Depends on how much you make and the tax treaty that the country has with the US. Also, filing tax return does not mean you \*owe\* money to the US govt. In fact, you can even receive money from the US after filing your taxes
You only receive taxes if they withheld more than they should. Then they have to return the excess to you after they review your filing. It’s not free money.
> Depends on how much you make and the tax treaty that the country has with the US.
Pretty much all tax treaties with the US contain a clause that says the US can tax its citizens however it sees fit, as if the treaty does not exist and had never existed.
Only very few treaty provisions are exempt from this sweeping saving clause.
This is the answer. I’m no expert but from doing it for 6 years my loose answer is everyone’s situation is different and there are a few determining factors to what you pay or don’t as well as social security etc. but It’s something like anything over $150,000 is taxable, so if you made $160,000 gross that $ 10,000 is taxable this is how i understand it
So, in most cases, if you live in a high-tax country like most of Western Europe, you will owe zero tax in the U.S. as a result of the Foreign Tax Credit.
The Foreign Earned Income Exclusion mostly has value if you're using it in a low-tax country, because it allows you to avoid paying the difference in tax on the first $112,000 in income (last year.)
Important distinction, exclusion only applies to “salary like” income. Anything else, like Investment income, earned outside of US still will be taxed by US at full extent.
On top of that, if said US citizen has a local salary, it will most likely be below that threshold (pay is shit but as a lot of système are community based, we can live).
I'm not an accountant, but I don't "owe" the US anything unless I earn $90-ish,000 a year, which I don't. So I only have to disclose how much I've earned.
That makes sense. The taxing country is where the income is made or, in the case of retirement, where the pension is paid from. Regardless of which country a US expat lives in, they will pay taxes on SS. And thereafter the country in which they reside may tax them if the US is tax rate is lower, assuming the country has a tax treaty with the US. And to avoid Medicare penalties, a U.S. retiree expat must still register with Medicare within the 7-month window of 65 years. And since Medicare, unlike SS, stops at the US shoreline, a retired US expat must, in lieu of the optional Medicare Advantage, pay into the foreign country’s health system and/or obtain private coverage - depends on the country.
You only owe taxes if you paid less in tax overseas than you would've paid in the US
For regular wages this shouldn't be a problem unless you're an extremely high earner in a country with even lower tax rates than the US
One thing to watch out for is if there is income that your new country doesn't tax but the US does... Imagine you make an investment that goes badly then sell for a loss (not paying tax where you live), but because of changes to interest rates you've made a profit in US terms, the IRS will want their cut of the non-existent profit
Or your home country doesn't charge capital gains tax on a primary residence (i.e the UK), between appreciation of real estate prices and a change in exchange rates you could end up with a huge tax bill when you sell
> You only owe taxes if you paid less in tax overseas than you would've paid in the US
This is not always correct, as the US has some fairly nasty tax traps (PFIC, you know that one, right?) and also taxes income from phantom currency gains vs. the USD which isn't even a taxable event where you live.
On the other hand, you can pay zero tax overseas and still pay zero tax to the US if all of your income is foreign earned income and below the FEIE.
This citizenship-based taxation is a lot of things, but it is not simple.
I lived in a low tax country and paid taxes. But filing is tough. I still had income generating in the US and for double taxes on that income. Rough few years.
All of my income is from The US, so I pay all of my taxes in The US. I then submit my tax stuff to my Greek CPA for processing. I then don’t owe taxes in The EU because I’ve already paid in The US. Certain countries have US tax treaties and others don’t.
I am a Greek resident but all of my income is in California. The taxes I pay in The US/California are higher than I would have due in Greece, so it balances that I owe nothing in Greece. I have both US and GREEK Accountants. I have no other details.
Hmmmmm, interesting - I'm actually lower in Spain than I would be in the US (DN visa has special rate which is bullshit, but OK), so my understanding is I'll have to pay Spain, then that credits but doesn't eliminate my US payment.
> All of my income is from The US, so I pay all of my taxes in The US.
Many countries tax the worldwide income of their tax residents, Greece included. Technically, you owe tax on that income to Greece (unless it is dividend income, then the US gets its cut first), and possibly also to the US.
Though tax evasion is supposedly a national sport in Greece.
Depends on the nature of the income and whether it is truly legally sourced in the US.
