Professional Documents
Culture Documents
Search: About Us Contact Subscribe Calendar
Search: About Us Contact Subscribe Calendar
Search: About Us Contact Subscribe Calendar
make media
participate printable version first nations
donate
links
search
A Palestiian-American's extended Family life: one day and more!
by TruePeace • Thursday June 27, 2002 at 07:53 PM
Sam Bahour is a Palestinian-American businessman living in the besieged Palestinian City of Al-Bireh in the West He is co-author of HOMELAND: Oral Histories of
Palestine and Palestinians (1994)
search
Sam Bahour is a Palestinian-American businessman living in the besieged Palestinian City of Al-Bireh in the West Bank and can be reached at sbahour@palnet.com. He is co-author of HOMELAND:
translate Oral Histories of Palestine and Palestinians (1994).
Sam Bahour is a Palestinian-American businessman living in the besieged Palestinian City of Al-Bireh in the West He is co-author of HOMELAND: Oral Histories of Palestine and Palestinians (1994)
© 2000-2002 Thunder Bay Independent Media Center. Unless otherwise stated by the author, all content is free for non-commercial reuse, reprint, and rebroadcast, on the net and elsewhere. Opinions are those of the contributors and are not
necessarily endorsed by the SF IMC. Disclaimer | Privacy
As a U.S. expatriate residing abroad, you still owe U.S. taxes each year on your worldwide
income! The stories you hear from some of your fellow expatriates sitting next to you at the
bar that once you leave the U.S., you no longer owe any taxes. That is true for citizens of
some countries, but not of the U.S. Its even against the law to give up your U.S. citizenship in
order to avoid U.S. taxes!
The U.S. has tax treaties with many countries in the world which allow them to exchange data
on their citizens living in the other country for tax purposes. The U.S. also has a few agents
located in each country that are there to help U.S. expatriates with their tax questions and
problems, but are suspected to also report on activities of U.S. expatriates which might not be
included in their U.S. tax returns.
The IRS has paid bribes, and made other deals with foreign bankers and investment advisors
to secure lists of U.S. people who have offshore accounts, and businesses in order to
determine if those individuals are reporting their activities on their tax returns. The IRS will not
release their statistics on the number of individuals living overseas who do file tax returns, but
it is believed that a large number do not.
If you do not file a tax return for a tax year, the statute of limitations on that year never runs
out. Therefore it is advisable to file a return for each year, even if your taxable income falls
below the minimum amount required for filing in order to cause the statute of limitations to run
out.
If you do file your tax return each year while living in Mexico, the statute of limitations for IRS
audits will expire three years after you file those returns. That means the IRS cannot go back
(absent fraud) and try to audit or change those returns later. Therefore, you should file your
return even if you have no income or don’t owe taxes in order to force the statute of limitations
to run and eliminate future problems when you decide to return to the U.S.
If you live abroad for a full calendar year, or live there for 330 days out of any consecutive 12
month period, you can exclude up to $74,000 of earned income from U.S. Income Taxation for
1999. If you are married, and both of you earn income and reside in Mexico, you can also
exclude up to another $74,000 of your spouses income from taxation. These exclusions can
only be claimed on a filed tax return and is not automatic if you fail to file your Form 1040 for
the year it applies as well as the appropriate forms claiming this exclusion. This is a fantastic
advantage for people who live and work overseas. in Mexico. Earned income is that paid you
for your work or services and does not apply to rental income, dividend or interest income, or
other types of income that is not paid for your own personal efforts.
You can also claim additional an additional exclusion from your U.S. taxes in excess of the
$74,000, if the rent you pay on your residence overseas and other living expenses exceed a
standard amount established by the IRS. This exclusion only comes into play when your
earnings are in excess of the $74,000 foreign income exclusion.
You can claim a foreign tax credit which directly offsets your U.S. taxes for any income which
is earned overseas and is subject to tax providing your residence country requires you to pay
income taxes. This foreign tax credit can only be used to offset U.S. taxes on income you earn
abroad or on interest or dividends earned abroad. The credit cannot exceed the amount of
U.S. taxes you actually pay on that foreign income. If the amount of foreign taxes, exceeds
the amount you can claim as a credit on your Form 1040, the excess can be carried over to
future years when it might be utilized when your foreign taxes on foreign income are less than
your U.S. taxes on that income.
If you are a bonafide employee of a foreign employer and have that country’s taxes and social
security numbers withheld from your pay, you do not have to pay U.S. social security or self
employment tax. The U.S. has social security treaties with only a small number of countries,
however. If you actually own your own business abroad or are an independent contractor, you
may owe U.S. self employment tax on your earnings, even though those earnings are not
subject to U.S. taxes due to the foreign earned income exclusion previously mentioned. The
self employment tax rate is 15.3% of your net income from self employment.
