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abroad is treated for tax purposes nearly identically with a permanent resident alien living abroad – but for a number of reasons, this has not troubled too many people or been seen as much of an issue. Why not? Well, first, many U.S. citizens abroad haven't been aware of their requirement to file. Upon becoming aware of the requirements, such individuals generally must seek professional tax assistance and come to an arrangement with the U.S. Internal Revenue Service (IRS) for missed taxes. Second, many U.S. citizens living abroad are doing so because they are working in Western Europe, and most countries there have substantially higher tax rates than the United States has, which means that by the time a tax credit offset is given (along with the Foreign Earned Income Exclusion which will be discussed later in Part V), they likely do not owe any U.S. taxes.

      Consider, for example, a software coder from California who has moved to Germany indefinitely and is aware of his need to file with the IRS (since he is still a U.S. citizen). To begin with, in most cases he won't have to file a California state tax return. This is because, like most states, California bases its taxation on a person's intent and residency, and allows you to break residency should you move to another U.S. state or internationally. Now, without California tax in the picture, this software coder might be subject to a top U.S. tax rate of 28 percent (after applying the foreign income exclusion), but he will first be paying approximately 45 percent in tax and various withholdings on his earnings in Germany (since he physically resides there, Germany gets to go first). With the tax credit he gets for what he paid in Germany, he is likely to end up owing no additional U.S. taxes.

       Scarcity of Professional Help and Information

      In addition to the lack of uniformity and the significant complexity, there is a third unique challenge: the lack of – the scarcity of – readily available help and easily accessible information. While those who are ultra-affluent can afford to put together a specialized team consisting of accountants, attorneys, and other professionals, most successful educated families find themselves facing a lack of good information and guidance. With so many unknowns and so many unclear (and shifting!) rules and regulations, it can be difficult for such families to gain a clear sense of their financial situation, to clarify their goals for the future, and to make sure that what they're currently doing is aligned with and optimized for achieving those long-term goals.

      Unfortunately, not only are there very few resources like the book you are now holding, but there are also very few places that a cross-border professional can turn to for help with even relatively simple problems. Not only do well-known financial and brokerage firms fail to make comprehensive service offerings available for cross-border families, in most cases they actively prohibit their advisors from giving cross-border tax, financial, and retirement planning advice.

      There are, simply, very few if any good sources of information available. If you are British and walk into a U.S. brokerage firm and explain that you have been with Intel for 15 years and now are retiring back to the United Kingdom and that you merely need someone to help you make sense of it all, especially what to do with your 401(k) that is worth a few hundred thousand dollars – you will in all likelihood be told that you can't be helped. This is mainly because the complexity of what is involved is beyond the ordinary capabilities of the financial advisors involved, and the companies they work for do not want to risk giving bad advice and being liable for that advice.

      Similarly, for the most part, foreign investment firms and banks will not give advice to, assist, or otherwise get involved with a U.S. citizen living abroad who has questions or problems. The world may be becoming increasingly mobile, but knowledge about what to do with cross-border financial planning has not yet become so. There's simply too much red tape, too much complexity, and too much potential liability, not to mention the additional potential difficulties that can arise from language, translation, and assorted cultural issues.

      Interestingly, even those global financial institutions that have divisions in other countries are loath to advise cross-border professionals. For example, a large European bank will typically not work with a European citizen residing in the United States, even if that person is from that bank's country of origin. Similarly, many U.S. brokerage firms have a substantial international presence for offering financial planning and investment advice; but if you are a U.S. citizen and walk into one of their branches, they will likely not work with you. Why not? Well, in most cases this foreign operation will be staffed by citizens of the foreign country, and their focus will be on serving people from that country; working with Americans is not their mission, and once again, would involve too much red tape, complexity, and potential liability. (This is the same situation with the branches of large international banks in the United States.)

A Changing Legal, Financial, and Regulatory Landscape

      Today, not only is capital more globally mobile than ever before, but we live during a time when technology and the Internet allow for the rapid dissemination of news and ideas in a way that vastly eclipses what had previously been possible. One byproduct of this informational bonanza has been more awareness and focus by national governments everywhere on those who attempt to evade taxes or otherwise keep the extent of their wealth at least somewhat hidden or secret. Similar attention has been turned towards unsavory, illegal, and outright criminal individuals and organizations, such as arms dealers, counterfeiters, and terrorists.

      A Prediction

      Going forward, it is unlikely that any new CEO of a Fortune 500 company will not have had overseas experience. Many of them, in fact, are likely to originally hail from a country other than the United States.

      There is, of course, nothing new about individuals and organizations going to great lengths to keep their affairs and the extent of their wealth private. The evolving interplay between those who claim they are owed taxes – rulers and governments of every type – and those individuals or families who are wealthy enough to resist paying what they feel is more than their fair share of such taxes, goes back many centuries, perhaps even to the beginning of civilization. What is new is the combination of relentless needs for more government revenue combined with a greater technological ability to track wealth. As a result, governments everywhere – as well as the large financial institutions compelled to adhere to the standards of these governments – are taking a more aggressive and proactive stance on uncovering assets that they claim they have the power to tax.