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Discussion forum for US expats?

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ORIGINAL POST
Posted by riverman 18 yrs ago
Is there a discussion forum, online or IRL, where US expats get together and talk about stuff? I'm feeling pretty angry at the new tax law and how it will impact us, and would love to have a chance to share thoughts, feelings and strategies with people who understand. My friends stateside are sympathetic, but they secretly resent the tax break we get for working overseas. My colleagues are either not Americans, or aren't the right people to share things with.


Thanks

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COMMENTS
RiceT 18 yrs ago
You could just start a thread on the topic here.

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dimac4 18 yrs ago
What are the new tax laws anyway?

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riverman 18 yrs ago
The House and Senate have passed a bill, which is on Bush's desk to be signed, that raises the exemption on foreign earned income to $82K, but drastically lowers the exemption on housing allowances and foreign investment income. According to this article http://tinyurl.com/fwxk3 if you earn $75K and have a $3K per month apartment provided for you (not unreasonable in HK), your US tax liability just went from US$600 to US$5110 for the coming tax year. The new law is retroactive to Jan 1, 2006.



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nycgal 18 yrs ago
hi riverman, thanks for the heads up. since i am in the same boat as you, this new bill is outrageous!! since this bill has passed, any chance that it could be vetoed by Bush (which is very unlikely unless there is a huge outcry)??

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riverman 18 yrs ago
I don't know what the odds are of Bush vetoing this bill, but I'd guess its down around zero. It was pushed through by Repubs, and he has been openly in favor of closing this particular 'loophole'. I think its pretty much a done deal. And he seems pretty impervious to backlash.


What is most outrageous is that this was a last minute add-on by an Idaho senator. Since they couldn't repeal the tax exclusion, he lowered the allowance on housing and (this is the worst part), the remainder is apparently taxable at the highest rate possible. Its not a sliding scale, where your first $X are at one rate, then your next are at a higher rate.


My own situation is that rental rates are so high here in HK that my housing benefit is actually higher than my salary. So my salary is exempt, but the taxes on my housing will make my tax debt higher than if I worked in the US. At least back home, I could write off my income against my mortgage interest, home improvements, work related expenses and other deductions. AFAIK, we have no ability to write off cost-of-living deductions against this new taxable benefit.


This is just BS; its a tax law that is not well-thought out and is going to impact HK expats (along with Singapore and Bermuda) more than anyone else in the world, because of the price of rentals.



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nycgal 18 yrs ago
except for your post here on this board, i had no idea about this new bill. you would think a bill like this would have generated much more publicity, right? I can't believe this is the first time i am hearing this news. It sucks for me because my firm just relocated me here this year and i thought maybe i can save a little bit but i guess that is not going to happen.

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Burgundy 18 yrs ago
Unfortunately, you will never be able to change tax rules adversely affecting expats of any country: we are too small as a voting constituency and can easily be portrayed as obscenely rich tax exiles.



Two examples from the UK (which has a much, much higher proportion of expats among its citizens than does the US, and whose expats should therefore be able to exert greater influence on policy):



1) If you were a UK teacher/government worker and retire to certain other countries (such as Australia), your pension ceases to be inflation-linked from the date you move overseas. Why? The government said last year that there is no logic behind this rule; but equally there is no consensus to change it.



2. If you are British and marry a British spouse, your entire estate passes tax-free on death to the spouse. However, if your spouse is not British, only a tiny sum passes tax free. The rest is taxed. Why? The government's best explanation is that it has been like this for many years.

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riverman 18 yrs ago
Well, its finally making the news, but I don't like the many references to HK.


http://tinyurl.com/gfsjo



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riverman 18 yrs ago
Sorry, I meant the references to HK I'm seeing in news reports I've been googling. They mention HK as being one place (along with Singapore, Paris and Bermuda) that will be particularly hard hit by this tax.


http://tinyurl.com/gl36o for example.






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da-bears 18 yrs ago
For those of us who work for non-US employers, if the IRS audits, what do we need to show the IRS as proof of income? Does anyone have any experience?


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Claire 18 yrs ago
Every year, your employer will give you a copy of the completed I.R. 56B/56E/56F/56G so you can complete your tax return. Why can't you show that? It suffices for the HK IRD.


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riverman 18 yrs ago
Another article on this tax: again HK is mentioned as being particularly hard hit.

http://tinyurl.com/rnqmk


--riverman


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dimac4 18 yrs ago
What sort of effect will it have on the HK rental market - I am thinking of all those Americans living in Redhill, Stanley, Midlevels and Repulse Bay paying outrageous rents 100,000+ per month. There may be a signifigant reduction in demand for this super luxury market - bringing down rental prices as companies and individuals try to save money and refuse to pay the big price ticket anymore.


Do you think there will be an effect on HK property?

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dimac4 18 yrs ago
Just a couple of questions - how can US citizens become tax exempt while living OS? Do they have surrender their US citizen ship? And what about those people who are not filling in tax returns - does that mean they can never re enter USA without gewtting a huge tax bill and go to jail for evasion?? Just curious.

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riverman 18 yrs ago
US citizens who earn their money outside the US get a tax exemption of US$80K on their income. Everything above that, they pay income tax on. They still have to file their tax form and claim the $80K as income, but they can deduct it from their total income to shelter it from taxes. The logic has many aspects: overseas workers are usually working in a capacity that increases trade with the US, also overseas workers are not able to take a lot of deductions that people in the US are.


If people live overseas and don't file their returns, they can be hammered pretty hard when they go home if the IRS audits them. There is a stiff penalty for not filing, even if you don't owe any money.


Besides, the US tax laws are so complex that the IRS can find a way that you owe money. I'm pretty convinced that there is not 'right' way to file your taxes...you just have to show that you attempted to be as honest as you are capable of being.



