Titilating Taxes

Standard

Yeah, I lied. Taxes aren’t exciting, but it’s a law and shit. You may be surprised to find out that if you are a US citizen living abroad and working for a foreign company or even self-employed as part of the your 2nd nation’s tax system, you have to report and pay taxes on that income to the United States as well. However, most tax benefits or breaks don’t apply to you. Isn’t that nice? I am no tax professional, as I’d rather drink a glass shard shake, but in keeping with my FYI theme of late, I thought I’d put up a quick note on it. I’ve talked to a lot of US citizens living here that either a) didn’t know that they are supposed to file and pay taxes at home on foreign income, or b) simply do not care. Here is the good news and a thought on why perspective ‘b’ is not the best approach. The US and Chile have a tax agreement [the US has these with some other countries, but far from all] that money a US citizen earns while working in Chile is not taxable up to roughly 85,000 USD per year. I think it was raised a bit higher recently. Essentially, if you make under that amount you will not be taxed twice by two countries, only in Chile where they give you most of it back anyhow. Another thing to consider is that if you spend time in the States each year, that time needs to be prorated and deducted from 85 G limit. Lame, but true. If you’re not too concerned about the law and figure since you don’t owe you can just forget about filing, you could get bit in the ass in the future. If you file and the IRS later on thinks you misreported, the statute of limitations on auditing you is 7 years [last time I checked], but if you file nothing there is no statute and your finances / income could be audited for any year you didn’t file at any time in the future. Not very fun. The last bit of good news is that there is an automatic two month extension for filing if you live abroad, meaning April 15th just became June 15th. Happy tax season. Buy yourself something nice for all your troubles. Or don’t and start another savings account.

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