FAQ's from American Citizens and Residents living abroad

#1 17 May 2012 23:38:19

jsexton
jsexton
Las Vegas

FAQ's from American Citizens and Residents living abroad

I often receive questions related to tax issues for American citizens and residents living abroad.  I will be posting common questions and responses.  I hope this will be helpful to some of you.

Question:   I am a U.S. citizen living abroad. Do I have to file a US tax return even though I don’t live or work in the US?

Answer:   United States citizens living abroad

•    Are required to file annual U.S. income tax returns.
•    Must report their worldwide income if they meet the minimum income filing requirements for their filing status and age.
•    Must contact the government of the country you are living in to determine whether you must file and pay taxes there.
•    May be able to elect to exclude some or all of their foreign earned income, if certain requirements are met, or to claim a foreign tax credit if taxes are paid to that country..

Question: Under my visa as a temporary nonresident alien, I'm not subject to social security and Medicare withholding. My employer withheld the taxes from my pay. What should I do to get a refund of my social security and Medicare?

Answer:   If social security tax and Medicare were withheld in error from pay received that was not subject to the taxes, you must first contact the employer for reimbursement. If you are unable to get a refund from the employer, file a claim for refund with the Internal Revenue Service

#3 21 May 2012 17:31:44

apassemard

Re: FAQ's from American Citizens and Residents living abroad

Hello jsexton,

Thanks for posting that, this is a recurring questions people ask.. I'd love to know more in terms of threshold..

Let's take the scenario of a US citizen living in France. Paid in France. I believe that person would have to declare to the US all the income made in France, which is fine. But then taxes are paid in France, and above a certain number taxes are also paid in the US. The number in question is particularly vague in all the documents I could find.

I guess if that person make 50K euros a year, it won't do anything, but let's assume a much bigger salary like 200K euro or more.

Above which number are you suppose to start paying taxes in the US? Is it based on the taxable income? gross income? something else (the taxable income in the US and France are very different when starting from the same gross..)?

Thank you

#4 23 May 2012 09:40:58

marquezhouse

Re: FAQ's from American Citizens and Residents living abroad

Yeap this question is too common based to the fact that in the US there are alot of taxes that can be put upon someone. See the likes of this you CEO of facebook Edwardo Saverin's time is on pressure he is a young man whose ambitions have overwhelmed Americans and now they have Put too much taxes on him which gives him no freedom to doing his business.

But Questions arise is it because he is a foreigner but besides he has the US citizenship? Haha

Too much For America


Herbert Mukiibi

#5 28 May 2012 02:47:59

jsexton
jsexton
Las Vegas

Re: FAQ's from American Citizens and Residents living abroad

Here are two more frequently asked tax questions from Americans living abroad.  I know that sometimes the answers lead to more confusion or questions.  Please feel free to post any questions you have so that I can clarify.

Question: If I am a permanent resident of the U.S. am I always a resident for tax purposes?

Answer: You are considered a lawful permanent resident if you have been given the privilege, according to the immigration laws, of residing permanently in the United States as an immigrant. You generally have this status if the US Citizenship and Immigration Services (USCIS) has issued you an alien registration card, also known as a green card. You are a U.S. resident for tax purposes beginning on the first day you are present in the U.S. as a lawful permanent resident. Therefore, for the first year of your residency, if you were a nonresident prior to obtaining permanent residency status, you will be classified as a dual-status alien for tax purposes. As a dual-status alien you must file a separate return, cannot claim the standard deduction, and generally cannot claim dependency exemptions.

As a resident taxpayer you must report, for U.S. tax purposes, your worldwide income. You are also eligible to claim the deductions and credits available to U.S. citizens once you are a full-year resident.

Question: What is foreign earned income? Is it income from a foreign source or income paid by a U.S. company while living abroad?

Answer: Earned income is pay for personal services performed, such as wages, salaries, or professional fees. Foreign earned income is income you receive for services you perform in a foreign country during a period when your tax home is in a foreign country and during which time you meet either the residence test or the physical presence test. It does not matter whether earned income is paid by a U.S. employer or a foreign employer.