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riverman 18 yrs ago
The International Herald Trib seems to be the only paper giving detailed explanations of this new tax.


http://tinyurl.com/eupf2


And it still gives the caveat that middle class workers in HK will be the hardest hit.


:-(

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NoHSL 18 yrs ago
US Citizens are never exempt on earnings just because they are overseas. That is the US tax system, for better or in this case for expats, worse. The reduction of the housing allowance will raise the tax costs for US expats that are not equalized in HK. There is some hope that the US Treasury will issue regulations that will allow for cost of living adjustments geographically that could raise the allowable housing deduction in HK to the $25 to 27K area. Good luck finding decent housing for that amount here.


The more troubling provision is the stacking rule that requires US expats to add the 2 exclusions back when computing the appropriate tax bracket. Now, as opposed to US citizens living in America, US expats do not get an averaging of the lower tax brackets but instead pay tax on the first dollar they earn above the exclusions at the higher rate. This combined with the basically retroactive nature of the tax and lack of notice is highly unfair and potentially could be construed as unconstitutional since it unfairly targets a discrete and insular minority among taxpayers.


Ted - I would be careful with trying to play around with your income as penalties for attempting to evade taxation can cost up to $100,000 as well as result in a felony conviction and 5 years of jail time.


Dimac4 - you can renounce your citizenship, however if you have made either an average of over $100,000 for the past 5 years or actually made over $100,000 for the past 5 years any renunciation will be deemed to have been made for tax purposes and the IRS will still seek to tax you. You should discuss with your tax advisor before considering this route.

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bayfield 18 yrs ago
There are two elements to this law hurtful to US citizens (and green card holders) working in Hong Kong


- earned income above the exclusion (new max US$82.4k) is now taxed at the marginal rate of $82.4k rather than starting at zero. So that first dollar above $82.4k could be taxed at as much as 38% rather than zero.


- Housing exemption: Rent up to US$$13,184 p.a. (HK$8570/mo)is taxable. That's no different from the past. But here's the kicker: Rent above that is not taxable only to a maximum of 30% of the income exclusion, i.e. a max US$11, 536 p.a (which is 30% of $82.4k). So if your total rent exceeds the sum of those two, i.e., US$24,720 p.a. or HK$16,000/mo, then everything above that amount is taxable whereas, previously, it was not.


So, if you are pay US taxes and if your rent is above HK$16k, you're screwed.


But there's one possibility: The Secretary of the Treasury under the law has the discretion to (in the words of PwC, link below) "issue regulations or other guidance which would provide for an adjustment to the 30% housing cost. This would apply in cases where geographic differences in housing cost exist, and provides the Secretary with the discretion to adjust the general 30% limit upward or downward as required."


So write your representatives, camp out at AmCham and make sure AmCham is aggressive about this, make sure Hong Kong is deemed a special case.


Link:

http://www.pwchk.com/home/eng/globalwatch_may2006.html






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lorem ipsum 18 yrs ago
Good luck!! There actually was a bit of press about this a few weeks ago. Most people then (and apparently now) see it as funding tax cuts for people at home - they're not going to exclude HK!


Quite frankly as an "Aussy" I'd be mightily p***ed if our government did this retrospectively.

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NoHSL 18 yrs ago
Three things:


First, the regulations are not excluding Hong Kong just increasing the allowable amount of the housing exclusion based on the higher cost of housing on Hong Kong when compared with, presumably, Washington D.C. This increase (or decrease for other locations) is already allowed for in the law. Even with this adjustment it is still a huge change for most people.


Second, as to Clare question, Hong Kong's tax year differs from that of most US individuals, so while the form you mention is a good approximation it does not reflect the actual amount a US citizen made in the calendar year. Nonetheless, my employer was able to give me calendar year information as I am sure most employers would be able to do.


Third, changing the housing amount to wages does not help as wages are taxable income. Also, having the company pay for the housing as opposed to providing an allowance also does not help since US tax law deems this amount (or at least the fair market value of the housing) as income.


The people that are being funded at home are the same fat cats that this change in law is seeking to tax. In the end the people who will be most affected are the middle class (as always) and the legislation will not raise the revenue that it is projected to raise. US citizens will either return home, buy property to get a mortgage deduction (interest is deductible for mortgages up to $1 million) or the corporation will gross up the employees' pay and take a full deduction on the compensation expense. A poor piece of legislation

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Katie 18 yrs ago
Found out yesterday the law has been signed and is now effective. Yikes....this is definitely bad news for US citizens living here. I guess some of us will be wanting to go home now rather than pay more taxes for the "privilege" of being American citizens.

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pekingman06 18 yrs ago
Assuming a good salary and healthy housing allowance is it better to be tax equalized or not?

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riverman 18 yrs ago
No, since the greatest share of my US tax will be on my housing benefit, and that tax comes out of my salary. I could take more money home if I lived somewhere else with a smaller salary and lower rents.


This new US tax means that we pay out of our salaries to 'equalize' the housing benefit which is inflated because of the outrageous rents in HK; something that has absolutely no cash value to us.



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HK Blonde 18 yrs ago
Please see the American Chamber of Commerce blog on this topic at

www.amcham.org.hk/taxhike for up-to-date information.

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NoHSL 18 yrs ago
Good news to all. Notice 2006-87 was just recently issued. In this notice, the housing allowance for Hong Kong is listed as $114,600. This is the highest amount of any foreign jurisdiction.


What this means is that after the first $13,184 of qualified housing expenses the next $101,116 is deductible.


The stacking rule of the foreign income exclusion can still potentially increase tax due but the regulations yield a much better result than section 911 itself provides

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