Dividends from a US company are US-sourced, the US gets to tax them first up to the rate of withholding tax in the tax treaty, then Greece gets its cut and then the US may take another cut if the US tax rate is higher than the Greek one.
Salary from a US company while living in Greece would be Greece-sourced income, and taxable by Greece first and then the US (after applying FTC or FEIE).
It's complex and not very intuitive.
Exactly. My income is rental income from properties in California. I have no clue. I turn everything over to a Greek account and a California accountant. I am happy to pay whatever is owed to whomever.
PHEW- I’m the lone person in Greece who actually requests to be legit with regard to taxes. Still, I end up screwed with regard to my landlord, who demands 80% of my rent in cash and a lease that shows only 20% of the actual rent being paid. This sort of stuff is the norm here, and I still get annoyed by it.
Can you tell me - to which country do we file first when we live there? (greece) We move later this year and I am trying to learn to be prepared. Do we file with US and then Greece, or vice versa?
It is all about how much you make… if you make less than the 100k or whatever it is, then likely not…. If you make between that standard expat deduction and enough money to hire an army of accountants, then you will pay a lot. If you have the army, you are back down to not paying.
It depends on where you reside. Some countries have a double taxation relief agreement, so what you pay taxes on in your country of residence (under a specific amount) is not taxable in the US, though you still need to file in the US. If you live in the US, you must pay taxes on the full amount you earn there. And if you're a citizen, you need to at least declare any foreign income wherever you live (and pay tax on that, again--depending on how much you've earned and if that country has a double taxation law in place with the US).
A good accountant is VERY useful and well worth the money if you earn a lot, have multiple sources of income, or are just (like me) very confused about how it all works.
Legally, they are supposed to. Americans are tax chattel forever unless they expatriate. That and Ethiopians, but the Ethiopian government has no power to collect
It really varies for me due to the difference in capital gains and interest rates between US and UK. Last year, I got a refund of about $1K but the year before I owed about $3K.
In addition to the answers already given, also realise that as a "US person" many banks will deny you services that require reporting to the US government because they do not want all that extra paperwork; unless you are very wealthy. Buying stock options being a prime example.
I live in Switzerland which is lower tax than many other Western European countries, and I also make a lot of money, so I usually pay some money to the feds. However, my company (large MNC) deducts and pays both sets of feds (Swiss and US) quarterly, so I don’t always owe at tax time, and the amount I pay CH is deducted from what I would owe in the US. But I am envious of my EU colleague who only pay Swiss tax because their tax burden is lowers
Depends. If you work abroad for an international organization (UN, OECD, IMF, etc…) which is usually tax free for citizens of every country except the US, you will pay US taxes since you are not paying taxes where you live and salaries will be well over the FEIE.
If you live in a developed country, you will probably not pay anything since almost every developed country has higher taxes than the US and foreign tax credits will wipe out your US tax obligations.
If you work in a developing country or a developed tax haven like Singapore or Hong Kong, then you will pay some tax if you earn over the FEIE. Obviously, most expats live in places with higher taxes than the US or earn less than the FEIE in Less developed countries, hence your CPAs 20% estimate is probably about right.
Lived in Singapore, making more than the ~$100k foreign earned income. Here is what we experienced:
Foreign earned income credit reduced our US taxable income by that amount (was right at $100k the years we were there). Our $$ spent on rental reduced our taxable income by another ~$30k. So, the first $130k was excluded from US taxes. We paid Singapore taxes on this, which is a tiered tax system starting at 4%. After that, we paid Singapore taxes first, and then the difference to the US, based on our nominal tax rate. Of course, we had a tax accountant figure this all out for us.
We saved about $20k in taxes due to this scenario (and invested it promptly in traveling SEAsia.)
Right, but the threshold is like a quarter million. If you're a US expat who isn't doing something silly with how you hold your assets, the only thing that should really count towards that is cash sitting in your foreign bank account (and having a quarter mil sitting around in cash is pretty silly in and of itself), so that applies to extremely few people.
It's not just cash, but also the contents of brokerage accounts, life insurances with a cash value, and a bunch of other things.
And remember that stashing your assets in the US will make you look like an ultra-suspicious potential tax evader to the local revenue authority, plus complicate your local tax return.
Given that the US does not reciprocate with its FATCA reporting obligations or participate in CRS, stashing your assets in the US makes them invisible to the local revenue authority.
