U.S. Tax for Earned Income Abroad

[VooDooChile]

Is there anyone that is a U.S. citizen and currently employed by Cathay or Emirates that can shed some light on U.S. taxation of earned income at these airlines? I have heard different things ranging from exemptions if you spend 330 days outside the U.S. and income less than 82,400 gross. Is there a way to file in order to "show' that you make less than this amount, say....by contributing more to a retirment fund abroad or something, thanks for the info.

VooDoo

[Kpt40]

The actual exemption amount can be found on the IRS website via form 2555.
The form also has 3 tests to determine eligibility for the deduction. If you meet anyone of the test criteria you are eligible for the foreign earned income exemption .

I do not know about the retirement fund idea, in that the IRS shouldn't care what you do with the money after its earned.

You will also need to fill out a 1040 or variant with the above form.

Some senator is trying-maybe has actually done it- to pass legislation that will consider houseing and school allowance as part of total compensation to be used in determining amount of income. Meaning you made 60k, the employer paid 15k for school for jr., and they gave you accomodations that cost 30k. Your total income is then 105k, and you will not be exempt for the difference. Again I do not know if this is on the books.

You do know that tax day was last month right? :)

[GlueBall]

If the foreign company provides you accommodation [hotel/apartment] they are not giving you money, it's not part of earnings. I've never heard of anyone asking their employer about the cost of the hotel/apartment so that they could include the employer's "expense" as part of their gross income. The IRS doesn't care whether you live in a tent or in a camper truck or on a boat, or at your girlfriend's apartment, nor about how much you, or your company, or your uncle, pay for your hotel room or apartment.

[typhoonpilot]

If the foreign company provides you accommodation [hotel/apartment] they are not giving you money, it's not part of earnings. I've never heard of anyone asking their employer about the cost of the hotel/apartment so that they could include the employer's "expense" as part of their gross income. The IRS doesn't care whether you live in a tent or in a camper truck or on a boat, or at your girlfriend's apartment, nor about how much you, or your company, or your uncle, pay for your hotel room or apartment

That's just so wrong I don't know where to start :suspect: . Good example of why not to get tax advice from a message board := .

Here's a link to the Form 2555 (http://www.irs.gov/pub/irs-pdf/f2555.pdf)



Typhoonpilot

[GlueBall]

13.3 Aliens and U.S. Citizens Living Abroad: Foreign Income & Foreign Income Exclusion

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

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 bona fide 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. Foreign earned income does not include the following amounts.
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 performed the services that earned the income.

[Kpt40]

Guys,
Here are some links..the rules appear have changed. And not for the better.... I will be the first to admit that a little knowledge is a dangerous thing, but if you can make heads or tails out of this feel free to share.

http://www.taxbrain.com/press/news/press_release_112806.asp

http://tax.aicpa.org/Resources/International/Legislation/AICPA+Opposes+Repeal+of+Foreign+Earned+Income+Exclusion.htm

[typhoonpilot]

The previously excluded value of meals and lodging furnished for the convenience of your employer.


You highlighted the wrong word. You should have highlighted Convenience.

If you are on an oil rig and living in the quarters that are provided on that oil rig the clause you highlighted applies. If you are living in a desert camp out at oil pumping station number 10, the clause that you highlighted applies. If you are living in a villa/apartment in the city that you are domiciled and that villa/apartment is either provided by the employer, or you are reimbursed wholly or partially for that villa/apartment it IS considered part of your income.

FOREIGN HOUSING EXCLUSION

If your tax home is in a foreign country and you meet either the bona fide residence test or the physical presence test, you may be able to claim an exclusion or a deduction from gross income for a housing amount paid to you. Housing amount is the excess, if any, of your allowable housing expenses for the tax year over a base amount. Allowable housing expenses are the reasonable expenses (such as rent, utilities other than telephone charges, and real and personal property insurance) paid or incurred during the tax year by you, or on your behalf, for your foreign housing and that of your spouse and dependents if they lived with you. You can include the rental value of housing provided by your employer in return for your services. You can also include the allowable housing expenses of a second foreign household for your spouse and dependents if they did not live with you because of dangerous, unhealthy, or otherwise adverse living conditions at your tax home. Housing expenses, for this purpose, do not include the cost of home purchase or other capital items, wages of domestic servants, or deductible interest and taxes.

The base amount for 2006 is $13,184 or $36.12 per day. To figure your base amount if you are a calendar year taxpayer, multiply $36.12 by the number of days in your period of foreign residence or presence, whichever applies, that are within the tax year. Beginning with tax year 2006, the maximum foreign housing exclusion is limited to $11,536 above the base amount.

Good tax site (http://www.taxmeless.com/IRS593Publication.htm)


Typhoonpilot

[Gillegan]

You highlighted the wrong word. You shoud have highlighted Convenience.

If you are on an oil rig and living in the quarters that are provided on that oil rig the clause you highlighted applies. If you are living in a desert camp out at oil pumping station number 10, the clause that you highlighted applies. If you are living in a villa/apartment in the city that you are domiciled and that villa/apartment is either provided by the employer, or you are reimbursed wholly or partially for that villa/apartment it IS considered part of your income.


Typhoonpilot

I'm not sure that the issue has been fleshed out sufficiently for you to make that statement. 2006 tax returns (the first year for the new rules) are just going out and until there is a consensus of opinion by the IRS as to how exactly they are going to interpret the "convenience" issue it's up for grabs. There appears to already be some backpedaling as the IRS has shown a willingness to adjust the $11,500 housing exclusion for high cost areas.

[typhoonpilot]

I'm not sure that the issue has been fleshed out sufficiently for you to make that statement. 2006 tax returns (the first year for the new rules) are just going out and until there is a consensus of opinion by the IRS as to how exactly they are going to interpret the "convenience" issue it's up for grabs. There appears to already be some backpedaling as the IRS has shown a willingness to adjust the $11,500 housing exclusion for high cost areas.

I agree, an argument can be made that housing provided to us IS for the convenience of the employer as we couldn't afford to live in our particular city otherwise. I wouldn't, however, bank on that argument being accepted by the IRS. If you took the cash option then it would be even more difficult to make an argument that it is provided for the convenience of the employer.


TP

[FlyingCroc]

Since we are not living in the US and not needing any services from the US do we still have to pay tax. I mean i do not own property, houses etc. So why not just bag the money and save it in some overseas offshore accout. Upon return to the US just arrive with no money. Is this a problem?

[typhoonpilot]

Since we are not living in the US and not needing any services from the US do we still have to pay tax. I mean i do not own property, houses etc. So why not just bag the money and save it in some overseas offshore accout. Upon return to the US just arrive with no money. Is this a problem?
Today 16:44


The best thing you can do is talk to a tax professional who specializes in expat taxes. He/she can answer ll your questions. Alternatively, Turbotax works pretty well if you follow the directions closely. In short: you may or may not have to pay taxes, but you definitely have to file a return. You must also, according to the Treasury Department, file a form listing all of your foreign bank accounts with more than $10,000.

http://taxes.about.com/od/preparingyourtaxes/a/TDF90221.htm


Typhoonpilot