•    The previously excluded value of meals and lodging furnished for the convenience of your employer.
•    Pension or annuity payments including social security benefits.
•    Payments by the U.S. Government, or any U.S. government agency or instrumentality, to its employees.
•    Amounts included in your income because of your employer's contributions to a nonexempt employee trust or to a nonqualifying annuity contract.
•    Recaptured unallowable moving expenses
•    Payments received after the end of the tax year following the tax year in which you earned the income.

#6 04 June 2012 00:46:18

jsexton
jsexton
Las Vegas

Re: FAQ's from American Citizens and Residents living abroad

Here is another FAQ related to taxation of American's living abroad.

Question:   Do I have to meet the 330-day physical presence test or have a valid working resident visa to be eligible for the foreign earned income exclusion?

Answer:   To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction:
•    You must have foreign earned income,
•    Your tax home must be in a foreign country, and
•    You must be one of the following:
•    A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
•    A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty with a nondiscrimination article in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
•    A U.S. citizen or resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.
•    U.S. tax law does not specifically require a foreign resident visa or work visa for this purpose, but you should comply with the foreign country's laws.

#7 04 June 2012 12:15:08

marquezhouse

Re: FAQ's from American Citizens and Residents living abroad

Hello buddy's its my pleasure once again to hear your opinions and stuff its really good

#8 14 June 2012 03:17:49

jsexton
jsexton
Las Vegas

Re: FAQ's from American Citizens and Residents living abroad

Here's another FAQ expat tax question and my reply.

Question:  Who is considered a foreign person for U.S. tax purposes?

Answer:  A foreign person is an individual that is not a U.S. person.  Generally, this includes non-resident alien and it also includes U.S. branches of foreign corporations, foreign estates, foreign corporations and partnerships.  For example, a foreign corporation is a corporation that was created or organized outside of the United States or under the law of a country other than the United States.  In general a non-resident alien is an individual whose permanent residence is outside of the United States and who is not a U.S. citizen.  The U.S. or foreign status should be documented for those payees who are paid FDAP income.

#9 21 June 2012 10:36:53

jsexton
jsexton
Las Vegas

Re: FAQ's from American Citizens and Residents living abroad

apassemard wrote:

Hello jsexton,

Thanks for posting that, this is a recurring questions people ask.. I'd love to know more in terms of threshold..

Let's take the scenario of a US citizen living in France. Paid in France. I believe that person would have to declare to the US all the income made in France, which is fine. But then taxes are paid in France, and above a certain number taxes are also paid in the US. The number in question is particularly vague in all the documents I could find.

I guess if that person make 50K euros a year, it won't do anything, but let's assume a much bigger salary like 200K euro or more.

Above which number are you suppose to start paying taxes in the US? Is it based on the taxable income? gross income? something else (the taxable income in the US and France are very different when starting from the same gross..)?

Thank you

Deart Apassemard,

What you are referring too is the Foreign Earned Income Exclusion and probably the reason the number is vague is because it is adjusted annually for inflation. The 2012 the number is $95,100. You can add to the foreign housing exclusion amount an additional foreign housing exclusion/deduction which is generally around $25,000. Above those amounts the income would be taxable in the US but you would receive a foreign tax credit for income tax paid in France. Since France has higher taxes than the US there likely wouldn't be any tax due in the US. I hope this helps!

Best regards,

James

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#10 21 June 2012 10:39:08

jsexton
jsexton
Las Vegas

Re: FAQ's from American Citizens and Residents living abroad

marquezhouse wrote:

Yeap this question is too common based to the fact that in the US there are alot of taxes that can be put upon someone. See the likes of this you CEO of facebook Edwardo Saverin's time is on pressure he is a young man whose ambitions have overwhelmed Americans and now they have Put too much taxes on him which gives him no freedom to doing his business.

But Questions arise is it because he is a foreigner but besides he has the US citizenship? Haha

Too much For America


Herbert Mukiibi

Dear Herbert,

Thanks for your posts. I'm glad you enjoy them. Yes, Saverin caused a lot of commotion in the US for sure. It is going to be interesting to see how this all unfolds. The US is one of two countries that taxes its citizens by virtue of citizenship, rather than residency.

Best regards,

James

These comments are subject to:

nomoretaxtrouble.com/disclaimer.php

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