Discussion:Taxpayer out of country for 3 years full time
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Discussion Forum Index --> Tax Questions --> Taxpayer out of country for 3 years full time
| 5 June 2008 | |
| If a taxpayer is living in another country full time for 2-3 years and earning income in that country, what taxes do they have to pay in US. They are a US citizen.
What if they establish citizenship in the other country also? Neil | |
| June 5, 2008 | |
| I am NOT a foreign tax person, not even amateur status....but generally, the US taxes all income to its citizens no matter where they are. They are permitted certain deductions and exemptions, and there are treaties that mitigate double taxation. This is why the renouncing citizenry is a big deal, and the new bill to end that little hole, by taxing an expatriate as they leave the US on all US earned assets. | |
| 5 June 2008 | |
| Not a foreign tax person, but do have at least amateur status in dealing w/individuals living abroad, but only with US source income--most have been subs of government. But I think JR1 is correct in that the individual may be subject to tax regardless of the source. There are tests to determine what tax they are subject to. IRS PUB 593 should give you most answers you need. Sorry I can't give more info here... | |
Death&Taxes (talk|edits) said: | 5 June 2008 |
| Publication 54 | |
| 5 June 2008 | |
| The U.S. citizen taxpayer is subject to U.S. tax on his/her worldwide income. They may be able to avoid double taxation through foreign tax credits, the foreign earned income exclusion or from treaty benefits. Simply becoming a citizen of another country does not eliminate U.S. citizenship. If he/she becomes a citizen of another country and then renounces U.S. citizenship, then they may be able to avoid U.S. tax. However, they may be subject to special expatriation rules under certain circumstances.
There can be big penalties for failing to file certain information tax returns (e.g., TD F 90-22.1, 5471, 3520, etc.). If they own non-U.S. mutual funds, they may need to file 8621. There may be other important items as well. | |
| 5 June 2008 | |
| A US citizen is subject to tax on world wide income. There are forms to (I don't recall the form number) that gets attached to the 1040 for working in a foreign country. There is a credit for the foreign tax paid. And then there's 1116 to complete. | |
Death&Taxes (talk|edits) said: | 5 June 2008 |
| Get yourself Form 2555 and 1116, then read the relevant instructions and publications. Sometimes in these areas it is best to contract the work out to someone very familiar with foreign income. | |
| 6 June 2008 | |
| I think it took me 10 hours to work through this the first time. When someone is an ex-patriot for more than 12 months, then that person is entitled to a foreign income exclusion of $80,000. In addition to that, certain living expenses are deductible, and foreign taxes paid can be claimed as a credit. As a result, unless they are in the megabucks, they rarely pay any US taxes. As D&T said, Forms 2225 & 1116 are the ones to use.
Just a suggestion, have your favorite mind-altering substance available, because if you're like me, you'll be talking to yourself, and you might want some company. I kept telling myself, "This is not that complicated, why aren't I getting it?" | |
| 6 June 2008 | |
| Don't forget the state issues. Depending on the state where the expatriate was domiciled when he or she left the country, and the total picture of all of the facts and circumstances, the expatriate's worldwide income may also be subject to state income taxation during his or her absence. Generally states do not allow credit for foreign taxes paid. | |
