The migraine for US expats and how to tackle it

It’s around that time again to show the government how much money you’ve made and how much you “owe” them, regardless of where you live.

And money. Lots of money.

And money. Lots of money.

A lot of people who move to another country would not think about how to juggle their finances from a tax perspective until the end of the new year or so. For US citizens, it can be a confusing double-whammy since technically you have to report to Uncle Sam how much you make and report that same amount to the host country (unless their is a tax treaty). If you are used to just sending your paperwork to a tax preparer for your regular state and federal taxes and now your are living abroad, now is the right time to start changing habits. As a former tax preparer, there is a HUGE advantage to learn how to do your taxes versus using a tax preparer service :

1) Decreased chances of someone else stealing your refund, Social Security number and other details. While working with clients who were hard-working adults with families to feed, one out of every 5 was a victim of Social Security theft once their filed taxes were rejected by the IRS.  It was disheartening to see the look of horror, anger and despair from these clients who were counting on their tax refunds to help them with bills and planned purchases for their kids. Explaining to them to contact the SSA to report the identity theft was more depressing because it would force them to take time off work to sort the mess out. What got my head twisted in knots is that most of the clients knew who may have done the deed with remarks such as “oh I got a friend of mine’s college kid to do it for me last year”.

Even if you are super vigilant about your information, if you take your taxes to one of the tax preparation places that have a small booth near the entrance of a Wal-Mart or a mall you may have encountered the following:

a) Not all offices are built for privacy. Some tax preparation offices are set up in open ceiling cubicles. You do know that cashier a few meters away can hear you.

b) Increased chances of exposing your information to outsiders due to lack of proper office security equipment. A good sign would be if you are able to notice a paper shredder or two at the office away from the customers waiting area.  It pays to ask your preparer how long they keep records of your returns. A good tax preparation office would keep the documents no more than a year, keep the data on external hard drives and have proper internet security firewalls in place. If you do not get an acceptable answer, run!

c) You don’t need your own Tax Preparer ID number to file your own taxes. Some places will hire experienced preparers but keep in mind that unless they have their own ID numbers, they have nothing to lose if anything goes wrong with your taxes. If you do have your taxes done with someone you suspect isn’t that good, chances are he/she has her boss check his/her work and then sign your returns with his signature and ID number. And you are STILL responsible for all information on your taxes, regardless of who screws them up.

d) The price is never right. A lot of preparers send your returns through the internet and then charge you up the nose for basically asking you questions about the stuff you should have been doing all year (collecting receipts and other things that help you reduce your tax bill). The money charged for such services would be justified if you owned your own business. But for the average non-business owner, it’s not worth paying one third of your refund to send 5 pages or less to the IRS and your local revenue office. Especially when the tax preparers use software to do the calculations for you.

They will find you and fleece you, one way or the other..

They will find you and fleece you, one way or the other..

Now imagine having to deal with all of this while living abroad. There are a lot of certified or chartered accountants  who specialize in tax preparation for US citizens living abroad. But the scary part is that they charge over $300 USD or more for working and filing both local and US federal taxes. Unless you own a business while living abroad, it pays in the long run to do research on your own on the host country’s tax laws. Things you NEED to find out:

1) Existing tax treaties between the US and the host country. This is something that EVERYONE who is planing to live abroad should look into FIRST. Forget the nice weather or cheap cost of living.  Depending on how much money who bring (or have) you can hit with a huge tax bill if you don’t report your money to the host country’s revenue office.

b) Residency status and when you became a resident in that country. This piece of information can make a huge difference on how much you owe money on your host country’s taxes and how much income and assets you have to report. You can find this information on the host country’s revenue office website or at their government building.

c) Constantly update your knowledge on how to report to Uncle Sam what you own while living abroad. Ever since FACTA was enacted, a lot of banks in different countries are pushing back against the US government’s attempt to turn them into foreign IRS agents.  Some banks have become reluctant to open accounts for US citizens as a result of this nightmare. Even if your host country manages to flip the bird against the enactment, all US citizens have to send paperwork to the Dept of Treasury showing you aren’t hiding anything from them (filing an FBAR if your foreign bank account has more than $10,000 USD worth at any time during the tax year).

Once you do your research, the next step would be if you can tackle on filing your own taxes. Again, keep in mind of your personal financial situation and which country you are currently residing in. Some countries may not accept your self-prepared tax returns unless they are certified by a registered or licensed accountant. If that is the case, then it’s best to shop around for someone who is willing to charge you for their stamp and signature instead of doing all of the work. If you need to have your taxes done by a professional, ask the professional (unless required by law) not to keep your information in the office. Even if you return to their office next year, chances are you will still need to give them last year’s returns for them to start on the new ones.  The reason behind this is that it is harder to prosecute criminals for identity theft when the crime is committed outside of the US.  Even if you are planing to live in the host country for the rest of your life, never turn your guard off.

Because no one gives a crap about your money more than you and Uncle Sam.

Advertisements

Frugality is working out!

Every weekend I call my family via Skype to keep myself-up-to-date with them (and to prevent them from calling me in an odd time).  The conversations always gear towards the topic of the cost of medicine because a) someone got a new condition that needs pills for and b) to see whether the cost of medication is cheaper in Canada or not.

The answer to b) is: it depends on whether you have a provincial health card or are self-insured.

It saddens me to hear when as family members get older, their health slowly deteriorate due to a combination of unhealthy eating habits and lack of exercise.  Some illnesses are NOT preventable (cancer, genetic diseases, caused by viruses, etc). But conditions such as obesity (which a lot of members of my family are guilty of) are and should be prevented at all costs.

