US Tax Filing & Compliance

[malcontent]

I’m in the midst of doing my US taxes at the moment. I always find that diving into the bowels of the US tax code is “fascinating” in a dystopian sort of way, especially the code that pertains to US citizens and residents living abroad.

On the one hand, it’s hard to believe that someone, somewhere actually came up with all this stuff (US tax dollars hard at work, no doubt). On the other hand, it is nothing short of exasperating to try and comply with it all. I would estimate that almost 100% of those living abroad with US filing obligations have at least something incorrect or are out of compliance in some sort of way.

Over the years I discovered many mistakes that I’ve made… some involved amending past returns, others were just fixed on future returns (thank goodness for the statute of limitations) but I can’t say I really feel guilty about it, because I have always made a good faith effort to be as compliant as possible, in spite of the mountain of cryptic and confusing tax codes. Despite all of this nonsensical filing and compliance, I have yet to pay a single cent in federal taxes all these years. Had I been more compliant, that would not have changed.

However, I have collected a nice 5 figure sum over the years in the form of child tax credits and economic stimulus payments. I don’t feel guilt about that either, because my time spent on complying with taxes is worth more than that! I’ve also not paid a single cent to file my tax, other than a postage stamp each year. I have almost learned to enjoy it in a strange sort of way. Maybe if I owed tax it would be different!

[sundaymorningstaple]

I spent 35 of the last 38 years without paying any US taxes either. Oddly enough, it wasn't until I retired that the perfect storm hit and now I'm being hit the last three years in a row since I retired. And will continue to get hit, albeit the sum is usually less than four digits to the left of the decimal point. This was more due to the recent changes of the tax laws. While filing US taxes isn't easy, it has gotten worse in the past three years due to a lot of stupidity in the IRS (Who are arguably the worse department of the government. They still haven't finalized my 2019 & 2020 return and credited a 2nd payment by me. This after 4.5 hours on two calls to Philly (on Skype). While the agree with me, they still haven't sent me any confirmation of same. They also lamented that they are grossly understaffed, and closing their doors for 6 months in 2020 at the beginning of the Covid mess, They've got millions of pieces of unopened mail even today. But you ignore their mail, die-die!

[malcontent]

I spent 35 of the last 38 years without paying any US taxes either. Oddly enough, it wasn't until I retired that the perfect storm hit and now I'm being hit the last three years in a row since I retired. And will continue to get hit, albeit the sum is usually less than four digits to the left of the decimal point.

Have you considered treating your nonresident spouse as a resident for tax purposes?

https://www.irs.gov/individuals/interna ... ent-spouse

If you elected and rescinded that in the past, it’s no-go. But if not, it might give you some tax advantages, depending on how much retirement income she has on her side.

[sundaymorningstaple]

Yeah. Have been for 3 years and it would be quite beneficial. Yeah, I am well aware of the election/rescinded penalty, I've never put her on any US tax return. She doesn't even have an ITIN number. Back when the kids were small I used to be able to get around the Married Filing separately with Head of Household and listing her by only putting NRA status in the SS boxes. But when they reached the age of majority I lost the HH status. But still didn't get burnt until I started drawing SS. That was the kicker. I'll see how it goes and then make a decision. Current estimated time for getting an ITIN due to the IRS incompetence, is around 7 weeks which probably translates to 7 months if my interaction with them in the two phone calls last year, totaling 4.5 hours, is any indication. This will be the first time I've not needed to use 2555 since my 1982 tax return as I no longer have any "earned income" at all. Will have to check to see if I can file electronically!

[malcontent]

Yeah. Have been for 3 years and it would be quite beneficial. Yeah, I am well aware of the election/rescinded penalty, I've never put her on any US tax return. She doesn't even have an ITIN number. Back when the kids were small I used to be able to get around the Married Filing separately with Head of Household and listing her by only putting NRA status in the SS boxes. But when they reached the age of majority I lost the HH status. But still didn't get burnt until I started drawing SS. That was the kicker. I'll see how it goes and then make a decision. Current estimated time for getting an ITIN due to the IRS incompetence, is around 7 weeks which probably translates to 7 months if my interaction with them in the two phone calls last year, totaling 4.5 hours, is any indication. This will be the first time I've not needed to use 2555 since my 1982 tax return as I no longer have any "earned income" at all. Will have to check to see if I can file electronically!

When I got SSNs for my kids it only took about 4 weeks — sent from Manila, that is the SS office covering this part of the world, and where the ITIN would come from. I suspect they are more efficient compared to SS offices in the US.

My wife already got her SSN as a student last time. Back then they still issued real SSNs to foreigners, I believe that’s changed now.

If you and your wife would have spent at least 5 years in the US, it could have bumped up your SS payment by 50%. And even now, if you both spend at least 30 days in the US, it counts as “being in the US” under SSA rules and you can get the 50% bump — it expires 6 months after you leave the US. But who knows, 6 months of spousal benefits might pay actually for the trip!

This is exactly why my wife and I need to “do our time” and at least spend 5 years in the US while our kids are in college. It’s not just the 50% bump, but also, if anything happens to me, she will continue to get 100% of my benefit. Given how much I’ve paid into FICA over the years, I at least want something back!

[Lisafuller]

I’m in the midst of doing my US taxes at the moment. I always find that diving into the bowels of the US tax code is “fascinating” in a dystopian sort of way, especially the code that pertains to US citizens and residents living abroad.