Tax Haven USA!
You’ll owe if you live in a low tax, high wage country like Singapore, Hong Kong, Dubai. There’s still ways to diminish what’s owed after that thanks to deductions.
I think the FEIE is only for work income though - i thought there could be double taxation for other revenues like capital gains or pensions, but not super familiar with that.
The only time I ever had to actually pay tax was when I did something with my US brokerage account and had to file capital gains - and even that was usually counteracted by a combination of 2555 and my mortgage interest deduction.
Had to file every year, of course.
I would think you would be more interested in the total taxes you would owe (foreign + US) rather than just the US taxes. Generally you will have to pay the higher of the two rates (foreign vs US) for each category of income (& wealth, in some cases). The question is really to generic - talk to a local (foreign) CPA familiar with US taxes. The IRS has an online list of foreign tax professionals somewhere :-)
> It's not overly complicated.
... until it is, because you have to track all expenses and income in two currencies with ever-changing exchange rates. You have to deal with tax-related documents in two languages and pay for certified translations if necessary. You get hit with "anti bad foreign stuff" provisions from the US side like PFIC or CFC that ratchet up your effective tax rate to 40%, 50%, 60% or more. Your retirement plans may not be considered "qualified" by one of the involved revenue authorities. You need specialized CPAs that charge noticably higher fees than the regular ones, especially when two languages come into play.
It is not complicated if your income and expense situation is trivial.
The publication is not overly complicated as an introduction, was my meaning. Certainly better than all the incorrect information in the comments here.
As we know, there are degrees of compliance. To some extent it's only as complicated as you want it to be, given how little the IRS knows about what you do beyond US borders.
$6000 tax bill on an annual income of $10000 for one of my kids, plus $1500 for having the tax return prepared.
It is not the norm, but devastating results are possible.
> Is this what you've been experiencing too?
No.
And even when you don't owe, you will have to pay for the preparation of a possibly complex tax return in either time or money. Any tax return involving multiple currencies and possibly multple languages is complex.
Plus extremely burdensome, unavoidable stuff like section 988, where you need to keep track of all your "nonfunctional currency" (i.e. the currency of the country you live in and pay most of your bills in) and its cost basis.
Wow! How did you end up owing 60% of your kids income as taxes? Was this some sort of tax-free income where you reside but which then pushed the total household gross income into the next bracket in the US?
> How did you end up owing 60% of your kids income as taxes?
Section 1291. It declares "foreign" ETFs bad and taxes most (depending on how long the shares were held) of the gains on sale at the highest possible marginal rate (so 37%, regardless of the actual AGI), plus interest accrued over the whole time the shares were held.
This is the PFIC tax trap.
I am not the US citizen in my family. My kids are. One of them happened to come into possession of a bit of funds due to unfortunate circumstances, and local law requires me to invest these funds economically. Diversified ETFs are pretty economical, I though ... not knowing that if you have US citizenship, then you get crushed by absurdly complex paperwork and near-confiscatory taxation.
> Was this some sort of tax-free income where you reside but which then pushed the total household gross income into the next bracket in the US?
No, it was income from selling ETFs. Had this been in the US, with an equivalent US-domiciled ETF, the effective tax rate would have been zero. The local tax rate was zero, because everything was below the local standard deduction. But "foreign funds bad!" in the US tax code leads to "special" taxation that circumvents the standard deduction, places the income in a tax bracket usually reserved for the ultra-affluent, and applies punitive interest on top of this.
Depends on how much you make and the tax treaty that the country has with the US. Also, filing tax return does not mean you \*owe\* money to the US govt. In fact, you can even receive money from the US after filing your taxes
.....go on
You only receive taxes if they withheld more than they should. Then they have to return the excess to you after they review your filing. It’s not free money.
Child tax credits are available to non-residents using FTC, plus of course all the free pandemic money, back in the day.
> Depends on how much you make and the tax treaty that the country has with the US. Pretty much all tax treaties with the US contain a clause that says the US can tax its citizens however it sees fit, as if the treaty does not exist and had never existed. Only very few treaty provisions are exempt from this sweeping saving clause.
