Earned Income Tax Credit

[keeshou]

I was looking at information from the IRS about different exemptions and ways of filing and I came across this "The Earned Income Tax Credit". Since I'm married (to a Thai national) and we have two children (one of whom has a social security card) and I'm a teacher (which means I make a small amount every year), I was wondering if anyone knew about this Earned Income Tax Credit and if living overseas precludes you from qualifying

http://www.irs.gov/individuals/article/0,,id=150557,00.html

This is the link to the page from the US government.

[PeaceBlondie]

I looked at that link and another. I suggest you file jointly with your Thai wife, claim at least one child exemption, and do not take the foreign earned income exclusion for 2007. You should owe no taxes, and I guess you will be entitled to a large EIC. Unless there are foreign issues that I am now aware of.

Anybody else know more about foreign issues relating to the EITC for 2007?

[Misty]

I looked at that link and another. I suggest you file jointly with your Thai wife, claim at least one child exemption, and do not take the foreign earned income exclusion for 2007. You should owe no taxes, and I guess you will be entitled to a large EIC. Unless there are foreign issues that I am now aware of.

Anybody else know more about foreign issues relating to the EITC for 2007?

Hi PeaceBlondie,

I'm curious if you think filing as Head of Household would be an option in qualifying for the EIC? Also, could the OP similarly owe no tax if he were to opt for the foreign earned income exclusion instead of the EIC?

I'm not a US tax professional, just interested in the options.

Cheers, MIsty

[keeshou]

Also, could the OP similarly owe no tax if he were to opt for the foreign earned income exclusion instead of the EIC?

I'm not a US tax professional, just interested in the options.

Cheers, MIsty

If you live outside of the US for over 330 days consecutively in a calender year you are entitled to an $85,000 deduction on the income you are taxed on. Considering that I am a teacher here in Thailand I made vastly less than that amount. In actuality I made so little, I might not even need to claim exemptions on my form as I am making under the poverty level set where no taxes are owed. This is why I was curious too see if I was entitled to a refund from the IRS.

[PeaceBlondie]

Head of Household, I recall, was section 2( of the Internal Revenue Code of 1954 and 1986. To be, or not 2(, that is the question. If you are married and not living with your spouse and not living with another person in violation of local law and living with your dependent, you used to be allowed to claim HofHH. But when it comes to tax years after 1996, or foreign issues, I do not know (and I used to be a tax professional, with the IRS retirement to show for it).

I am embarrassed that after I told Keeshou to post his question on ThaiVisa, he got better answers on the teaching website. But perhaps we are not known as an American income tax expatriate advice site.

[CWMcMurray]

From reading the website I would say, Expats can not use this exemption.

I would be very happy if someone knows of anything that proves me wrong, I would like to apply for this if i could.

http://apps.irs.gov/app/eitc2007/ShowQualifyingChildTips.do

Qualifying Children for EITC NOT all children are considered qualifying children. Any qualifying child you use to claim the EITC must have a valid social security number.

Your child is your qualifying child if the child meets three tests. The three tests are:

1. Relationship,
   
2. Age, and
   
3. Residency.
   

You can use up to two qualifying children to claim the Earned Income Tax Credit.

Residency Test

Did your child live with you in the United States for more than half of 2007? (This means the 50 states and the District of Columbia. It does not include U.S. possessions, such as Guam and the Virgin Islands, or Puerto Rico.) Yes No

Main Home in the United States

Your main home (and your spouse's, if filing a joint return) must have been in the United States for more than half the year.

United States. This term includes the 50 states and the District of Columbia. It does not include U.S. possessions, such as Guam and the Virgin Islands, or Puerto Rico.

Homeless shelter. If you lived in one or more homeless shelters in the United States for more than half the year, you meet this rule.

Military personnel stationed outside the United States. U.S. military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EITC.

[Misty]

If you are married and not living with your spouse and not living with another person in violation of local law and living with your dependent, you used to be allowed to claim HofHH.

There's one other way to use HoH: If your spouse can be considered a Nonresident Alien for US income tax purposes (in this case a Thai national living in Thailand), you can also use HoH--even if you live with them.

Question for keeshou--did you pay any US tax in 2007? If so, then I could understand why some/all of it might be refunded.

Also:

"If you live outside of the US for over 330 days consecutively in a calender year you are entitled to an $85,000 deduction on the income you are taxed on. Considering that I am a teacher here in Thailand I made vastly less than that amount."

If you qualify for the exclusion under one of the various tax residency tests, you can deduct up to $85k (or whatever the exclusion amount is for 2007) on your foreign earned income . If you had foreign earned income that was vastly less, you can still use the exclusion--you simply deduct the amount you made.

If you don't use the exclusion, another option is to consider using the foreign tax credit (assuming you've paid Thai personal income tax).