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From reading previous posts, I understand that US citizens, residing in the US, must report income derived from all sources, including income derived from other countries (for example from Offshore accounts).

My question is, if a US citizen permantly resides outside of the US, (for example in a tax haven like the Bahamas or the Caymans), then is income derived in these countries still subject to US taxes?

In other words, are US citizens subject to US taxes on foreign income even if they don't reside in the US?

Thanks,

David
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From reading previous posts, I understand that US citizens, residing in the US, must report income derived from all sources, including income derived from other countries (for example from Offshore accounts).

My question is, if a US citizen permantly resides outside of the US, (for example in a tax haven like the Bahamas or the Caymans), then is income derived in these countries still subject to US taxes?

In other words, are US citizens subject to US taxes on foreign income even if they don't reside in the US?

***Yes!=:) All U.S. Citizens are subject to the reporting of ALL worldwide income, no matter the source!

If you are a U.S. citizen or resident alien living or traveling outside the United States, you generally are required to file income tax returns, estate tax returns, and gift tax returns and pay estimated tax in the same way as those residing in the United States.

Your income, filing status, and age generally determine whether you must file a return. Generally you must file a return for 1998 if your gross income is at least the amount shown for your filing status in the following table: Filing Status
--------------------------------------------------------------------------------
Amount
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Single $6,950
65 or older $8,000
Head of household $8,950
65 or older $10,000
Qualifying widow(er) $9,800
65 or older $10,650
Married filing jointly $12,500
Not living with spouse at end of year $2,700
One spouse 65 or older $13,350
Both spouses 65 or older $14,200
Married filing separately $2,700
If you are the dependent of another taxpayer, see the instructions for Form 1040 for more information on whether you must file a return.

Gross income. This includes all income you receive in the form of money, goods, property, and services that is not exempt from tax.

In determining whether you must file a return, you must consider as gross income any income that you exclude as foreign earned income or as a foreign housing amount. If you must file a return and you exclude all or part of your income under these rules, you must prepare Form 2555 or you may be able to file Form 2555-EZ if you are claiming only the foreign earned income exclusion.

For more, mouse this:

http://www.irs.ustreas.gov/prod/forms_pubs/pubs/p540101.htm

"Jack"
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***Yes!=:) All U.S. Citizens are subject to the reporting of ALL worldwide income, no matter the source!

Jack . . . if this is true, then what is all the hype about Offshore tax havens? I have heard of US citizens permanently moving to a tax free jurisdiction and trading stocks over the internet and not having to pay taxes on the dividends or capital gains, because the country they're trading in does not tax dividends or capital gains. How are they doing this? Does it involve dual citizenship?

David
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David999 wrote " I have heard of US citizens permanently moving to a tax free jurisdiction and trading stocks over the internet and not having to pay taxes on the dividends or capital gains, because the country they're trading in does not tax dividends or capital gains. How are they doing this? Does it involve dual citizenship?"

I doubt dual citizenship comes into play; I know that it is possible to renounce US citizenship but have never learned the details because it is unimaginable to me.

Other thought that comes to mind is evasion and tax fraud.

Just my $0.02. Regards, JAFO
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***Yes!=:) All U.S. Citizens are subject to the reporting of ALL worldwide income, no matter the source!

Jack . . . if this is true, then what is all the hype about Offshore tax havens? I have heard of US citizens permanently moving to a tax free jurisdiction and trading stocks over the internet and not having to pay taxes on the dividends or capital gains, because the country they're trading in does not tax dividends or capital gains. How are they doing this? Does it involve dual citizenship?

***There's a whole mess of exclusions, credits, treaties, etc. involved in this matter. Tax fraud is possible. Evasion and avoidance are not the same. Criminal penalties can be brought to bear unless you work, positively, within the framework of the law.
There are benefits available such as credits for taxes paid to other countries and foreign earned income exclusion.

To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income, your tax home must be in a foreign country, and you must be one of the following:

A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

For more information mouse this:

http://www.irs.ustreas.gov/prod/forms_pubs/pubs/p540402.htm

There are many countries with which the U.S. shares information when it comes to criminal offenses. Extradition is also a possibility.

I applaud anyone who can find ways to avoid having to pay taxes. When it comes to evasion, the risks one takes belong to the one who is taking them!=:) You may be one of those who can discover the secrets of avoidance. If so, more power to you!=:) Come share them with us!!!

Good Luck!=:)

"Jack"

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Renouncing your US citizenship used to be a way to keep your money, that is until 1995 when they changed the law so that you are taxed on your total worth on exiting. Basically your government wants you to pay big time for the priviledge of being a US citizen, regardless of whether you live here and or not, and also wants you to pay big time if you don't want that priviledge.

Here's some info: http://www.cyberhaven.com/offshorelibrary/expattax.html

Don't forget, you are living in the land of the free, as long as you pay to get in, stay, and leave. I'm British (and currently non-green card), so I may have a "slim" chance of getting out with my loot, I believe if you have a green card for a little too long you get as stuffed as US citizens upon leaving - call it the great escape.

Sorry if this is a trifle negative, but I am up to here with the US tax situation, it's a wonder anyone ever actually gets rich here (and stays rich) with the rather large slice your government wants from what you have made.

Good luck - and be *well* informed before you do anything.
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