Many Abaconians hold two passports: a Bahamian passport and an American passport. This is because they were either born in the United States or one of their parents was American. Many of these people do not realize that when they begin earning money they are required by US law to submit a tax form to a tax office in the States. This does not mean that they have to pay income tax, only that they have to file a report. However, many do not realize this requirement.
The United States is now wanting to enforce this requirement that has been a law for many years. Beginning in July 2014 the US is requiring banks all over the world to provide information on any US citizen signing on any account: personal, business or corporate. The US authorities are looking for people or businesses that are hiding money and not wanting to pay tax on it. But it is going to be a shock to many who are innocent of the law and are not complying with its requirements.
The US is asking that anyone not filing this paper, do so by the end of 2013. Then they must continue to submit a form each year to the Internal Revenue Service (IRA).
The Abaco Chamber of Commerce is working to have people come to Abaco later this year to explain this situation and how to get assistance.
There are several basic principles that the tax is based on.
1) Those who work for a wage or salary are probably exempt but still must file on “earned income.” However, they are not liable for paying tax until their incomes exceed the exemption amount which is close to $100,000 annually.
2) Those selling land or receiving rent from a house or apartment are liable for tax on “unearned income.” Only the profit is taxed on this income.
3) Those owning a business can exempt their salary up to the allowed amount but will be liable for taxes on the profit the business makes and salary above the exemption.
4) A Bahamian with a US spouse may have estate problems on the death of the US spouse. This is due to the IRS believing that the Bahamian spouse was given money, property and other assets in a scheme to avoid paying US taxes. The estate of the US spouse, which would appear to be under the control of the Bahamian spouse, actually has a substantial US tax liability.
5) US citizens owning a Bahamian business will probably require the professional services of an accountant or specialist trained in the tax requirements of US citizens abroad. There may be legal reasons for not paying taxes which is different from illegal tax evasion.
6) Ignorance of the law and non-compliance becomes illegal tax evasion if action is not taken.
This short summary by the Chamber is to alert those holding US passports of the need to find out more about this situation. The Chamber will notify the public as plans for this workshop/ seminar are
made, possibly in early December.