April 15th Tax Day For Those Of Us Still In The Usa!

[Mike45]

I understand that the USA will continue to expect my tax payments even after I retire in Thailand….but what can I do to minimize them?

401K, Traditional IRA, Roth IRA, Company Pension, Social Security and my savings/ stock market investments are going to be my only sources of income.

Does anyone have any suggestions that have worked for them?

[YoungFarang13]

#1 strategy is dont be late...

[Pepe']

#1 strategy is dont be late...

----------------------

Correct and start a business and get a good accountant.

Everything, "business related is a write off."

[Spee]

#1 strategy is dont be late...

----------------------

Correct and start a business and get a good accountant.

Everything, "business related is a write off."

Could not agree more mi amigo Don Pepe'.

Also, if you are only spending part of the year in the US, then get your residency established in a state with no state and/or local income taxes, like Florida, Texas, Nevada New Hampshire, etc. I mean, why pay 6% of your income to "tax-a-chusetts" (aka Massachusetts) if you don't have to. Same goes for NY, California, DC or other high tax areas.

This would also include things like estate tax. Shelter as much as you possibly can and if possible, make the payments out to direct beneficiaries rather than to "an estate." It's a <deleted>' racket, and the only way to minimze your exposure is to keep current with it.

Also, study the tax code as much as you can and take every deduction that you feel is allowable by law. Any decent tax accountant will say the same thing. When in doubt, take the deduction, and if it happens to get picked up in an audit and the decision is unfavorable, then it is just that, a difference of opinion rather than an evasion tactic.

In particular, study the international bits of the tax code, such as residency, dependents and being able to claim them, etc. If your dependents live with you for 12 months in LoS, then you may not be able to claim them. But if they live with you for half the year in the US, maybe you can.

What is your time worth? $20 an hour? $30 an hour? More? Let's say you feel your time is worth $30 per hour. Then your break even point is $1200. If you think that studying the tax code for 40 hours may produce more than $1200 worth of savings or prevention of tax payments, then it is probably worth your time.

The same cost-benefit trade-off can be done for an accountant. If an accountant is going to cost you $100 an hour, and a week of his time is going to cost you four grand, but from that week he produces five grand in tax savings, then you have done well for yourself.

I'm no tax expert and don't claim to be. But I do accept the fac that the IRS code is a racket designed to separate you from your money, first and foremost. And the only way to defend against it is to work harder at understanding it and utlizing the various "loopholes" that are there.

US state tax codes are no different. Let's say your retirement income is $50,000 per year. If you establish residency in Texas instead of say, Illinois, then you will have saved about $2,000 a year in state income tax. There may be other factors to consider, but this is a valid example of differentials based solely on one form of taxation.

[srifah]

I understand that the USA will continue to expect my tax payments even after I retire in Thailand….but what can I do to minimize them?

401K, Traditional IRA, Roth IRA, Company Pension, Social Security and my savings/ stock market investments are going to be my only sources of income.

Does anyone have any suggestions that have worked for them?

You probably roll over your 401K to traditional IRA, then convert to Roth. Once you have the account for 5 years and your age over 59 1/2, you can take out the money without paying taxes. Your company pension and up to 85% of your SS could be taxed, if your income over AGI threshold. Get with your tax accountant rather than read the tax codes yourself since your uncle(Sam) always wanted his cut of your money.

[Jingthing]

If you are moving lock, stock, and barrel to Thailand to retire, I suggest you consider buying a condo (in your own name). This can save you on US taxes! For example, consider 100K invested in a condo versus the stock market/bonds (in non-retirement accounts). The profits/income from the latter would be fully US taxable, while the virtual returns of having "free" housing are not taxable.

[PeaceBlondie]

Not all your income will be fully included in Adjusted Gross Income, but much of it will be. The 401(k) and traditional IRA's, most of your pension income, little or none of your SS income, etc., are includible.

With respect for Pepe's advice about business deductions, that is not necessarily completely true, and requires you to have a business here, which you may not wish to have, or which might cost you a fortune in real losses.

