Should US citizens in Switzerland pay for a specialist tax advisor?
Tax deadline in the United States is fast approaching — as every year, it falls on April 15th. If you are a US citizen living in Switzerland, can you manage to prepare your tax declaration yourself, or do you need an expert to help you?
For many US-based residents, filing a standard tax return is pretty straightforward.
But that is not the case for Americans living abroad, including in Switzerland.
Not only do they have to file taxes in both countries — which is a financial burden in itself — but preparing a return for Americans living overseas is more complex, because the forms are long and the instructions not always easy to understand for an average person.
READ ALSO: Why Americans in Switzerland renounce their US passport
For instance, Americans living abroad are allowed to deduct part of their foreign salary from their overall income, but the calculation is based on complicated rules.
And all the amounts must be converted from francs into U.S. dollars, a time-consuming process of looking up exchange rates on specific days during the previous year, or using the currency conversion chart provided by the US tax authority, the Internal Revenue Service (IRS).
READ ALSO: 'No one wants us': Why Americans in Switzerland struggle to save money
But that’s not all
There is also the FBAR — an acronym for Foreign Bank and Financial Accounts.
This is a separate document that anyone who has accounts of any kind in a non-US bank must file. So if you have a savings or any other account in a Swiss bank — including mortgage, life insurance, retirement plans, annuities, etc. —you must declare the highest amount (converted into US dollars) in each of these accounts during the year for which you file.
And just ignoring this obligation is not a risk you want to take.
Many Americans in Switzerland renounce their US passports due to the complications with filing tax. Photo by Levi Ventura on Unsplash
That’s because the Foreign Account Tax Compliance Act (FATCA) — which Switzerland and the US signed in 2014 —requires Swiss banks to report information to the IRS regarding all financial accounts held by American clients.
If you don’t comply, your bank might close your account.
Finding another financial institution will not be easy, because Swiss banks are not exactly queuing up, eager to lure in American clients.
READ ALSO: Why are Americans being turned away from Swiss banks?
But it’s not only the risk of being ‘dumped’ by a bank that should make US citizens think twice about not declaring their full income or foreign holdings to the IRS.
If caught cheating, Uncle Sam will fine you heavily, even if your error is unintentional.
The IRS can impose a penalty of over $15,000 a year for undisclosed foreign accounts, even if they don’t generate any taxable income in the United States.
In fact, this requirement to file taxes on money they have earned while working in Switzerland (or anywhere else outside the United States) has pushed many dual-national Americans to renounce their US citizenship.
READ ALSO: Why do US citizens in Switzerland give up their American passports?
So should you hire a specialist to help with your US taxes?
Given all the hassles and the sheer complexity of figuring out your US taxes, it may be a good idea to seek expert help, especially if you have considerable assets in a Swiss bank.
Not only is such a person, who specialises in preparing declarations for overseas Americans, up on all the rules and regulations, but you can also rest assured that your taxes will be prepared as required.
Yes, this ‘luxury’ costs money — anywhere from 1,000 to 5,000 (francs or dollars), depending on the complexity of a given tax return.
But on the positive side, you will not lose any sleep at night worrying about the IRS knocking on your door.
‘Extremely cumbersome’
Among Switzerland-based US citizens, opinions vary about whether hiring a tax specialist is a necessity.
“Completion of a tax return for US purposes is extremely cumbersome,” one such Switzerland-based American said in a survey conducted on this topic by SEAT group (Stop Extraterritorial American Taxation).
“I would estimate that it takes 120 hours each year, compared to 30 hours for my Swiss tax return.”
Another respondent agreed.
“I am an intelligent, capable professional, but I can’t understand the tax code, and all the different documents that I must file,” that person said.
Yet another noted that he / she lives “in constant fear of not reporting my taxes correctly, and facing criminal charges.”
Yet, not every survey participant relies on outside help.
