Long-term American Expats In Los And Tax Returns

[tutsiwarrior]

I do NOT believe this is correct! I believe every US citizen needs to file a tax return, regardless of the amount of income.

Without regard to what you believe, IRS Publication 501, page 2, addresses this clearly and distinctly; a US citizen or resident alien must file a federal income tax return if their gross income is over a certain amount.

Check the publication for the right amounts, but this is what I got…

Filing single under 65 - $8,450

Filing single 65 or older - $9,700

Filing head of household under 65 – $10,850

Filing head of household 65 or older – $12,100

Married, filing jointly (under 65 both spouses) – $16,900

Married, filing jointly (65 or older one spouse) – $17,900

Married, filing jointly (65 or older both spouses) – $18,900

Married filing separately (any age) $3,300

Qualifying widow(er) with dependent child (under 65) - $13,600

Qualifying widow(er) with dependent child (65 or older) - $14,600

so, could we say that a single person WITHOUT ANY INCOME (ie., unemployed without any income from assets) for an entire tax year does not have to file a federal tax return?

[Jingthing]

so, could we say that a single person WITHOUT ANY INCOME (ie., unemployed without any income from assets) for an entire tax year does not have to file a federal tax return?

Yes, we could say that, but its always wise to read the irs website every year as there are a few exceptions.

Edited October 22, 2007 by Jingthing

[PeaceBlondie]

Not every US citizen is required to file. Your infant grandchild who has no trust fund, your great grandmother who's only on Social Security, most students, etc., et al, ad infinitum, ad nauseum, DO NOT have to file and the IRS does not want them to file.

[greenwanderer108]

So it appears I never did nor don't have to file as I am head of a household (son has American passport and will have his SS on its way as soon as I remember to get to the post office) which brings my threshold higher. I don't/have never made more than 10,000 USD in any year that I've been here (equal to about 450,000 baht when I first came...and 330,000 abouts now !!!)

@Gumball, 'if I do owe something???' There's no question about it in my mind, if the IRS ever tried to say I owe them taxes from my time in Thailand, it would call for me to write a thoughtful hip hop song about American pride with references to the Boston tea party and all such other significant events that have made me a proud American...But in the event that everything I have said is true, than the IRS says I'm not required. Like I said, if they want to prove I am actually not way under the US poverty line and under the tax exemption limit...then they'd be up for disappointment.

The thing is, I don't intend or wish to be taxed for actually going through with filing backtaxes, which according to the rates mentioned, looks like I was never required to file in the first place so I'm not going to pay some CPA or buy some program or pay late penalty fees for filing something that the law says I don't have to file. Though if I do choose to keep this stance, than I will need to prepare a letter explaining my reasons for not filing taxes, which would probably be best to reference school transcripts, bank statements, employment salary letters and pay stubs that I have collected over the years...or would I be better off not providing any such references and just the letter or just doing nothing or ???

Thanks fellow Yanks

[lanny]

The thing is, I don't intend or wish to be taxed for actually going through with filing backtaxes, which according to the rates mentioned, looks like I was never required to file in the first place so I'm not going to pay some CPA or buy some program or pay late penalty fees for filing something that the law says I don't have to file. Though if I do choose to keep this stance, than I will need to prepare a letter explaining my reasons for not filing taxes, which would probably be best to reference school transcripts, bank statements, employment salary letters and pay stubs that I have collected over the years...or would I be better off not providing any such references and just the letter or just doing nothing or ???

Thanks fellow Yanks

Greenwanderer -- If you don't have the income, you don't have to file. However, you are wrong about IRS having to disprove your numbers. That would be true if you file a return; then IRS must prove any additional amount they claim you earned. However, if you do not file a return, the law permits IRS to file a return for you and, if they do, the income they put on that substitute for a return is presumed to be correct. In other words, you have to prove any different amount you claim.

So, you should keep your records but not file.

[taxout]

Read the rules very carefully!

Even if your gross income doesn't meet the limits mentioned above, you still have to file a return if your self-employment income is $400 or more.

To repeat my earlier advice, you file when your income is below the filing requirements in order to start the statute of limitations running; this is a technical point, but can be very important if you have problems with the IRS down the line.

And talking about returns, don't forget the annual return disclosing foreign bank accounts.

[tutsiwarrior]

Read the rules very carefully!

