American expatriates fall into two categories according to IRS rules. Those who qualify for the IRS earned income exclusion of $97,500 and those who don’t.
To qualify for the IRS $97,500 earned income exclusion (which means no tax on your first $97,500 plus housing cost deductions, etc,) you must either “be in a foreign country, or countries…throughout your period of bona fide residence or physical presence, whichever applies1.”
That means to qualify for the IRS exclusion you either have to have a residence or work visa in a foreign country, or remain outside of the U.S. for a full 330 days in any calendar year.
Those fortunate expatriates who qualify for the IRS earned exclusion are NOT subject to the Affordable Care Act (Obamacare)Obamacare.
Many retired American expatriates do not fall into this elite IRS category. They are therefore subject to Obamacare. Expatriate Americans who are subject to Obamacare must either pay a fine or enroll in Obamacare.
However, should expatriate Americans who are subject to Obamacare chose to enroll in Obamacare, they are committing a felony.
This is according to two sources. We met personally with the Social Security Administration (today) and with California’s Imperial County Department of Social Services (several days ago).
According to both institutions, it is a felony to enroll in Obamacare (or even Medicaid or Medi-Cal) when one is not actually physically living in the United States. This holds true even if the American expatriate owns a house or has a post office box in the United States.
Why this fact of committing a felony is not made public with the public is inexcusable.
The commission of a felony by American expatriates enrolling in Obamacare is easy for the United States authorities to verify. They keep track of each person’s entry into the United States. Each entry (or entries for a given day), no matter how short, counts for a full day in the United States. This is deducted from the 330 days required for the individual to claim the $97,500 earned income exclusion.
We have no estimates of how many American expatriates will be committing a felony by enrolling in Obamacare, but there are many American retirees living abroad. The best way for American expatriates to be safe from the law is to pay the penalty for not enrolling in Obamacare.
It is better to pay the Obamacare fine than to land up in prison and owing a fine and losing your civil rights as a felon.
Of course, if you do wind up in prison, you will be exempt from Obamacare during time served.
Today, I logged into “Covered California,” California’s new health insurance exchange. Unlike the Obamacare website, everything seemed to be working quite well. For my questions, I was given a choice—a telephone conversation or a chat. I chose a chat and a separate chat screen opened.
I entered my question which was, “I am an American expat. I understand that American expats are subject to Obamacare if they do not qualify for the IRS income exclusion they are subject to Obamacare. Since I do not qualify for the IRS foreign income exclusion, I am subject to Obamacare. I have also been informed that, if I do enroll in an Obamacare insurance plan, since I am an expat, I will be committing a felony. Is this so?”
The chat screen showed me that I was number 128 on the list of people waiting and that the average wait time was a little over 28 minutes. Slowly I moved moved close to chatting with an agent in the chain of users, and was always given a new waiting time. Very good! Finally, I became the next user.
Instead of getting into a live chat, I received the screen with the information that there “are no agents available.” The screen, however, did give me the option to “REQUEST EMAIL RESPONSE.” That seemed just as good, as an agent could email me an answer.
I hit the button for the email response. The following screen (below) was an error screen stating, “Permission Denied.”
Either the agent at Covered California did not like my question or Covered California is no better than Obamacare.