I was unwilling to renounce and stay abroad, for a variety of reasons, so I returned to the US and decided to stay. But for a good while I lived and traveled outside the US as a digital nomad and the tax implications are immense, especially if you are a member of any corporation or LLC, have any retirement accounts, or own any property. It's an absolute nightmare to correctly file taxes, has an astronomically high audit risk (you basically /will/ be audited), and is very expensive to hire accountants that have understanding of multiple national tax laws to cover things correctly.
FATCA made this even worse. Now many companies and financial institutions abroad will refuse to do business with you if you hold US citizenship /even/ if you are a dual citizen and primary resident of the country they are based in. It's absolutely absurd how the US government treats American expats, and is in stark contrast to how British, Australian, and German expats are treated (of which there are many all over the world).
I was an American citizen living in Luxembourg for 3 years around 2015.
I agree - many banks did not want to let me open an account, and when BNP Paribas said they work with Americans it was a huge ordeal to open the account.
However, as a salaried employee, I did not struggle with the taxes. The IRS form was very straightforward and after deductions I didnt owe any US taxes (I made just over the equivalent of $100k USD).
IIRC the theory is that you determine your tax liability if you had made all your income in the US and you subtract the liability you incurred by your foreign tax residence. You pay the difference but only after you cross some income threshold. If you are living somewhere that 'pays more in taxes' then you wont owe anything to the US.
I can 100% understand why very wealthy people hate this system, but as a software dev making a modest living it was not onerous or unfair or difficult to manage.
> I can 100% understand why very wealthy people hate this system, but as a software dev making a modest living it was not onerous or unfair or difficult to manage.
Okay, now apply your experience with this system but instead of being a salaried employee you run a <5 person LLC that is incorporated in the US that does the same work but on contract and has a small leased office. It goes from being one form and a simple exercise into a massive nightmare, even though the dollar amounts you are actually making in income aren't any higher (at the time I think my AGI was like $126K USD).
Anything off the path of salaried employee stationary in a foreign tax residence exponentially increases the complexity involved and therefore the expense to file. Most years, my accountancy bill was actually higher than the taxes owed, and it would have saved everyone quite a lot of trouble for little gain to just do away with this archaic and pointless rule which no other civilized nation has.
This is not just a problem for the very wealthy, it's a problem for anyone who does not fall in a very narrow bucket but happens to reside abroad while having US citizenship. Even in your case, where you found the process simple, you must admit it made it difficult to secure accounts and form business relationships abroad because of the tax implications and reporting implications for your possible business partners.
I have no idea what form I used. I do know that I paper filed those years and it didn't cost me money, only time, a few evenings, reading IRS publications and googling 'expat taxes please help'.
The reason I ask is because for the forms I mentioned, it's very easy to either make an error or fail to file a form you were required to.
The fact that you mentioned "paper file" is a bit worrisome. You were required to file an FBAR if you had foreign accounts (such as bank accounts) totaling more than $10,000, and given your stated income, that seems likely. FBAR must generally be done electronically, and is a separate process from your tax return.
Normally, I found, when filling out a 1040 and walking through line by line, you are able to discover the forms you need and guide yourself quite easily. In the case of citizens living abroad, there is a publication as well that mentions everything, including all the forms and the FBAR you talk about. I found the process is quite discoverable and linear.
Also - the FBAR did not apply to me based on how I moved my money back to my domestic account, the foreign account was a current account for local bills, its balance never exceeded $5k.
FATCA made this even worse. Now many companies and financial institutions abroad will refuse to do business with you if you hold US citizenship /even/ if you are a dual citizen and primary resident of the country they are based in. It's absolutely absurd how the US government treats American expats, and is in stark contrast to how British, Australian, and German expats are treated (of which there are many all over the world).