If you do work here as self-employed or as an employee, you can elect the Earned Income Exclusion, but the earnings would be subject to Thai income taxes. You are limited to 45 hours per MONTH of work as an employee before reacing full retirement age (on SS), or else you forfeit your entire month's SS check.

Learn the rules, or get an expensive accountant. You don't need to memorize the Internal Revenue Code itself (far, far too complex), but the publications on the IRS website (www.irs.gov) can help.

Good luck.

[Rhys]

At what amount does one need to file an income tax? 6000USD 5555

[PeaceBlondie]

At what amount does one need to file an income tax? 6000USD 5555

If it were only that simple! The standard deduction plus your own personal exemption, added together, might be about $10,000. Unless you are married, filing a separate return. Or, liable for Self-Employment Tax, Alternative Minimum Tax, or certain other taxes. Or, if you can be claimed as a dependent by somebody else. Or, you wish to claim the new refund or the earned income credit. Etc.

You can go to www.irs.gov and search for "filing requirements" for individuals.

[Mike45]

#1 strategy is dont be late...

----------------------

Correct and start a business and get a good accountant.

Everything, "business related is a write off."

I am not planning on working while in Thailand. I plan to arrive there in three years when I turn 50 and live there full time. For my first 5 years in Thailand I will be living off proceeds from my taxable investments, savings interest and stock portfolio dividends.

Are you saying that if I start a business in Thailand, like a hair shop for my wife, that I will be able to use expenses from the business as write offs against tax’s due because of dividends and interest accrued from my taxable investments?

[Mike45]

Could not agree more mi amigo Don Pepe'.

Also, if you are only spending part of the year in the US, then get your residency established in a state with no state and/or local income taxes, like Florida, Texas, Nevada New Hampshire, etc. I mean, why pay 6% of your income to "tax-a-chusetts" (aka Massachusetts) if you don't have to. Same goes for NY, California, DC or other high tax areas.

I live in New Hampshire and will keep residency here until i leave.

This would also include things like estate tax. Shelter as much as you possibly can and if possible, make the payments out to direct beneficiaries rather than to "an estate." It's a <deleted>' racket, and the only way to minimze your exposure is to keep current with it.

I understand what you mean. I setup and entire estate plan a few years ago. But i do not feel comfortable with "my guy" because I do not get the feeling that he understands the intricacies of living permanently outside the USA.

Right now almost everything except tax advantaged accounts are in revocable or irrevocable trusts that i have FULL control over. I know that Thailand does not have trusts but I do not plan to bring more than I can afford to lose into Thailand so I expect that it will stay in those trusts in the United States until I get a plan to reduce tax's.

Also, study the tax code as much as you can and take every deduction that you feel is allowable by law. Any decent tax accountant will say the same thing. When in doubt, take the deduction, and if it happens to get picked up in an audit and the decision is unfavorable, then it is just that, a difference of opinion rather than an evasion tactic.

In particular, study the international bits of the tax code, such as residency, dependents and being able to claim them, etc. If your dependents live with you for 12 months in LoS, then you may not be able to claim them. But if they live with you for half the year in the US, maybe you can.

What is your time worth? $20 an hour? $30 an hour? More? Let's say you feel your time is worth $30 per hour. Then your break even point is $1200. If you think that studying the tax code for 40 hours may produce more than $1200 worth of savings or prevention of tax payments, then it is probably worth your time.

The same cost-benefit trade-off can be done for an accountant. If an accountant is going to cost you $100 an hour, and a week of his time is going to cost you four grand, but from that week he produces five grand in tax savings, then you have done well for yourself.

I have no problem with hiring an expert but i need to understand what the options are and then triple check them to see if there is something better to feel comfortable with it.

I'm no tax expert and don't claim to be. But I do accept the fac that the IRS code is a racket designed to separate you from your money, first and foremost. And the only way to defend against it is to work harder at understanding it and utlizing the various "loopholes" that are there.

I believe that every American has the right to minimize their taxes...That is why I am looking for the "loopholes" now three years before they can be implemented.

US state tax codes are no different. Let's say your retirement income is $50,000 per year. If you establish residency in Texas instead of say, Illinois, then you will have saved about $2,000 a year in state income tax. There may be other factors to consider, but this is a valid example of differentials based solely on one form of taxation.

