Receiving Social Security Benefits While Living Abroad

Social Security - that onerous tax we pay to work in the United States, supposedly for our own retirement but it seems to be more to fund those who are already drawing on it! I have quite a few clients who are on temporary work visas here in the US. They rightfully question whether they will be able repatriate Social Security when they are eligible to draw on it. Or there are those US Citizens who travel after they retire and may even choose to settle abroad or go back to their home country if they had migrated to the USA. 

Are You A US Citizen or Not?: 
Retirees who are U.S. citizens are entitled to continue receiving benefits for as long as they live outside the United States. However, citizens of other countries who receive Social Security may have some restrictions on how long they can receive benefits while outside the United States. 

There are some countries where the Social Security Administration (SSA) will not send social security checks. Do look for the complete list of such countries on the SSA website, if it's your plan to retire abroad. 

How Can I Actually Receive My Social Security Income and For How Long?

Like I said earlier, citizens of other countries who receive Social Security may have some restrictions on how long they can receive benefits while outside the United States. These rules are quite complicated. To get a quick overview, the SSA publication, "Your Payments While You Are Outside the United States", explains in detail what restrictions citizens of individual countries are subject to. 

Recipients of Social Security Income can have their checks directly deposited into a bank account in the United States, and this service is also available in some other countries. As you can imagine, using direct deposit avoids check-cashing and currency-conversion fees.

In many countries where there are a large number of U.S. retirees, American embassies and consulates have officers who are trained to provide Social Security services, including taking applications. Phone numbers for Office of International Operations are listed on the SSA Webpage here. 

Taxation of Social Security Benefits/ Income: 

If you are a US Citizen living abroad, you know you have to file a US tax return showing "world-wide" income and taxation of your social security benefits are subject to the same rules as if you were living in the US. Your total income together with your social security income determines whether and how much of your benefits are taxable. More than 85% of your Social Security Benefits cannot be taxed. This involves complicated calculations and is best left to your tax professional to determine. 

In addition to U.S. taxes, the country of your residence may tax benefits as well. If you would like to find out whether a country imposes taxes on Social Security benefits, you could contact the country's embassy in the United States.

Also, remember you will have FATCA obligations. 

Renunciation of US Citizenship & Consequences: 

If you have renounced your US citizenship, you are considered a non-resident alien (NRA). Now the US Social Security rules for NRAs will apply to you. It is your responsibility to notify authorities of your changed status. 

As an NRA, depending on your country of residence, you can generally continue to collect US Social Security in the long run. Bilateral agreements (or lack thereof) with the US & your country of residence, determine if your social security payments maybe be completely discontinued after more than six months outside the US or there may be only a minor tax adjustment to your social security payment.

Social Security Income and benefits in itself is an exhaustive topic and cannot be covered in one blog post. Please do contact a trained tax professional, such as an Enrolled Agent, to give you specific advice as per your requirements. 

Bibliography: ssa.gov; American Citizens Abroad; Social Security Lectures & Webinars. 

---

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website, www.mntaxsolutionsllc.com.

New Countries on FATCA: India & UAE...What This Means For You!

If you are a regular reader on my blog ~ you know the tax geek that I am, I write a lot about tax compliance for foreign bank account holders and the effect of the FATCA. FATCA stands for Foreign Account Tax Compliance Act. Calling a spade a "large digging instrument", we know this law is one-sided and forces other countries to enforce US tax laws. And if they fail to comply, they are effectively locked out of US markets and the US dollar ~ the "world currency" for now. 

For your reference, I wrote earlier on FATCA compliance here, here and here. 

Countries that sign the FATCA Agreement or Inter Governmental Agreement (IGA) are considered tax compliant. This means the banks/ foreign financial institutions (FFI) in these countries send information as demanded by the IRS to their own tax authorities which is then shared with the IRS. This is "Model 1". 

Other countries, like Switzerland, for example, leave it up to the banks/ financial institutions to come to an agreement with the IRS, this is a "Model 2" agreement. 

United Arab Emirates (UAE) jumped on board in February of this year (2015). 

If you are a US Citizen and are living in the UAE or are a US citizen living in the US and have accounts in the UAE, you should have filed FinCEN Form 114 also known as the FBAR if you have had AED (Emirati Dirham) 36732 or more which is approximately $10,000; filed Form 8938 if you have had AED 183657 or more (Single- approximately $50,000) and AED 367315 or more (filing Married & Joint- approximately $100,000) at end of the year. 

