Larry's 2015 U.S. Tax Guide for U.S. Expats, Green Card Holders and Non-Resident Aliens in User-Friendly English. Laurence E. 'Larry'
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. , there is much more than a better chance that you have to report all of your accounts in your new jurisdiction on a new, efiled form that is difficult, at best, to access. Read on, my friends – there’s a section of this book that covers this area.
• I am a U.S. government employee. Am I affected by these exemptions and deductions when I work outside of the U.S.?
Generally, no. You are treated like all U.S. citizens living in the U.S. Some cost of living and foreign area allowances might be excludable but by and large, you’re not going to get any tax advantages working overseas.
• I am not employed by the U.S. government – I am not a government employee. But I do earn income from the U.S. government. Do I qualify for exclusions and deductions?
Yes!
• Can I claim the housing deduction or exclusion for two foreign households if I cannot take my family to my new employment location because of adverse conditions? Can I house my family nearby so I can visit them regularly?
Yes! Under these circumstances, expenses for the second household may be included in your reasonable-foreign housing expenses.
• Is it possible to use my foreign income tax as a deduction under itemized deductions instead of a credit if it would be more advantageous?
Of course you can – but you have to make that choice! Remember, the chances are that you are not going to have a large mortgage interest deduction, living overseas. Consequently, the chances of your being able to advantageously use itemized deductions over the standard deduction are going to be very difficult. And remember – you cannot claim a deduction for foreign taxes paid on the income excluded under the foreign earned income exclusion or housing exclusion. Thus, unless there are ‘exceptions’, plan on using the standard deduction and the foreign tax credit!
• Because of the differences between the U.S. tax year and the tax year of the foreign country I currently reside in, I cannot be certain, now, that the choices I make regarding tax credits or tax deductions are the best ones for me. Can I change my mind?
Yes you can! Simply file an amended tax return within three years of the due date of the tax return in question or within two years of the date you paid the U.S. tax.
• Apart from the special exclusions for foreign earned income, will I apply the rest of U.S. tax rules the same way as I did when I lived in the states?
Alas, no. Unfortunately, areas of U.S. tax laws draw a distinction between taxpayers inside and outside of the U.S. In many cases, this is an economic disincentive to living and working abroad. For example, contributions to foreign charities generally cannot be deducted. If you own rental property overseas, you are subject to entirely different depreciation rules and regulations than you have back home in the states.
• Can I pay my taxes in a foreign currency?
Sorry, my friends – check or credit card, only – the U.S. government does not accept foreign currencies – and you might have difficulties, as well, with foreign cashiers checks. – if you are that Hong Kong teacher, recently moved from the U.S. – do not close your U.S. bank account – it will come in handy, in the long run!
* What happens when I move back to the U.S. to reside with my non-resident, foreign spouse, who has all of the family business and investments in her/his name?
Don’t walk - run - to a specialist before you decide you want to live back in the States. There are some serious tax problems you are going to be confronted with in an all too familiar scenario that has become a nightmare for many who did not plan.......!!! This is planning you need – you are going to have to pay more – a heck of a lot more – for this planning than the cost of this book!
*What happens if I haven’t filed in many years and I have been told that it is hell to get back into the system?
Read the section about the Offshore Voluntary Disclosure Program (which you want to avoid – if at all possible) and the Streamlined Foreign Procedures about alternative for filing the past three years tax returns and six years FinCEN114. This brand new alternative is made just for you…..but take advantage of it, if you can, before they end allowing for this!
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