Maybe that is an understatement. A lot of the things my family suffers from can be prevented or kept under control if they get active and eat healthier.  From experience, this can be a challenge given that they still live in a tropical island where growing leafy greens is next to impossible. A lot of the vegetables I ate while growing up were from a can.

In financial terms, they could be saving money if they switched to a healthier lifestyle and got the weight under control, instead of spending $200-$300 in medicine per month.  And now that they are beneficiaries of Medicare, they should really make it a priority.

Hell the CDC even published it based on actual studies :   Annual Medical Cost of Obesity in the US- Centers for Disease Control and Prevention

Since I can’t brow beat them into taking better care of themselves, the best I can do is keep myself as healthy as possible.  I won’t kid when I say IT IS HARD AS HELL to stay fit. Injuries, illnesses and lack of energy always throw any progress you make. Especially during these cold months.

Before the frost, I used to go a small gym nearby, paying $42 a month. I have to admit, it felt good working out 2-3 times a week. Then I got injured (stupid plantar facilitis).

Did I gave up? Nope.

I added that injury to the list of old injuries (shin splints, bad knees, muscle sprains, etc) rested, then switched from going to the gym to working out at home.  How? By using YouTube (gratis!).

There are lots of videos to work out too, ranging from beginner’s levels to advanced.

If you are pressed for time, I recommend this video one from Fitness Blender. For 37 minutes, you will get your butt kicked:

Note: This is a high-intensity workout. Do not start with this one if you haven’t worked out in a long while. Cutie saw this and said this is similar to getting “smoked” during military physical training. If you feel daring, stretch out A LOT before starting the workout.

Besides of pocketing that $42, I managed to avoid the constant ear spam brought by too much Bryan Adams on the radio. And the constant sight of these:

th

What I hope to gain from all of the pain and hard work?

1-Hoping to live longer for Cutie

2-Hoping to need less medicine to stay alive. Hell, maybe not even needing it!

3-Hoping to work longer (that is, if someone wants to hire me 😦 )

4- Hoping to be healthy enough to take care of the ones I love

Those are my reasons to work out. What are your reasons?

 

A cheap high

The high is not new. But the fact that it lasts longer than a cigarette break or a few drinks is pretty awesome.

Not even the sun pisses me off today!

Not even the sun pisses me off today!

I got rid of A LOT of stuff I did not need today. Donated it to charity.  I have less stuff to:

– Keep track of

– Insure (if you have home owner’s or renter’s insurance)

– Stuff to pack when moving (saves money on renting a truck plus gas)

– Clean

– Keep pets away from to reduce damage

When I first got renter’s insurance, I got so paranoid about whether my basic coverage was enough that I started a long list of items both Cutie and I had. I also took pictures of the stuff in case our stuff got destroyed in a fire at our building.

UGH!!!

UGH!!!

I got overwhelmed at how much stuff we had in a one-bedroom apartment. I couldn’t complete the list or keep updating it with changes on it whenever we received presents from friends and family.

That pretty much killed the last of my desire for shopping for stuff.  Which also means I have a fuller wallet each month.

If that isn’t enough to get on the stuff purging bandwagon, try watching an episode of  Hoarders:

I would set this place on fire before trying to clean anything up!

I would set this place on fire before trying to clean anything up!

Practicing an old skill

While growing up, I wanted to get as many clothes for my dolls as possible. Since my family was broke 99% of the time, my mom decided to teach me how to sew.  As the years progressed, my projects became bigger and then smaller based on my wants and needs.  When I didn’t feel like buying a small coin purse, I made one. When I was too broke to buy a pair of jeans, I would get hand-me downs from friends and family and then I would tailor them to fit.  I even made my own blouse to wear when I was 10 years old (too bad it didn’t last long 😦 ).

I am at a point at my life where I don’t have to make anything if I want or need it. But buying everything does lose its appeal with time.

This is what I am working on:

2013-02-02 20.35.57

 

It doesn’t look like much now, but this is will eventually become a purse. Purses activate my  unnecessary spending binges from time to time. So why not try to control them a little by making one myself?

Since I am not using my sewing machine, the process is taking LONGER than I anticipated. I wish it wasn’t broken.  I hope by the time I finish this project, I will be able to control my urge to just buy another purse when I see one.  And maybe train me in the art of delayed self-gratification.

 

 

 

One way to avoid compulsive online shopping

After a 10 hour shift, I come home and Cutie already has a drink and dinner waiting for me (LOVE HIM!!). The drink was a perfect one to unwind with: brandy with champagne. After an hour or so, I got the impulse to do some online shopping with my credit card. That is when I had to pull myself together, go to my dresser drawer and take a good look at what happened the last time I overspent while drinking.

Booze + Money= Instant Wallet Drain!

I remember the first time it happened: I was visiting my first motorcycle festival with my friends and we were having a blast walking from tent to tent, ogling different types of merchandise. We stopped at a tent that sold shirts of all kinds. A small tight black shirt with hearts and wings caught my eye. I walked out of that tent $47 poorer and clueless about what had happened. The next morning I had buyer’s regret: I lost the receipt and I didn’t remember which tent I bought the shirt from.

But I remember eating this!

Unfortunately I can only wear that shirt on occasion so that it can last longer without wearing out.

With this reminder, I closed the Amazon website and sobered up to the fact that if I gave in to my alcohol-induced implusion, I would have to work more hours to pay my credit card bill next month.

If you find yourself in a similar situation, try your best to remember the last time you’ve overspent when you don’t want to. If you have to, staple your reminder (a picture, the item itself) on the wall close to your computer: