The death of American citizens living abroad has sparked a debate over the complicated issue of U.S. tax obligations across borders. The U.S. is one of only two countries in the world that taxes based on citizenship rather than residency, meaning that American citizens living abroad are required to file U.S. tax returns even if they are already paying taxes in their country of residence. This can create a significant burden for expats, who must navigate complex tax laws and potentially face additional taxes and penalties for non-compliance.
The recent death of American entrepreneur and digital nomad Thomas Wert in Bali has brought the issue to the forefront. Wert’s widow, Vicky Wert, is now facing a daunting tax situation as she navigates the requirements of both the U.S. and Indonesian tax systems. The United States has a Foreign Account Tax Compliance Act (FATCA) that requires foreign financial institutions to report on accounts held by U.S. citizens, further complicating matters for expats who may not even be aware of their U.S. tax obligations.
One of the key issues facing American expats is the lack of awareness and understanding of their tax obligations. Many expats do not realize they are required to file U.S. tax returns, and those who do often struggle to understand the complex rules and regulations. The IRS has implemented programs like the Streamlined Filing Compliance Procedures to help expats catch up on their tax filings and avoid penalties, but the process can still be overwhelming for those not familiar with U.S. tax laws.
Another challenge for American expats is the potential for double taxation. While the U.S. does have tax treaties with many countries to prevent double taxation, the complexity of the tax laws can still sometimes result in expats being taxed on the same income by both the U.S. and their country of residence. This can significantly impact expats’ finances and make it difficult for them to continue living and working abroad.
At the heart of the issue is the U.S. government’s approach to taxing citizens living abroad, which some argue is outdated and overly burdensome. Critics of the current system point to the fact that the U.S. is one of only two countries in the world that taxes on citizenship rather than residency, and argue that this puts American expats at a disadvantage compared to citizens of other countries. There have been calls for reform of the U.S. tax system to be more in line with international norms and reduce the burden on American citizens living abroad.
Overall, the death of American citizens living abroad highlights the challenges and complexities of U.S. tax obligations across borders. American expats must navigate a complex and often confusing tax system that can result in double taxation and significant financial burdens. Calls for reform of the U.S. tax system to be more in line with international norms are growing, as expats continue to struggle to meet their tax obligations while living and working abroad.
