Tax Specialist in Chiang Mai

[JimGant]

You can use grey areas in the tax language to your advantage, and when I was doing taxes (airline employees), I took advantage where I could in the working expense area, but knowing, in every situation, that I had a sound argument to fall back on, should I be queried.

 

Mr Carden can use two things here to his (and the client's) advantage:

 

1. He can quote the tax treaty verbatim, emphasizing that the language explicitly says the country of residence, as defined for tax purposes, has "explicit" right to tax private pensions and IRAs of US citizens, as long as they're residents of Thailand for 180 days, which would be easy to prove. He just doesn't need to mention that pesky "savings clause" that overrides the above language, i.e., Thailand actually does NOT have exclusive right, therefore US citizens also have to declare this income in their US tax return.

 

2. Using this explanation, with a direct quote from the tax treaty giving exclusive taxation rights to Thailand, would probably blow away most clerks at the IRS, most to whom have never seen an expat return, with a Form 8833 quoting chapter and verse about "exclusive" taxation rights by a foreign country. And, yes, there in black and white, the tax treaty definitely says Thailand has explicit taxation rights. Savings clause? Never heard of it. Thus, amended returns stamped "approved," and likewise any future tax filings with Form 8833 attached. This is even assuming such amended filings, and filings going forward, even are seen by human eyeballs at the IRS. Less and less likely these days.

 

So, yeah, if Mr Carden is challenged (per the above, not likely), he has a lot of tap dance room: he can take advantage of tax treaty language, that says one thing, but really means another (which is not divulged, in context, to the uninitiated). And, if he gets caught, he has sufficient wiggle room to skate free. Not my kind of guy. But, hey, if tax evasion is becoming so easy, why not sell it?

 

Most US tax treaties aren't primarily designed to help US citizens. It's mainly non resident aliens that get the advantage. Tax treaties do, however, aim to avoid double taxation -- but not eliminate taxation totally: One country gets priority in collecting taxes over the other country. In this situation we're discussing, the Thai-US tax treaty would allow Thailand to collect taxes on US private pensions and IRAs, for those US citizens deemed residents of Thailand. Meanwhile, that US citizen resident of Thailand must declare this income on his US return (again, the "savings clause"). But he gets to take a credit against his US taxes for those taxes paid in Thailand. In my situation, if I paid Thai taxes on my IRA withdrawals, this tax would be less than my US tax on such withdrawals -- and I'd end up paying, between Thailand and the US, exactly the same amount of taxes as if I only filed with the US.

 

And I wouldn't mind doing this, if Thailand actually began enforcing taxation of farang income brought into country (whole 'nother subject). Why? Because, as long as I'm paying the same amount of taxes in total between the two countries, I'd rather this tax revenue fill in pot holes in Thailand, not EastJesus, Iowa.

 

Yes, everyone should try to minimize the legal amount of taxes due. Evasion of taxes, however, is another deal. I remember signing something ethically related when I got my Virginia CPA license. Maybe enrolled agents don't have to do the same......

 

 

 

Edited November 10, 2017 by JimGant

[JimGant]

Quote

Hubby just informed me that he was talking with someone whose friend has used Mr. Carden for several years, had an IRS audit, and everything was found to be OK.  This person spoke very highly of Mr. Carden

Was that the same as your situation, i.e., avoiding paying US taxes on private pensions and IRAs? Possibly Carden just did a straight forward, honest income tax return, not involving pensions....?

Edited November 10, 2017 by JimGant

[NancyL]

JimGant, my goodness, you are doing some moralizing, aren't you?  Were Hubby and I evil because we followed the advice of a tax accountant who classified our greenhouse/nursery business as a "farm" and not a retail store and thus utilized tax advantages available to farmers?  

 

 

[JimGant]

Quote

JimGant, my goodness, you are doing some moralizing, aren't you?  Were Hubby and I evil because we followed the advice of a tax accountant who classified our greenhouse/nursery business as a "farm" and not a retail store and thus utilized tax advantages available to farmers? 