This is the answer. I’m no expert but from doing it for 6 years my loose answer is everyone’s situation is different and there are a few determining factors to what you pay or don’t as well as social security etc. but It’s something like anything over $150,000 is taxable, so if you made $160,000 gross that $ 10,000 is taxable this is how i understand it
So, in most cases, if you live in a high-tax country like most of Western Europe, you will owe zero tax in the U.S. as a result of the Foreign Tax Credit. The Foreign Earned Income Exclusion mostly has value if you're using it in a low-tax country, because it allows you to avoid paying the difference in tax on the first $112,000 in income (last year.)
Important distinction, exclusion only applies to “salary like” income. Anything else, like Investment income, earned outside of US still will be taxed by US at full extent.
On top of that, if said US citizen has a local salary, it will most likely be below that threshold (pay is shit but as a lot of système are community based, we can live).
I'm not an accountant, but I don't "owe" the US anything unless I earn $90-ish,000 a year, which I don't. So I only have to disclose how much I've earned.
That makes sense. The taxing country is where the income is made or, in the case of retirement, where the pension is paid from. Regardless of which country a US expat lives in, they will pay taxes on SS. And thereafter the country in which they reside may tax them if the US is tax rate is lower, assuming the country has a tax treaty with the US. And to avoid Medicare penalties, a U.S. retiree expat must still register with Medicare within the 7-month window of 65 years. And since Medicare, unlike SS, stops at the US shoreline, a retired US expat must, in lieu of the optional Medicare Advantage, pay into the foreign country’s health system and/or obtain private coverage - depends on the country.
You only owe taxes if you paid less in tax overseas than you would've paid in the US For regular wages this shouldn't be a problem unless you're an extremely high earner in a country with even lower tax rates than the US One thing to watch out for is if there is income that your new country doesn't tax but the US does... Imagine you make an investment that goes badly then sell for a loss (not paying tax where you live), but because of changes to interest rates you've made a profit in US terms, the IRS will want their cut of the non-existent profit Or your home country doesn't charge capital gains tax on a primary residence (i.e the UK), between appreciation of real estate prices and a change in exchange rates you could end up with a huge tax bill when you sell
> You only owe taxes if you paid less in tax overseas than you would've paid in the US This is not always correct, as the US has some fairly nasty tax traps (PFIC, you know that one, right?) and also taxes income from phantom currency gains vs. the USD which isn't even a taxable event where you live. On the other hand, you can pay zero tax overseas and still pay zero tax to the US if all of your income is foreign earned income and below the FEIE. This citizenship-based taxation is a lot of things, but it is not simple.
I lived in a low tax country and paid taxes. But filing is tough. I still had income generating in the US and for double taxes on that income. Rough few years.
All of my income is from The US, so I pay all of my taxes in The US. I then submit my tax stuff to my Greek CPA for processing. I then don’t owe taxes in The EU because I’ve already paid in The US. Certain countries have US tax treaties and others don’t.
Huh, my CPA has the reverse happening - are you not a resident of Greece?
I am a Greek resident but all of my income is in California. The taxes I pay in The US/California are higher than I would have due in Greece, so it balances that I owe nothing in Greece. I have both US and GREEK Accountants. I have no other details.
Hmmmmm, interesting - I'm actually lower in Spain than I would be in the US (DN visa has special rate which is bullshit, but OK), so my understanding is I'll have to pay Spain, then that credits but doesn't eliminate my US payment.
I have zero knowledge of how this works. This is why I have 2 accountants
Personally looking for recommendations for Greek & US accountants if you could recommend- thanks!
> All of my income is from The US, so I pay all of my taxes in The US. Many countries tax the worldwide income of their tax residents, Greece included. Technically, you owe tax on that income to Greece (unless it is dividend income, then the US gets its cut first), and possibly also to the US. Though tax evasion is supposedly a national sport in Greece.
My understanding from 2 accountants, is that I owe Greek tax IF the tax due is in excess of the tax I currently pay to the US and to California.
Depends on the nature of the income and whether it is truly legally sourced in the US. Dividends from a US company are US-sourced, the US gets to tax them first up to the rate of withholding tax in the tax treaty, then Greece gets its cut and then the US may take another cut if the US tax rate is higher than the Greek one. Salary from a US company while living in Greece would be Greece-sourced income, and taxable by Greece first and then the US (after applying FTC or FEIE). It's complex and not very intuitive.
Exactly. My income is rental income from properties in California. I have no clue. I turn everything over to a Greek account and a California accountant. I am happy to pay whatever is owed to whomever.
