Tax Problems for Americans Overseas: Expats Seeking a Simple Life Finding Complicated Mess in New Tax Laws – FATCA and FBAR

It’s beyond the scope of this blog to go into all the intricate details of the new tax legislation passed by Congress that is reeking havoc around the world for Americans living abroad.  Besides, the idea of going into all the tax law details just gives me a headache, how about you Dear Reader?

However, for those of us that are living overseas already or who ponder and daydream about living in a foreign land with beautiful vistas, fresh fruit to be picked off the trees, and a cheaper cost of living (especially medical and dental care) … and I suppose for every fan of House Hunters International, there’s big stuff happening now that’s hurting American expats.

It began as an attempt to collect unpaid taxes by the federal government, where officials were concerned with fighting tax evasion.  Laws were passed.  Yes, they are already on the books.  Now, the IRS is implementing those laws through IRS regulations and there’s the rub.

What’s going on with FATCA, FBAR, and the American Expatriate?

Okay first there are two laws involved here: the Foreign Accounts Tax Compliance Act  (FATCA) and the Bank Secrecy Act.  The Bank Secrecy Act requires American citizens living overseas to report their overseas bank account details each year to the Internal Revenue Service by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). 

FATCA requires foreign banks to report account information to the U.S. government on all their American customers and if the banks don’t do this, then the federal government imposes huge fees upon these foreign banks for failing to comply.  Nevermind that they aren’t American institutions and have their own set of privacy laws, financial regulations, etc. 

The banks are reacting by doing things like ditching their American customers rather than mess with the whole FATCA deal.  Some countries are insulted and are ignoring FATCA (like China). 

Meanwhile, FBAR requirements are causing nightmare situations for expats all over the place.   One good article with lots of real life stories appeared this week in The Atlantic.  Entitled, “The FATCA Chronicles: Tales from China, Canada and Estonia,” this is the third in a series of articles by James Fallows discussing the expat situation and the new laws trying to thwart perceived tax evasion by the feds. 

Problems include American expats who are signatories on foreign business accounts that have no American income following through them; same thing with foreign accounts held by foreign-citizen spouses; and those with dual citizenship. 

For details on what this means to expats, check out GlobalTaxHelp’s FATCA and FBAR summary and follow the blog posts at US Expatriate, written by a CPA whose practice focuses on expatriate tax issues. 

Expatriating to Mexico: Is It Safe to Go?

Combine a scary U.S. economy with a cheaper one in Mexico, which has the largest American expatriate population in the world, and it's no surprise that many are considering picking up and moving south of the border in the near future - for a least part of the time.  The health care is so much cheaper; it doesn't snow there; it's got all those beautiful beaches and tasty tropical drinks. 

However, the news these days is filled with beheadings, kidnappings, and Mexican police being gunned down on what seems like a daily basis.  Names of Mexican drug cartels are known to us now:  the Gulf Cartel, the Sinaloa Cartel, the Zetas.

Is Mexico safe for Americans now?

The State of Texas' Department of Public Safety has just issued a warning that no one should plan on taking their Spring Break in Mexico this year - it's just too dangerous, the state officials warn, what with all those drug cartels running amuk. 

Over at the U.S. Department of State, there is a long list of instructions and advice for students considering a vacation in Mexico, even giving information on various sites (Cancun, etc.).

Earlier this year, a similar release was issued by Texas against "Winter Texans" going to Mexico in 2011.  (Read the full release here.)  This warning was issued shortly after drug cartel gunfire killed a 59 year old Texas missionary, Nancy Davis, as she and her husband attempted to circumvent the cartel's road block on a Northern Mexico roadway not far from the Texas border. 

Review the U.S. Department of State website, and you will discover that there are "travel alerts" and "travel warnings."  Warnings are more serious:

• Travel alerts "... disseminate information about short-term conditions, either transnational or within a particular country, that pose significant risks to the security of U.S. citizens. Natural disasters, terrorist attacks, coups, anniversaries of terrorist events, election-related demonstrations or violence, and high-profile events such as international conferences or regional sports events are examples of conditions that might generate a Travel Alert."
• Travel warnings advise of "... long-term, protracted conditions that make a country dangerous or unstable lead the State Department to recommend that Americans avoid or consider the risk of travel to that country. A Travel Warning is also issued when the U.S. Government's ability to assist American citizens is constrained due to the closure of an embassy or consulate or because of a drawdown of its staff." 

Mexico got a State Department travel warning back in September 2010. 

So, both federal and state officials are warning Americans that traveling is Mexico is dangerous - so dangerous, in fact, that it's not worth the risk.  However, this isn't the same information that you will find if you investigate the forums and blogs that deal with Mexico expatriating.

What the Mexico Expats Are Reporting About Being an American Traveling in Mexico

The Ajijic Real Estate News covers the region surrounding Mexico's Lake Chapala, where the largest American expatriate community in Mexico resides.  According to Daniel Steele in his post dated January 26, 2011, "Safety in Lake Chapala and Ajijic Mexico," everything is fine - Mexico has its "pockets" that you need to avoid, just like other countries do.  Of course, most of his post is suspect: he's trying to sell you Mexican real estate. 