That sounds like one of the classic grey area situations, that could go two ways with two experienced auditors. So, sure, you opt for the situation that favors you. Not so in this situation with the savings clause. Yes, if you were doing your own taxes, you could be forgiven for overlooking the arcane language of the tax treaty, and then just focus on the "explicit taxing authority" language. So, in the off chance you got audited, just using this portion of the treaty as your validation would surely get you off the hook for knowingly violating the tax code. But a licensed tax professional, specializing in expat taxation, doing the same thing.....and for whom the IRS has translated the tax treaty into plain English in their technical pub....

 

I really don't think I'm wrong here. But, you never know, especially since you won't share the "boilerplate" language he used to sidestep the savings clause. He may have found something that explains why US expats in Thailand are unique when it comes to taxes.

 

Anyway, I'm not blaming you for taking the advice of a licensed tax professional, specializing in expat taxation. He's the guy I've got a problem with.

[suzannegoh]

16 hours ago, NancyL said:

Yes, you're right.  All we'd be out is his fee.  It's not like the cases where so-called IFA's ride into town and get people to turn over their life savings to them.  As I pointed out to EvenStevens, we're not changing anything about our investments.

 

As for his fee, I think you should contact him to discuss your specific situation.  It is definitely a fee along the lines of what you'd pay an accountant in the U.S., not a "Thai wage".

I had heard about this fellow before, second hand from someone else who attended that seminar.  Whether he’s right or wrong, the main impediment in my case is that I’m not yet old enough to withdraw from my IRAs without penalty.  What it potentially could affect for me is that under the rules as I understood them it would make sense to do Roth Conversions each year until I’m 59.5 because I’m presently in a low tax bracket.  But if Mr. Carden’s interpretation of that tax treaty is correct then Roth Conversions would be dumb and the smart thing to do would be to do nothing with my IRAs until I’m 59.5 years old then and start drawing them down tax free.

[TallGuyJohninBKK]

 

On 11/10/2017 at 5:22 PM, NancyL said:

Yes, you're right.  All we'd be out is his fee.

 

NancyL, a couple of months have passed since your last update here re Carden's amended tax filings...

 

Any news back from the IRS as yet?

[NancyL]

4 hours ago, TallGuyJohninBKK said:

 

 

NancyL, a couple of months have passed since your last update here re Carden's amended tax filings...

 

Any news back from the IRS as yet?

Hubby and I filed three years of amended returns, mailing all in one envelope and a friend filed three years of amended returns in another envelope a few days later in early October.  So far, our friend has received two refund checks, for 2016 and 2015.  The first -- for 2016, amazingly arrived within three weeks of mailing, to his Thai address.  

 

So far, Hubby and I haven't heard a peep from the IRS and neither has our friend about his 2014 amended returns.  We all were getting a little edgy in late December, concerned about the three year limit on filing amended returns and concerned that maybe the IRS conveniently "lost" our amended returns.  Mr. Carden did some checking and assured us that the filing deadline is actually April 15 and not December 31.  He also said he spent several hours on the phone with the IRS getting them to accept the POA for him to be able to talk on our behalf only to learn that the IRS was in the process of upgrading their computer systems.  He suggested I make a call early in January myself and gave me the proper phone number.

 

I haven't made that call yet to check on the status of our amended return filings.  I will later this week and report here.

 

I think there are several reasons our friend's amended returns have been accepted so readily.  He has used his Thai address on his tax returns ever since he moved to Thailand six or seven years ago, and never returned to the U.S.  Yet, he continued to own a house in California that was rented and managed by an agency.  His U.S. tax accountant had rightly obtained non-resident status with the state of California for him, so he didn't owe any income taxes to the state of California.  Thus, he was already on record with the state of California as being resident in Thailand.

 

 

[Dante99]

1 hour ago, NancyL said:

Yet, he continued to own a house in California that was rented and managed by an agency.  His U.S. tax accountant had rightly obtained non-resident status with the state of California for him, so he didn't owe any income taxes to the state of California.

If a person has income property in California, they are required to pay California income tax on it, people with Non Resident status pay too.