If you own more than a 5% ownership interest in a foreign (non-US) corporation you are
required to file a special form with the IRS reporting that interest. In many cases, if that
foreign corporation is making profits, it will be a “controlled foreign corporation” and you may
also owe U.S. tax on its earnings. If you are the beneficiary or trustee of a foreign trust you
must file a special form with the IRS. Another a form is required to be filed with the U.S.
Treasury if you have ownership or signature authority over a foreign bank account which
anytime during the year has a balance of more than $10,000 US or more. If you fail to file any
of these forms as required by law, you will be subject to penalties up to $10,000 or more.
These penalties might be assessed many years from now when the U.S. IRS and the
Mexican Hacienda finally start sharing information on a regular basis. If you do not file these
forms when required, it will be very difficult to later avoid those penalties.
If you have no income or maintain a permanent residence in a state in the U.S., you do not
have to file any state income tax return in your previous residence state. Some of the criteria
that a state looks at to determine if you are a resident for state income tax purposes includes
your driver license, if you register to vote there, if you maintain an address there, the location
of your bank accounts, if you own or rent real property there, the license plates on your cars,
and if you still receive utility bills in that state. There are many other factors used by state
taxing agencies to determine if you are a resident, but they are too numerous to mention here.
You must be careful to reduce or eliminate all indices of residency or your previous state of
residency in the U.S. will come after you for state income taxes. California is especially active
in attempting to tax individuals who have left to live overseas, by initiating a claim that they are
still actually California residents because they intend to return to California after their stay
abroad terminates. You must carefully review and structure you factual situation in order to
avoid California’s tentacles if you were previously a resident there.
You do have to pay taxes in a state if you receive rental income there or receive income from
a trade or business located there, even if you are no longer a resident. Investment income
such as from stock sales, dividends, and interest are not subject to state tax unless you live
there. Pensions are no longer taxable in the state in which you earned the pension if you
permanently leave that state.
If one of the reasons you are living abroad is that you owe substantial amounts to the IRS or
state taxing agencies, Offer in Compromise programs may allow you to settle the balance
owed for pennies on the dollar. When you do owe back taxes, the amount owed increases at
a fast pace due to interest and penalties and therefore can get very large compared with the
original amount of tax owed. In order to make an offer in compromise you must file tax returns
for all of your past tax years and cannot just rely on amounts assessed by the IRS.
Many delinquent taxpayers have used the “Offer in Compromise” programs to settle with the
IRS for payments of anywhere from 10% to 50% of the total amount owed. The IRS statistics
show that in the past 25 percent of the Offers in Compromise have been accepted and that the
average compromise was 18 percent of the total amount due. The entire process usually
takes three to six months and requires filing financial current information with the IRS as well
as the required forms. You can make an offer which allows you to pay off the amount agreed
over a period of time. The IRS very recently released new regulations which will increase the
number of offers in compromise its accepts and allows taxpayers to claim “hardship” as a
reason for the Offer. These Offers in Compromise can be made by a representative in the
U.S. and do not require the presence of the taxpayer in the U.S.
Don D. Nelson is an Attorney and CPA with offices in California. He has tax clients located
throughout the world and regularly prepares expatriate tax returns, and handles other U.S. and
state tax matters. He has worked with U.S. Citizens living overseas in connection with their
U.S. tax and legal concerns for over 20 years. He also is an expert in Offshore and U.S.
corporations and Limited Liability Companies. Since he is an attorney, all communications
between Mr. Nelson and his clients are privileged and cannot be disclosed to anyone. He
regularly prepares 5 to 10 years in returns for clients who wish to become current with their
U.S. taxation to pave the way for their return to the U.S. problem free. He is a member of the
Tax Section and International Law Section of the American Bar Association. He is also
admitted to U.S. Tax Court.
West Bloomfield
5859 Maple Road
West Bloomfield, MI
48322
(248) 538-5283
Welcome to American
House West Bloomfield,
a place where delicious
food, impeccable
housekeeping, and
stimulating activities
await.
Stay as active and social as you like at American House West Bloomfield.
With a beauty salon, TV room, library, game room, multipurpose room,
cozy sitting areas and two inviting courtyards, there is always something
to do. Great entertainment and creative programming will inspire the
mind and stimulate the body.
Residents and their families have trusted American House for over 20
years. We invite you to benefit from the same security, companionship
and peace of mind that hundreds of others have.
If you would like additional information about this brand new, state of the
art community, we encourage you to call us at (248) 538-5283. We
would be happy to send you a brochure or set up an appointment for a
complimentary lunch and tour.