[Naam]

If you are moving lock, stock, and barrel to Thailand to retire, I suggest you ...

...you move all your assets out of the U.S. and the claws of the IRS. of course... if you like to finance smart bombs and cruise missiles with your tax dollars which kill innocent people then leave everything as is you have my blessing,

[PeaceBlondie]

If you are moving lock, stock, and barrel to Thailand to retire, I suggest you ...

...you move all your assets out of the U.S. and the claws of the IRS. of course... if you like to finance smart bombs and cruise missiles with your tax dollars which kill innocent people then leave everything as is you have my blessing,

Naam, the USA is one of the few big countries that taxes WORLD WIDE INCOME. Legally, we have to renounce our citizenship to escape the claws of the IRS. Even American war resisters and the Amish cannot escape those claws.

[Mike45]

I understand that the USA will continue to expect my tax payments even after I retire in Thailand….but what can I do to minimize them?

401K, Traditional IRA, Roth IRA, Company Pension, Social Security and my savings/ stock market investments are going to be my only sources of income.

Does anyone have any suggestions that have worked for them?

You probably roll over your 401K to traditional IRA, then convert to Roth. Once you have the account for 5 years and your age over 59 1/2, you can take out the money without paying taxes. Your company pension and up to 85% of your SS could be taxed, if your income over AGI threshold. Get with your tax accountant rather than read the tax codes yourself since your uncle(Sam) always wanted his cut of your money.

Yes I intend to roll over my 401K into an IRA. Perhaps separating some of it into an IRA that I can setup a SEPP so I can use the money before age 59 1/2. But it's to early for me to make that decision about the SEPP. I will evaluate my taxable assets and do it only if I will need the money...I do not believe I will need to.

Converting a traditional IRA over to a ROTH is a taxable event...I believe. That would mean that I would have to pay the tax's on that money at that time instead of later. Maybe I can convert some every year it during my first 5 years in Thailand before I am collecting a pension at age 55. Maybe because I will expect to be in a very low tax bracket I can calculate the correct amount each year to convert that will keep me paying almost nothing on taxes.

[Mike45]

If you are moving lock, stock, and barrel to Thailand to retire, I suggest you ...

...you move all your assets out of the U.S. and the claws of the IRS. of course... if you like to finance smart bombs and cruise missiles with your tax dollars which kill innocent people then leave everything as is you have my blessing,

While I no longer support the USA wars I do support my soldier that is in Tikrit Iraq. Hey don't knock those smart bombs and cruise missile...I've made a great living off making them

[Mike45]

If you are moving lock, stock, and barrel to Thailand to retire, I suggest you consider buying a condo (in your own name). This can save you on US taxes! For example, consider 100K invested in a condo versus the stock market/bonds (in non-retirement accounts). The profits/income from the latter would be fully US taxable, while the virtual returns of having "free" housing are not taxable.

My plan is to rent for a few years until my Thai wife and I know where we want to live and what would suit our future needs. I really can not see myself living in a condo long term. I am a house type person and i understand all the risks involved in non-ownership of a house in Thailand.

I like seeing my money grow even if I have to pay taxes on the earnings.

[TerryLH]

"If your dependents live with you for 12 months in LoS, then you may not be able to claim them."

I've been living here full time for years and never had a problem claiming dependants.

All they need is a ssn or tax id number.

[Mike45]

To recap the suggestions received to date:

1 Pay on time. Thanks for that one YoungFarng13 I never would have thought of that on my own

2. Start a business in Thailand. I assume so I can use the expenses ( real and ) to reduce my taxes.

3. Get a good accountant. I agree with this but I want to try to understand it more before I get one. Understanding it will help me decide who I do business with.

4. Leave the USA from the right state. I think I already do because I live in New Hampshire.

5. Roll over my 401K to traditional IRA, then convert to Roth. Once you have the account for 5 years and your age over 59 1/2, you can take out the money without paying taxes. I think there might be good time to do this Roth conversion. Probably during my first 5 years before I begin collecting my small pension.

