May 24, 2012

How Taxing...

I guess it could be worse: we could have to do taxes in German. (Image)

I've read a few articles lately about Eduardo Saverin, one of the original founders of Facebook. You may have heard that he renounced his US citizenship. Although he claims it was to allow himself to settle permanently in Singapore, others suggest that it was to avoid American taxes. Two senators have even introduced a bill that would basically ban Saverin from ever re-entering the US.

But that's not what this post is about. I don't really care about Saverin. But I do care about taxes. Did you know, for example, that even though I live in Costa Rica, I still have to report my earnings here to the IRS every year? I also have to do Costa Rican tax crap, of course, but think about that: For the last 6 years, I've not worked a day in the US, but I still needed to report my earnings to the IRS there. And this isn't necessarily about American bank accounts, stocks, or investments, either. I do have some of those, but I actually have to report the money I earned in Costa Rica, working for Costa Rican companies, as a Costa Rican permanent resident, to American tax authorities.

Fortunately, I don't earn much. In fact, my salary is pretty laughable. If you have a job --any job, really-- you probably make more than I do. As a result, I've always been below any tax obligation thresholds, fortunately...or maybe unfortunately... I suppose it depends on how you look at it. But I still need to report it every year.

Luckily, my mom is a wonderful woman, and she helps me do that every year. I can't even begin to imagine the logistical nightmare that would crop up if I tried to do tax stuff from Costa Rica, especially if we involved the Costa Rican postal system (here are three hints: the streets here don't have names, we've had DVDs stolen from packages that were subsequently re-sealed and put in our P.O. Box, and in my 4 years in Berlín de San Ramón, I've gotten exactly 1 letter delivered to my house).

I'm getting off track. This isn't supposed to be a rant against Correos de Costa Rica, it's supposed to be a rant against the IRS!

Anyhow, if you live outside the US but are a citizen, you still need to report your foreign earnings. Check here and see for yourself. Apparently, this isn't common, globally-speaking. At all. Here in Costa Rica, the mere act of collecting taxes seems almost unbelievable, so no one really believes me when I tell them I also have to deal with taxes in the US. But according to this article, the only other country that does this is Eritrea. The site doesn't seem terribly unbiased, though, as it's named "renunciationguide.com," but I saw similar factoids mentioned on other sites. I've also heard anecdotally that North Korea does this, but if that's true, then it still hardly seems like a good club of countries to be in.

And apparently this is becoming a problem for a lot of expats. This article and this article point out that record numbers of American citizens are renouncing their citizenship, and many suspect that these tax reporting obligations may have something to do with it. This one explains how the tax system works for Americans abroad.

Of course, I'm not going to renounce my citizenship. However, I wish that I didn't have to report my Costa Rican earnings to the US. First of all, because it's embarrassing. Second, something tells me that these years I'm reporting my earnings won't count towards my Social Security work years in the US --not that I was expecting a huge payout, but still, it's the principle that matters. And finally, it's an annoying hassle that doesn't make sense at all. I'd rather not do it.

OK, rant out. Thanks for reading, and have a great rest of the week!

Shit, I don't even really know what bonds ARE, but I hope the IRS doesn't make me report them, too! (Image)


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