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Expat Living in Costa Rica: You Need Three Best Friends

The legal, tax, and social structures of other countries can be very, very different from those of the U.S.  Though many of the titles and words may seem familiar to us, costly mistakes can be made if incorrect action is taken.  This is where establishing these three best friends can make sure your expat dream does not become a nightmare.

EVERYONE NEEDS A SENOR BOB
After touring Costa Rica, I decided that I wanted a second home in Jaco Beach.  It is advisable to spend some extended time renting in your selected location, so I decided to take my son on a month-long surfing vacation there.  The first item on my list:  Find a place to stay.

Enter:  Bob Johnson (www.oceansiderealty-cr.com)
Talking with Bob Johnson, realtor with Oceanside Realty was a breath of fresh air after my conversations with other rental agencies in Jaco.  Everyone but Bob told me that a month’s rental in Jaco Beach would cost me around three thousand dollars.  Everyone but Bob just wanted to rent to me at the highest possible price.  In talking with Bob, I found out that he wanted more:  he wanted to find me the best deal for my dream to happen.

Expat Taxes: New IRS FATCA Rule is ANOTHER Way to Penalize You $10,000

The IRS continues to roll out new ways to identify Americans holding financial and investment accounts abroad. These disclosure reporting requirements all come loaded with the highest IRS penalties, starting at $10,000 per non-filing or incorrect filing incident.

Many of you are fully aware of the filing requirements of Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). You know if the aggregate value of your foreign bank and financial accounts reach $10,000 in any one year, you must file this report with the Treasury Department (not the IRS) the following year. Non-filing or incorrect filing of this form bears a statutory $10,000 penalty.

The IRS has added ANOTHER required form, Form 8938, to be filed WITH your annual tax return. This form is also loaded with $10,000 non-filing or incorrect filing penalties. Additional penalties may be assessed, up to $50,000 for continued failure to file after IRS notification. A 40 percent penalty on any understatement of tax attributable to non-disclosed assets can also be imposed. A special statute of limitation also applies to the filing of Form 8938. Here are some other points to note:

American Expat Tax Confessions: 7 Reasons I Did Not File A U.S. Tax Return

The single, most common mistake that U.S. citizens abroad make is to not file a U.S. tax return while they are out of the country.  Here are the reasons we’ve heard over the years. 

Please note:  the IRS does NOT accept ANY of these reasons for a failure to file.

“A presenter at a local expat community group told us we do not need to file.”

“I thought that since the Foreign Earned Income Exclusion (for 2009) was $91,400 and we made under $91,400, we did not need to file – that’s what ‘exclusion’ means, right?”

“I read online that if we do not work in U.S. we do not need to file.” 

“My stateside tax preparer said he didn’t think I needed to file while abroad because I didn’t think I’d be working while I was there.”

“A friend told me that I do not need to file because the U.S. only taxes U.S. income.”

“A co-worker told me when we arrived that since we work for a foreign company, we do not need to file.”

“I checked and learned that I worked in a non-tax jurisdiction.  Doesn’t that mean that I did not need to file?”

We share this list with you to reiterate:  If you’re a U.S. citizen or foreign national, you must file a U.S. tax return.