6. Invest in a condo. I will have a smaller stock portfolio so less taxes. I do need a place to live eventually.

7. Learn the rules, or get an expensive accountant. Very good advice…I’m trying to learn as much as I can before I hire another accountant.

8. I can claim my dependant deductions even when i live fulltime in LOS.

[jstumbo]

If you are moving lock, stock, and barrel to Thailand to retire, I suggest you ...

...you move all your assets out of the U.S. and the claws of the IRS. of course... if you like to finance smart bombs and cruise missiles with your tax dollars which kill innocent people then leave everything as is you have my blessing,

Naam, the USA is one of the few big countries that taxes WORLD WIDE INCOME. Legally, we have to renounce our citizenship to escape the claws of the IRS. Even American war resisters and the Amish cannot escape those claws.

And then if the reason for renouncing your citizenship is to avoid paying taxes, then you can get nailed for that also.

[Naam]

If you are moving lock, stock, and barrel to Thailand to retire, I suggest you ...

...you move all your assets out of the U.S. and the claws of the IRS. of course... if you like to finance smart bombs and cruise missiles with your tax dollars which kill innocent people then leave everything as is you have my blessing,

Naam, the USA is one of the few big countries that taxes WORLD WIDE INCOME. Legally, we have to renounce our citizenship to escape the claws of the IRS. Even American war resisters and the Amish cannot escape those claws.

PB, you don't have to renounce anything if you have "movable" assets which (after you moved them) you might tell the IRS that you spend all the dough on sick buffaloes, freaking expensive cuban cigars, 125 year old swiss cheese, a 95,000 dollar Cartier for your boy/girlfriend, a week at the roulette table in Macau, or whatever. the IRS has no means to find out whether you still have your assets or whether you burned everything.

in your case the problem seems to be a "non-movable" pension.

[Naam]

a few years ago i assisted not one but several american friends to escape the IRS. it was a breeze and the setup took only some weeks. established offshore corporations, "sold" them, money flowed from 401k, IRAs and similar pains in the @ss now two of them are living in the Philippines, another one in Turkey, they draw salaries from their corporations (being "consultants") and claim their "out of the country tax free allowance". as simple as that, no rocket science involved.

[Spee]

in your case the problem seems to be a "non-movable" pension.

Otherwise known as a 401k and social security. I'm personally not counting on social security payments. If I ever get what I'm entitled to (I've been paying in since I was 15), then it will be by luck. The benefits of a 401k far outweigh the cons. Anyone with an opportunity to pay into one, should max out, or get as close to the max as can be afforded. It is the closest thing to "free money" as there is.

I don't agree at all with buying a condo in Thailand as an investment. Buying it as a place to live? Sure, no problem. But as an investment, it is high-risk, at best. IMHO, if one wanted to make a real estate investment, it would be much better to buy a house or flat in the US and make a rental property out of it. There are many varied ways to obtain tax benefits from it, including get an annual tax decuctible trip "to check on the property."

As PB said, there is practically no way to get away from the IRS without renouncing citizenship, which doesn't seem to make much sense. If one retains citizenship (and hence a certain degree of federal tax liability), then it makes sense to take as much advantages of tax loopholes as possible.

[Spee]

a few years ago i assisted not one but several american friends to escape the IRS. it was a breeze and the setup took only some weeks. established offshore corporations, "sold" them, money flowed from 401k, IRAs and similar pains in the @ss now two of them are living in the Philippines, another one in Turkey, they draw salaries from their corporations (being "consultants") and claim their "out of the country tax free allowance". as simple as that, no rocket science involved.

These are great ideas right up until ....

a-- ... one gets caught (not a good thing to get charged with felony income tax evation in one's retirement years). Can't happen you say? Just ask the number of corporate executives associated with offshore online gambling companies.

or

b-- ... the country in which the offshore tax shelter is based has a sudden change in government and one's "tax-free" retirement savings get appropriated. Can't happen you say? Just ask the people who lost millions in Panamanian banks during the 70's and 80's.

I like your thoughts, Naam, but there would seem to be a substantial amount of risk associated with the reward.

Edited April 16, 2008 by Spee

[PeaceBlondie]

I understand, Naam. I understand that it is still tax evasion, but the IRS would probably never find out.

