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Foreign Income Exclusion
02-28-2012, 03:34 PM
I qualified this year and it saved me a ton of money. It looks like I will be staying out of the USA 11 months of every year now.
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Foreign Income Exclusion
02-28-2012, 05:26 PM
Quote: (08-31-2011 06:55 PM)oldnemesis Wrote:
Quote: (08-30-2011 06:37 PM)worldwidetraveler Wrote:
We are talking about person income, not what your business is making.
Did you actually read the Publication 54?
It makes it very clear that only earned income could be excluded.
For example, your gambling winnings, alimony and pension are definitely personal income, but it CANNOT be excluded.
Your professional fees may be business income which CAN be excluded.
Business income is stated as "variable", meaning it may or may not be excluded depending on circumstances.
Glad you mentioned Publication 54. I was going to bring that up. My boy from the States has been living in Thailand and Brazil for the past 7 years, but he was paying US taxes on "earned" income while not being cognizant of the exception. The good thing is the IRS refunded him "retroactively" for years of mistakenly taxed income, thanks to an astute tax accountant he spoke with. He was happy as hell to get a check for ten grand!
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Foreign Income Exclusion
02-28-2012, 09:26 PM
Uncle Sam is taking $5-6K per month from my check. This is why I am "banished" from the states till Oct. If not, I won't see most of that money returned.
A word of advice. ALWAYS pay into the tax system, then get the big return after filing the following year. I know a lot of guys that filed tax exempt, then had to go back to the states for family emergencies, injuries, losing their job, ect. Come tax time they owed around $20-30K to the "Guv". That's hard to pay back when you aren't working, and spent all your savings on toys, mortgage, ect.
I doesn't bother me now, since the interests rates are so low with the banks. The money I give them up front isn't making me money anyway. Besides, I look at it an emergency savings plan. Next year I know I'll get a fat return, and it's money I can't touch till then. I file single and 0 so the max can be taken out. If my master plan fails later, and I'm broke and jobless in Sao Paulo, there will be money to use later to get back on my feet.
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Foreign Income Exclusion
02-29-2012, 12:28 PM
Oh and if you're self-employed you still have to pay social security.
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Foreign Income Exclusion
02-29-2012, 01:01 PM
Correct. I think it's 15%.
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Foreign Income Exclusion
05-15-2013, 02:31 PM
Quote: (05-15-2013 01:43 PM)The Duke Wrote:
FYI for Americans. If you qualify for Foreign Income Exclusion, the medical insurance mandate starting in 2014 does not apply to you.
Quote:Quote:
1) Eligible for the IRS’s foreign earned income exclusion, which means the expatriate must have a tax home (the general area of your main place of business or employment where you happen to be permanently or indefinitely engaged) in a foreign country, as well as be either a legitimate resident in that country, or
2) spend at least 330 days a year outside the United States.
http://whiskeyandgunpowder.com/expat-meet-obamacare/
well golly gee isn't it nice of the US government to exempt expats from paying for healthcare they never would use.
The US just blows - I hate the fact that we're basically the only Western country that taxes it's citizens abroad. All my UK, European and Aussie friends laugh at me when they realize I have to pay taxes above a certain income. It's just so unfair and ridiculous really. Makes me not want to give any children I have, if any, a US passport....its almost become a liability for me and others now, as opposed the golden ticket it supposedly was years ago.
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Foreign Income Exclusion
05-16-2013, 09:59 PM
i've done some snooping on the Interwebs, found this page, is it any good ???
http://www.theparisblog.com/top-7-tax-ti...taxpayers/
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Foreign Income Exclusion
05-17-2013, 04:00 AM
Quote: (03-01-2012 11:09 PM)oldnemesis Wrote:
330 full days during the tax year, to be specific. Not just living abroad 11 months out of 12 unless you have a different tax year (is it available for individuals?)
Make sure you can prove it in case you're audited, and that you can still prove it even if you lose your passport tomorrow. The burden is on you.
I have done this several times working in SW Asia as a contractor.
Income earned during any year in which you spend 330 days out can be excluded. It does not have to be the calendar tax year, and you can "roll" the dates and overlap them.
Basically, if you were out of the USA from June to June or March to March you can still exclude income earned within that period.
Another tip: if you are leaving the USA by air and fly over a foreign country before midnight after leaving US airspace, you can count the next day as being outside the USA.
Example: JFK - FRA flight leaving at 8pm flies over Nova Scotia before midnight.
On the other hand, if you flew from MIA - FRA and did not fly over Canada or, say Bermuda on the way out before midnight, the next day would be counted against you.