 

From the California FTB:

"You are required to file a Nonresident or Part-Year Resident Income Tax Return (Long or Short Form 540NR) with California if you have income from California sources, such as rental income, income from the sale of property, or partnership income in 2017 ....''

 

There are of course minimums that must be exceeded for any tax to be due.

[NancyL]

6 hours ago, Dante99 said:

If a person has income property in California, they are required to pay California income tax on it, people with Non Resident status pay too.

 

From the California FTB:

"You are required to file a Nonresident or Part-Year Resident Income Tax Return (Long or Short Form 540NR) with California if you have income from California sources, such as rental income, income from the sale of property, or partnership income in 2017 ....''

 

There are of course minimums that must be exceeded for any tax to be due.

I think our friend is below the minimums.  In any event his 2017 filing is going to be interesting since he sold his house last year to pay for medical bills here.  I hope can write off the over $50,000 in Thai medical bills he had in 2017.

[Bill97]

I think our friend is below the minimums. 

Perhaps if the rent was not much over $1,000 per month.


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[NancyL]

Just an update, this week, at long last we received our refund checks for the amended returns from the IRS.  No correspondence from IRS (yet) just the checks in the mail.  Deposited them in our USD account at Bangkok Bank after a little tussle with them about how you have to deposit U.S. pension checks into a Thai baht account.  Nope, not pension checks, tax refunds made out to both of us (i.e. Hubby AND NancyL, just like on our USD account) and there's no way we're going to convert that amount of money into Thai baht right now.  They finally relented.

 

Our friend still hasn't heard a peep from the IRS about his 2014 amended return, but both he and us are in the process of using Mr. Carden to file our 2017 taxes.  So, it does appear that the IRS is accepting Mr. Carden's assertion that private pension income, sourced in the U.S. is considered taxable in Thailand, not the U.S. if we are truly resident in Thailand.   And, in general, Thailand doesn't tax pension income or income that is foreign sourced and held outside the country for a year.  

 

 

 

 

[JimGant]

Quote

So, it does appear that the IRS is accepting Mr. Carden's assertion that private pension income, sourced in the U.S. is considered taxable in Thailand, not the U.S. if we are truly resident in Thailand.   And, in general, Thailand doesn't tax pension income or income that is foreign sourced and held outside the country for a year.  

That's fantastic -- from now on you can take your Required Minimum Distribution, or, hey, even your entire IRA, and not pay anyone one cent. And since the IRS has lost a third of its auditors, costing billions in lost tax collections, your chance of getting audited (as a non millionaire) is virtually nil. And, even nicer (as you pay your 2017 and later taxes), no red flag because you don't report your 1099R IRA payout amount on your 1040 -- because you *DO* report it on the designated line. You just back it out with an equivalent negative number on line 21 ("Other Income"). Slick. No bells going off in this scenario, with today's computerized matching of 1099 data.

 

No, I still can't see what gimmick Carden has discovered, other than just reporting what the treaty says, namely, Thailand has "exclusive" taxation rights on private pensions, including IRAs. Fair enough -- as far as it goes (and as far as the GS5 clerk -- if any actual eyeballs get involved at all -- is concerned). But, this exclusivity is trumped by the savings clause -- and although savings clauses sometimes do have exceptions, private pensions are not one of them with the US-Thai treaty.

 

Nor with the US-Swiss treaty. Again, the nearest situation that the IRS has issued a report on to the US-Thai situation is that with US-Switzerland. I apologize, as I mentioned this earlier in the thread, but it's pretty darn germaine:

https://hodgen.com/ira-distribution-to-u-s-citizen-living-in-switzerland-which-country-taxes-it/

 

Hold the two IRS Technical Explanations for both treaties up to the light:

Quote

The Swiss Treaty:

The provisions of this Article are subject to the saving clause of paragraph 2 of Article 1
(Personal Scope). Thus, a U.S. citizen who is a resident of Switzerland and receives a pension or annuity from the United States may be subject to U.S. tax on the payment, notwithstanding the rules in Article 18 that give the State of residence of the recipient the exclusive taxing right.