Even if your gross income doesn't meet the limits mentioned above, you still have to file a return if your self-employment income is $400 or more.

To repeat my earlier advice, you file when your income is below the filing requirements in order to start the statute of limitations running; this is a technical point, but can be very important if you have problems with the IRS down the line.

And talking about returns, don't forget the annual return disclosing foreign bank accounts.

WHAT IS THIS???...is it required? Is there an IRS website reference?...what is the associated IRS document/tax schedule?

[Jingthing]

ohmy.gif ohmy.gif WHAT IS THIS???...is it required? Is there an IRS website reference?...what is the associated IRS document/tax schedule?

This is very real.

You don't file this to the IRS or send it to the IRS and the deadline schedule is different. Instead, the FBAR form is sent to the treasury deparment.

You NEED to file this if you had money in a foreign bank account over 10,000 USD for even one second during any given year. The financial penalties for not filing are shockingly harsh!!!!!

If your foreign account doesn't go over 10,000 USD you should not file this.

The deadline to file is in the year following the reporting year. It is now past the deadline for 2006.

<a href="http://www.irs.gov/businesses/small/articl...=148845,00.html" target="_blank">http://www.irs.gov/businesses/small/articl...=148845,00.html</a>

ALSO, this is reported on IRS forms as well, but that doesn't mean you don't have to file the FBAR form.

The holders report their foreign accounts by completing boxes 7a and 7b on Form 1040 Schedule B and completing Form TD F 90-22.1.

Also, if you SWIFT in money to a foreign bank account the government knows about your bank account if you think you can hide it. All this info is gathered for homeland security. I don't know if the SWIFT spies share this info with the IRS and/or treasury dept.; perhaps one of our taxheads can venture an opinion.

Edited October 23, 2007 by Jingthing

[taxout]

Note that the $10,000 filing requirement is applied on a aggregate basis to all foreign accounts.

Note too that the requirement extends to all foreign financial accounts, not just bank accounts; securities accounts, for example, are included.

Note finally that the requirement extends not only to accounts in your name, but to accounts in which you have a "financial interest" as well.

Further, you're required to disclose on Schedule B, Form 1040, whether you have an interest in a foreign account, regardless of amount, and disclose the countries in which the accounts are located.

http://www.irs.gov/pub/irs-pdf/f90221.pdf

http://www.irs.gov/pub/irs-pdf/f1040sab.pdf

[Jingthing]

Thanks taxout. Most excellent details.

I am sure most of us do not like this FBAR form and aren't in the class of people the government is trying to catch with this program (terrorists, money launderers, drug dealers etc). However, rather than whining and evading, it is just easier to pay respects to our mightly, powerful government because they can bury us.

It isn't so easy to escape from America, Even if you choose to give up your citizenship, the IRS can challenge that if they rule you did so to avoid tax obligations,

Edited October 23, 2007 by Jingthing

[h5n1]

i basically no longer file. my interest income is barely below us6500 and does not warrant. you wont pay taxes if your income is like us9.5k single, shortform - but you have to file (maybe even more 11k?) ...it says it on the irs book first few pages of the 1040ez i think 6.5k

if you have worked whos to know? just do some sort of filing for years youve been away if that makes you feel better -

there is NO statute of limitations on paying taxes -you always will owe. whether it runs out on 'crimes' i dont know

i figure im totally getting over - not paying for bushs' war and the social security ill only marginally collect (why pay in?). medicare will go b4 ss year 2020??? . why bother, why pay?

Edited October 23, 2007 by h5n1

[IMA_FARANG]

I don't mean to hijack this thread, but if you are an expat earning less than $80K with all of your income coming from overseas, what forms do you file with?

1040EZ and 2555EZ?

Or just 2555EZ?

1. If you are claiming the overseas residence exemption for working overseas (the 80,000 dollars exemption) it is better to use the form 1040 and the form 2555. It has the lines ypu will need to enter the exemption on the 1040. I'm not sure you can enter it on the 1040Z.

2. You can only claim this exemption if you are living outside of the U.S. by reason of your employment. In my case, I have always been employed by a american company outside the U.S. and that has been what I reported. I do not know whether you will be able to get the exemption working for a non-us based source.