“Three hours of advice of how to file my taxes from a tax advisor specializing in Americans overseas cost me more than 1,000 dollars. I can’t possibly afford that so I do my very best to complete the taxes myself.”
If you are looking for a Swiss-based expert in US taxes, this source may be helpful.
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For many US-based residents, filing a standard tax return is pretty straightforward.
But that is not the case for Americans living abroad, including in Switzerland.
Not only do they have to file taxes in both countries — which is a financial burden in itself — but preparing a return for Americans living overseas is more complex, because the forms are long and the instructions not always easy to understand for an average person.
READ ALSO: Why Americans in Switzerland renounce their US passport
For instance, Americans living abroad are allowed to deduct part of their foreign salary from their overall income, but the calculation is based on complicated rules.
And all the amounts must be converted from francs into U.S. dollars, a time-consuming process of looking up exchange rates on specific days during the previous year, or using the currency conversion chart provided by the US tax authority, the Internal Revenue Service (IRS).
READ ALSO: 'No one wants us': Why Americans in Switzerland struggle to save money
But that’s not all
There is also the FBAR — an acronym for Foreign Bank and Financial Accounts.
This is a separate document that anyone who has accounts of any kind in a non-US bank must file. So if you have a savings or any other account in a Swiss bank — including mortgage, life insurance, retirement plans, annuities, etc. —you must declare the highest amount (converted into US dollars) in each of these accounts during the year for which you file.
And just ignoring this obligation is not a risk you want to take.
That’s because the Foreign Account Tax Compliance Act (FATCA) — which Switzerland and the US signed in 2014 —requires Swiss banks to report information to the IRS regarding all financial accounts held by American clients.
If you don’t comply, your bank might close your account.
Finding another financial institution will not be easy, because Swiss banks are not exactly queuing up, eager to lure in American clients.
READ ALSO: Why are Americans being turned away from Swiss banks?
But it’s not only the risk of being ‘dumped’ by a bank that should make US citizens think twice about not declaring their full income or foreign holdings to the IRS.
If caught cheating, Uncle Sam will fine you heavily, even if your error is unintentional.
The IRS can impose a penalty of over $15,000 a year for undisclosed foreign accounts, even if they don’t generate any taxable income in the United States.
In fact, this requirement to file taxes on money they have earned while working in Switzerland (or anywhere else outside the United States) has pushed many dual-national Americans to renounce their US citizenship.
READ ALSO: Why do US citizens in Switzerland give up their American passports?
So should you hire a specialist to help with your US taxes?
Given all the hassles and the sheer complexity of figuring out your US taxes, it may be a good idea to seek expert help, especially if you have considerable assets in a Swiss bank.
Not only is such a person, who specialises in preparing declarations for overseas Americans, up on all the rules and regulations, but you can also rest assured that your taxes will be prepared as required.
Yes, this ‘luxury’ costs money — anywhere from 1,000 to 5,000 (francs or dollars), depending on the complexity of a given tax return.
But on the positive side, you will not lose any sleep at night worrying about the IRS knocking on your door.
‘Extremely cumbersome’
Among Switzerland-based US citizens, opinions vary about whether hiring a tax specialist is a necessity.
“Completion of a tax return for US purposes is extremely cumbersome,” one such Switzerland-based American said in a survey conducted on this topic by SEAT group (Stop Extraterritorial American Taxation).
“I would estimate that it takes 120 hours each year, compared to 30 hours for my Swiss tax return.”
Another respondent agreed.
“I am an intelligent, capable professional, but I can’t understand the tax code, and all the different documents that I must file,” that person said.
Yet another noted that he / she lives “in constant fear of not reporting my taxes correctly, and facing criminal charges.”
Yet, not every survey participant relies on outside help.
“Three hours of advice of how to file my taxes from a tax advisor specializing in Americans overseas cost me more than 1,000 dollars. I can’t possibly afford that so I do my very best to complete the taxes myself.”
If you are looking for a Swiss-based expert in US taxes, this source may be helpful.
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