Quote

The Thai Treaty:

Paragraphs 1, 3 and 4 of Article 20 are subject to the saving clause of paragraph 2 of
Article 1 (Personal Scope). Thus, a U.S. citizen who is resident in the other Contracting State,
and receives either a pension, annuity or alimony payment from the United States, may be
subject to U.S. tax on the payment, notwithstanding the rules in those three paragraphs that give the State of residence of the recipient the exclusive taxing right.

Now, we have no IRS legal explanation for the Thai-US treaty. But we do for the Swiss-US with the referenced Hodgen article. So, let's list side by side referenced paragraphs from both treaties in this IRS ruling (italics for Thai treaty):

 

Quote

Because Taxpayer is a U.S. citizen, the saving clause permits the United States to tax his IRA distributions. Furthermore, Article 1(3) does not contain any exception from the saving clause for private pensions within the jurisdiction Article 18 [Paras 1,3,4 of Article 20]. Thus, the United States can tax Taxpayer’s IRA distributions under the Code as if the Treaty had not come into effect.

Quote

Taxpayer’s IRA distributions are taxable in both Switzerland under Article 18(1) [Article 20(1)] and the United States under Article 1(2). To alleviate double taxation, Taxpayer would look to Article 23 [Article 25] (Relief from Double Taxation) for one country to credit the tax paid to the other country.

Who knows -- maybe Carden has found some magic interpretation amongst the arcane language of the convention and the code. But, I just can't get by why the Thai tax treaty would be so differently interpreted than the Swiss one... (and I don't think it can). And, remember, one of the reasons for the savings clause was to ensure that you, the US citizen, paid taxes to at least one of the treaty parties. After all, these treaties for for avoidance of double taxation -- not avoidance of any taxation (and the latest OECD efforts are addressing just this question).

 

So, hey, why not gamble with Carden. The worst that could happen would be you'd owe back taxes, with interest. But probably no fine, since you relied on a licensed tax professional. But, if it seems too good to be true...........

[suzannegoh]

15 minutes ago, JimGant said:

That's fantastic -- from now on you can take your Required Minimum Distribution, or, hey, even your entire IRA, and not pay anyone one cent. And since the IRS has lost a third of its auditors, costing billions in lost tax collections, your chance of getting audited (as a non millionaire) is virtually nil. And, even nicer (as you pay your 2017 and later taxes), no red flag because you don't report your 1099R IRA payout amount on your 1040 -- because you *DO* report it on the designated line. You just back it out with an equivalent negative number on line 21 ("Other Income"). Slick. No bells going off in this scenario, with today's computerized matching of 1099 data.

 

No, I still can't see what gimmick Carden has discovered, other than just reporting what the treaty says, namely, Thailand has "exclusive" taxation rights on private pensions, including IRAs. Fair enough -- as far as it goes (and as far as the GS5 clerk -- if any actual eyeballs get involved at all -- is concerned). But, this exclusivity is trumped by the savings clause -- and although savings clauses sometimes do have exceptions, private pensions are not one of them with the US-Thai treaty.

 

Nor with the US-Swiss treaty. Again, the nearest situation that the IRS has issued a report on to the US-Thai situation is that with US-Switzerland. I apologize, as I mentioned this earlier in the thread, but it's pretty darn germaine:

https://hodgen.com/ira-distribution-to-u-s-citizen-living-in-switzerland-which-country-taxes-it/

 

Hold the two IRS Technical Explanations for both treaties up to the light:

Now, we have no IRS legal explanation for the Thai-US treaty. But we do for the Swiss-US with the referenced Hodgen article. So, let's list side by side referenced paragraphs from both treaties in this IRS ruling (italics for Thai treaty):

 

Who knows -- maybe Carden has found some magic interpretation amongst the arcane language of the convention and the code. But, I just can't get by why the Thai tax treaty would be so differently interpreted than the Swiss one... (and I don't think it can). And, remember, one of the reasons for the savings clause was to ensure that you, the US citizen, paid taxes to at least one of the treaty parties. After all, these treaties for for avoidance of double taxation -- not avoidance of any taxation (and the latest OECD efforts are addressing just this question).

