U.s. Tax Consideration

[LoveDaBlues]

Mods, if I've posted this in the wrong section please move.

Here is my current situation. I live full time in Thailand (since Oct. 2005). No intentions of going back to the United States. My income is all derived in the US. It consists of a monthly pension, rental income from my US house, and other investment income from the US in US Dollars. Don't think it matters but I'm 50 years old. Currently I have no income in Thai baht.

I do my Federal taxes myself (using TurboTax) and also I read a lot from www.irs.gov. After all my research I've come to the conclusion that my living in Thailand full time has no bearing on the amount of tax I pay. My income is all derived in the US and Uncle Sammy wants his cut. The purpose of this post is to verify my findings. Anyone disagree with what I've said?

Also, if I'm correct as to my tax status maybe someone out there has a 'creative' way that I can use to avoid some of my tax burden?

LDB

[PeaceBlondie]

What you say appears correct. You appear to meet the residency requirement, but that's only for income you earn overseas, of which you have none.

I'm in the same boat/moobahn.

You could convert some of your savings to municipal bonds; the interest would be free of federal income tax. If you need to draw upon savings, touch the IRA and 401(k) funds that are fully taxable, as a last resort only.

There aren't many ways to avoid tax. Of course, claim depreciation on rental real estate.

[jdinasia]

A good CPA or Tax attny is the very best bet here. My liabilities have been way reduced through the work of one such kind schemer

Edited August 25, 2006 by jdinasia

[Spaniel]

I would say you are correct. You didn't mention if you have a Thai wife or not. If so you can claim her and of course any kids that are yours by her.

[Tywais]

That is correct. My case is different only in that I have income from US and Thailand but satisfy the residency requirements and my Thai income is not taxed by US and handle my US taxes as though I were there. However, if you decide to work here (legally) then just be sure you fill out the necessary IRS forms for the exclusion. Also, if you have a bank account here with more then $10,000 then you need to submit a declaration to the Department of the Treasury to that effect (form f9022-1).

Edited August 25, 2006 by tywais

[fxm88]

[deleted]

Edited August 25, 2006 by fxm88

[lopburi3]

Claim your wife as what? The reason for your happiness or sorrows?

To file a joint return with a Thai wife would require she agree in writing to be taxed by the USA on her worldwide income. Not a problem if a housewife but could be a bad choice if she works.

The foreign bank accounts reporting (form 9022-1) is not filed to IRS and has a different due date than tax day but probably good to do both at the same time.

[Tywais]

The foreign bank accounts reporting (form 9022-1) is not filed to IRS and has a different due date than tax day but probably good to do both at the same time.

You're right lop, my mistake, I should have known since I just submitted it last June. It's filed with the Department of the Treasury.

[LoveDaBlues]

Thanks for all the replies. I did a lot of reading on my situation and figured I was right; just wanted to verify. I also mailed in that form to the Dept. of Treasury.

I quit using tax 'professionals' years ago when I kept catching their mistakes. At one time I did have a good guy doing my taxes but he retired. After that I just went from one to another and each time they screwed up my taxes lol.

TurboTax is good but having a knowledge about your own tax situation really helps. The irs having all the tax law on the internet helps a lot too.

I've had rentel property going back almost 20 years so I know about depreciation, etc.

Anyway thanks again for the help.

LDB

[migrant]

Thanks for all the replies. I did a lot of reading on my situation and figured I was right; just wanted to verify. I also mailed in that form to the Dept. of Treasury.

I quit using tax 'professionals' years ago when I kept catching their mistakes. At one time I did have a good guy doing my taxes but he retired. After that I just went from one to another and each time they screwed up my taxes lol.

TurboTax is good but having a knowledge about your own tax situation really helps. The irs having all the tax law on the internet helps a lot too.

I've had rentel property going back almost 20 years so I know about depreciation, etc.

Anyway thanks again for the help.

LDB

Hey LDB

I'm a bean counter here in California (a CPA) and do some expat returns. You are correct in your thoughts. The IRS allows a exclusion of income for earned income only, and there are specific rules on time out of country, etc.

Pensions and investment income is not earned income under their definition, the same with rental income. So, as you mentioned, they want their cut.

