American Expats: Taxes and US citizenship

[Manassas]

We are recently retired and split our time between the US and Thailand. We also plan to get my (Thai) wife US citizenship, primarily for ease of foreign travel.

But I'm getting documents ready for this year's US income taxes. I'm wondering, what are the downside tax implications for my wife in our later years when we are likely to be residing in Thailand full time? ...keeping in mind that she will draw social security when eligible. I can file joint returns easy enough, but I'm wondering what happens if she survives me? Is reporting of any Thai-based interest income under the new rules difficult with currency conversions etc? I have an accountant in the US so I think everything can be done by email.

I welcome any tips from those who have done this.

[Suradit69]

Is reporting of any Thai-based interest income under the new rules difficult with currency conversions etc?

If her main income would be from SS, they send out a W-2 whether you/she are in the US or in Thailand. If she will derive income from taxable US investments, they will send 1099-B or 1099-int or whatever. If she has income from a Roth IRA in her name, that's not taxable .

Any investments or bank accounts you have in Thailand will need to be reported to the US Treasury annually if they exceed certain limits. http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-FBAR

Whatever income that's generated from foreign sources that is not "earned" according to the IRS definition of "earned" can be included on her 1040, but if you mean the interest from keeping living expenses in a Thai savings account, it won't amount to much.

If she works in Thailand she will be allowed an income exclusion up to a generous limit for that earned income.

You can convert Baht interest or income into dollars for reporting using a reasonable exchange rate average over the year or if you want to be really compulsive about it, you can record the specific conversion amount every time you receive a payment.

If she basically understands how to submit a 1040 now, it won't be that much different . I use TurboTax each year and just plug in numbers and print it out. If you start using it while you are here together, it will carry forward a lot of information from year to year that will make it even easier for her if she is doing it alone.

You will probably need to keep US based brokerage, mutual funds, and bank accounts with a US address. It used to be no problem having a foreign address, but the Patriot Act made that difficult to impossible. Use a friend's or relative's address. No problem having a foreign address for Social Security.

Edited December 23, 2013 by Suradit69

[DogNo1]

The IRS lists the average yearly exchange rates on its webpages. They are also posted on various websites including OANDA. It's much easier to use the average yearly rate than to note the exchange rate for each transaction.

[streetlite]

I apologize for intruding on your question but the FBar issue has always puzzled me. For example:

United States persons are required to file an FBAR if:

1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.

I have a pension and SS income that is direct deposited into a US bank account. All money is taxed before deposit. I use TaxAct for income tax filing.I then wire transfer every month to my Thai bank accounts. There is never more than 90,000 thb in the Thai banks per month but through the year it obviously adds up to over $10,000 US. The word "aggregate" in the above statement is what confuses me. Does that mean $10,000 US at one time in the bank or do I still have to do an FBar because the money is spread throughout the year?

Thanks for any help.

[rickb]

It is my understanding that she will be responsible to pay US taxes on her social security payments whether she is a Thai citizen or a US citizen. As a Thai citizen she must pay 15% in taxes on all income derived from the US, i.e., social security payments. That percentage is based on the latest tax agreement between the USA and Thailand. As a US citizen, she is entitled to the various exemptions and deductions which could reduce her US tax to zero. So, from that viewpoint, I would think it is better to be a US citizen.

Regarding Thai bank accounts and reporting them to the US government, again it is my understanding, from reading Turbo Tax's explanations, that only foreign bank accounts that exceed US$10,000 in aggregate at any one time during the year must be reported. The way I interpret that is the sum of all of your foreign bank accounts should be reviewed over the entire year. If, at any one time, the sum of all these accounts exceeds US$10,000, you must report that to the US Government. If the sum never exceeds US$10,000, than no report is necessary

Edited December 24, 2013 by rickb

[Langsuan Man]

I am concerned by the OP's statement that they are currently splitting their time between the US and Thailand and that he is trying to get her US Citizenship

I think that there are some requirements that she must stay in the US continuously to qualify for US Citizenship

Hopefully there will be some members here that can give you the exact requirements

streetlite the term aggregate means that the $10,000 figure is the total amount that you have in all Thai bank accounts that you have control over.