 

So, hey, why not gamble with Carden. The worst that could happen would be you'd owe back taxes, with interest. But probably no fine, since you relied on a licensed tax professional. But, if it seems too good to be true...........

The IRS has an email address that you can write to an they will verify whether someone is an IRS Enrolled Agent.  I did that and Carden checks out.  Also, while his University of Phoenix academic credentials were criticized earlier in this thread, I think that it would be more of a red flag if he was claiming to be educated at Wharton and Oxford.  No one lies about being trained at the University of Phoenix.

[TallGuyJohninBKK]

On 2/23/2018 at 5:40 PM, NancyL said:

 So, it does appear that the IRS is accepting Mr. Carden's assertion that private pension income, sourced in the U.S. is considered taxable in Thailand, not the U.S. if we are truly resident in Thailand.   And, in general, Thailand doesn't tax pension income or income that is foreign sourced and held outside the country for a year. 

 

Nancy and/or Jim: Is there some reason all the references on this topic are referencing "private pension income" as opposed to just "pension income"?  If you accept Carden's interpretation of things, does that for some reason apply only to private pensions, but not to public/government agency ones for all of us former civil servants around these parts? 

 

[JimGant]

John, definitely government pensions are taxable only by the paying country (see Article 21 in the treaty). One exception for US pensions -- if payee is a resident of Thailand and also a Thai national. Then, Thailand has taxing authority.

[NancyL]

58 minutes ago, JimGant said:

John, definitely government pensions are taxable only by the paying country (see Article 21 in the treaty). One exception for US pensions -- if payee is a resident of Thailand and also a Thai national. Then, Thailand has taxing authority.

Yeah, you gotta read the tax treaty https://www.irs.gov/pub/irs-trty/thailand.pdf  or better yet the "technical explanation" which is in plain English: https://www.irs.gov/pub/irs-trty/thaitech.pdf

 

What is comes down to is that if your U.S. pension comes from a gov't agency, then it will be taxed as if you are resident in the U.S.  If your pension comes from a "private source", like a non-government company or your own personal IRA or 401K, then it will be taxed as if you are a Thai resident and, in general, pension income isn't taxed in Thailand. 

 

The Thai gov't realizes they have a big problem with their demographics and are trying to encourage their people to save for retirement.  One way they do that is to permit them to put a portion of their pre-tax  income during their working life into accounts similar to 401Ks and then there is no tax upon withdrawal after retirement age.   Also, Thai people don't have to pay tax on money that has been held overseas for more than one year.  It's really a very nice income tax system.

 

Take a look at the Thai income tax website.  It's in English and very good.  http://www.rd.go.th/publish/6045.0.html

 

[JimGant]

Quote

So, hey, why not gamble with Carden. The worst that could happen would be you'd owe back taxes, with interest. But probably no fine, since you relied on a licensed tax professional. But, if it seems too good to be true...........

I felt no obligation to not say the above, since I've retired as a CPA and thus my license has expired. Thus, I no longer have a fiduciary responsibility to not hold out questionable advice.

[suzannegoh]

Let's suppose that you invoke that treaty on your tax return every year and after 10 years the IRS decides that it's not legitimate and comes after you for back taxes. In that case, how many years can they go back?

 

 

 

[JimGant]

Quote

Let's suppose that you invoke that treaty on your tax return every year and after 10 years the IRS decides that it's not legitimate and comes after you for back taxes. In that case, how many years can they go back?

 

That gets tricky. If fraud is involved (and that would be with your tax preparer, not you, as you relied on his advice), then they can go back indefinitely to see if the same fraud exists in previous (or subsequent) returns. So, if they find you owe back taxes for 10 plus years, or whatever, that's what you're on the hook for (plus interest and any civil -- but not civil fraud -- penalties).

 

Quote

 "If your return is flagged, double-checked, but no audit is ordered, you're not out of the woods because a simple in-house review doesn't count. If a subsequent year's return is audited and the IRS has reason to believe your previous returns might share the same error, they can go back the statutory three years – or indefinitely if fraud is involved. Technically, the IRS can audit every one of your returns if it wants to, year after year, unless it has actually audited one of those returns before."

https://finance.zacks.com/irs-double-check-tax-returns-8650.html

And, even if there is no fraud involved, if taxes owed are more than 25% of the bill, audits can extend back to 6 years.

