Living In Thailand

[jbowman1993]

I have a question that I bet one of you knows the answer.

I have been in Thailand for four years, and the past three years, I haven't bothered to file a US Tax return. I plan to live in Thailand permanently, and since I am making less than 15,000 US a year, I didn't see the point. (I heard that there is an 80k exception on income earned overseas anyway).

(I'm blessed to have a Thai wife who makes a LOT more money than I do, as a university professor, lol)

But recently I have begun to question that decision. I received my latest US Social Security Statement, and it says I have earned 37 credits, and need 40 credits total to be eligible for retirement benefits (in 34 years, when I turn 65). Should I begin to file, and pay the US for my Thai income (which is already taxed here), for another 34 years, so I can recieve social security?

Or just say, "fugetaboutit" and save my money and buy some cows and land?

Any insights would be appreciated.

Peace.

Edited December 8, 2006 by jbowman1993

[RBWilson]

I have a friend in New Zealand who was in a similar situation - had not filed US taxes for years, but was refused SS benefits until he filed retro-active returns (with penalty). The advice I always hear is file an annual return, even if you owe no tax. The first $80,000 (maybe $90,000??) of Thai taxed income is exempt from tax in the US (Requires a special form for reporting).

[Old Man River]

I have a question that I bet one of you knows the answer.

I have been in Thailand for four years, and the past three years, I haven't bothered to file a US Tax return. I plan to live in Thailand permanently, and since I am making less than 15,000 US a year, I didn't see the point. (I heard that there is an 80k exception on income earned overseas anyway).

(I'm blessed to have a Thai wife who makes a LOT more money than I do, as a university professor, lol)

But recently I have begun to question that decision. I received my latest US Social Security Statement, and it says I have earned 37 credits, and need 40 credits total to be eligible for retirement benefits (in 34 years, when I turn 65). Should I begin to file, and pay the US for my Thai income (which is already taxed here), for another 34 years, so I can recieve social security?

Or just say, "fugetaboutit" and save my money and buy some cows and land?

Any insights would be appreciated.

Peace.

There are legal issues here, but I can say for sure that you should be filing your tax return every year whether you owe taxes or not. There is a lot of info on this on the internet, including how your wife's income would be treated. Also, you might want to talk to a US tax advisor in Thailand for peace of mind. Remember, you were filing tax returns prior to coming to Thailand, and while you say you will never return to the US, things change.

[Jingthing]

Can you earn Social Security credits on your Thai income? Hopefully, you can. If you can't, it might almost be worth it to go back to the US for awhile to put you into the eligibility zone. That is, if you think social security will be paying out when you are 65 ...

[PeaceBlondie]

You are talking about two very separate 'incomes' in the opening post:

A. Whether income is subject to personal income tax. If you earn a salary overseas, it is taxable UNLESS you claim the exclusion for it, the Foreign Earned Income Exclusion. If you wait too long, you may not be eligible to claim the exclusion for those years.

B. FICA or SECA. These stand for the tax laws that require you to pay into Social Security for employment, or self-employment. These are what give you credits toward a social security pension. Most foreign employment isn't covered by FICA. For example, teaching at a Thai govt. school.

Lots of issues here. Also, paying into Social Security for 'forty quarters' (that isn't exactly what it means, though) might only qualify you for a social security monthly pension of $10 or $21 or $82. And as Jingting points out, if you're only 31 or 36 now, there's no telling what the system will be when you're in your late 60's or late 90's.

[jbowman1993]

Ok, Thanks so much. I think I have a better handle on it right now.

Even though I fall within (far far within, lol) the 80k exemption, I still need to file. I understand that now, Thanks Everyone!.

So now, I guess i need to get straight with the IRS for the past two years (how do I even do that)? Or should I just file a new return next year for 2006 and not worry about 04 and 05? (Last time I filed was in 03).

As for social security, I have no plans to go back to the US, even to pick up the extra credits to hit 40. Im married here, have a kid, morgage here, etc. Guess Ill invest in those cows and land after all. (And get my son a business degree).

Edited December 8, 2006 by jbowman1993

[taxout]

Actually, the minimum 40 quarters should qualify you for a minimum SS pension of several hundred dollars per month, though just how much is impossible to say.

The real benefit of qualifying for over 40 quarters, however, may be less the pension than Medicare benefits. Yes, they're not available overseas and yes, you don't intend to return to the US, but who knows how your situation will change. And medical expenses in the US could easily bankrupt you in old age without Medicare coverage.

[lanny]

I'll put in my 2 cents worth, even if I don't add much to what has been said.

The foreign earned income exclusion is an option or election and is not automatic. You must file a return and claim the exclusion each year. If you do not file and IRS contacts you about your missing return, you no longer have the opportunity to make this election. So, failing to file can cause you to owe tax on income that should have been excluded.

As for social security, if you have 10 years of covered employment you will qualify for a minimum benefit. And, if you return to the US for any reason, you can also get Medicare coverage. For this reason, alone, it may be desireable to contribute to SS.

Personally, I can't say just what social security will be like in another 20 or 30 years but a doubt very much that it will go away. Remember, in 1964 the senior vote went against Barry Goldwater because he was supposedly going to cut social security. Politicians haven't forgotten this and the secior vote is a much larger fraction of the total voter population now than it was in 1964. No politician wants to be on record as voting against social security; to do so would be political suicide.

[PeaceBlondie]

The SS reforms that saved the system around 1985 knocked the floor out of the 'minimum pension' for people who retired later on. You take your entire work record, adjust the wages for inflation. Then you take the 35 highest years of wages, even if some years are zero or $39. Then you divide by 420 months to get the average monthly wage. Then you reduce that by another ten percent. There are numerous other reductions, disallowances, provisions, etc. My computation included part time work when I was in high school, since I had so many zero years.

Technically, it's not ten years, but 40 'quarters' and you can earn 4 quarters in a single day. You can only earn 4 quarters in a calendar year, though. That's just to qualify, but the formula then may result in a pension of well under $100/month.

The SS website may be www.ssa.gov It contains 3 calculators online to estimate your final pension. I had to use the third, most complex calculator. But if you're below 40 years of age and earning very low wages overseas, please save for your retirement with the assumption that SS will pay you nothing.

[jbowman1993]

Thanks everyone for your advice and input. I really appreciate it!

I'm not too worried about social security. I married a rich lady, lol.

Since so many of you seem so knowledgable, let me ask. How do I go about filing for 2004, and 2005, which I neglected to do? I can't seem to find anything on the ITG website that addresses this issue.

Joe

[Tywais]

Thanks everyone for your advice and input. I really appreciate it!

I'm not too worried about social security. I married a rich lady, lol.

Since so many of you seem so knowledgable, let me ask. How do I go about filing for 2004, and 2005, which I neglected to do? I can't seem to find anything on the ITG website that addresses this issue.

Joe

I had to file forms for about 4 years and just downloaded them from the IRS site, filled them in and submitted them at one time. However, if you have earned any income here during that period (Thailand) you can no longer use the exclusion and will be caught up paying US taxes on the earnings even if having paid Thai taxes. I got stuck with that one and it put a dent in my 'payment due' totals. However this was after receiving notifcation from the IRS I was remiss in my filings. Took a long time to get it straightened out including a hold put on one of my accounts. Best to do it before they inform you.

http://www.irs.gov/formspubs/article/0,,id=98339,00.html