Americans Abroad: Why the HIRE Act Means You Need to Get Caught Up on Your US Taxes NOW


From over 30 years of experience with US expat taxes, we have found that not filing US income tax returns for a number of years is actually a fairly common situation. With the excitement of a move abroad, coupled with all the changes such a decision brings, the last thing most people care about is filing their taxes. When living in the United States Americans are inundated with H&R Block and Turbotax ads, but if you live peacefully outside the United States, it's easy for the deadline to inadvertently pass you by. So, American expats who are behind on their American taxes are certainly not a new situation. What is new, however, is the degree of scrutiny the IRS is beginning to exercise over Americans living abroad and the efforts being made to ensure tax compliance.

While it has always been a tax return requirement for all Americans living outside the United States each year, many American expats have thus far justified not filing by thinking that the IRS has no way of "finding" them and knowing they live overseas / earn income overseas. All that changed with the HIRE law.

What is the HIRE Law?

The main purpose of the HIRE (Hiring Incentives to Restore Employment) law, enacted on March 18, 2010, is to stimulate employment growth by providing tax breaks and incentives for businesses to hire the unemployed. So what does this have to do with Americans abroad? To help pay for the costs of the HIRE Act, a number of provisions have been introduced, meaning Americans living abroad will come under even greater scrutiny. The HIRE Act requires that international financial institutions (i.e. banks, brokerage houses, wealth management companies, etc.) disclose to the IRS which of their clients are US citizens with accounts over $ 50,000. Non-compliance by banks will be costly: Banks that do not agree to report these customers are subject to a 30% withholding tax on their US assets.

How Does HIRE Law Affect American Expats?

HIRE law can affect you in a number of ways, but the two main ones are: 1) Your bank overseas may decide that US citizens are too heavy to process and close your account (this happens with many Swiss banks and more UK banks are starting to do this as well) AND 2) if you haven't filed your US tax return, the IRS will now know you exist and they don’t Have no record of you, which means you are not up to date with your tax returns.

So if you haven't filed your US taxes, what does that mean to you? First off, many countries have double taxation treaties with the United States that will minimize the tax you owe if you live and pay taxes abroad. For example, if you live in Europe, tax rates in Europe tend to be higher than those in the United States, which would mean that you are unlikely to owe any money. money in the US Treasury. The sticking point, however, could be the Foreign Bank Account Report (FBAR), which the Treasury requires you to file each year by disclosing overseas bank accounts containing more than $ 10,000. If you do not file this form and the Treasury chooses to apply the fine, there is a minimum penalty of $ 10,000, and this fine may increase depending on how much you do not have not declared. At this point, it's unclear how the Treasury will enforce these fines, but it could be very costly for people who haven't followed their U.S. tax returns.

Our advice:

If you've fallen behind on your US tax obligations and reporting your foreign assets, now is the time to clean up! You should begin the process of catching up on your income tax returns immediately. The IRS will usually require tax returns for the past 6 years to start, and they may require more if you owe money. You will also need to file the Foreign Bank Account (FBAR) report for this period and attach a letter explaining why you have not already completed this form.

You should also be aware that financial institutions that you have worked with for years may no longer want your business. Many boutique businesses decide that American expats are not worth the time and effort to comply with US regulations and close their accounts. Fortunately, others are springing up to specialize in this now niche area, so you should be able to find a new fund manager without too much difficulty, but there is always the hassle of change to contend with.

There are many other potential implications of the HIRE Act, such as decreasing foreign investment in the United States, but for American expats, the key point now is that the time has come to hire an experienced tax accountant to help you. get your stuff in order to avoid any negative problem. implications for the future. Visit for more information or help on these topics.



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