Residence-based US taxation (RBT) is a new idea being presented to Congress, which would address many inequalities US expats face. The organization "American Citizens Abroad" (ACA) has been pushing for quite a while for this to be implemented. Some key points: RBT would exempt those who elect it from paying US tax on foreign income. They would continue to be taxed on US-sourced income. Individuals electing RBT would not be subject to FATCA reporting in the country of their residence. Those that were bona fide residents of a foreign country for five years would be eligible to make the election. In addition, ACA's recent study highlights other important data, US citizens overseas are not "super wealthy" and are not significantly more wealthy than their US citizen counterparts. The size of the community is not 9 million, as opposed to State Department estimates (ACA is still awaiting a Freedom of Information Request on the methodology used by the US State Department to support their figure). ACA estimates the non-military size of the community to be 3.9 million with 2.2 million showing up on a tax return, i.e. tax compliant! Where are the other 1.7 million? ACA research indicates that many fall below the threshold for reporting -- clearly not super wealthy. Some are mistakenly interpreting the annual Foreign Earned Income Exclusion (FEIE) to mean that if they don't earn over the exclusion amount they don't need to file US taxes. Many may simply not know they have a US tax obligation to file. There are a myriad of reasons why these individuals are not filing, the least of these being willful, criminal tax evasion. Let's hope this gets approved. It would make the lives of US expats much easier.

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