United States expatriates, dual Citizens possessing United States citizenship, and United States Green Card holders may be required to file annual tax returns with Internal Revenue.

These are some of the new tax-law dollar limits to take into account in 2001 due to cost-of-living adjustments and law changes. For many taxpayers, these new figures amount to a tax cut in 2001, even without any gyrations or exhortations from the current Republican administration.

The highlights include the following: Tax year 2001 2000 Personal Exemptions $2,900 $2,800 Standard Deduction Single $4,550 $4,400 Married Filing Jointly $7,600 $7,350 Head of Household $6,650 $6,450 Married Filing Separately $3,800 $3,675 NRAs (non-resident aliens) who may need to file a United States income tax return, have different sets of deductions and tax rates.

Social security tax continues to climb. The first $80,400 will be taxed at 7.65 percent in 2001. If you are self-employed as a consultant, for instance, the tax is double, 15.3 percent.

The capital gains tax after in 2001 drops to 18 percent for assets acquired after Dec 31, 2000 and held for more than five years. Those in the 15 percent bracket pay only 8 percent (eight) capital gains tax on assets held more than five years. This rule will affect many expatriates because the foreign earned income exclusion drops your reportable income threshold downward into lower tax brackets.

The foreign earned income exclusion (for each taxpayer working abroad) rises to $76,000 in 2000 ($78,000 in 2001). If you aren't saving any money after this tax-free gift, it's time for a hard look at your finances. Note that this exclusion only applies to earned income, and is not applicable to passive and investment income, pensions, social security and other unearned income.

Charities will be penalised for participating in or allowing charitable split-dollar life insurance transactions under the new rules. It could also endanger their 501(c) status.

Higher income individuals must make bigger estimated tax payments to avoid an estimated tax penalty, 110 percent of prior year's tax for 2001 estimates.

401(k) and 403(b) salary reduction limits increase to $10,500.

The limit on contributions to defined contribution plans is $35,000, up from $30,000 in tax year 2000.

New dollar thresholds for presumption of tax avoidance motive for an expatriate. If you are considering waiving rights to US citizenship, you absolutely must consult an experienced tax practitioner. This is not a decision to be taken lightly, given that IRS has the right to levy tax against you for ten years after decision is made.

And for estate tax planning: Increased unified credit Higher amount may be transferred to a noncitizen spouse free of gift tax. A US citizen married to a non-resident alien does not have the use of the unlimited marital deduction for estate planning purposes; different estate planning strategies need to be developed here.

Indexing increases the Generation Skipping Exemption for 2000 and 2001.

For those of you who are US expatriates newly transferred to Bermuda, even if you are below the foreign earned income exclusion, you must file a tax return annually to elect to take the exclusion. Otherwise, at a later date, the presumption may be that all of your foreign earned income is taxable. Start now to sort through your data. Your filing deadline may be automatically extended until June 15 if you meet certain tests regarding the time you have been abroad.

For others who are trying to sort out estate planning issues, particularly relative to dual citizen marriages, foreign trusts with US beneficiaries, or even Bermudians owning assets in the United States, I urge you to take an hour to consult with a one of the big Five firms that specialise in international taxation issues. KPMG, Ernst & Young and Deloitte have world-class experienced tax practitioners and estate tax specialists to advise you of the correct procedures.

Your chances of getting audited by IRS have dropped slightly. Of course, Internal Revenue Service is always three years behind with most people having totally forgotten about filing their 1996 return. However, 1.5 million individual 1040's were audited for the 1996 tax year, an average of 1.28 percent, down 30 points from 1995 -1.67 percent. Large corporations with assets of more than 250 million, are audited more than 50 percent of the time.

And finally, estate tax filings are still the most scrutinised, more than 50 percent of estate tax returns over 2 million in gross estate assets also face IRS line by line review.

And if you think that you will be ignored because you are out of the country, there have been massive changes in compliance reporting for offshore institutions through US intermediaries to IRS. The Internal Revenue Service has also begun a new far-reaching address-matching programme that will match taxpayers against addresses in files of other federal and state agencies.

Among them are, Department of Education Student Financial Aid, Dept of Veterans Affairs, Accounts Receivable records, Social Security beneficiary record system, Dept of Justice debt collection system (credit card reviews), Dept of Housing and Urban development (every mortgage), various state registry of deeds, licensing bureaus for attorneys, accountants, etc. etc., trade licences, i.e. electrical, etc, title records, mortgage records, physical addresses (wealthy neighborhoods) compared to income reported, boat licenses, etc. and on and on. Taxpayers renewing passports may be asked to provide proof of filing returns for the prior three years.

Ah, the age of access, was it George Orwell who said: "Big Brother is watching you''? A final note: There is a very common misconception her that Bermuda has a tax treaty with the United States. It does not. This means that you may be subject to taxation here on your Bermudian assets (by the Bermudian government) and in the US on both your Bermudian and US assets. Tax practitioners visiting here who are unfamiliar with Bermuda's international standing have been known to state that if you are taxed in Bermuda, you won't be taxed elsewhere. This is not the case. As in all things financial, do yourself a favor and shop around.

And don't pay extra for someone to do the research because they don't know.

The tax professionals working here understand domestic and international tax laws; they work with these rules every day. That is why they are top notch.

The opinions expressed or discussed by the author are hers alone and are general in nature. Clients needing specific assistance should seek professional advice from their financial advisor. Martha Myron CPA CA, a Bermudian, is a United States federally authorised tax practitioner and a Senior Financial Advisor.