 

But, there's a further situation involved here -- if an audit uncovers a common theme between a tax preparer and clients, namely, escape from taxation via a boilerplate Form 8833, then all those clients would be subject to examination and back taxes. Not hard to do -- just plug in the tax preparer's name and license number, then screen all the returns for Form 8833 input. But, without fraud involved, maybe 6 years back is all that can be recovered.....

 

And, I really don't see the Carden situation as fraud. Negligence, yes, based on faulty research (e.g., the Swiss example) -- something he could have easily researched, but probably "too inconvenient" to do so.

 

So, hey, what now? We probably haven't seen the end to this -- after all, Nancy getting a refund is pro forma for the IRS, where they mail checks (giving the benefit of the doubt) before any possible human screening.

 

Feel lucky, huckleberry?

 

 

 

 

[TallGuyJohninBKK]

Thanks Jim and Nancy...

 

So, the Carden argument is moot for me (being on a government agency pension from the U.S.), until and unless I start trying to draw down on my private IRA.

 

So maybe by that time, there'll be more of a track record on the matter at hand...

[Mapguy]

Wow!  

 

First, I want to say thank you to NancyL for sharing the information.  Second, I just wish to say how impressive this conversation has been.  Third, I wish to say I am MOST impressed for various reasons with what poster Jim Gant has to say and the clarity and practicality with which he expresses himself. (No, I don't know him.)

 

I should note that I do not qualify for this particular "break" in the US tax code --- if it exists ---  that NancyL has presented.  Sounds like a lot of money for those who qualify.  That said,....

 

1.  Not being as generous as Jim Gant with his polite and realistic comments,  I believe that a degree(s) from Phoenix is (are) basically "crap."  OK, perhaps NancyL's  Bangkok-based "specialist" has burrowed into the Thai-US tax treaty to find an "angle."  If it works, it works.  If not, --- uh oh!, as Mr. Gant has pointed out.

 

2.  So, a question.  How "easy" are the refunds?  Is it enough money to merit spending money to double- or triple-check?  How many well-qualified CPAs in America has NancyL run this by?  A qualified CPA with such treaty experience is  NOT easy or cheap to find, unfortunately., but NancyL has a lot of energy.  But such might keep her and her husband out of hot water in the future burning up endless hours  in a fight in which they would probably require some expensive qualified professional assistance, especially if they have ever had "discussions" with the American Internal Revenue Service before.

 

So,  to end with a simple wish, may the financial future for us all be simple and restful as well as adequate for our needs!  And may currency exhange rates be favorable!

 

 

 

 

 

Edited February 26, 2018 by Mapguy

[NancyL]

Take the time to read the treaty:

 

https://www.irs.gov/pub/irs-trty/thailand.pdf

 

and the "Technical Explanation" which is in plain English:

 

https://www.irs.gov/pub/irs-trty/thaitech.pdf

 

It's pretty obvious and it was, too, to our long-time U.S. financial adviser (although he was quick to point out that he's not a tax specialist)

 

When Hubby and I were in the greenhouse/nursery business we used a tax accountant who specialized solely in the greenhouse/nursery business where it was her interpretation that we were engaged in agriculture (not running a small business) and entitled to all the special tax benefits afforded to farmers.  This was a creative interpretation that a more conservative accountant may not taken.  We never had any problems with the IRS, nor were we aware of anyone else who did (it was a tight-knit industry)

 

Mr. Carden is a Bangkok-based accountant who is working on his PhD thesis with this tax treaty as the subject.  I see no need to travel to the U.S. to ask an accountant unfamiliar with this treaty for an interpretation.  We learned from our previous life to utilize an accountant familiar with "your niche".

  

[JimGant]

Quote

Take the time to read the treaty:

 

https://www.irs.gov/pub/irs-trty/thailand.pdf

 

and the "Technical Explanation" which is in plain English:

 

https://www.irs.gov/pub/irs-trty/thaitech.pdf

 

It's pretty obvious and it was, too, to our long-time U.S. financial adviser (although he was quick to point out that he's not a tax specialist)

Your definition of obvious is, well, curious.