As for creativity, well that is up to the individual, remember pigs get fed, hogs get slaughtered.

My clients vary all over the board as to their sensitivity to risk. Some are very far over the line, some a mile back of it.

The IRS gets extremely angry when one tries to hide income, so I strongly advise against it., but on the expense side, any amounts paid that you can even try to justify as business, could be taken. Worst case you argue with them about the deductability of the expense and perhaps do some horsetrading with them (I'll give you the deduction for the Mother-in-law, you give me the company board meeting at Nana plaza).

[Thaiquila]

I think if you are living overseas, you do get an AUTOMATIC extension of time to file (though from my understand, no extension of the time to pay tax due). The main benefit of this would be that you don't have to file the extenstion form.

Tax wonks, please confirm.

Also, US expats, HOW exactly are you paying the tax to the IRS?

Credit card through the new services?

A US check sent from Thailand?

Through online banking services that cut a check to any party, experiences using this to pay IRS?

[Tywais]

I think if you are living overseas, you do get an AUTOMATIC extension of time to file (though from my understand, no extension of the time to pay tax due). The main benefit of this would be that you don't have to file the extenstion form.

Tax wonks, please confirm.

Also, US expats, HOW exactly are you paying the tax to the IRS?

Credit card through the new services?

A US check sent from Thailand?

Through online banking services that cut a check to any party, experiences using this to pay IRS?

You get an automatic 2 month extension without needing to file a time extension. Also, the extension applies to the tax due.

I pay my taxes with a US check sent from Thailand. You can use an e-tax firm (IRS approved) to do the paper work, file and pay by CC.

[Thaiquila]

Oh, that's good news (extension of date to pay).

I think there are some IRS approved credit card ways of paying even without using a tax preparing service, but not really sure.

[fxm88]

I think there are some IRS approved credit card ways of paying even without using a tax preparing service, but not really sure.

Don't forget that you'll have to cover the transaction fee, 2.5% or something, usually eaten by the merchant but not the IRS. Of course, living in Thialand you're used to this already.

[migrant]

I think if you are living overseas, you do get an AUTOMATIC extension of time to file (though from my understand, no extension of the time to pay tax due). The main benefit of this would be that you don't have to file the extenstion form.

Tax wonks, please confirm.

Also, US expats, HOW exactly are you paying the tax to the IRS?

Credit card through the new services?

A US check sent from Thailand?

Through online banking services that cut a check to any party, experiences using this to pay IRS?

You get an automatic 2 month extension without needing to file a time extension. Also, the extension applies to the tax due.

I pay my taxes with a US check sent from Thailand. You can use an e-tax firm (IRS approved) to do the paper work, file and pay by CC.

If you need longer than two months, you can file the extension which gets you up to October 15th, but you generally have to pay by June 15th.

Out of the country doesn't apply for vacations, only if a resident of a foreign country and your main place of work is also outside the US.

Below copied from form 4868 extension form for you. If you pay by this method you will get a confirmation number

Pay by Credit Card

You can get an extension if you pay part or all of your estimate

of income tax due by using a credit card (American Express®

Card, Discover® Card, MasterCard® card, or Visa® card). Your

payment must be at least $1. You can pay by phone or over the

Internet through one of the service providers listed below.

Link2Gov Corporation

1-888-PAY-1040

www.pay1040.com

Official Payments Corporation

1-800-2PAY-TAX

www.officialpayments.com

[lanny]

As a tax accountant (CPA) in Thailand, I can't really add much to the earlier posts. I just have to put in my two cents (8 baht.)

Only income EARNED outside the US is excludable for US tax purposes. So, your pension, rentals, and investment income is fully taxable. So, in your situation, there isn't much you can do to avoid the IRS, at least not legally.

If you are living outside the US on 4/15, you are entitled to an automtic extension for 60 days -- to 6/15. This is an extension of time to file and to pay, but IRS will charge interest on any balance due. You only avoid late filing and late payment penalties. To get this extension you do not have to file the usual extension form but you must attach a statement to the return explaining that you do qualify.

Payment of any tax due must be in US funds, so you need a check on a US bank or a dollar cashier's check from a Thai bank if you don't use the credit card alternatives.