Since UAE has signed the FATCA agreement with the US, the UAE banks/ financial institutions will start to share information with the IRS regarding accounts held by US Citizens, reportedly from the 2nd quarter of 2015.

Map of India

India signed the IGA with the US early this month on the 9th of July, 2015. Nearly a 1,000 or more Indian FFIs have already signed agreements with the IRS long before, to share US Citizen information, however the official IGA came into place now. 

Hence the FBAR thresholds as described in the above would apply to you as well. The 2014 official INR or the Indian Rupee to USD conversion was Rs.63.469 to $1. 

Per the Indian press release, FATCA Compliance will cover all new accounts opened by Indian FFIs from July 1st, 2014 on wards. 

Do I Have To Be Worried If I had Financial Accounts In these Countries Before the IGA came into place? 

Undoubtedly- YES!! If you have had undeclared accounts in FFIs in India or the UAE from before these IGA dates and they exceed the FBAR limits, there are various procedures in place for you to come into tax compliance. These procedures, known as the Offshore Voluntary Disclosure Program or the Streamlined Compliance Procedures, can be used to work with the IRS. There are different penalties involved with the different programs, please talk to your tax professional to determine what is right for you. 

Fall Out From the FATCA IGA With Various Countries:

What we are seeing increasingly is that the USD is no longer as welcome in countries as it used to be. This is not because the FFIs do not like US Citizens any more, it is more to do with the fact that the bank/ FFI authorities do not want to have to deal with the additional paper-work involved with having US citizens as their clients. 

Not to speak of the confusion in the rules and regulations as instructions are understood and percolated down to every employee who deal with US citizens-customers. Till then, we have had to deal with misinformation and misinterpretation on the part of the authorities in these countries. 

Record number of US citizens are deciding to renounce their citizenship due to the increased pressure to report all world-wide income. The expatriation in itself is a herculean task to undertake not to mention the expatriation taxes that are due and hardship caused for any future visits/ immigration to the US by the expatriates themselves or their children. More on Expatriation Tax in my post here. 

The unforeseen consequences from this increased vigilance by the US tax authorities and other countries hoping for reciprocal cooperation to bring their tax evaders into tax compliance will be felt increasingly in the years to come I am sure. 

I cannot stress enough on the importance of contacting a tax professional knowledgeable in this field if you have questions regarding foreign bank account tax compliance. This is not something I would recommend venturing out as a Do-It-Yourself project. 

   

Bibliography: Form 8938; Form 114; FATCA News Releases

---

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website, www.mntaxsolutionsllc.com.

Tax Related Identity Theft

This past year, Identity Theft has become such a buzz word, that it needs to be revisited on my blog. Between scamming crooks on the phone from off-shore based call centers, hackers believed to be from Russia raiding the IRS website and some more hackers from China getting into the national data-base & managing to steal classified information of hundreds & thousands of federal employees, protecting one's identity has become a top priority for all. 

I wrote about Protecting Your Identity here earlier.  

According to today's news, the scammer who took millions with fake IRS calls from gullible taxpayers was sentenced to 14 years in prison. To many getting a phone call from someone claiming to be IRS can set off a panic attack! It is imperative to know that the IRS does NOT initiate contact with taxpayers by email to request personal or financial information EVER. And this includes any type of electronic communication, be it, text messages or messages over social media. 

What Is Tax Related Identity Theft?: 

If a tax return is filed without your knowledge using your social Security Number to claim a refund, that is "Tax Related Identity Theft". You are not likely to find out that a fraudulent return has been filed till you (try to) file your own tax return and learn that you can't do so. 

Alarm bells should go off if: 

 1. You get a notice form the IRS that 2 returns have been filed with the same SSN. 

 2. You haven't filed a tax return but you get a notice from the IRS that you owe taxes, are getting a refund offset or there is a collection notice being taken against you. 

 3.  You get a notice from the IRS that an employer you don't know paid you wages. 

If you suspect that your Social Security Number has been compromised and you know or suspect that you are a victim of Identity theft, contact a tax professional such as an Enrolled Agent immediately. An Enrolled Agent will be able to: 

1. Help our respond to any IRS notice effectively. 

2. Help complete Form 14039, which is an Identity theft Affidavit. 

3. file your tax return and stay in touch with the IRS. 

If you have previously contacted the IRS and did not have a resolution, contact the Specialized Unit at 1-800-908-4490. 

---

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website, www.mntaxsolutionsllc.com.