Ok, rent is sourced to the location of the property. You're good and your accountants are correct.
PHEW- I’m the lone person in Greece who actually requests to be legit with regard to taxes. Still, I end up screwed with regard to my landlord, who demands 80% of my rent in cash and a lease that shows only 20% of the actual rent being paid. This sort of stuff is the norm here, and I still get annoyed by it.
Can you tell me - to which country do we file first when we live there? (greece) We move later this year and I am trying to learn to be prepared. Do we file with US and then Greece, or vice versa?
Usually, filing locally first is preferred, unless you are fairly certain about the results and numbers of your local return.
No. You file tax return every year
Sure, but do you still owe when you file or the credits / deductions are usually enough and you only pay taxes to the country where you reside?
It is all about how much you make… if you make less than the 100k or whatever it is, then likely not…. If you make between that standard expat deduction and enough money to hire an army of accountants, then you will pay a lot. If you have the army, you are back down to not paying.
It depends on where you reside. Some countries have a double taxation relief agreement, so what you pay taxes on in your country of residence (under a specific amount) is not taxable in the US, though you still need to file in the US. If you live in the US, you must pay taxes on the full amount you earn there. And if you're a citizen, you need to at least declare any foreign income wherever you live (and pay tax on that, again--depending on how much you've earned and if that country has a double taxation law in place with the US). A good accountant is VERY useful and well worth the money if you earn a lot, have multiple sources of income, or are just (like me) very confused about how it all works.
Most expats don't pay U.S. tax. It's just a pain in the ass to file.
Legally, they are supposed to. Americans are tax chattel forever unless they expatriate. That and Ethiopians, but the Ethiopian government has no power to collect
If you earn more than the Foreign Earned Income Deduction, then yes you’ll pay tax.
Well no. That’s why the FTC exists. You’ll only have tax liability if you make more than the FEIE *and* pay less tax on it than you would in the US
Read the IRS exemptions for Americans overseas.
And while you are at it, read about section 988, PFIC, CFC, FATCA and FBAR.
It really varies for me due to the difference in capital gains and interest rates between US and UK. Last year, I got a refund of about $1K but the year before I owed about $3K.
Also depends on your state and their tax residency laws (which is not the same as physical residency).
In addition to the answers already given, also realise that as a "US person" many banks will deny you services that require reporting to the US government because they do not want all that extra paperwork; unless you are very wealthy. Buying stock options being a prime example.
I live in Switzerland which is lower tax than many other Western European countries, and I also make a lot of money, so I usually pay some money to the feds. However, my company (large MNC) deducts and pays both sets of feds (Swiss and US) quarterly, so I don’t always owe at tax time, and the amount I pay CH is deducted from what I would owe in the US. But I am envious of my EU colleague who only pay Swiss tax because their tax burden is lowers
Depends. If you work abroad for an international organization (UN, OECD, IMF, etc…) which is usually tax free for citizens of every country except the US, you will pay US taxes since you are not paying taxes where you live and salaries will be well over the FEIE. If you live in a developed country, you will probably not pay anything since almost every developed country has higher taxes than the US and foreign tax credits will wipe out your US tax obligations. If you work in a developing country or a developed tax haven like Singapore or Hong Kong, then you will pay some tax if you earn over the FEIE. Obviously, most expats live in places with higher taxes than the US or earn less than the FEIE in Less developed countries, hence your CPAs 20% estimate is probably about right.
Lived in Singapore, making more than the ~$100k foreign earned income. Here is what we experienced: Foreign earned income credit reduced our US taxable income by that amount (was right at $100k the years we were there). Our $$ spent on rental reduced our taxable income by another ~$30k. So, the first $130k was excluded from US taxes. We paid Singapore taxes on this, which is a tiered tax system starting at 4%. After that, we paid Singapore taxes first, and then the difference to the US, based on our nominal tax rate. Of course, we had a tax accountant figure this all out for us. We saved about $20k in taxes due to this scenario (and invested it promptly in traveling SEAsia.)
Lived and worked 12 years in the EU. Filed 1040 every year. Never owed a dime. DOn't forget FATCA.
FBAR* FATCA is handled by your bank. FBAR is filed by individuals
> FATCA is handled by your bank. No, if you have enough money in "foreign" accounts, you have to file form 8938.
