Passport current? Everything packed? These are some of the questions my clients are asking as they get ready to leave America; some alone, some with family in tow. Desperate times call for desperate measures.
So, you were an online player and after realizing online poker is pretty much gone for U.S. citizens, short of getting a “real” job, it’s time to pick a new home country. About 20 percent of my clients are doing this and many want to know how this works logistically and from a tax perspective.
The first step you’re likely going to take is to open a bank account in your new country. Just understand that when you get a bank account outside of the United States, you have a foreign bank account, and you have to disclose that on your U.S. tax return when you file it next year. It doesn’t matter if you have $1 in the account, you still have to tell the U.S. government. You do this on the Schedule B, which is filed with your Form 1040.
This is reported at the bottom of the form, by checking the “yes” box to the question of “At any time, did you have an interest in or a signature or other authority over a financial account in a foreign country, such as a bank account. …” You then have to tell them the name of the foreign country where the account is. That’s all there is to it. … sort of.
If any time during the year, for even a split second, you have $10,000 or more in this foreign account, the rules change. Not only do you have to do the Schedule B, you also have to do a separate form called a Form 90-22.1. This form is a little more detailed, wanting the name of the bank where the account is, the address of the bank, the account number and the largest balance you had during the year. This form is due on June 30, and is reporting the previous year’s activity. Form 90-22.1 is filed separately from your tax return.
The next question is whether you have to pay tax on the money earned outside of America. Unfortunately, the answer is yes, unless you renounce your U.S. citizenship, which I do not encourage. There are some ways to exclude part of that money, but that’s an incredibly complicated conversation that would put you to sleep in seconds.
Moving expenses can be deducted and there are other things to consider that can help lessen the tax burden. Seek professional advice if you’re planning to head out of the country for a while.
— Ann-Margaret Johnston is a practicing CPA in North Georgia. She is the author of How to Turn Your Poker Playing Into A Business. You can find answers to commonly asked poker tax questions on her website at pokerdeductions.com. You can email her at firstname.lastname@example.org.