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Estimated tax payments is one reason why you should begin thinking about this in November instead of March.

The foreign earned income exclusion is 75 or 80K. Not sure but I think maybe you don't have to declare the free housing.

There are folks on this forum who can do tax prep.

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Tax Prep

[Carmine6]

Estimated tax payments is one reason why you should begin thinking about this in November instead of March.

The foreign earned income exclusion is 75 or 80K. Not sure but I think maybe you don't have to declare the free housing.

There are folks on this forum who can do tax prep.

Free housing might be taxable. If the family business is paying for or providing it, then technically it is part of compenation and subject to tax. But if his wife pays the rent or owns the house outright, then no.

But, let me throw the issue out there of how would they know about any of this? In the OP's case it's not much income and it's a family business. So the important thing is knowing how these costs are being reported by the company. Making sure those amounts are covered in any tax filing is important.

[OriginalPoster]

Free housing might be taxable. If the family business is paying for or providing it, then technically it is part of compenation and subject to tax. But if his wife pays the rent or owns the house outright, then no.

The free housing might be reportable but there is also a Foreign Housing Exclusion that you might be able to claim against your US taxes. See http://taxes.about.com/od/taxhelp/a/ForeignIncome_4.htm .

Unfortunately, expat tax matters are unduly complex. Most likely the original poster doesn't owe any taxes because is total cash & non-cash income is below the $87K limit, figuring out all the laws and regulations that make that so can take some research. TurboTax, by the way, does seem to figure out the Foreign Income allowance and Foreign Housing allowance correctly, using something like that and also reading what the regulations say as a sanity check on TurboTax's results, may increase the chances of applying all the rules correctly.

Edited March 20, 2009 by OriginalPoster

[lopburi3]

TaxAct indeed can handle foreign address and can be filed online/or by mail. I have been using for the last 10 years. I would strongly advise using a computer type program if you have no knowledge of the laws (or even if you do; as a double check).

Lopburi3, are you using a Thai address and have no W-2's (i.e. work for a Thai company that doesn't issue W-2's)? I have been using TaxCut (H&R Block) for a few years and it won't allow e-filing for me or several of my friends under the same circumstances.

From your post I am beginning to wonder if the problem is that I am not using TaxAct, or if it is that I just don't qualify for e-filing.

No. That is why I suggested trying the software to find out how it handled alternate W-2 process. I am retired so only have US pension, US bank interest, US IRA and local bank taxable sources. Have no active income. For this I use a Thai address and file electronically using TaxAct entry.

[Pseacraft]

IRS Form 2555 (2555EZ) handles your Foreign Earned Income Exclusion and Foreign Household Exclusion. Foreign Earned Income Exclusion is up to $87,500 and the Housing exclusion is based on location which if you are in BKK is about $31,000 but outside BKK is about $25,000. You must do the 2555 first than IRS Form 1040. The directions are simple to follow. Of note: if you earned more than $87,500 than you will pay a higher tax rate because the method used to figure considers all of your income first, then your excluded income is calculated and eventually subtracted from the former. This will result in what your taxable income and taxes will be. It does provide a nice break

Sounds harder than it really is.

[thaihome]

IRS Form 2555 (2555EZ) handles your Foreign Earned Income Exclusion and Foreign Household Exclusion. Foreign Earned Income Exclusion is up to $87,500 and the Housing exclusion is based on location which if you are in BKK is about $31,000 but outside BKK is about $25,000. You must do the 2555 first than IRS Form 1040. The directions are simple to follow. Of note: if you earned more than $87,500 than you will pay a higher tax rate because the method used to figure considers all of your income first, then your excluded income is calculated and eventually subtracted from the former. This will result in what your taxable income and taxes will be. It does provide a nice break

Sounds harder than it really is.

Note that any foreign income tax you paid on the amount over the exclusion can be used as a tax credit against any US tax you owe.

What some people fail to do is to pay the FICA tax, or self employment tax if they are working for non US company that does not pay the employer portion of the FICA. This is what got ISB graduate Tim Geithner in trouble. He failed to pay the FICA tax on hie earning from the World Bank. Had nothing to do with income tax.

TH

[OriginalPoster]

IRS Form 2555 (2555EZ) handles your Foreign Earned Income Exclusion and Foreign Household Exclusion. Foreign Earned Income Exclusion is up to $87,500 and the Housing exclusion is based on location which if you are in BKK is about $31,000 but outside BKK is about $25,000. You must do the 2555 first than IRS Form 1040. The directions are simple to follow. Of note: if you earned more than $87,500 than you will pay a higher tax rate because the method used to figure considers all of your income first, then your excluded income is calculated and eventually subtracted from the former. This will result in what your taxable income and taxes will be. It does provide a nice break

Sounds harder than it really is.

Note that any foreign income tax you paid on the amount over the exclusion can be used as a tax credit against any US tax you owe.

What some people fail to do is to pay the FICA tax, or self employment tax if they are working for non US company that does not pay the employer portion of the FICA. This is what got ISB graduate Tim Geithner in trouble. He failed to pay the FICA tax on hie earning from the World Bank. Had nothing to do with income tax.

TH

You can claim a credit for foreign taxes you pay on earnings above the $87K exclusion but you’ll find that the method that the IRS uses to calculate how much of the foreign taxes that you paid are attributable to the amount above $87K is rigged against you. The IRS treats the foreign tax as if it’s applied at a flat rate on all your earnings, rather than accounting for the fact that the marginal rate for the foreign taxes that you paid on the amount above $87K will be higher than the average rate that you paid on amounts below $87K.

About the FICA, I don’t know what Geithner’s situation was, but the advice that I received was that if I worked outside the US for a non-US entity that neither I nor my company would need to pay into FICA. Was I steered wrong on that point?

Edited March 23, 2009 by OriginalPoster

[PeaceBlondie]

I do not know the details about Geitner, but there are two kinds of employment taxes

FICA - when you are employed by an employer who is required to withhold 7.65% of your gross wages and match it.

SECA - when you are considered self-employed such as consultant or independent contractor, and must pay the entire tax yourself on Form SE.

I think Geitner got caught on SECA

When I worked as an employee of a Thai school, no FICA or Seca applied.

If you are selfemployed, at home or abroad, you are liable for SE tax, yourself.

[girlx]

You have an automatic two month extension from April 15 on both filing and paying if you are abroad on April 15.

just wanted to double check... are you sure on this? you don't need to file for that extension?

i usually leave taxes til the last minute... good to know i don't need to get them in til june.

PS- FYI I did get motivated this past weekend and did my taxes with (Intuit) Turbotax online... only to find out at the very end they don't allow you to pay with a credit card that has a foreign billing address!!!! So I wasted that two hours as I have no US billing address. Would have been nice if there was a warning of that upfront.

Edited March 23, 2009 by girlx

[TerryLH]

OP, according to your original post, you shouldn't owe any US taxes.

If you have money coming in from US sources that might change.

As Peaceblondie said in his first post here, file forms 1040 and 2555EZ. Both are very easy to do yourself and can be downloaded off the net, as well as the whole tax book that gives you line by line directions.

All the other advice, while good, doesn't appear to apply to you if the facts you stated in your OP are accurate.