Tax On Pension On Retirement Extension

[phetaroi]

I am still in my first year living here, and on an extension based on retirement. I thought -- and assumed -- my American pension was not taxable here in Thailand. Each month it is deposited in my American bank account.

I am correct in this...aren't I?

[retiredusn]

Your right

[lopburi3]

The dual tax treaty that I read years ago only exempted government paid pensions in my reading.

But Thailand does not tax money that is not remitted in the year earned so have never seen anyone report tax issues. I would continue to have it deposited in the US if not an official government paid pension.

[phetaroi]

The dual tax treaty that I read years ago only exempted government paid pensions in my reading.

But Thailand does not tax money that is not remitted in the year earned so have never seen anyone report tax issues. I would continue to have it deposited in the US if not an official government paid pension.

I have two pensions -- one is a state government pension, the other is a local government pension.

[lopburi3]

I think you will find it is good to keep financial accounts in the US as there are times when you want credit cards with US source and direct deposit facilities for tax/or other refunds.

BBL offers good ACH transfer service using there New York office for on-line transfer (takes about 2 days). SWIFT wire transfers take only about 13 hours on workdays at optional times. So no need to have more money in Thailand then you would normally need in an immediate emergency. Large transfers several times a year would be reasonable in respect to fees. But even a few thousand is not that expensive using ACH.

[Pib]

The dual tax treaty that I read years ago only exempted government paid pensions in my reading.

But Thailand does not tax money that is not remitted in the year earned so have never seen anyone report tax issues. I would continue to have it deposited in the US if not an official government paid pension.

I have two pensions -- one is a state government pension, the other is a local government pension.

You must pay U.S. taxes. U.S. citizens are taxable on your worldwide income unless exempted by a treaty, agreement, etc. Although you may be living Thailand right now, you are still a resident/national of the U.S. and subject to U.S. federal taxes. And whether you maintained legal residence in your previous state (i.,e, CA, NY, etc), that states tax laws determine where your pension is taxable by that state. Generally, the "source" country of the payment (the U.S. in this case) is the one which you must pay taxes to. Take a look at below U.S. Treasury/IRS web link that shows you the tax agreement/convention between the U.S. and Thailand...Articles 21 and 20 probably address your question.

And don't confuse how income you might get from working in Thailand is taxed with your pension/income from the U.S.; completely different set of rules where you can get tax exempt from one of the countries but not both. Of course you are not working in Thailand since you are on a Retirement Visa/Extension of Stay.

http://www.ustreas.gov/offices/tax-policy/library/tethai.pdf

[TerryLH]

"You must pay U.S. taxes."

Not completely accurate. After a certain amount of income you are required to file, but that doesn't mean you will actually owe anything.

"Although you may be living Thailand right now, you are still a resident/national of the U.S...."

If you choose to reside in Thailand, that's the country you are a resident in. You could claim to be resident in the US, but why would you?

"And whether you maintained legal residence in your previous state (i.,e, CA, NY, etc), that states tax laws determine where your pension is taxable by that state."

If you meet the criteria for foreign residency, you don't even have to file state tax forms. The law is you file in the state you live in, not necessarily the state your pension comes from. If you live in Thailand, you obviously don't live in any of the states, so you don't have to file.

Note. You might get a letter from your old state's franchise tax board saying they show you getting payments, but not filing. Just send them a letter telling them you no longer live in that state and that you won't be filing any tax forms with them. It worked for me.

OP

I believe the embassy in BKK and the consulate in CM have people there who can answer questions for you during this time of year.

Good luck.

[Pib]

Regarding the requirement of filing of a federal income tax return for U.S. citizens, I think the first paragraph from below web site pretty much sums it up:

http://www.taxmeless.com/page4.html

Quote:

Your U.S. Income Tax Obligation While Living Abroad

As a U.S. expatriate residing in abroad, you still owe U.S. taxes each year on your worldwide income! The stories you hear from the fellow American expatriate sitting next to you at the bar that once you leave the U.S., you no longer owe any taxes or have to file tax returns , are about as true as most bar room tales. Its against the law to give up your U.S. citizenship in order to avoid U.S. taxes! Therefore, if you aren't filing your U.S. tax return, the statute of limitations on tax collections will not run out and your tax return obligation only grows greater as each year passes.

End Quote.

Regarding the filing of a state return, each state has it own rules. But usually there is a procedure/document/closing return you must process/file to legally clear yourself of state income tax obligations to that state.

