The New York Times wrote an article today about American citizens living overseas who give up their citizenship rather than pay taxes to a country they don’t live in. The United States is the only developed country that taxes its citizens who live in a foreign country. Not only that, the United States taxes its citizens who have become permanent residents of other countries as well. Most countries do not tax their citizens living abroad, and therefore do not push their citizens to make the difficult decision of renouncing citizenship.

To add insult to injury, the Republican Congress, despite all its talk of tax cuts, actually drastically increased taxes for those who live outside the U.S.

But after Congress sharply raised taxes this year for many Americans living abroad, some international tax lawyers say they detect rising demand from citizens to renounce ties with the United States, the only developed country that taxes it citizens while they live overseas. Americans abroad are also taxed in the countries where they live.

“The administrative costs of being an American and living outside the U.S. have gone up dramatically,” said Marnin Michaels, a tax lawyer with Baker & McKenzie in Zurich. (Read more…)

According to the NYT article, only 509 Americans have given up citizenship so far this year. For more information about the newly enacted tax regulations, click here.

It’s time to start thinking about the 2006 tax year again, but some people still haven’t received their refunds for 2005 yet. This is especially true for people who moved without telling the IRS or who whose mail forwarding expired before the IRS mailed their check. It can be easy for travelers or snowbirds to lose track of or even forget about their refunds entirely. Each year the IRS keeps hundreds of thousands of dollars in unpaid refunds. Fortunately, the IRS will mail your refund check if you get in touch with them.

You can call the IRS “Where’s My Refund” service at this number: 800-829-1954.

You can also access this service online at:

http://www.irs.gov/individuals/article/0,,id=96596,00.html

However, they will ask you to enter in your Social Security number, filing status and the refund amount on your 2005 tax return.

Earlier this year President Bush signed into law the “Tax Increase Prevention Reconciliation Act of 2005.” Buried in this legislation are measures that erode tax protections for Americans living overseas. Overseas Digest has written an excellent article outlining three factors that the new law changes. In short the changes are:

1. A marginally increased foreign income exclusion (this is actually a good thing)
2. The foreign income housing exclusion was capped at 30%. This could hit some pocket books pretty hard.
3. Housing expenses that are included must now be included when determining the marginal tax rate on other taxable income.

This week the Treasury Department released this notice which effectively increases the housing exclusion for some places:

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For most people the 2005 tax season is over, but for many travellers and expats it’s just beginning. If you’re one of 9.6 million taxpayers who filed for a tax extension, you’ve got less than one month left to get your forms submitted. Here is the official press release from the IRS.
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