[Thaiquila]

I think the above might be incorrect. My tax guy once told me being ABROAD on April 15 does not qualify for an automatic extension, rather there is a test of days in the calender year abroad.

[LoveDaBlues]

Hey LDB

I'm a bean counter here in California (a CPA) and do some expat returns. You are correct in your thoughts. The IRS allows a exclusion of income for earned income only, and there are specific rules on time out of country, etc.

Pensions and investment income is not earned income under their definition, the same with rental income. So, as you mentioned, they want their cut.

As for creativity, well that is up to the individual, remember pigs get fed, hogs get slaughtered.

My clients vary all over the board as to their sensitivity to risk. Some are very far over the line, some a mile back of it.

The IRS gets extremely angry when one tries to hide income, so I strongly advise against it., but on the expense side, any amounts paid that you can even try to justify as business, could be taken. Worst case you argue with them about the deductability of the expense and perhaps do some horsetrading with them (I'll give you the deduction for the Mother-in-law, you give me the company board meeting at Nana plaza).

Hey, thanks for this reply migrant; nice getting this from a current bean counter . (Perhaps you should change your 'handle' to bean counter.....just a thought!)

I guess my biggest problem is my own honesty. Even with my rental properties I've always disclosed every penny of income I ever made. My other income (pension for example) the IRS gets the paperwork (electronic file?) on it so they know EXACTLY how much I make there. My brother tried to 'hide' some income years ago and got caught. The outcome was not pretty. I learned from his mistake; I don't <deleted> with the IRS.

[LoveDaBlues]

I think if you are living overseas, you do get an AUTOMATIC extension of time to file (though from my understand, no extension of the time to pay tax due). The main benefit of this would be that you don't have to file the extenstion form.

Tax wonks, please confirm.

Also, US expats, HOW exactly are you paying the tax to the IRS?

Credit card through the new services?

A US check sent from Thailand?

Through online banking services that cut a check to any party, experiences using this to pay IRS?

Thaiquila - currently there are over 6 million Americans using EFTPS. This is an electronic (web) system that allows (among other things) the paying of 'estimated taxes' and also you can pay any taxes owed after doing your yearly Federal Tax Return. I use EFTPS and like it. Here is the link you can check it out.

Oh.....best of all it is FREE.

www.eftps.com

BTW......when using the above link you will be asked to select your location. I used 'USA' and entered my home state (where my mail goes to a relative). I have had no problems using the site and paying estimated taxes......bottom line they (EFTPS) send mail as a normal part of the enrollment process. I felt better getting mail delivered to USA rather than here in Thailand.

Hope this helps. LDB

BTW - yer avatar freaks me out!!!!!!!!!

[migrant]

Oh.....best of all it is FREE.

www.eftps.com

BTW......when using the above link you will be asked to select your location. I used 'USA' and entered my home state (where my mail goes to a relative). I have had no problems using the site and paying estimated taxes......bottom line they (EFTPS) send mail as a normal part of the enrollment process. I felt better getting mail delivered to USA rather than here in Thailand.

Hope this helps. LDB

BTW - yer avatar freaks me out!!!!!!!!!

Very good. The computer software I use allows me to e-file my clients, so never had to worry about this.

It's good because every year I get a few people that just want me to e-file their self prepared return. I usually try to help, but during tax season it's 16-18 hours a day, 7 days a week so it's a pain in the a** to help them. Now I can give this to them.

Changing the handle to bean counter would be acurate, but I'm a migrant at heart counting the days until my migration to Thailand full-time

My approximate countdown

Countdown

[LoveDaBlues]

Oh.....best of all it is FREE.

www.eftps.com

BTW......when using the above link you will be asked to select your location. I used 'USA' and entered my home state (where my mail goes to a relative). I have had no problems using the site and paying estimated taxes......bottom line they (EFTPS) send mail as a normal part of the enrollment process. I felt better getting mail delivered to USA rather than here in Thailand.

Hope this helps. LDB

BTW - yer avatar freaks me out!!!!!!!!!

Very good. The computer software I use allows me to e-file my clients, so never had to worry about this.

It's good because every year I get a few people that just want me to e-file their self prepared return. I usually try to help, but during tax season it's 16-18 hours a day, 7 days a week so it's a pain in the a** to help them. Now I can give this to them.

