How to Retire Overseas and Avoid IRS Penalties?

Do you think about getting retirement overseas?  This’s a good choice as well as a decision as to where must be made after the careful considerations regarding taxes, financial needs, and much more.

Do not Make Common Mistakes while Retiring Overseas to Avoid IRS Penalties?

The idea of your perfect retirement might involve residing overseas like some retired expat.  In case you could not perform the due diligence before you move abroad, although, you might be hit by waves of the tax repercussions.  It is always good to find several countries where you will like to get retirement.  So, you could research about tax implications while making a final decision.  How to Retire Overseas and Avoid IRS Penalties? Following are some major points to see when you decide where to retire overseas.

This’s crucial that you are going to file the annual US tax return.  In case you do not owe the taxes then you still should fill the tax return out and thus file this with IRS.

In case you have not completely announced your citizenship then you’re still an American citizen and therefore, are required to just file the annual income tax return.  So, for each year, if you could not file your tax return then you incur interest as well as penalties.

You might also be needed to file your income tax return in case you yet maintain your residence in that state where you are living before getting retirement like an expat. Also, you might think about selling the property as well as making some other adjustments.  Your state might want that you file your state tax return in case you maintain the voter registration, use storage facilities, have your driver’s license, got any other professional or personal commitments to the home state.

The FATCA laws are implemented across the world and also you’re expected for reporting your offshore financial accounts which you’ve when these cross a certain threshold.

In the recent years, U.S.A. has been involved in a large crackdown against the tax evasion as well as money laundering.  Because of the noncompliance on the certain obligations for reporting the foreign assets, there’re a few American expats who actually deny an access to the banks as well as brokerage accounts.  

Moreover, there are penalties of almost 100K dollars or half account balance.  The penalties would also apply to each year when you did not file.  It is becoming quite tough to hide, as the financial institutions across the world are now following FATCA standards by showing information of accounts for the US Citizens as well as Green Card Holders.

Thus, you might avoid a few pitfalls through reporting the offshore financial activities and getting advice from an experienced accountant.  In case you got at least 10K dollars in your foreign accounts then you must file the FBAR that is FinCEN Form 114.  And, in case you got more than 200K dollars (for the one taxpayer) or 400K dollars (for the married people) worth of their assets or in case they’re valued at 300K dollars / 600K dollars at some point during that year then you would be needed to file the Form 8938.

In case you’re going to retire overseas then do not make a mistake to close your US accounts if there’re various advantages of leaving these open.

Definitely, you would require some local bank financial account in a foreign country where you are living.  This does not mean that you need to actually close the US account, though.  Hence, there’re some good points why you must leave these open.  In case you want to transfer from the US account then this would be quite easy.  This might be even better than the foreign bank which charges some fees for different services that include the check cashing as well as making deposits.

In case you got the IRA or 401(k), it is a nice notion to leave such accounts because they’re to just avoid the early withdrawal of fees and for keeping an ability to make the tax-free contribution.   Even that foreign country where you are going to move has some retirement plan which is quite similar to yours in America then this does not mean that this would get the similar tax treatment by IRS.