[TerryLH]

"As a U.S. expatriate residing in abroad, you still owe U.S. taxes each year on your worldwide income!"

You seem to have left out the important info for US expats working abroad.

"Foreign Earned Income Exclusion

If you have your full time residence abroad for a full calendar year, or live there for 330 days out of any consecutive 12 month period, you can exclude up to $87,600 of earned income from U.S. Income Taxation for 2008"

For 2009 the amount you can exclude is $91,400.

I believe the info you're quoting is from an attorneys 'infomercial', bad grammar and all. They have good info there, but they make it sound like you need their services to file taxes, just like any advertisement is designed to get paying customers.

You'd be better served using a US tax book Form 1040-7. It is specifically for overseas filers.

I've filed for the last 15 years, and haven't owed anything. During that time I have not filed in CA, and don't owe them anything.

According to the info you're referring to, not having to file/pay state taxes is a difficult proposition.

If you are truly living out of the country, it's very easy. As I understand it, it's the same for all the states.

CA was highlighted as being one of the more difficult states. In my experience, it was simple. A letter to the franchise tax board was all I needed.

If you're not really willing to change your residency, there might be issues.

This is my own personal, firsthand experience. Yours may be different.

[Pib]

"As a U.S. expatriate residing in abroad, you still owe U.S. taxes each year on your worldwide income!"

You seem to have left out the important info for US expats working abroad.

"Foreign Earned Income Exclusion

If you have your full time residence abroad for a full calendar year, or live there for 330 days out of any consecutive 12 month period, you can exclude up to $87,600 of earned income from U.S. Income Taxation for 2008"

For 2009 the amount you can exclude is $91,400.

The OP is "not" talking "foreign" earned income. He is talking his U.S. paid/earned pensions. Once again, he is not talking foreign earned income.

Take a look at this web site link (U.S. IRS) regarding U.S. citizens living inside or outside the U.S.

http://www.irs.gov/businesses/article/0,,id=182017,00.html

Partial Quote:

International Tax Gap Series

May 2008

WASHINGTON – United States citizens and resident aliens are taxed on their worldwide income, whether the person lives inside or outside of the United States. However, qualifying U.S. citizens and resident aliens who live and work abroad may be able to exclude from their income all or part of their foreign salary or wages, or amounts received as compensation for their personal services. In addition, they may also qualify to exclude or deduct certain foreign housing costs.

End Quote.

[Pib]

To the OP,

Don't get confused with the "foreign earned income" exemption info one poster has provided. His info definitely applies if you are "residing and working" in a foreign country like Thailand. But you question was on your U.S. paid pension.

The pension income you asked about is "not" foreign earned income. And the IRS specifically states it's not foreign earned income on Page 16 (top left corner) of IRS Pub 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad at http://www.irs.gov/app/vita/globalmedia/p54.pdf

Just do some more googling regarding federal taxes and U.S. exparts/citizens and plenty of links will come up saying you still have to file a federal return and your pension is taxable. But hopefully, you will have exemptions which will offset taxes on most of it. BUT, the foreign income exeption ain't one of them.

[lopburi3]

Pib is totally correct. Your US income/pension is taxed by the US and you must pay that tax to the US. It is not foreign earned income or exempt from US tax.

[TerryLH]

Actually, I was responding to Pib, not the OP. He quoted a tax law referring to worldwide income.

The amount you get from US sources, minus any deductions you might have, determines whether you will owe anything. I suppose I wasn't clear on that. I think we are in agreement there for federal taxes.

For state taxes, what I said is accurate, at least as far as CA is concerned. If you are resident in Thailand you do not even have to file state forms in CA. I believe it's the same in every state.

[phetaroi]

For state taxes, what I said is accurate, at least as far as CA is concerned. If you are resident in Thailand you do not even have to file state forms in CA. I believe it's the same in every state.

Regrettably, as has been discussed in several posts on the forum over time, Virginia dogs its former citizens seemingly forever unless they move to another American state and take up residency.

[mahjongguy]

The OP made it clear that he receives a pension from his state gov't and his municipal gov't.

Some states require that he pay taxes unless he is a resident of another state which is already taxing that income.

Since the OP did not tell us which state is paying him, we cannot answer the question. He should consult the website of that state. Many of them (e.g. CA) have simple online questionaires that help you determine if filing is required.