The U.S. has tax treaties with some countries, which can deliver a tax break in the form of lower rates or some exemptions. Also, the foreign earned income exclusion allows you to exclude up to $105,900 (for 2019) earned in another country as long as you meet certain criteria.
Yet beyond filing a tax return every year with the IRS, you also face financial-reporting requirements.
"There are all sorts of anti-abuse rules in the U.S. tax code and the presumption is that when you set up a foreign bank account or business, there's the potential for abuse," Freshman said. "So you have to do a lot of reporting."
For starters, you'd have to file a Report of Foreign Bank and Financial Accounts, or FBAR, which discloses any accounts you own that hold an aggregate of more than $10,000 during any point of the year.
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If you don't file the report, you'll face penalties. If the non-reporting is deemed willful, you'd face a $100,000 penalty or 50 percent of the account balance, whichever is greater.
On top of that, you'd need to file Form 8938 if the total value of your foreign financial assets exceeds $200,000 on the last day of the tax year ($400,000 for married couples filing a joint tax return) or if the value is above $300,000 at any time during the year ($600,000 for married couples).
Foreign institutions also are required to disclose account holdings by U.S. citizens under the Foreign Account Tax Compliance Act.