FINALMENTE!!! Pop the prosecco, we have finally finished both of our tax filings. Imagine how chagrined I, a lawyer, was when I first learned we that I didn't know beforehand we had to file income tax in Italy even though we don't earn any income here. It is simply something I never thought about before we arrived. And there is a lot of misinformation and confusion among the expat online community. Part of the problem is that the U.S. is one of a very, very few countries that taxes their citizen's worldwide income even if they don't reside in the U.S., hence the double filing. Another problem is the obscurity of the Italian tax code, which most Italians don't understand. They all told me we would have to have a commercialista because "non e possibile" to do your own taxes. General astonishment when I told them most Americans do their own taxes online!
A third problem--finding a commercialista willing to deal with Americans. Most of the international commercialiste deal with Brits (there are a lot of them here) and find American requirements too confusing to bother with. After trying about 30 different offices, Niccolo Billi in Florence was willing to undertake the task. We gave him the documents and got back the tax bill--about 6 times more than what we would have paid in the U.S.! Part of the cost of living in Paradise. Then we had to find a bank that would open a bank account for U.S. citizens, again, something they don't want to bother with because of U.S. banking regulations. FATCA purports to impose huge penalties on foreign banks that don't comply with reporting requirements, and Italian bankers generally prefer to avoid the problem by avoiding Americans. Niccolo found a small bank that opens accounts for Americans, met us there to get the paperwork taken care of, and only 47 signatures later, we had an account, paid our taxes online, and even had an Italian debit card! Donatella, "our" banker, even gave us her personal cell so we can call her if we have any problems or banking questions. That is not service I ever got from a U.S. bank! Donatella's bank doesn't mind the U.S. regulations because they are not affiliated with a U.S. bank and thus don't have assets in the U.S., so they don't have to worry about the specter of 30% of their assets being seized for non-compliance with FATCA. (A side note--Democrats Abroad is trying to get a change in the banking laws so expat bank accounts are not included, which I support. Our account is not a 'foreign account' in the sense intended by FATCA, it is our local bank account where we live. Expat accounts are not part of the terrorist problem Congress thinks it is addressing by these laws).
There is a tax treaty, so we don't have to pay twice, we can take a deduction for the amount we paid and, since it is so large, we don't owe U.S. tax, we just have to file a return. Turbo tax software includes the foreign tax forms which was convenient, they were missing or not working on another site I looked at. It was a bit confusing to figure out, but basically you can take a credit or a deduction for taxes paid on income earned in Italy. For income earned in the U.S. you can only take a deduction for taxes paid. IRS publication 514 actually does a pretty good job of explaining this in a mere 29 pages. There is a very helpful book online for anyone trying to get an overview of what expats do and don't have to pay, called Larry's Tax Guide. It is updated annually, and I recommend it to any american dealing with expat tax issues. Wish I had found it earlier.
The banker and the commercialista were amazed at how happy we were to be paying our taxes, but after 6 months of figuring out IF we had to pay, WHAT we had to pay, and HOW we could make the payment, it was a huge relief to have it over with. And having just pushed send on the US filing (yes, we had an extension) I can forget about taxes for the next six months. Hence, the prosecco.
No comments:
Post a Comment