3. You are required to be outside the U.S. for 330 days in the normal 365 day tax year (from Jan 1st to Dec 31st of that year). Or to be precise in that tax year you must not have been in the U.S. or U.S. territory for more than 30 days in the that tax year.

4. You should have filed a form, a withholding form, for your taxes, that stipulated you intended to be psyically present outside of the U.S. That would have meant no tax witheld from your earnings.

5. From what I deduce you may have not filed tax returns for the past few years. Not my business. But if that is the case you need to contact the IRS and get it fixed. Hope you can convince them you misunderstood. I failed to file once for 5 years, and after a lot of hassle, the IRS actually let me off the hook (mainly due to the fact that my income was so low, and I was overseas all the time). But be warned, the overseas exemption is not automatic even if you qualify for it. The IRS can disqualify you for the overseas exemption as a penalty for non-file of taxes if they chose that course. It is up to the IRS to decide.

Good luck.

Edited October 23, 2007 by IMA_FARANG

[Jingthing]

If you didn't need to file and you know they don't have any reports like 1099s showing enough income to need to file, I don't see any point in explaining yourself with a letter. Just file when you need to under the law, and don't when you don't.

[TerryLH]

"2. You can only claim this exemption if you are living outside of the U.S. by reason of your employment. In my case, I have always been employed by a american company outside the U.S. and that has been what I reported. I do not know whether you will be able to get the exemption working for a non-us based source."

The reason you live outside the US is not relevant, and not required to be because of employment.

For exemption purposes it doesn't matter who you work for. It does not have to be an American company.

"4. You should have filed a form, a withholding form, for your taxes, that stipulated you intended to be psyically present outside of the U.S. That would have meant no tax witheld from your earnings."

That might apply if your money is coming from a US source, but not needed if working for a foreign company.

A foreign company will only be interested in the tax stuff for wherever you are.

[taxout]

"3. You are required to be outside the U.S. for 330 days in the normal 365 day tax year (from Jan 1st to Dec 31st of that year). Or to be precise in that tax year you must not have been in the U.S. or U.S. territory for more than 30 days in the that tax year."

No, this is not the way the physical-presence test works. It requires 330 days of physical presence outside the US in a consecutive 365-day period, not necessarily a tax year. If, for example, you arrive in Thailand on October 24, 2007 and remain and work in Thailand until September 30, 2008, you'll qualify for the exclusion in 2007 and 2008. However, the exclusion will be pro-rated between the two tax years. You'll also need to get an extension on filing your 2007 return since you can't claim the exclusion until you've met the 330-day test.

And in addition to the physical-presence test, there's also the alternative bona-fide foreign-residence test.

Edited October 23, 2007 by taxout

[PeaceBlondie]

A shy member has sent me a PM with this question about late filing of US tax returns and the earned income exemption. She filed for 2003 and 2004, claiming and receiving the exemption. She hasn't filed 2005 and 2006 yet (naughty girl). Can she still claim the exemption since she was claiming it previously? Can she still claim it if IRS notifies her first? And what constitutes being notified by the IRS? A mere inquiry about late filing, or a full blown section 6020( b ) filing of a substitute for return by the IRS?

[lanny]

As long as IRS has not started a formal process, such as an audit, you should be able to claim the exclusion. However, the way the law and regulations read, a mere inquiry for a missing return could be used by IRS to deny the election.

The election is made annually. And, it must be affirmative; i.e. you must claim the exclusion on the return involved. In effect, attaching Form 2555 to your return is an affirmative election.

There is a Revenue Procedure for filing late returns and claiming the exclusion. You may be allowed to claim the exclusion without following the RevProc but you stand a better chance of acceptance if you follow it.

For Taxout -- You are basically right about the physical presence rule; it is 330 days out of any 12-month period. In fact, it is possible to have 2 330 day periods in a given year. A 330 day period starting in 2006, say, and running into 2007. Then a period of more than 35 days in the US, followed by another 330 day period starting in 2007 and running into 2008. You only count the days in 2007, of course.

[cloudhopper]

I do NOT believe this is correct! I believe every US citizen needs to file a tax return, regardless of the amount of income.

Without regard to what you believe, IRS Publication 501, page 2, addresses this clearly and distinctly; a US citizen or resident alien must file a federal income tax return if their gross income is over a certain amount.