 

Read the TE on the US-Swiss tax treaty:

https://www.irs.gov/pub/irs-trty/swistech.pdf

 

Look familiar? It should, because it looks like all the other tax treaties based on the OECD Model treaty, to include the US-Thai treaty.

And, as I showed in a previous post, the language in both tax treaties (US-Thai, US-Swiss) is nearly identical, with only paragraph numbers differing. Can you agree on that?

 

In the HodgenLaw article, the IRS defines the legal meaning of the US-Swiss tax treaty regarding taxation rights of IRA distributions. Their definition, at least based on the wording of both treaties, would equally apply to IRA distributions to US citizens resident in Thailand. (I hate to repeat, but here's their ruling, with Thai paragraphs in italics.)

 

"Because Taxpayer is a U.S. citizen, the saving clause permits the United States to tax his IRA distributions. Furthermore, Article 1(3) does not contain any exception from the saving clause for private pensions within the jurisdiction Article 18 [Paras 1,3,4 of Article 20]. Thus, the United States can tax Taxpayer’s IRA distributions under the Code as if the Treaty had not come into effect."

 

The bottom line with the IRS legal definition for the US-Swiss treaty is: Yes, Switzerland has exclusive taxation rights on IRAs paid to US citizens resident in Switzerland -- except, due to the savings clause, this citizen must also declare this IRA distribution on his US tax return, and take a credit for Swiss taxes paid to avoid double taxation. Yes, Switzerland gets your tax money, and the US doesn't (which is bizarre,  since your IRA was tax deferred....but that's another subject).

 

Thus, an IRS legal explanation of taxing authority with the US-Thai tax treaty certainly would read the same as the US-Swiss tax treaty.....

 

.....But, somehow Carden (and you, I guess) believe that the Thai and Swiss situations differ enough to preclude the savings clause.... (jeez, could you please shed some light on Carden's Form 8833 language?)

 

Of course, the other main difference is that you, the US citizen living in Switzerland do end up paying tax to one of the two contracting countries -- just as the OECD intended in their treaty language. But, because of Thailand's rules on taxing only income brought in in current year, you end up paying nobody taxes, which is not in the spirit of the OECD tax models. Thus, the OECD recently has been rewriting its model treaty language to address this "dual non taxation."

 

And the US thought they had this loophole covered by their savings clause -- except, I guess, in Bangkok. Other countries (either Norway or Denmark, I forget which) cover this "dual non taxation" by requiring a copy of your Thai tax return in order to get any credit on your mandatory home country taxes.

 

You've discovered a gold mine -- or is that pyrite........

Cheers

 

 

Edited February 27, 2018 by JimGant

[Bill97]

So you take a chance for short term gains and risk a large long term problem. Everybody assesses the odds differently. Roll the dice.


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[luther]

At 65 a pension paying you $10,000/year adds $125,000 to your net worth. Most retired people I know here in Thailand have a net worth over $500,000.

 

A couple with earned income of $20,000 owes no US federal tax. It's hard for me to imagine many couples crossing the $20,000 threshold without also crossing the $500,000 net worth threshold.

Edited February 27, 2018 by luther

[JimGant]

Hey, did you convert your conventional IRA's to Roth IRA's in 2017? If so, that's probably a large tax hit. And the new (Trump) tax act says conversions after 2017 can't be reversed. But, hey, if Carsten says your conventional IRA proceeds aren't taxable, jeez, best convert back from Roth to conventional. And you have until the end of the filing extension period (Oct 2018) to do so:

 

Quote

 ...there also may be reasons to reverse a Roth IRA conversion. For instance, a process known as recharacterization. But the window for recharacterizations is closing quickly, as the tax reform bill eliminated this strategy beginning in the 2018 tax year. If you converted to a Roth in 2017, you may be able to complete a recharacterization by the 2018 deadline.

