A lot of folks always dream of a perfect world where there are no taxes and income is limitless. Reality check, unfortunately, that is not how the world works. Taxes are as inevitable as death. Some people go into great lengths just to get away from taxes but sooner or later, the IRS will catch up with you.
Before you go booking a flight to the nearest tax haven country, being an American citizen, try to ponder on these thoughts first:
– The United States of America is one of the few countries and is in fact, the only major country that imposes taxes based on citizenship. If you are an American citizen, regardless of where you are in the world and whatever source your income is coming from, taxes must be paid to Uncle Sam.
– Not paying your taxes and not filing your taxes is not the same thing but they do produce the same results: more costs. Mental note to self, evasion equates to penalties, penalties and a whole lot more of penalties.
– Renouncing your citizenship does have its own benefits. But before giving up your citizenship to escape paying tax to the U.S. government, it is best to contemplate on these reminders:
- You can renounce your citizenship if you pass a Net Income Tax Test.
- You also need to pass the Net worth Test.
- Certification test: all tax obligations have been settled.
- Make sure you get approved for citizenship with the other country or else you’ll end up having no country at all.
- Once you renounce your citizenship, you may no longer be qualified to all those retirement pensions and retirement benefits.
If you don’t have millions, don’t even think about doing this.
– If you try and escape to another country to avoid taxes, always remember that unpaid taxes that you owe maybe shaved off from your retirement benefits, pensions and all those things that you are eligible for.
– If you are on disability pension, SSI or receiving other types of benefits; you may end up not receiving them because these agencies require notification for you to receive your benefits regularly. In short, you always need to be tracked down first.
Moral of the story:
Do not hide and evade your taxes.