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Foreign Income Exclusion
05-18-2013, 10:42 PM
What is to stop you guys from simply not reporting your income earned overseas if you do not in fact meet the 330 day minimum? I can understand that for those with mad money repatriating it back to the states will be kinda awkward if you didn't report any earnings, but what about the lowly bottom dwellers who may only make 20-30,000? If you're teaching English in Asia, for example, why not just simply say that you had no steady employment and only made a few hundred bucks a month for living expenses? It's not like foreign entities report your earnings to the IRS, so how would be IRS be able to call you out?
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Foreign Income Exclusion
05-19-2013, 07:21 PM
Quote: (05-18-2013 10:42 PM)rekruler Wrote:
What is to stop you guys from simply not reporting your income earned overseas if you do not in fact meet the 330 day minimum? I can understand that for those with mad money repatriating it back to the states will be kinda awkward if you didn't report any earnings, but what about the lowly bottom dwellers who may only make 20-30,000? If you're teaching English in Asia, for example, why not just simply say that you had no steady employment and only made a few hundred bucks a month for living expenses? It's not like foreign entities report your earnings to the IRS, so how would be IRS be able to call you out?
One thing that US citizens living abroad should be aware of is new rules regarding reporting of financial accounts of Americans living abroad.
http://www.irs.gov/Businesses/Small-Busi...%28FBAR%29
http://americansabroad.org/issues/fbar/f...-accounts/
When I was living and working in Israel (I'm a US citizen too), my bank contacted me in 2012 and forced me to sign a form giving them permission to report about my account to the US government. If I wouldn't sign, they would have closed the account.
Now this doesn't necessarily mean that you need to pay taxes on income earned abroad, but things are going to be pretty obvious to the IRS when you have a steady income in a foreign account.
I think the idea is to cut down on money laundering and tax evasion of US citizens abroad. Pretty annoying and invasive though.
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Foreign Income Exclusion
05-19-2013, 08:02 PM
When I was Working overseas back in 2001 I had to stay outside of us for the 330 days. Alot of co workers didn't bother reporting income. If you work for a non us company without using your ss number there is really no way for them to know. The key is either get paid in cash or open an offshore bank account. Our company had a deal with the royal bank in Scotland in guernsey so employees could open an account.
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Foreign Income Exclusion
05-20-2013, 09:09 AM
Quote: (05-19-2013 07:21 PM)Sabra Wrote:
Quote: (05-18-2013 10:42 PM)rekruler Wrote:
What is to stop you guys from simply not reporting your income earned overseas if you do not in fact meet the 330 day minimum? I can understand that for those with mad money repatriating it back to the states will be kinda awkward if you didn't report any earnings, but what about the lowly bottom dwellers who may only make 20-30,000? If you're teaching English in Asia, for example, why not just simply say that you had no steady employment and only made a few hundred bucks a month for living expenses? It's not like foreign entities report your earnings to the IRS, so how would be IRS be able to call you out?
One thing that US citizens living abroad should be aware of is new rules regarding reporting of financial accounts of Americans living abroad.
http://www.irs.gov/Businesses/Small-Busi...%28FBAR%29
http://americansabroad.org/issues/fbar/f...-accounts/
When I was living and working in Israel (I'm a US citizen too), my bank contacted me in 2012 and forced me to sign a form giving them permission to report about my account to the US government. If I wouldn't sign, they would have closed the account.
Now this doesn't necessarily mean that you need to pay taxes on income earned abroad, but things are going to be pretty obvious to the IRS when you have a steady income in a foreign account.
I think the idea is to cut down on money laundering and tax evasion of US citizens abroad. Pretty annoying and invasive though.
The US has no reason or rationale to tax it's citizens on income earned in a foreign currency while living abroad. To my knowledge we are the only major country that does this other than Japan (who are notorious in trapping it's citizens to only investing domestically to prop up the bond and other markets - mr. and mrs. watanabe etc.). Nobody else in the Western World does it currently, not even France.
It sucks we have to pay ANY taxes on income earned abroad but we do.....just so unfair.
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Foreign Income Exclusion
05-21-2013, 08:29 AM
Interesting article about citizenship and taxes. Gives good theory about how it's smarter to just leave the country and not file a tax return than to renounce and risk being rejected for a visa due to the Reed Amendment:
http://www.johntreed.com/renouncingUScitizenship.html
Of course, renouncing only makes sense if you're a millionare and most of your money is from investments. Get around the CFC and PFIC laws, and there's gotta be a way to defer taxation on investment income.