Changing the handle to bean counter would be acurate, but I'm a migrant at heart counting the days until my migration to Thailand full-time

My approximate countdown

Countdown

counting the days...... ....I couldn't wait to leave my job but managed not to count each second......

Any idea what part of Thailand you're moving to?

[lanny]

I think the above might be incorrect. My tax guy once told me being ABROAD on April 15 does not qualify for an automatic extension, rather there is a test of days in the calender year abroad.

No, the number of days outside the US does affect the amount in income that may be excluded but has nothing to do with the automatic exentsion of time to file. The automatic extension applies if you are outside the US on the due date for your retunr AND your tax home is outside the US. So, you don't get the extension if you are outside the US on vacation. It hasn't always been that way. I remember the days when everyone in California went to Tijuana or Acupulco for a few days in April so they could wait till June to file.

The automatic extension is covered in IRS regulations: 1.6081-2(5)

[Thaiquila]

Yes, thats the kicker. Your tax home outside the US.

[migrant]

counting the days...... ....I couldn't wait to leave my job but managed not to count each second......

Any idea what part of Thailand you're moving to?

My soon to be Thai wife has family, and land near Hua Hin/ Cha Am. I love the ocean and Hua Hin is great (other than the scuba diving) so probably around there.

[IMA_FARANG]

What you say appears correct. You appear to meet the residency requirement, but that's only for income you earn overseas, of which you have none.

I'm in the same boat/moobahn.

You could convert some of your savings to municipal bonds; the interest would be free of federal income tax. If you need to draw upon savings, touch the IRA and 401(k) funds that are fully taxable, as a last resort only.

There aren't many ways to avoid tax. Of course, claim depreciation on rental real estate.

Since your not talking about income you get from employment what I am about to say doesn't apply to you. But it is important to realise it doesn't make a difference whether the company you work for is a U.S. company or not. For example, I work for a U.S. based company in Greece. I claim the tax emption based on residence in Greece. The fact that the company I work for is a U.S. company, and the salary is paid to my account in the U.S., does not affect my eligibility to qualify for the overseas tax emption because THE INCOME I EARN IS A CONSEQUENCE OF MY EMPLOYMENT IN GREECE. So my earnings, up to $80,000, are exempt from tax according to IRS rules. Yes there are some stipulations and restrictions. Not trying to be a nit-picker, but that is how I have filed for the last 8 years, and the IRS has accepted the returns.

[Thaiquila]

Go ahead and be a nit picker! The IRS surely is.

On that subject, if a person met the residency requirements but worked in a US based business in an OWNERSHIP capacity, would they also be eligible for the 80,000 earned income exemption (or whatever the current figure is)?

[Head Snake]

I work and am a resident in SIngapore for a US based company and I get paid in the States. Based on getting paid in the states, Singapore does not tax me.

Do people who live in Thailand get taxed if they are a resident?

[Tywais]

I work and am a resident in SIngapore for a US based company and I get paid in the States. Based on getting paid in the states, Singapore does not tax me.

Do people who live in Thailand get taxed if they are a resident?

If thailand and the home country have a dual taxation treaty then no. I work in Thailand and have income in the US also. I pay taxes to Thailand on income earned in Thailand and pay taxes in the US on income earned in the US.

[paperwerks]

It's so easy to use www.eftps.gov for making payments online.

Sort of like paying with paypal except that nothing will ever be shipped to you.

You can pay for the war in Iraq and welfare mommys on crack with eftps.gov Very Convenient!

[thaihome]

I work and am a resident in SIngapore for a US based company and I get paid in the States. Based on getting paid in the states, Singapore does not tax me.

Do people who live in Thailand get taxed if they are a resident?

That is exactly the opposite of my experience in living and working in Singapore. Singapore taxed you on entire income earned while in Singapore even if paid overseas. Only exclusion was any income earned while out of country (and they were know to check passports).This was 8 years ago, maybe they have changed since then.

Yes, income earned in Thailand is taxed by Thai Revenue Dept, you get a dollar for dollar foreign income tax credit on your US return (in addition to foreign income exclusion). I basically pay Thai income tax and no US tax, though I do have to file US return every year. Was the same working in Singapore.

TH