I don’t expect that the USA’s Internal Revenue Service (IRS) gets a mention in many songs but it did feature in Rockwell’s 1980s super-paranoid hit, Somebody’s Watching Me, in which the singer wonders if he is being watched by neighbours, the mailman, the people on TV and the IRS. Rockwell might have been wrong on the first three counts but perhaps not on the last one.
A quick search on line will show just how much the IRS drives terror into the heart of Americans. I found one site which described it as the ‘much-feared enforcer of the US tax code‘, another admitted ‘There is nothing that scares us more than the idea of running afoul with the IRS‘ and a third went so far as to say ‘The IRS lurks out there for all of us. Like a vampire of legend it hovers, rapacious teeth gleaming, waiting to pounce, sucking the life’s blood from our veins.‘
That’s some pretty strong stuff! Suffice to say it is worth staying on the side of the IRS to avoid paying late payment fees if nothing else. All US citizens have to file a tax return and are subject to US income tax regardless of where in the world they reside. Usually returns are due by 15th April, although an automatic two month extension is applied for those residing overseas. There are exemptions for income earned on foreign soil so technically you should not have to pay tax on income earned abroad twice. You can see the rules and regulations in more detail here.
I was amused to read that not even astronauts in outer space can escape the grip of the IRS! Yes apparently even astronauts working on the International Space Station are not exempted from meeting the deadlines. NASA transcripts from Apollo 13 show that last-minute addition to the crew, Jack Swigert, had to radio mission control in Houston to ask them to ensure that his tax return was filed in time!
Which raises the question of whether Swigert would be able to benefit from the exemption for income earned on foreign soil. Apparently, international airspace and waters are not considered to be a foreign country under IRS rules and are likely to be classed as offshore and therefore subject to US tax. It could be a moot point anyway as an astronaut is a government employee and therefore Swigert would not be eligible for exemption.
This all goes to prove that international taxation can throw up some unlikely questions and be extremely tricky to navigate. If you are an expat and need assistance with international tax issues, it might be time to consult a professional who can help.