[waxon]

I am concerned by the OP's statement that they are currently splitting their time between the US and Thailand and that he is trying to get her US Citizenship

I think that there are some requirements that she must stay in the US continuously to qualify for US Citizenship

Hopefully there will be some members here that can give you the exact requirements

streetlite the term aggregate means that the $10,000 figure is the total amount that you have in all Thai bank accounts that you have control over.

My wife had a permanent residence visa with a green card for over 2 years. She got it because we thought, at one point, that we would be living in the US. During that time, she only traveled to the States 3 times. The last time we entered, the immigration officer told us that the PR is only for people who want to stay and live in the US. To get citizenship, you need to fist have a PR for some period of time (5 years?). Once you become a citizen, there is no requirement for staying there though.

Regarding the aggregate amount, that is at any one time for all foreign bank accounts. Not the aggregate amount for the entire year.

[SpokaneAl]

It is my understanding that she will be responsible to pay US taxes on her social security payments whether she is a Thai citizen or a US citizen. As a Thai citizen she must pay 15% in taxes on all income derived from the US, i.e., social security payments. That percentage is based on the latest tax agreement between the USA and Thailand. As a US citizen, she is entitled to the various exemptions and deductions which could reduce her US tax to zero. So, from that viewpoint, I would think it is better to be a US citizen.

Regarding Thai bank accounts and reporting them to the US government, again it is my understanding, from reading Turbo Tax's explanations, that only foreign bank accounts that exceed US$10,000 in aggregate at any one time during the year must be reported. The way I interpret that is the sum of all of your foreign bank accounts should be reviewed over the entire year. If, at any one time, the sum of all these accounts exceeds US$10,000, you must report that to the US Government. If the sum never exceeds US$10,000, than no report is necessary

If her only income is that from Social Security she will incur no U.S. income tax liability. And if that is the case she may not even be required to file.

[howiem]

For both Manassas and Streetlite,

You both need to look at http://www.irs.gov/Businesses/Corporations/Foreign-Account-Tax-Compliance-Act-%28FATCA%29 also known as FATCA reporting in addition to the FBAR report. I believe that the threshhold for FATCA reporting is $50,000, and the FBAR amount is $10,000. .You can bet that if the U.S. government sees one report, it will check and see the amount, and if, for example, the FBAR report shows that you had an aggregate of $50,000 during the year, the IRS will look to see if you submitted a FATCA report. Failure to submit either report could cost you $10,000 per report! In addition, as I understand matters, the US government has told Thai banks to check the accounts of Americans and report (he US government has ways of pressuring just about anyone), So if the Thai bank reports that you have 4 accounts and the aggregate during the year was %55,000, the US government will likely check to see if your FBAR and FATCA reports coincide with the bank's report.

Just to be sure, you should check with your accountant.

2. For Streetlite: If after reading Richb's comment above , if aggregate is still unclear, think of it this way. Suppose you have 3 accounts in Thailand with $3,300 in each account all year and never change those amouns (except a little interest)., The aggregate in those accounts at any time during the year will be $3,300 x 3 or $9,900 (not including interest). Iff the interest does not make the aggregate total of all accounts $10,000 or more, then no reports are needed. However, if at any time during the year you put $100 into any one of those accounts (even for just a day), or you get interest of $100, the new aggregate amount will be $10,000, and you will have to do an FBAR report. See the link above for more info on reporting FATCA.

Be sure you get it right. The penalty can be $10,000 for failure to submit either report (FBAR and FATCA) and you probably don't want to pay out $20,000 in penalties.

[lopburi3]

As said the FBAR report is only concerned with US person accounts of more than 10k at any point in time (not a total for a period) so no report would be required for normal interest - you would just report as interest on tax return and using taxact or similar program just enter the amounts for year using conversion rates in effect when received for yearly federal rate.

If she is not a citizen pensions would not be subject to US tax laws after your death (she would have to pay in Thailand) but not sure of SS but would expect it to be the same. Tax exemption paperwork would have to be filed. If she becomes a US citizen or lives in US then tax payments would be to US.

[howiem]

As said the FBAR report is only concerned with US person accounts of more than 10k at any point in time (not a total for a period) so no report would be required for normal interest - you would just report as interest on tax return and using taxact or similar program just enter the amounts for year using conversion rates in effect when received for yearly federal rate.

Are you sure that interest on savuings in a Thai bank account that puts the aggregate at over $10,000 is not counted and will not require the submissio0n of the FBAR? It seems to me that any money that puts the amount at $10,000 or more during the year would kick in the FBAR reporting requirement and possibly the FATCA requirement as well if it meets the higher threshhold. . The FBAR does not have anything to do with normal income tax filing with a 1040 or one of its variants. .