This gold mine just keeps getting better and better....imagine the millions and millions of dollars we US expats in Thailand paid because we weren't aware of the Carsten magic touch. Thank God for the independent thinking of this incredible tax professional.

Edited February 27, 2018 by JimGant

[suzannegoh]

I'm pretty sure that at least one associate of Mr. Carden is reading this. Any comments?

[JimGant]

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Recently, the saving clause in the Israel Treaty was the subject of litigation involving a U.S. citizen residing in Israel. The conflict was resolved by the U.S. Tax Court, which upheld the application of the saving clause. The parties in Cole v. Commissioner4 submitted the case to the court for decision without trial. According to the facts stipulated in the summary opinion, the petitioner was a U.S. citizen who moved to Israel in 2009. As a result of the move, under local Israeli law, he was entitled to a ten-year “tax holiday,”5 which provided an exemption from Israeli tax on non-Israeli-source capital gains.6 When he moved to Israel, the petitioner held U.S. stock, which he later sold in 2010. The petitioner realized long-term capital gains of over $100,000. He reported the sale on his U.S. tax return but did not include it in his taxable income, offering the following explanation: “No tax should be administered on this transaction pursuant [sic] to treaties [sic] between the United States and taxpayers [sic] resident country (Israel).” The I.R.S. issued the taxpayer a notice of deficiency requiring that he pay U.S. tax on the capital gains.

Another situation where "exclusive taxation rights" is trumped by the savings clause. Just a heads up.....

[JimGant]

Gosh, it's been a year since the last post on this subject. But, you would of thunk that Thailand would now be in the headlines as the only country in the world that allows an American expat's traditional IRA to be cashed in tax free, from either Thailand or the US. Yes, if you haven't converted to Roth, your tax deferred IRA, which begins to require taxation (the so-called Required Minimum Distribution) at age 71, is already subject to US taxes -- unless you live in Thailand and believe in an IRS enrolled agent (EA) based in Bangkok. He somehow has interpreted the treaty language to exclude your IRA from the "saving clause" (described in detail in earlier posts on this thread).

 

And, magic upon magic, Thailand, with exclusive taxation authority over your IRA -- if you lived here for over 180 days -- doesn't require you to file a tax return. Thus, expat heaven -- if you have a traditional IRA -- as nobody is interested in taxing it. At least according to one EA.

 

Why, then, is no expat publication singing the praises of Thailand, the only country that allows complete escape from taxation on your IRA ---- which for many would amount to five figures in taxation? Could it be this Bangkok EA is a charlatan .....? Duh.

 

Tired of the Swiss example re the saving clause -- try the Brit version:

https://www.kpateloffice.com/how-to-read-tax-treaties/

 

 

 

 

 

 

[suzannegoh]

4 minutes ago, JimGant said:

Gosh, it's been a year since the last post on this subject. But, you would of thunk that Thailand would now be in the headlines as the only country in the world that allows an American expat's traditional IRA to be cashed in tax free, from either Thailand or the US. Yes, if you haven't converted to Roth, your tax deferred IRA, which begins to require taxation (the so-called Required Minimum Distribution) at age 71, is already subject to US taxes -- unless you live in Thailand and believe in an IRS enrolled agent (EA) based in Bangkok. He somehow has interpreted the treaty language to exclude your IRA from the "saving clause" (described in detail in earlier posts on this thread).

 

And, magic upon magic, Thailand, with exclusive taxation authority over your IRA -- if you lived here for over 180 days -- doesn't require you to file a tax return. Thus, expat heaven -- if you have a traditional IRA -- as nobody is interested in taxing it. At least according to one EA.

 

Why, then, is no expat publication singing the praises of Thailand, the only country that allows complete escape from taxation on your IRA ---- which for many would amount to five figures in taxation? Could it be this Bangkok EA is a charlatan .....? Duh.

 

Tired of the Swiss example re the saving clause -- try the Brit version:

https://www.kpateloffice.com/how-to-read-tax-treaties/

 

 

 

 

 

 

I tried reading the Tax Treaty and didn't get the same meaning out if it as that guy but I'm not an accountant and I verified with the IRS that he is in fact an IRS enrolled agent.