Check the publication for the right amounts, but this is what I got…

Filing single under 65 - $8,450

Filing single 65 or older - $9,700

Filing head of household under 65 – $10,850

Filing head of household 65 or older – $12,100

Married, filing jointly (under 65 both spouses) – $16,900

Married, filing jointly (65 or older one spouse) – $17,900

Married, filing jointly (65 or older both spouses) – $18,900

Married filing separately (any age) $3,300

Qualifying widow(er) with dependent child (under 65) - $13,600

Qualifying widow(er) with dependent child (65 or older) - $14,600

Is this for earned or all income? I'm under 65,retired expat, legally married to a non earning, non tax paying/filing Thai. What category should I file (or possibly "not file") under?

Thanks!

[wolfmanjack]

Note that the $10,000 filing requirement is applied on a aggregate basis to all foreign accounts.

Note too that the requirement extends to all foreign financial accounts, not just bank accounts; securities accounts, for example, are included.

Note finally that the requirement extends not only to accounts in your name, but to accounts in which you have a "financial interest" as well.

Further, you're required to disclose on Schedule B, Form 1040, whether you have an interest in a foreign account, regardless of amount, and disclose the countries in which the accounts are located.

<a href="http://www.irs.gov/pub/irs-pdf/f90221.pdf" target="_blank">http://www.irs.gov/pub/irs-pdf/f90221.pdf</a>

<a href="http://www.irs.gov/pub/irs-pdf/f1040sab.pdf" target="_blank">http://www.irs.gov/pub/irs-pdf/f1040sab.pdf</a>

I think it is safe to say that most of us had no idea that we had to file this FBAR form. I for one had never heard of this before. The penalties are pretty severe. Since i have signatory rights over the company check book that would mean i was suppose to file even though i do not have more than 50% of the shares. Now what to do ??? The deadline is past. Just wait until next year and file or what ? I did not read all of the legalese to see if there is an amnesty for those filing late that did not know they had to file.

[Jingthing]

wolfman,

I would seek professional help. It seems you have two choices: continue to not report or start reporting and send an apology letter claiming ignorance and begging for mercy.

[wolfmanjack]

wolfman,

I would seek professional help. It seems you have two choices: continue to not report or start reporting and send an apology letter claiming ignorance and begging for mercy.

begging for mercy may work for the treasury department but i doubt it for the IRS.

Maybe i will wait until next year and file with the treasury department. I make too little to file a normal return with the IRS.

[just_Elaine]

I think someone already mentioned Pub 54. Here is a link to the 2006 version:

http://www.irs.gov/publications/p54/index.html

[JaiGuru]

Is this for earned or all income? I'm under 65,retired expat, legally married to a non earning, non tax paying/filing Thai. What category should I file (or possibly "not file") under?

The way I read it, it is for *all* income even un-earned. If there are 1099s floating around, they'll notice them sooner or later. IMO, it's better to have one's story on record before the IRS starts coming up with ideas of their own.

If you're legally married and your wife doesn't have an SSN, think about getting her a TIN and filing joint returns; it's worth the bother. Without a wife's SSN or TIN it might not be possible to claim her, which doesn't leave much else other than filing single.

My plan is to file even when if it's not required for me. It only takes a few moments with TurboTax, and I sleep better not having to worry about the IRS getting any wise ideas about my IRAs. I'd rather have things documented and not need them, than somebody having some questions about my situation and not being easily contacted to respond.

[Jingthing]

I found it pretty much impossible to file online, not enough room to put in my Thai address.

[lanny]

Is this for earned or all income? I'm under 65,retired expat, legally married to a non earning, non tax paying/filing Thai. What category should I file (or possibly "not file") under?

The way I read it, it is for *all* income even un-earned. If there are 1099s floating around, they'll notice them sooner or later. IMO, it's better to have one's story on record before the IRS starts coming up with ideas of their own.

If you're legally married and your wife doesn't have an SSN, think about getting her a TIN and filing joint returns; it's worth the bother. Without a wife's SSN or TIN it might not be possible to claim her, which doesn't leave much else other than filing single.

My plan is to file even when if it's not required for me. It only takes a few moments with TurboTax, and I sleep better not having to worry about the IRS getting any wise ideas about my IRAs. I'd rather have things documented and not need them, than somebody having some questions about my situation and not being easily contacted to respond.

