From: Stephen Cobb <stephen@iu.net>
Date: Mon, 19 Aug 1996 04:27:54 +0800
To: Vincent Cate <vince@offshore.com.ai>
Subject: Re: US Taxes on X-Pats
Message-ID: <1.5.4.32.19960818182834.00bb88ac@iu.net>
MIME-Version: 1.0
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Pardon me for jumping in...but a year ago I won a case in tax court brought
aainst me by the IRA for not paying taxes on income earned while living
overseas...apart from the verdict, the whole thing was a complete farce!

My advice is to research the subject in detail before leaving the country
and file IRS returns faithfully every year regardless of where you live even
if you owe no tax (I owed no tax so filed no returns, penalty for not filing
= % of tax owed, so no penalty for not filing, but only IF the IRS agrees
you don't owe).

Yes, there has been talk in the Clinton administration of dropping the
overseas earning provision. You might want to email either Sen. Byron Dorgan
or Sen. Kent Conrad of N.D. since both these guys were State Tax
Commssioners before going to Washington and seem to be clued in on federal
tax issues. The report I read in the Orlando Sentinel suggested that Clinton
felt the exclusion was a money loser desined to help US corporations get
employees to work overseas. However, it seems to me that it is also part of
the complex web of international tax treaties designed to prevent double
taxation. If you are a US citizen earning in a country that has an income
tax they are likely going to expect you to pay tax, just as we tax foreign
nationals living here.

My impression is that many IRS staff lack in-depth knowledge of this very
complex area (for example, I paid tax on my overseas income to the
government of the country in which I was living when I earned it and that
country has a tax treaty with the US...after about 6 very scary phone calls
the agent assigned to the case agreed that I did not owe income tax...but
then he tried to hit me up for thousands fo dollars in self-employed soc sec
contribution -- when I told him that was also covered under a reciprocal
treaty it was complete news to him...he asked me, and I wish I had taped the
call, to send him the IRS document in which I had read this!)

The result is often months of very stressful waiting, staring huge penalties
in the face, while they learn up on the subject and say "I guess you're
right, you don't owe that $60,000 in unpaid tax and penalties we asked the
judge to award us." I still have a state tax lien triggered by this bogus
action against me lying around on one of my credit reports.

Respectfully...Stephen

ps The recent US legislation denying soc sec benefits to legal aliens seems
to be a breach of the referred to above. 

pps The relation to cypto is :-)?