[oneday]

I apologize for intruding on your question but the FBar issue has always puzzled me. For example:

United States persons are required to file an FBAR if:

1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.

I have a pension and SS income that is direct deposited into a US bank account. All money is taxed before deposit. I use TaxAct for income tax filing.I then wire transfer every month to my Thai bank accounts. There is never more than 90,000 thb in the Thai banks per month but through the year it obviously adds up to over $10,000 US. The word "aggregate" in the above statement is what confuses me. Does that mean $10,000 US at one time in the bank or do I still have to do an FBar because the money is spread throughout the year?

Thanks for any help.

Take a close look at the "TD F 90-22.1" you must file for a bank account in your name or that you have an interest in. One of the pieces of data asked for in Part II, item 15, is the "maximum value of account during the calendar year". I take that to mean my highest balance. As long as your highest balance never exceeds $10,000 then you are probably exempt from reporting, but I'm not an expert...ask your accountant.

The only other possible interpretation, IMO, is to add up all the credits for the year without consideration for any withdrawals. I'm sure that is not what they are asking for, because then just about everyone would exceed $10,000 since 99.99% of Expats need more than that to survive on.

This form also says to use the US official year-end exchange rate which can be found here for any conversions from THB to USD.

http://www.fms.treas.gov/intn.html

Edited December 24, 2013 by oneday

[lopburi3]

As said the FBAR report is only concerned with US person accounts of more than 10k at any point in time (not a total for a period) so no report would be required for normal interest - you would just report as interest on tax return and using taxact or similar program just enter the amounts for year using conversion rates in effect when received for yearly federal rate.

Are you sure that interest on savuings in a Thai bank account that puts the aggregate at over $10,000 is not counted and will not require the submissio0n of the FBAR? It seems to me that any money that puts the amount at $10,000 or more during the year would kick in the FBAR reporting requirement and possibly the FATCA requirement as well if it meets the higher threshhold. . The FBAR does not have anything to do with normal income tax filing with a 1040 or one of its variants. .

That was in response to OP question on interest reporting on 1040 "is reporting of any Thai-based interest income under the new rules difficult with currency conversions etc?" As I said if total gets to 10k on any day it needs to be reported on FBAR as well.

[mesquite]

As said the FBAR report is only concerned with US person accounts of more than 10k at any point in time (not a total for a period) so no report would be required for normal interest - you would just report as interest on tax return and using taxact or similar program just enter the amounts for year using conversion rates in effect when received for yearly federal rate.

If she is not a citizen pensions would not be subject to US tax laws after your death (she would have to pay in Thailand) but not sure of SS but would expect it to be the same. Tax exemption paperwork would have to be filed. If she becomes a US citizen or lives in US then tax payments would be to US.

The FBAR is also required for those who are permanent residents and/or possess a "green card."

Edited December 24, 2013 by mesquite

[streetlite]

Thank you everyone for your concise and prompt answer to my question. Again, I apologize, Manassas, for jumping on your bandwagon.

[CaptHaddock]

OP,

If your wife has lived with you in the US for 5 years, then she is entitled to received spousal/widow benefits based on your SS contributions, even if she returns to Thailand permanently. However, that regulation has changed in the past and could change in the future, possibly to the detriment of non-resident foreign recipients. Therefore, the strongest claim that she will have to SS benefits would be based on being a US citizen. That's the reason my wife is a US citizen and I recommend citizenship for that reason.

The downside is that she will be taxable to the IRS on her world-wide income for life. It doesn't matter where the income originates, whether in the US, Thailand or elsewhere. There are provisions that will enable her to avoid double-taxation by the the US and Thai tax authorities simultaneously. If she were to own her own business in Thailand she would be obligated to pay the Self-Employment Tax (i.e. Social Security, approx. 15%) as well. Nevertheless, US SS benefits are generous, go for life, and include a cost of living adjustment and are, in my opinion, well worth the tax burden.

The FATCA and FBAR requirements are a non-issue if you both comply or a very large issue if you do not. Not worth discussing in my opinion.

You should also try to avoid liability for state income taxes, if possible depending on your state, maintain bank, credit card, and brokerage accounts in the US along with a mailing address and a US phone number.