Over on the Teaching Forum, we may have coined a new term, combining "it's not rocket science" and "it's not as complex as surgery." Now we say it's not rocket surgery. However, the IRS code is more complex.

[Mike45]

a few years ago i assisted not one but several american friends to escape the IRS. it was a breeze and the setup took only some weeks. established offshore corporations, "sold" them, money flowed from 401k, IRAs and similar pains in the @ss now two of them are living in the Philippines, another one in Turkey, they draw salaries from their corporations (being "consultants") and claim their "out of the country tax free allowance". as simple as that, no rocket science involved.

I find this to be an interesting line of discussion. I'm not saying I would do it, condone/decry it. To the best of my knowledge when money comes out of a tax advantage account, 401K/IRA that in itself is the taxable event. So tax's are due and sometimes actually withheld by the institution.

I can see how this would work with regular accounts but how does someone even get the money out of the 401K/IRA without it being a taxable event?

[Naam]

To the best of my knowledge when money comes out of a tax advantage account, 401K/IRA that in itself is the taxable event. So tax's are due and sometimes actually withheld by the institution.

I can see how this would work with regular accounts but how does someone even get the money out of the 401K/IRA without it being a taxable event?

withdrawing funds from tax deferred accounts are of course taxable AND at a high tax percentage. but only ONCE

[Naam]

I like your thoughts, Naam, but there would seem to be a substantial amount of risk associated with the reward.

the risks of losing funds are minimal Spee. "offshore" does not mean keeping assets in some exotic country with a shady bank. offshore can be London, Zürich, Singapore, Hong Kong, Frankfurt or you name it. as far as tax evasion is concerned the decision is up to the individual and his her conscience. personally i am lucky as my home country does not tax my income because i live abroad and i am lucky² because the thai taxman ignores me.

[Mike45]

To the best of my knowledge when money comes out of a tax advantage account, 401K/IRA that in itself is the taxable event. So tax's are due and sometimes actually withheld by the institution.

I can see how this would work with regular accounts but how does someone even get the money out of the 401K/IRA without it being a taxable event?

withdrawing funds from tax deferred accounts are of course taxable AND at a high tax percentage. but only ONCE

I see your point. Paying the tax on it sooner rather than later and then allowing to to grow tax free outside the US.

[Jingthing]

To the best of my knowledge when money comes out of a tax advantage account, 401K/IRA that in itself is the taxable event. So tax's are due and sometimes actually withheld by the institution.

I can see how this would work with regular accounts but how does someone even get the money out of the 401K/IRA without it being a taxable event?

withdrawing funds from tax deferred accounts are of course taxable AND at a high tax percentage. but only ONCE

I see your point. Paying the tax on it sooner rather than later and then allowing to to grow tax free outside the US.

It makes no sense to me at all! If you took out all of your IRA the same year ALL of that income would be taxed as income for that one year (for most people at a higher tax rate). The tax hit would be massive. On the other hand, if you take it out in drips and drabs, it continues to grow tax protected, and you only pay the tax for the much smaller amount you take out annually.

[PeaceBlondie]

To the best of my knowledge when money comes out of a tax advantage account, 401K/IRA that in itself is the taxable event. So tax's are due and sometimes actually withheld by the institution.

I can see how this would work with regular accounts but how does someone even get the money out of the 401K/IRA without it being a taxable event?

withdrawing funds from tax deferred accounts are of course taxable AND at a high tax percentage. but only ONCE

I see your point. Paying the tax on it sooner rather than later and then allowing to to grow tax free outside the US.

It makes no sense to me at all! If you took out all of your IRA the same year ALL of that income would be taxed as income for that one year (for most people at a higher tax rate). The tax hit would be massive. On the other hand, if you take it out in drips and drabs, it continues to grow tax protected, and you only pay the tax for the much smaller amount you take out annually.

I think you're right, Jingthing. Also, I think that usually, a taxable withdrawal prior to age 59.5 also carries its own penalty of another ten percent. And, I do not think the 5 or 10 year averaging formula can be used on the lump sum tax calculation. Still, it is way too involved for me, unless I would be earning US$80 per hour to research it.