Two comments:

First, if you are legally married, you cannot file as "Single." If your spouse has a SSN of ITIN, you can file a joint return; otherwise, your only alternative is "Married filing separate." If you have children that you can claim as dependents, you have a second alternative -- the IRS allows taxpayers married to non-resident aliens with dependent children to file "Head of household."

If your income is below the applicable filing requirement, IRS does not want you to file. I've actually had clients who insisted on filing who subsequently received letters from IRS telling them not to file! Processing a return costs IRS money and they don't like spending money if there is no tax to collect.

[lopburi3]

Believe he may have the alternative to file joint return and submit application for ITIN at the same time; or would that only be available the next year? When I got ITIN for wife it did not have to be done the way they require now.

(Jinthing) I have not had any problem using my Thai address for on-line filing the last few years using TaxAct.

[old wanderer]

Note that the $10,000 filing requirement is applied on a aggregate basis to all foreign accounts.

Note too that the requirement extends to all foreign financial accounts, not just bank accounts; securities accounts, for example, are included.

Note finally that the requirement extends not only to accounts in your name, but to accounts in which you have a "financial interest" as well.

Further, you're required to disclose on Schedule B, Form 1040, whether you have an interest in a foreign account, regardless of amount, and disclose the countries in which the accounts are located.

<a href="http://www.irs.gov/pub/irs-pdf/f90221.pdf" target="_blank">http://www.irs.gov/pub/irs-pdf/f90221.pdf</a>

<a href="http://www.irs.gov/pub/irs-pdf/f1040sab.pdf" target="_blank">http://www.irs.gov/pub/irs-pdf/f1040sab.pdf</a>

I think it is safe to say that most of us had no idea that we had to file this FBAR form. I for one had never heard of this before. The penalties are pretty severe. Since i have signatory rights over the company check book that would mean i was suppose to file even though i do not have more than 50% of the shares. Now what to do ??? The deadline is past. Just wait until next year and file or what ? I did not read all of the legalese to see if there is an amnesty for those filing late that did not know they had to file.

It is really ugly...I have a friend that almost did a suicide over the IRS problems and then got jumped on the FBAR which he had never heard about. He was an American citizen, but had lived most of his life outside the USA. Had PR in Thailand and a company. The fact is the US government does not care how much it disrupts your life, or puts you in to poverty....it simply does not care. Another friend lost a multi-million dollar home, when he went to tax court, and the tax court did not rule on his case for over 10 months, and then only sent the ruling to his attorney who had been disbarred and jailed. They waited 2 years before moving on him. He went through the 9th circuit court of appeals, but they simply ruled it was well beyond the appeal time and the court had no responsibility but to notify his attorney of record. (He was 65 when this happened and died of a broken heart 2 years later).

So I will file my FBAR for 2007 in November just so I do not forget.

There was an article in Time magazine 6 months ago about how it used to rare for a person to renounce their citizenship, (London,,,,,less than 6 a year 10 years ago) Now there is a 4 month wait to do it. Europeans (or USA citizens with dual citizenship) have decided the tax monster the USA has become, better to owe allegiance somewhere else.

Someday it would be a worthy case to fight the notion that "Ignorance of the law is no excuse" It is absolutely impossible to comprehend all the laws we might be subject too.

[David2up]

Greetings Yankee tax gurus.

Well, how is this for a paranoid thought (my speciality). Wouldn't it be wise to continue to file even if you don't need to to make it clear to the government that you still exist? I am particularly interested in whether you would fall off the map of the social security system if you didn't file for many years.

Hi Jingthing and others,

Falling off the map with the social security sytem might not be all that hard, if year after year you do not file for what ever reason, but what happens to you when it comes time to renew your passport and the renewal form asks if you have filed with IRS? Will they still go ahead and issue you a new one, or god forbid, call you in to say the renewal has been denied? And now you are here in the LOS with no passport, or one that is just about to expire?

Maybe better to file each year as needed and stay on the good side of the SS system and IRS? My "paranoid thought" for the day.

Cheers

[lopburi3]

There is no such question on US Passport applications.

[PeaceBlondie]

You fall off the Social Security record-keeping system by not working for employers who pay FICA taxes on your wages, or by not reporting self-employment taxes on your self-employed net profits. Living overseas like that for decades will ensure that your SS pension, if it exists at all, will not amount to enough, even by Thai poverty standards.