There is a website dedicated to tracking criminal activity in this area:  the Lake Chapala Crime Watch.  Read it today, and you'll find that burglary and to some extent, robbery (where you're there when the criminal wants to take your stuff - burglary means he waits till you've gone), seems pretty high in the area.  Homes, cars.  The most serious thing I found there: a recent report of a man shooting a rifle with a silencer from a rooftop - not at any living thing, apparently. 

Barbie, who is responsible for RetireInLuxury.com, has a fact sheet for her fellow expats in Mexico, filled with tips and references.  She discusses the difference between tourist spots and other locations, as well as the US-Mexico border as a hotspot for cartel activity.  Barbie advises lots of common sense things, like don't throw money around so everyone knows you've got some; don't wear lots of bling; and don't drive on roads that aren't tourist-friendly - and don't drive at night.  You can follow Barbie's blog and contact her directly at MoneySavingMexico.com. 

So, bottom line: is Mexico safe? Not entirely.  It's not the same as living in San Antonio, that's for sure. We don't have men shooting rifles from (yet).  I'm not worried about running up to the grocery store late in the evening here -  but I do notice there are signs on the lampposts warning me not to leave my valuables in my car. 

Crime is everywhere.  You have to evaluate the risk for yourself.  However, if my teenager were pondering where to spend Spring Break 2011, I'd be pushing for the Texas Gulf Coast, anywhere from Corpus to Galveston and steering clear of South Padre Island and its temptation to cross the border into Mexico.

Becoming an Expatriate: Health Care in Other Countries

For some, traveling to other countries for medical care is their sole purpose in visiting the country, and medical tourism is becoming more and more popular here in the United States.  That's a different issue for a different day (other than what I've already written about it, if you're interested in that subject).

Medical Care for Expatriates - Not Medical Tourism

When you're pondering living for an extended time in another country - e.g., a retired snowbird following the sun, a young adventurer wanting to see the world, a family following a corporate job - one of the big issues will be the kind of health care that you'll get, how much it will cost, and how best to plan ahead to insure that you're covered from the minute that you hit your new shores.  Each country is different, and different expatriates may qualify for different levels of care in their new homeland. 

Here are some good resources to start your studies on expatriate medical care:

1. TransitionsAbroad.com has tons of information about this topic in a series of articles covering Health, Safety, and Insurance for Expatriates.
2. For those who like lists, ShelterOvershore offers a short, smart overview in  Expatriate Healthcare Checklist with five articles providing more details on the topic (like whether or not you need insurance coverage before you go overseas) in the site's right sidebar. 
   
3. A huge list of insurers provided international medical coverage has been collected at expatriates.com.
4. An expatriate in Spain gives first hand information about medical care in Spain with lots of details in a great blog, SpainExpat.
   
5. A great discussion of a British expat's life in Greece can be found at Living in Greece.  Pauline describes the ease with which she gets her high blood pressure medication and how efficiently her husband's athlete's foot was treated.

Watch This on Canada's Health Care

Thanks to Robin Lee Hatcher for sharing this video. It's worth the 20 minutes to watch this video, in its entirety, as part of your personal research on whether or not the U.S. should have socialized medicine.

Retiring in Mexico

More and more news reports are covering the rise in Americans retiring in Mexico. This is due in part to the lower cost of living, as well as the lower costs of medical and dental care and nursing home expense. It's also due in part to the Mexican people themselves: their loving attitudes toward family, and friendly acceptance and assistance to expatriates, makes Mexico a welcoming place for many Seniors.

For more information on retiring in Mexico, check out these sources:

Mexperience
The People's Guide to Mexico
Gadling
ExpatForum - Mexico
MexConnect
Transitions Abroad - Mexico

Overseas Surgery: Same Quality, Less Cost

Here in Texas, stories of folk going across the border for medical care and prescription drugs is very old news. The savings has always been striking, and while there have been occasional horror stories of bad drugs or marred nose jobs, the bad reports have been few and far between.

Now, it appears that the idea of going overseas for medical care is a growing national trend, fueled by rising health care costs and an escalating population that is uninsured. The trend already has a name: "medical tourism."

PlanetHospital.Com is one of the services filling this market niche. Others are WorldMedAssist.com , MedRetreat.Com and MedJourneys.Com.

Not only are your medical needs coordinated to the appropriate surgeon or specialist, the companies also provide comforts like a concierge service, an English-speaking guide, and all act as travel agent. "All you have to do is show up," PlanetHospital assures.

Furthermore, the health care itself is high quality. You can find health care providers overseas that are U.S. board certified, and many facilities that are affiliated with prestigious American institutions. WorldMedAssist provides the Anadolu Medical Center as an example; it is a facility in Istanbul, Turkey, that is affiliated with the elite Johns Hopkins.

The savings are huge. Angioplasty costs $11,000 overseas; it is $36,000 here. The difference: $25,000. Carpal tunnel surgery is $9000 overseas and $22,000 here. Savings: $13,000.00.

For an online listing of medical tourism sites, check out OpenDirectory. For more information, read an University of Delaware article on the topic, as well as the ever-expanding Wikipedia entry.