[IAMSOBAD]

As an American and now retired in Thailand ...I am saddened by my government becoming exactly how we were brainwashed to believe Russia and China were to its citizens.

Seems like 9-11 made the good old USA a police state while Russian and Chinese people are now traveling the world with huge wads of cash.

$10,000 is chump change in this day and age.

Make the amount $100,000 and be realistic America.

Government waste will totally eat up the mere pennies you collect.

[dighambara]

It is my understanding that she will be responsible to pay US taxes on her social security payments whether she is a Thai citizen or a US citizen. As a Thai citizen she must pay 15% in taxes on all income derived from the US, i.e., social security payments. That percentage is based on the latest tax agreement between the USA and Thailand. As a US citizen, she is entitled to the various exemptions and deductions which could reduce her US tax to zero. So, from that viewpoint, I would think it is better to be a US citizen.

Regarding Thai bank accounts and reporting them to the US government, again it is my understanding, from reading Turbo Tax's explanations, that only foreign bank accounts that exceed US$10,000 in aggregate at any one time during the year must be reported. The way I interpret that is the sum of all of your foreign bank accounts should be reviewed over the entire year. If, at any one time, the sum of all these accounts exceeds US$10,000, you must report that to the US Government. If the sum never exceeds US$10,000, than no report is necessary

If her only income is that from Social Security she will incur no U.S. income tax liability. And if that is the case she may not even be required to file.

NOTE: Even thugh income is below the require reporting level, the IRS will hassle you to file. My income has been below the reporting limt for over a decade and periodically, the IRS checks up. It was so much of a hassle, answering IRS questions, that I began filing every year to keep them off my back.

[imjmn]

Fact - if your wife becomes a US citizen she will be required to file a tax return and pay US tax if due on worldwide income! This includes any income from Thailand. She will needed to file a tax return every year even if no tax is due. She, as a Thai citizen would also have to pay any applicable Thai tax due.

Go to the official Social Security site - http://www.ssa.gov/survivorplan/ifyou2.htm and get the real scoop on what is required and if it is even possible that she can get your SS benefits as a survivor.

I myself am married to a Thai and have opted to just get her a 10 year multiple entry visa as we will not likely stay in the US fed extended periods. If we do decide to stay I would then get on the path to a Green Card.

Sounds like you really need to get professional advice from a Tax/Law firm that is competent in Thai and US tax law to be compliant and be informed of any possible pit falls.

As noted by other posters there are lot of things to consider to be compliant and the laws/rules are always changing.

MJ

[Rama]

Your wife doesn't automatically get ss by being your wife. She needs to reside in the US continuously to receive that benefit. I don't remember the number of years, it's on the ss website. she will also have to get permanent residency before they grant citizenship. If you're planning to be there half time only, expect the government to fight you against granting permanent residency, they'll be probably be willing to grant a 6 month visa first. You're looking at YEARS of paperwork to get this done. Not to mention again that she must live continuously, not part time, to get ss benefits. No way around that.

[thaikahuna]

I apologize for intruding on your question but the FBar issue has always puzzled me. For example:

United States persons are required to file an FBAR if:

1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.

I have a pension and SS income that is direct deposited into a US bank account. All money is taxed before deposit. I use TaxAct for income tax filing.I then wire transfer every month to my Thai bank accounts. There is never more than 90,000 thb in the Thai banks per month but through the year it obviously adds up to over $10,000 US. The word "aggregate" in the above statement is what confuses me. Does that mean $10,000 US at one time in the bank or do I still have to do an FBar because the money is spread throughout the year?

Thanks for any help.

If your deposits in any Thai bank Exceeds $10,000.00 during the year, it must be reported. Using your example of B90,000, that I approximately $3000USD. You would exceed the threshold in April of the year.

[KED]

I am also piggybacking on the thread to ask a question. If I have a Thai spouse who is not a U.S. citizen or alient, are there any tax advantages or am I able to file a joint tax return with them as a non-resident alien?

[lopburi3]

I apologize for intruding on your question but the FBar issue has always puzzled me. For example:

United States persons are required to file an FBAR if:

1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.