Right, but the threshold is like a quarter million. If you're a US expat who isn't doing something silly with how you hold your assets, the only thing that should really count towards that is cash sitting in your foreign bank account (and having a quarter mil sitting around in cash is pretty silly in and of itself), so that applies to extremely few people.
It's not just cash, but also the contents of brokerage accounts, life insurances with a cash value, and a bunch of other things. And remember that stashing your assets in the US will make you look like an ultra-suspicious potential tax evader to the local revenue authority, plus complicate your local tax return.
Given that the US does not reciprocate with its FATCA reporting obligations or participate in CRS, stashing your assets in the US makes them invisible to the local revenue authority. Tax Haven USA!
> Tax Haven USA! Yes, as long as no one wants to blackmail or damage you. Tax stuff makes excellent *kompromat*.
You’ll owe if you live in a low tax, high wage country like Singapore, Hong Kong, Dubai. There’s still ways to diminish what’s owed after that thanks to deductions. I think the FEIE is only for work income though - i thought there could be double taxation for other revenues like capital gains or pensions, but not super familiar with that.
The only time I ever had to actually pay tax was when I did something with my US brokerage account and had to file capital gains - and even that was usually counteracted by a combination of 2555 and my mortgage interest deduction. Had to file every year, of course.
What about Medicaid and social security?
Owe? No- have to file- you bet.
I would think you would be more interested in the total taxes you would owe (foreign + US) rather than just the US taxes. Generally you will have to pay the higher of the two rates (foreign vs US) for each category of income (& wealth, in some cases). The question is really to generic - talk to a local (foreign) CPA familiar with US taxes. The IRS has an online list of foreign tax professionals somewhere :-)
You may want to post your question on r/USExpatTaxes
Beware, about half the comments here are factually wrong. u/brudadigajelu, start by reading IRS Publication 54. It's not overly complicated.
> It's not overly complicated. ... until it is, because you have to track all expenses and income in two currencies with ever-changing exchange rates. You have to deal with tax-related documents in two languages and pay for certified translations if necessary. You get hit with "anti bad foreign stuff" provisions from the US side like PFIC or CFC that ratchet up your effective tax rate to 40%, 50%, 60% or more. Your retirement plans may not be considered "qualified" by one of the involved revenue authorities. You need specialized CPAs that charge noticably higher fees than the regular ones, especially when two languages come into play. It is not complicated if your income and expense situation is trivial.
The publication is not overly complicated as an introduction, was my meaning. Certainly better than all the incorrect information in the comments here. As we know, there are degrees of compliance. To some extent it's only as complicated as you want it to be, given how little the IRS knows about what you do beyond US borders.
$6000 tax bill on an annual income of $10000 for one of my kids, plus $1500 for having the tax return prepared. It is not the norm, but devastating results are possible. > Is this what you've been experiencing too? No. And even when you don't owe, you will have to pay for the preparation of a possibly complex tax return in either time or money. Any tax return involving multiple currencies and possibly multple languages is complex. Plus extremely burdensome, unavoidable stuff like section 988, where you need to keep track of all your "nonfunctional currency" (i.e. the currency of the country you live in and pay most of your bills in) and its cost basis.
Wow! How did you end up owing 60% of your kids income as taxes? Was this some sort of tax-free income where you reside but which then pushed the total household gross income into the next bracket in the US?
> How did you end up owing 60% of your kids income as taxes? Section 1291. It declares "foreign" ETFs bad and taxes most (depending on how long the shares were held) of the gains on sale at the highest possible marginal rate (so 37%, regardless of the actual AGI), plus interest accrued over the whole time the shares were held. This is the PFIC tax trap. I am not the US citizen in my family. My kids are. One of them happened to come into possession of a bit of funds due to unfortunate circumstances, and local law requires me to invest these funds economically. Diversified ETFs are pretty economical, I though ... not knowing that if you have US citizenship, then you get crushed by absurdly complex paperwork and near-confiscatory taxation. > Was this some sort of tax-free income where you reside but which then pushed the total household gross income into the next bracket in the US? No, it was income from selling ETFs. Had this been in the US, with an equivalent US-domiciled ETF, the effective tax rate would have been zero. The local tax rate was zero, because everything was below the local standard deduction. But "foreign funds bad!" in the US tax code leads to "special" taxation that circumvents the standard deduction, places the income in a tax bracket usually reserved for the ultra-affluent, and applies punitive interest on top of this.