Americans Say Zai Jian To Citizenship

[Thomas Promise]

A good number of Americans are trying to dodge the tax burdens.

 

 

http://money.cnn.com/2013/09/04/news/citizenship-us-tax/index.html?iid=Lead

[Randy W]

The thing to be aware of there is your tax responsibilities. If your spouse (and/or YOU) lives in China, his/her income may be taxable, and any bank accounts which have attained a balance of over $10,000 must be reported. In order to exclude foreign income, it must be reported to the IRS.

 

You can take a credit to exempt the income from US tax if you paid China tax on your income. You should use Form 1040 and the required Foreign Tax Credit (1116) and Foreign Earned Income (2555). The limit for 2009 was $91,400 (now a little higher). The foreign earned income exclusion will reduce your regular tax liability, but requires AN ALTERNATE FORMULA FOR THE CALCULATION OF YOUR TAX - be sure to check for the Foreign Earned Income Exclusion worksheet in the 1040 instructions.

 

Be aware of your responsibilities regarding forms TD F 90-22.1, Report of Foreign Bank and Financial Accounts ("FBAR") with the Department of the Treasury. The FBAR is due by June 30 for a foreign account in which the aggregate value exceeded $10,000 at any time during the previous calendar year." If you wire more than $10,000 to a foreign account from the U.S., you may be on their radar.

[Guest ExChinaExpat]

Income in China is not taxable by the US if you have paid taxes in China and earned less than the minimum taxable income. The income level was over 90K (USD) per year the last I looked. You MUST file a US tax return every year you live in China, regardless whether you had income or not. The US consititution forbids taxing a US citizen if they have paid taxes to a foreign government (see double-indemnity). The US tax return is for record only, and must be filed by law.

[Randy W]

Income in China is not taxable by the US if you have paid taxes in China and earned less than the minimum taxable income. The income level was over 90K (USD) per year the last I looked. You MUST file a US tax return every year you live in China, regardless whether you had income or not. The US consititution forbids taxing a US citizen if they have paid taxes to a foreign government (see double-indemnity). The US tax return is for record only, and must be filed by law.

 

But if you earn $100,000 in the U.S. (or enough to put you in the 15% nor greater bracket), while your wife earns even $10,000 in China - you will pay SOME tax on the $10,000, no? The Foreign Earned Income Exclusion doesn't actually exclude that income - it simply provides a different way of calculating the taxes (essentially, allowing a credit for taxation at the 10% level - see the Foreign Earned Income Tax Worksheeet .

 

From Publication 54 -

See the instructions for Form 1040 and complete the Foreign Earned Income Tax Worksheet to figure the amount of tax to enter on Form 1040, line 44.

 

 

You'll see that one of the line items in the Worksheet is the amount of tax on the $10,000 = $1000 (no deductions or exemptions), since it's calculated in the 10% bracket.

 

In other words, you only exclude $1000 of the extra taxes on the $10,000, regardless of what bracket you're in. If you're in the 20% bracket, you pay $2000 (=20%) - $1000 = $1000 tax on the $10,000 even after it's "Excluded".

 

But the main thing to be aware of is that if you are paying taxes (filed jointly) in the U.S., and your spouse has income in China, you will PROBABLY OWE TAXES ON HIS/HER INCOME IN CHINA, even when choosing the Exclusion.

 

I'm having a hard time locating what clause you're referring to here - "The US constitution forbids taxing a US citizen if they have paid taxes to a foreign government (see double-indemnity)." Can you help me out?

 

The same Publication 54 also lists the minimum incomes for requiring a tax return -

Your income, filing status, and age generally determine whether you must file an income tax return. Generally, you must file a return for 2012 if your gross income from worldwide sources is at least the amount shown for your filing status in the following table.

 

 

This income amount is BEFORE the exclusion, since you cannot claim the exclusion except by filing a tax return. But a teacher earning $7,000 would not be required to file a tax return, since there is no tax even if the Exclusion is not chosen. Of course, it doesn't hurt to file one anyway, especially if you're going to be filing a visa petition in the next few years.

 

The latest amounts (from 2012) are $9750 (gross income) for a single tax payer, and $19,500 for married filing jointly. If your gross income is below these amounts, you MAY not need to file a tax return.

Edited September 6, 2013 by Randy W (see edit history)

[Guest ExChinaExpat]

 

Income in China is not taxable by the US if you have paid taxes in China and earned less than the minimum taxable income. The income level was over 90K (USD) per year the last I looked. You MUST file a US tax return every year you live in China, regardless whether you had income or not. The US consititution forbids taxing a US citizen if they have paid taxes to a foreign government (see double-indemnity). The US tax return is for record only, and must be filed by law.

 

But if you earn $100,000 in the U.S. (or enough to put you in the 15% nor greater bracket), while your wife earns even $10,000 in China - you will pay SOME tax on the $10,000, no? The Foreign Earned Income Exclusion doesn't actually exclude that income - it simply provides a different way of calculating the taxes (essentially, allowing a credit for taxation at the 10% level - see the Foreign Earned Income Tax Worksheeet .

 

From Publication 54 -

See the instructions for Form 1040 and complete the Foreign Earned Income Tax Worksheet to figure the amount of tax to enter on Form 1040, line 44.

 

 

You'll see that one of the line items in the Worksheet is the amount of tax on the $10,000 = $1000 (no deductions or exemptions), since it's calculated in the 10% bracket.

 

In other words, you only exclude $1000 of the extra taxes on the $10,000, regardless of what bracket you're in. If you're in the 20% bracket, you pay $2000 (=20%) - $1000 = $1000 tax on the $10,000 even after it's "Excluded".

