Before moving to the post, if you believe that Americans abroad are being treated unjustly by the United States Government: Join me on May 17, 2019 for a discussion of U.S. “citizenship-based taxation” as follows:
You Are Invited To TaxConnections YouTube Live Stream Event: What Is The Future Of Citizenship Based Taxation AKA @CitizenshipTax? https://t.co/v5EVE5ITYG via @taxconnections
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) April 16, 2019
You are invited to submit your questions in advance.
And now, back to our regularly scheduled programming.
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I begin with the conclusion …
#Americansabroad who marry a non-US citizen (AKA nonresident alien) are now (if using married filing separately status) required to file a US tax return unless the nonresident alien makes a 6013(g) election to enter the US tax system. #YouCantMakeThisUp! https://t.co/QkxLsKCO3w
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) April 15, 2019
The Every Day facts:
"The United States imposes a separate and more punitive tax system on those Americans living outside the United States than it does on Homeland Americans." They have a special hatred for the non-citizen spouse. In fact: https://t.co/VrAKXYWDf4 pic.twitter.com/3gNf9lIqiX
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) April 18, 2019
1. A U.S. citizen living in Canada Is married to an alien (the nonresident type)
2. Had $500 of part time employment income
3. Because she is married (in accordance with the definition of “married” in Internal Revenue Code 7703) she is of course required to absorb all the punitive consequences of the “married filing separately” filing category. The “married filing separately category” is a punitive filing category which is a “hidden tax on Americans abroad“.
In the 2017 tax (and previous) year she had NOT met the filing threshold required to file a U.S. tax return. Using the IRS Interactive “Do I Have To File A Tax Return” tool, we find that:
(Note that this refers to a threshold of $4050 which is the amount of the personal exemption for 2017. The significance of this will be further explained below.)
She did however have financial assets which exceeded the $200,000 threshold required to file Form 8938. Most of these assets were owned jointly with her nonresident alien husband. Because she had not met the filing threshold for “married filing separately” in 2017 and previous years she had not been required to file Form 8938. Notice that Form 8938 does require her to report to the IRS assets that are jointly owned with her “nonresident alien” husband. (By the way he would not be happy about this. I some cases this forces Americans abroad to choose between their U.S. citizenship and their marriage.)
April 2019 – An SOS …
I received a frantic message. She was/is trying to to determine whether she is required to file a U.S. tax return for the 2018 year (based on her $500 of income and her status as “married filing separately”).
On the one hand she is directed by IRS publication 54 (the Bible For Americans Abroad) that her filing threshold is $12,000.
Page 3 of the 2018 IRS Publication 54 for Americans abroad directs that those in "married filing separately" category have a $12,000 filing threshold. This is the publication for Americans abroad. https://t.co/CcHpkoWdWd pic.twitter.com/sCOQ5QEEiN
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) April 18, 2019
On the other hand, she is being told on the IRS page describing filing thresholds that she is required to file a U.S. tax return.
IRS Publication 501 decrees that for the 2018 tax year, "married filing separately" taxpayers must file a 1040 with income from all sources of $5 https://t.co/iJhWTeO4BA pic.twitter.com/aTREUxcTKg
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) April 18, 2019