Just when you thought things couldn’t get any worse, Washington throws another curveball at us expats.
American citizens who live abroad are already treated differently from our compatriots at home. For example, people who live and keep money inside the United States don’t have to tell the IRS what’s in their bank accounts. Those of us who live outside the country do.
And if we don’t file the relevant paperwork, we’ll be hit with penalties so severe that we could end up owing the government more than what’s in those accounts.
Now the geniuses who make our laws want to make our lives even more difficult.
Buried deep inside the “One Big Beautiful Bill” that passed the House of Representatives in May—so deep most of the Congresspeople who voted for it didn't even know it was there—is a provision that threatens to wreak havoc in our lives.
The new law will impose a 3.5% excise tax on all money sent from anyone inside the United States to any recipient in a foreign country. The tax applies even if the sender and receiver are the same person, like many of us expats.
Now, technically, the law would apply only to non-citizens, including green card holders. The goal is to raise revenue by targeting remittances sent by non-citizen workers to their family and friends at home. Such people are an easy target for greedy politicians, since they can’t vote.
But guess who must prove that they are a US citizen to avoid this tax? You and I. And guess what happens if we don’t prove it? The money transfer agencies we use will withhold that 3.5% and send it to the IRS.
On top of that, if your money transfer agency hasn’t signed a contract with the IRS to withhold this tax, they won’t be considered a “qualified transfer provider” and therefore will have to apply the tax to everyone, even US citizens.
If you live abroad, you already know how much uphill we get when we sign up for a service like Xoom or Remitly. Before they’ll create an account, they ask all sorts of invasive questions about the origins of your funds, what you plan to do with them, and so on. That’s to satisfy existing regulations supposedly meant to combat terrorism and money laundering.
Now, on top of that, we're going to have to prove that we're US citizens. Since the law says that money transfer agencies that don't withhold this tax will have to pay it themselves, you can be sure they're going to make our lives even more difficult.
This new law was sloppily drafted and doesn't address some critical things. What if the sender and receiver are the same person, and they live overseas? As written, that means they're not “located” in the US, so the law wouldn't apply. But you can be sure there will be endless arguments about that.
Many of the people who consult with me at my Global Citizen service have expressed concern that something like this might happen eventually. That’s why people are rushing to find solutions that will allow them to move their money out of the United States, so they could avoid this nonsense.
For instance, if you know you’re going to buy a property abroad, consider moving some funds right now—through, for instance, Moneycorp , where you can lock in an exchange rate and where it can sit in a segregated account until you need it.
NOTE: You can own foreign currency directly from home with a Moneycorp account. And you’ll get a much better exchange rate than you’re likely to find at your bank. If you plan to travel or buy property overseas, you can also plan ahead and track exchange rates—buying foreign currencies when the dollar is strong—so that you get the best rate possible. Sign up for a FREE account here .
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What else should you do?
Let your representatives in Congress know you’re not in favor of this provision.
Write and call your Senators immediately to let them know where you stand.
And let me say, too: There is a long-term solution to this problem—move even more of your money abroad. I’ve done it, and I can help you do it too!
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