 

But the main thing to be aware of is that if you are paying taxes (filed jointly) in the U.S., and your spouse has income in China, you will PROBABLY OWE TAXES ON HIS/HER INCOME IN CHINA, even when choosing the Exclusion.

 

I'm having a hard time locating what clause you're referring to here - "The US constitution forbids taxing a US citizen if they have paid taxes to a foreign government (see double-indemnity)." Can you help me out?

 

The same Publication 54 also lists the minimum incomes for requiring a tax return -

Your income, filing status, and age generally determine whether you must file an income tax return. Generally, you must file a return for 2012 if your gross income from worldwide sources is at least the amount shown for your filing status in the following table.

 

 

This income amount is BEFORE the exclusion, since you cannot claim the exclusion except by filing a tax return. But a teacher earning $7,000 would not be required to file a tax return, since there is no tax even if the Exclusion is not chosen. Of course, it doesn't hurt to file one anyway, especially if you're going to be filing a visa petition in the next few years.

 

The latest amounts (from 2012) are $9750 (gross income) for a single tax payer, and $19,500 for married filing jointly. If your gross income is below these amounts, you MAY not need to file a tax return.

 

 

 

Randy, I just spent a lot of time with tax experts in the US regarding my income in China since 2008. Like you, I mistakenly believed that I did NOT need to file a tax return in the US. However, I was corrected by the tax professionals that every American citizen is required to file a US tax return every year whether they had income or not. So, I filed an amendment for my 2008 tax return, and filed a tax return for 2009-2012. I did not have to pay tax in the US for that income, but I did have to pay the fee for the tax professionals to complete my returns. I was due money back for 2008, but because more than three-years passed, I lost the chance to collect it. It's a pisser that if you owe money that the US can seek to collect it forever, but if they owe you money you lose the chance to collect it if you do NOT file to collect it within three years.

[Randy W]

 

 

You'll see that one of the line items in the Worksheet is the amount of tax on the $10,000 = $1000 (no deductions or exemptions), since it's calculated in the 10% bracket.

 

In other words, you only exclude $1000 of the extra taxes on the $10,000, regardless of what bracket you're in. If you're in the 20% bracket, you pay $2000 (=20%) - $1000 = $1000 tax on the $10,000 even after it's "Excluded".

 

But the main thing to be aware of is that if you are paying taxes (filed jointly) in the U.S., and your spouse has income in China, you will PROBABLY OWE TAXES ON HIS/HER INCOME IN CHINA, even when choosing the Exclusion.

 

I'm having a hard time locating what clause you're referring to here - "The US constitution forbids taxing a US citizen if they have paid taxes to a foreign government (see double-indemnity)." Can you help me out?

 

The same Publication 54 also lists the minimum incomes for requiring a tax return -

Your income, filing status, and age generally determine whether you must file an income tax return. Generally, you must file a return for 2012 if your gross income from worldwide sources is at least the amount shown for your filing status in the following table.

 

 

This income amount is BEFORE the exclusion, since you cannot claim the exclusion except by filing a tax return. But a teacher earning $7,000 would not be required to file a tax return, since there is no tax even if the Exclusion is not chosen. Of course, it doesn't hurt to file one anyway, especially if you're going to be filing a visa petition in the next few years.

 

The latest amounts (from 2012) are $9750 (gross income) for a single tax payer, and $19,500 for married filing jointly. If your gross income is below these amounts, you MAY not need to file a tax return.

 

 

 

Randy, I just spent a lot of time with tax experts in the US regarding my income in China since 2008. Like you, I mistakenly believed that I did NOT need to file a tax return in the US. However, I was corrected by the tax professionals that every American citizen is required to file a US tax return every year whether they had income or not. So, I filed an amendment for my 2008 tax return, and filed a tax return for 2009-2012. I did not have to pay tax in the US for that income, but I did have to pay the fee for the tax professionals to complete my returns. I was due money back for 2008, but because more than three-years passed, I lost the chance to collect it. It's a pisser that if you owe money that the US can seek to collect it forever, but if they owe you money you lose the chance to collect it if you do NOT file to collect it within three years.

 

 

Jesse, they told you the same thing I did. Why would you imply something when the opposite is true? I have filed a tax return every year since around 1968 and am aware of my responsibilities.

 

Things to be aware of are Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, Foreign Tax Credit (Form 1116) and Foreign Earned Income (Form 2555) forms, and the Foreign Earned Income Exclusion Worksheet, which is in the Form 1040 instructions. The "Exclusion" is calculated on this Worksheet, and is NOT a simple Exclusion of Foreign Income.

 

 

http://www.taxbarron.com/faqs.php

 

Quote -

Q: I already report my income to my foreign country of residence. The Foreign Earned Income Exclusion eliminates that income for U.S. tax purposes. So why should I report to IRS?

A: Because if you don't report your earnings - even though they are 100% excluded - the IRS can later deny you the exclusion and tax you on that income (even though the foreign country already taxed the income).

 

 

http://www.taxmeless.com/IRS593Publication.htm

 

Quote -

 

Who must file. Your age, filing status, gross income, and whether you can be claimed as a dependent by another taxpayer determine whether you must file a U.S. federal income tax return. To determine if you meet the gross income requirement for filing purposes, you must include all income you receive from foreign sources as well as your U.S. income. This is true even if:

• The income is paid in foreign money,
• The foreign country imposes an income tax on that income, or
• The income is excludable under the foreign earned income exclusion, discussed later.