Financial planning support for Americans working abroad is crucial

The financial planning industry is very far behind the globalization of the workforce. The US State Department estimates that there are about nine million US citizens living abroad and about 45 million immigrants in the US, about a third with bachelor's degrees or higher, according to Pew research.  There are millions more middle-class workers residing in a country other than their home. 

There is likely wealth being lost. Tax filing obligations, estate planning, foreign exchange, investment regulatory differences, and more could be costing this cohort a bundle.  20% of Americans don’t claim the Earned Income Tax Credit from their home country.   

There are definitely compliance problems.  Only 3% of Americans abroad file Foreign Bank Account Reports (FBARs) required when a US citizen has $10,000 or more in foreign bank accounts. That seems low, doesn’t it?  Again, that’s just the US rule. How is an expat US citizen to know what the tax rules are for the country in which they work and reside? 

Hopefully there is some help on the horizon. A group was formed last year called the Global Financial Planning Institute to educate, build a community, and advocate for global financial planning. I’m a member and have attended a few webinars. They have a blog with some good content.   

I learned for instance, that foreign taxes such as wealth tax, VAT, and foreign property taxes that are not determined as a percentage of income are not eligible for the foreign income credit. The US generally gives you full credit for foreign taxes paid so you aren’t taxed twice, but only for income tax. 

Does your nonprofit have foreign workers or US citizens abroad?  Have you thought about providing them financial planning support? Hopefully this will be a new resource.