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S. citizens who renounced their citizenship and long-term residents who have ended their U.S. resident status for federal tax purposes" (Expatriation Tax, 2011). Different rules apply according to the date upon which one expatriated. People that give up their U.S. citizenship or terminate their long-term resident status for tax purposes after June 3, 2004 are required to confirm to the IRS that they have fulfilled all federal tax requirements for the five years before expatriation. If all federal tax requirements have not been fulfilled for the five ears before expatriation, even if the person does not meet the financial thresholds, the person will be subject to the expatriation tax provisions. People that have expatriated should file all tax returns that are due, in spite of whether or not full payment can be made with the return. Depending on a person's circumstances, a taxpayer filing late may meet the criteria for a payment plan. All payment plans necessitate sustained compliance with all filing and payment responsibilities after the plan is accepted (Expatriation Tax, 2011).
The U.S. tax code is a very complicated beast of which almost nobody understands. One thing that could be done to improve the rules and make the tax code more equitable would be to rewrite it so that everyone who has at least a sixth grade education could understand it. Since every U.S. citizen is required by law to pay taxes they should at least know what it is that they are paying. A second thing that could be done is to make it harder for people to move abroad and then get out of paying their U.S. income taxes. All...
A third thing that could be done would be to do away with the foreign tax credit. This credit allows for people who are working overseas to get credit for foreign income earned. This reduces the amount of tax that they owe the U.S. In the end. If people chose to live overseas and keep their U.S. citizenship then they should still have to pay the full amount of taxes that would be due if they were living here. People should not be able to have the rights and privileges that come with being a U.S. citizen unless they are willing to contribute to the tax base like everyone else does.
It seems that the rules that are in place now hinder income being expatriated to the U.S. The rules are set up so that there are all kinds of provisions in place for these people to either drastically reduce or eliminate their U.S. tax debt altogether. This does not seem fair to everyone else who is paying taxes in this country year after year.
References
Expatriation Tax. (2011). Retreived from http://www.irs.gov/businesses/small/international/article/0,,id=97245,00.html
Foreign Tax Credit - Choosing To Take Credit or Deduction. (2011). Retrieved from http://www.irs.gov/businesses/small/international/article/0,,id=97037,00.html
Income Tax Compliance by U.S. Citizens and U.S. Lawful Permanent Residents Residing
Outside the United States and Related Issues. (1998). Retrieved from http://www.treasury.gov/press-center/press-releases/Documents/tax598.pdf
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