Larry's 2016 U.S. Tax Guide 'Supplement' for U.S. Expats, Green Card Holders and Non-Resident Aliens in User Friendly English. Laurence E. 'Larry'

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СКАЧАТЬ who do not have the time to read what is ‘hidden’ into many joint conference committee bills. The rider added to that bill now set limits on the maximum amount that could be excluded, based upon cost of housing, per location; and the graduated income tax, with progressive rates is, for all intents and purposes, inapplicable to those taking advantage of foreign earned income and housing exclusions: that the very first dollar over and above all valid expenses, deductions and exclusions would now be taxed as if the taxpayer were at the 33 percent tax bracket rather than starting out at the lowest 10 percent rate and working up to the higher rates – progressive taxation is now a thing of the past for expats. And, if you lived in a high cost of living/low tax jurisdiction (ie Singapore, Hong Kong, Dubai), you, the U.S. expat, could expect to encounter some previously unseen tax problems. It is now 2016 – sadly, nothing has changed in Washington. Do you think any of the 535 Congresspersons or Senators read Hire-FATCA of 2010? Not one! That, my friends, is a very, very sad commentary about American democracy…..

      The Foreign Tax Credit

      Executive summary: yes, you are entitled to a credit, offsetting your U.S. income tax with foreign income taxes paid but contrary to the most widely believed misconception, you will not get dollar-for-dollar.....and you might not get any credit at all.....SO BE AWARE!!! If you have to pay taxes, a lot of taxes to the jurisdiction where you have residency, even if it is a low tax jurisdiction, you might just be able to offset some of your U.S. tax obligation through the foreign tax credit. The tax you pay must qualify as income tax (not social welfare tax) legitimately owed or paid. And rest assured, you’ll definitely benefit if the foreign country where you reside taxes you at a higher rate than in the U.S. In China, for example, where there is a 45 percent maximum individual income tax, if you are earning enough to be in that bracket and paying a portion of your tax in the PRC at that amount, then you, as a U.S. expat or green card holder, will not likely have any U.S. individual income tax on that portion of your income because China is extracting more from you than the IRS is, in this instance.

      Simultaneously, U.S. expats in Hong Kong – remember: one country/two systems through 2047, at which time Hong Kong’s tax system will be run by the State Administration of Taxation and not the Inland Revenue Department; until such time, though, Hong Kongers who fall under the auspices of Hong Kong law must deal with the Inland Revenue Department – they will likely face a U.S. income tax as there is a 16.5 percent individual income tax in Hong Kong – far less than that 33 percent ‘entry level’ U.S. tax.

      My Frequently asked questions by expats section....!

      The IRS has FAQs for a whole lot of things. I have a question about their FAQs: How can you come up with a new program, issuing FAQs before a question has even been asked? Their FAQs are, by and large, impersonal, confusing, not user-friendly. My FAQs, on the other hand, are the opposite! What, you refuse to believe that? Then the only way you are going to find out is to read!!

      • Where can I get good, readily available information about U.S. taxes, no matter where I am?

      Where is your computer, my friend? Are you online? Then go to www.irs.gov and take a brief look at this website. Everything you conceivably would like to know (at least, the way that the IRS wants you to know it); every form and set of instructions that is currently available can be found off of this site. The site is a bountiful of item availability, though its sheer volume is also its downfall because sometimes it really is a task to find what you want – and these searches, unless you have plenty of patience, can likely end in frustration. Throughout this book, as I refer to either a tax form, the form instructions or an IRS publication, I will list the URL because while containing an abundance of information, the IRS site is too damned difficult to navigate and access – even for me!

      Throughout this book, you’ll see me suggesting that you lok at IRS Publication 54. Yes, indeed, do so!! Look at Publication 54 – the ‘official’ set of guidelines for overseas U.S. tax filers – written for your benefit (if not enjoyment in reading) by your friends at the Internal Revenue Service! http://www.irs.gov/pub/irs-pdf/p54.pdf

      • My spouse is not a U.S. citizen and has never lived in the U.S. How does this affect my federal tax status?

      It’s one thing if you lived in the U.S. and something entirely different if you reside overseas. You might file a joint tax return. If so, then you’re going to have to get either a taxpayer identification number or a social security number for your spouse if you want to be able to take an exemption for her or maintain the MFJ standard deduction. Look up Form W-7 on the IRS site for getting a Taxpayer Identification Number if your spouse is not a U.S. citizen. http://www.irs.gov/pub/irs-pdf/fw7.pdf.

      On the other hand, you might choose to file as married, filing separate or head of household. Obviously these would not give you the same standard deduction as you would get if you filed married, filing jointly..........but you would not be required to list either a social security number or a tax payer’s identification number for your spouse, your spouse’s income would not be reported on the U.S. tax return. Yes, I do know some U.S. taxpayers (either husband or wife) married to foreign citizens who earn income that, because the expat excludes them from her/his U.S. tax return, does not include that income for tax purposes, either. But read on, later on, in a section of this book devoted to planning necessary to avoid the pitfalls and problems encountered if you are planning upon a move back to the U.S. .....!

      • I keep on getting threatening letters from the IRS. I answer them but they seem to ignore my correspondence. What do I do?

      Once again, go to www.irs.gov and look at the home page – somewhere on that front page is a listing about the Taxpayer Advocate Service – click upon that section. I can only tell you mixed results about using that ‘interface’ with the IRS – it’s a good idea but it has not always worked well at all.

      • When I depart from the U.S. with my family, we will be living overseas in a small community provided by my employer. My employer requires this so that we can be close to work. Will this affect my income tax liability?

      It might affect your taxes. There are special rules for excluding the value of housing in this type of situation. This is called ‘camp’ housing and is usually provided for work in remote areas where satisfactory housing is not otherwise available. Employers must meet specific requirements for you, the employee, to be exempt from showing the value of housing as income – if you are going into this situation, you should look into this.

      • Are all U.S. taxpayers abroad subject to the same tax rules?

      No! There are numerous categories. Self-employed individuals are subject to different tax treatment than employees of foreign corporations. Employees of U.S. corporations, with W-2s at the end of the year will still have Social Security and Medicare deductions from their gross pay check. Members of the armed forces are treated differently than other U.S. government employees....and other rules apply, as well, to taxpayers living in U.S. possessions like Guam or for those working for certain qualifying international organizations. Ah, if only it were so cut and dried and simple....alas, this is the real world and we are stuck with a cumbersome, semi-intelligible (at best) tax system. This is further ‘exacerbated’ because of double tax treaties with various countries. Should the tax system be trashed and redone? Absolutely! Will that ever happen? I definitely would not bet on it!! And let us not forget F(u)BAR and the FinCEN114 – if you live in the United States, do you need a separate filing for all of your bank and brokerage accounts where you live? Hell no! But if you live outside the U.S. СКАЧАТЬ