International vs. Domestic Tax Law

A subscriber to my newsletter recently sent me an email saying that she was confused by my occasional discussions regarding domestic tax law because she expected I would only deal with international tax and asset protection topics.

Although 'international tax law' generally deals with cross-border tax issues, always keep in mind that the US government taxes all US persons (citizens or resident aliens [green card holders]) on their world-wide
income, no matter where that 'US person' lives, where they work or where their assets are located.

This means that US domestic tax rules apply to international employment, investments and business income, unless there is a specific exception in the tax code. The entire body of international tax law basically is a
set of exceptions to the general US tax rules that apply to domestic US transactions.

For example, US persons are subject to income tax on earned income, regardless of where the income actually is earned. There is an exception to this general rule, called foreign income exclusion, for a US citizen who earns income from living and working in a foreign country for more than a year. Up to $80,000 can be earned free of US income tax. However, there are many conditions that must be met in order to qualify for this major exception to the general income tax rules.

In my opinion it would be somewhere between difficult and impossible to be competent in the subject of international tax law without a solid foundation in domestic US tax law. But there are far too many 'tax
experts,' as they call themselves, who don't know tax law, foreign or domestic. If you rely on them, then you could become liable.

If you would like more information regarding asset protection, trusts, family limited partnerships or the subject of this article please call or email our office.


 

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