Need tax advice?

Question

I'm a U.S. citizen living and working in Thailand. I worked in the U.S. until May 2007 when I moved overseas. I now teach for a company here. Do I have claim my wages earned thus far for the 2008 tax season? If so, is there an easy way to do it?

Answer 1

The IRS publication 54 discusses the rules for US Citizens living abroad. Pay particular attention to the form 2555.

As a US citizen you will report worldwide income on the 1040 form. You will convert each paycheck to the US dollar equivalent (www.oanda.com/convert/fxhistory is useful) and add it to line 7 with your other wage income.

If you lived and worked in Thailand starting in May 2007, you can't qualify for the form 2555 until at least the end of April 2008, so you could file for an extension if you expect to use the form. Even if you do qualify for the exclusion (which is prorated for the time period of May to December) you could still owe tax on the income earned in the US from January to May.

Alternately, you can file your return by 4/15 showing the worldwide income and pay the income tax due. Then if you do qualify for form 2555, you would have until 4/15 2011 to file an amended return.

Answer 2

As a US citizen you are subject to US taxation on your world-wide income regardless of where you earn it or live.

You MIGHT be able to exclude some or all of your Foreign Earned Income from US tax if you meet certain qualifications. The rules are too complex to go into in this forum, however the income you earn in 2007 will probably not qualify for the exclusion. Alternatively you may take a credit against your US tax liability for the foreign income taxes that you actually paid.

Get a copy of IRS Pub 54 from the IRS website. It will go into detail on the tax consequences, benefits, and rules for ex-pats living and working overseas.