I have a pension and SS income that is direct deposited into a US bank account. All money is taxed before deposit. I use TaxAct for income tax filing.I then wire transfer every month to my Thai bank accounts. There is never more than 90,000 thb in the Thai banks per month but through the year it obviously adds up to over $10,000 US. The word "aggregate" in the above statement is what confuses me. Does that mean $10,000 US at one time in the bank or do I still have to do an FBar because the money is spread throughout the year?

Thanks for any help.

If your deposits in any Thai bank Exceeds $10,000.00 during the year, it must be reported. Using your example of B90,000, that I approximately $3000USD. You would exceed the threshold in April of the year.

the 10k is based on being in accounts at one set time during the year - not on income/transactions. Never more than 90k would not require reporting if that was the only account held as it is only about 3k.

[Langsuan Man]

I am also piggybacking on the thread to ask a question. If I have a Thai spouse who is not a U.S. citizen or alient, are there any tax advantages or am I able to file a joint tax return with them as a non-resident alien?

Yes, she (and any children you may have) can be claimed as dependent on your tax return so long as you have applied for her / them to get a ITIN (Individual Taxpayer Identification Number)

When Claiming Exemptions for Dependent or Spouse:You generally must list on your individual income tax return the social security number (SSN) of any person for whom you claim an exemption. If your dependent or spouse does not have and is not eligible to get an SSN, you must list the ITIN instead of an SSN.

see:

http://www.irs.gov/Individuals/International-Taxpayers/Taxpayer-Identification-Numbers-%28TIN%29

[lopburi3]

As said an ITIN must be obtained and now believe that is only available during the actual tax submission process. To file joint return believe you must include a statement that foreign national agrees to worldwide tax to US on earnings (first time) so might not be a good option for some.

[Hunter88]

What makes you think your wife will receive your S.S. benifits after your death? If you marry her on monday and die on tuesday do you really think she will receive your benifts? Any income earned in the U.S. is taxable. Regardless of where you live. If she has a green card she must live in the U.S to keep it.

Why not establish an account in Thailand for her and call it a day. What your suggesting may drive you crazy.

[kimchibob]

Let me get this straight. As a U.S. citizen/taxpayer, if my Bangkok Bank account balance exceeds $50,000 at any time during the tax year, I must file both FBAR and FACTA? Two separate forms, or are they both the same thing?

[CMBob]

Let me get this straight. As a U.S. citizen/taxpayer, if my Bangkok Bank account balance exceeds $50,000 at any time during the tax year, I must file both FBAR and FACTA? Two separate forms, or are they both the same thing?

Contrary to at least one post, the amount you deposit in total during the year has nothing to do with either the Fbar or FACTA filings - it's the highest amount you have at any one moment of the year. For Fbar, it's $10,000 in value in all accounts (which includes bank accounts, stock accounts, etc., outside the US and can include accounts which you don't own anything in the account or not all of the account if you have signatory authority over that account). So, if the a person doesn't ever have $10,000 of value during the year (and, as noted by somebody, you can get the online baht conversion rate from the Treasury department - but I think you have to use the 12/31 rate which isn't determined yet), the person doesn't have to file anything. However, also as noted, you have to include interest earned and other income earned on your US tax return although you may not have to pay taxes on income earned outside the US (at least up to a given amount - your US accountant will take care of all of that).

The Fbar is filed with the Department of Treasury by June 30th. You can download the form, it's extremely easy to file, and that filing doesn't in itself create any tax liability.

The FATCA filing [where you have more than $50,000 of applicable accounts at any one moment outside the US - and I'd note that the figure may be different for a joint return (I'm not sure, I've only ever filed as a single person)] goes with your tax return to the IRS. The form you're looking for there is called a 8938 form (you can download it from IRS and/or Treasury)]. It's also easy to fill out (for both forms, if my memory is correct, you just have to list the bank name, bank address, account number, name on the account, and the highest value for the calendar year based on the 12/31 exchange rate published by Treasury).

I've done the Fbar myself for the last few years and maybe takes me 10 minutes to prepare it. My US accountant has done the FATCA (8938 form) for me but it looks rather easy to fill out.

Edited December 24, 2013 by CMBob

[kimchibob]

Thanks CMBob...got it.

[lopburi3]

FBAR must be filed online from this point on from last report I have seen - no more mailing of forms to Treasury. But believe still have until June to file so web site should be working OK by that time (hope). The exchange rate I believe is the yearly average which is not published until some time in January and below link provides once available.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Treasury-Department-End-of-Year-Exchange-Rates