions, etc.
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Old 10.02.2009, 14:28
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Re: EU / US Dual Citizenship and Taxes

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If you don't fancy preparing the return yourself there are plenty of good accountants who can do it for you. Worth their weight in restful nights!
Any recommendations..? Specifically for those in the Zurich area..?
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Old 11.02.2009, 13:24
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Re: EU / US Dual Citizenship and Taxes

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Any recommendations..? Specifically for those in the Zurich area..?
I live in Zurich, but I hired an expat American living in Nyon. Her name is Pamela Ballentine and her company is "American Tax Abroad". The website is: http://www.americantaxabroad.com/

Another option is the larger consulting/accounting companies like Deloitte & Touche who will do both your US and Swiss taxes at the same time. You will pay more for the name and the convenience.
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Old 31.03.2009, 10:39
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Re: EU / US Dual Citizenship and Taxes

Thanks to everyone for all of the good advice. I understand that I have to declare my income to the IRS regardless of my country of residence. But again, I am residing in Switzerland as a SPANISH citizen, not as a GRINGO!
So, I would assume that the Swiss Tax Authorities cannot disclose any of my income to the IRS since they don't have me on the record as an US Citizen. right?
I guess, the way to find out is to consult with a Tax Expert. Thanks Again!
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Old 31.03.2009, 10:52
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Re: EU / US Dual Citizenship and Taxes

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But again, I am residing in Switzerland as a SPANISH citizen, not as a GRINGO!
So, I would assume that the Swiss Tax Authorities cannot disclose any of my income to the IRS since they don't have me on the record as an US Citizen. right?
Again, do whatever you think is appropriate. You shouldn't have to pay much if anything more to the IRS on top of what you are paying to the Swiss tax authorities. We report everything as we would rather not deal with the consequences. I've been audited enough times already and have been up front about everything. I wouldn't like to have been caught up in trying to hide income as the IRS are a pain in the ass if they think anything looks fishy.

Maybe you want to consider looking into living in another "tax haven" as Switzerland isn't like it used to be.

BTW, what is your planned response to the IRS when they ask you where you are now residing? What will you show them when they ask to see the tax forms from that country? Are you planning on pretending that you are still a US resident? If so, I would recommend sneaking across the Mexican border when coming and going from the US so they have no records of your entering or exiting.
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Old 31.03.2009, 11:19
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Re: EU / US Dual Citizenship and Taxes

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Thanks to everyone for all of the good advice. I understand that I have to declare my income to the IRS regardless of my country of residence. But again, I am residing in Switzerland as a SPANISH citizen, not as a GRINGO!
So, I would assume that the Swiss Tax Authorities cannot disclose any of my income to the IRS since they don't have me on the record as an US Citizen. right?
I guess, the way to find out is to consult with a Tax Expert. Thanks Again!
there is something on all CH tax forms about US citizens! not being one and not applying to me i ignore it! check the the software for your canton. but you may have to declare that you are US and then that info is in the CH system. how paranoid are you about the different systems talking to each other? (c'
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Old 31.03.2009, 11:22
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Re: EU / US Dual Citizenship and Taxes

Like I said in my second post, I don't make much money nor I'm planning to hide my foreign income to the IRS. I now know that I wouldn't have to pay anything to the IRS next year thanks to the foreign income tax credit, maybe I'll even get a refund. I was just wondering what are the implications of being a DUAL citizen and having foreign income, what are the advantages/disadvantages of it.
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Old 31.03.2009, 11:26
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Re: EU / US Dual Citizenship and Taxes

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We report everything as we would rather not deal with the consequences. I've been audited enough times already and have been up front about everything. I wouldn't like to have been caught up in trying to hide income as the IRS are a pain in the ass if they think anything looks fishy.
Patxi, are you a Dual Citizen as well? or just your wife?

G.
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Old 31.03.2009, 11:54
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Re: EU / US Dual Citizenship and Taxes

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Thanks to everyone for all of the good advice. I understand that I have to declare my income to the IRS regardless of my country of residence. But again, I am residing in Switzerland as a SPANISH citizen, not as a GRINGO!
I see you're getting nowhere with this - so let me rephrase this for you. Your tax obligations towards the US government are a direct result of your holding the US nationality, they are not affected by ownership of another passport and/or foreign residency, and the IRS doesn't care under which other possible nationality you take residence into whichever country.

US private fiscal jurisdiction is global, so your current country of residence may or may not disclose your earnings to the IRS, but make sure that once you step on american soil, the IRS will be back with a vengeance inquiring about missing tax returns and you'll end up living in a world of pain.
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Old 31.03.2009, 12:42
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Re: EU / US Dual Citizenship and Taxes

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Your tax obligations towards the US government are a direct result of your holding the US nationality, they are not affected by ownership of another passport and/or foreign residency, and the IRS doesn't care under which other possible nationality you take residence into whichever country.
That's exactly what I wanted to know.

THANKS!
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Old 31.03.2009, 15:19
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Re: EU / US Dual Citizenship and Taxes

As others have remarked your obligation to file a US tax return arises because you hold a US passport. The same is true for Green Card holders and certain non resident aliens if they spend a sufficient time in the US or earn income when in the USA.
The IRS explains this quite extensively at:
http://www.irs.gov/businesses/small/...=97324,00.html

You should also be aware that you need to report any bank accounts held abroad where you have signing authority and the amount in the account exceeds $10,000. This might not result in you being liable for tax but is essentially there because US banks have the obligation to report to the IRS transfers in and out of accounts for more than $10K.

If you file through a tax advisor (and you have until June 15 to file though you may be assessed penalties if you owe them money), it is wise to check if the advisor can e file. This saves time and therefore costs.
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