On the one hand, it’s hard to believe that someone, somewhere actually came up with all this stuff (US tax dollars hard at work, no doubt). On the other hand, it is nothing short of exasperating to try and comply with it all. I would estimate that almost 100% of those living abroad with US filing obligations have at least something incorrect or are out of compliance in some sort of way.

Over the years I discovered many mistakes that I’ve made… some involved amending past returns, others were just fixed on future returns (thank goodness for the statute of limitations) but I can’t say I really feel guilty about it, because I have always made a good faith effort to be as compliant as possible, in spite of the mountain of cryptic and confusing tax codes. Despite all of this nonsensical filing and compliance, I have yet to pay a single cent in federal taxes all these years. Had I been more compliant, that would not have changed.

However, I have collected a nice 5 figure sum over the years in the form of child tax credits and economic stimulus payments. I don’t feel guilt about that either, because my time spent on complying with taxes is worth more than that! I’ve also not paid a single cent to file my tax, other than a postage stamp each year. I have almost learned to enjoy it in a strange sort of way. Maybe if I owed tax it would be different!

You don’t have to tell me. Filing is painful and tedious, but the stimmy checks help to soften the blow quite a bit.

[Myasis Dragon]

You don’t have to tell me. Filing is painful and tedious...

You don't have to tell me, either. In addition to sorting through how earned income exclusions, housing allowances, and IRA contributions worked on a joint return, I had to file bank reports and financial returns for my companies in Singapore, Thailand, Hong Kong, Malaysia, and Australia.

You can thank thieving money launderers, tax scammers, and traffickers for the situation we have now.

[Lisafuller]

Goodness, filing just my 1040, 2555 and schedules have me pulling my hair out, can’t imagine the amount of paperwork you must be drowning in.

[malcontent]

I just finished, except for final checks…

1040
1040 schedule 1
1040 schedule b
1040 schedule d
2555
8949 (cap gains/losses)
8606 (backdoor Roth)

Fortunately no pesky foreign tax credits to deal with this year.

I’m still sitting on the fence about the backdoor Roth this year. Based on the proposed changes in the yet-to-be-passed build back better bill, I may have to do a deductible and then make a taxable conversion - from what I can tell, the income and deduction should offset one another, so it seems I can still use the backdoor and then do a little dance.

Interestingly, I will get a $100 refund this year, money that is “leaking” out of my SRS account, because they send the IRS 30% dividend withholding on S27 shares (SPY but traded on SGX). I get a 1099-DIV from UOB, so I can get back that withholding, because 30% only applies to non-US investors.

[Lisafuller]

Just reading this had my head spinning.

[malcontent]

Just reading this had my head spinning.

Yep, you are not alone. I helped my brother do his taxes yesterday and his head almost exploded. It’s no wonder so many Americans overseas want to renounce and be done with it.

The “free file” software that the IRS touts, the providers have so many gotchas that you can almost never file for free. They are really unscrupulous.

Knowing the IRS doesn’t like paper returns gives me added incentive to give them paper! Serves them right.

[sundaymorningstaple]

I just finished, except for final checks…

1040
1040 schedule 1
1040 schedule b
1040 schedule d
2555
8949 (cap gains/losses)
8606 (backdoor Roth)

Fortunately no pesky foreign tax credits to deal with this year.

I’m still sitting on the fence about the backdoor Roth this year. Based on the proposed changes in the yet-to-be-passed build back better bill, I may have to do a deductible and then make a taxable conversion - from what I can tell, the income and deduction should offset one another, so it seems I can still use the backdoor and then do a little dance.

Interestingly, I will get a $100 refund this year, money that is “leaking” out of my SRS account, because they send the IRS 30% dividend withholding on S27 shares (SPY but traded on SGX). I get a 1099-DIV from UOB, so I can get back that withholding, because 30% only applies to non-US investors.

Don't forget FINCEN!

[malcontent]

Don't forget FINCEN!

Yes. I almost forgot that, thanks!

Technically, I am supposed to report my credit cards because they often have a brief credit balance after the annual fee reversal. I can’t make this stuff up — it is crazy town.

[sundaymorningstaple]

Don't forget FINCEN!

Yes. I almost forgot that, thanks!

Technically, I am supposed to report my credit cards because they often have a brief credit balance after the annual fee reversal. I can’t make this stuff up — it is crazy town.

I cannot find if it's mandatory any more, but form 8938 used to be required and was noted on Sch B at the bottom of the page where the three tick boxes are and FINCEN is mentioned (dependent on which tick boxes were ticked yes). It's no longer noted on Sch B but I've been filing it with my return every year including this year (not filed yet but getting there shortly) as the form hasn't been redacted so I would assume it is still necessary. Changed a little bit but I reckon I'll file it anyway because it's virtually the same data that you put on FINCEN. Oh, going with the change to MFJ as what I can gather I can just submit with the W-7 and certified identity docs (the reason I was at the Sg Academy of Law) and mail it using the private mail services like DHL to a special address in Austin, TX (special for ITIN initial applications). If it all works, I'm back to Zero liability and should get a refund on the overpayment of the 2020 return if they ever get their shit together in Philadelphia!!!!

NB: That's where I am. Not done the FINCEN but finished the return except for final checking and printing.

[sundaymorningstaple]

I'm still thinking about renunciation as well after all these years. I only have three living blood relatives in the US. Got five here and all are mine. What's to go back for? Seriously thinking about it now. I just need a trigger to pull as I did some reading about it recently and I don't think I would have any tax issues as I've never seen the kind of money they are talking about, taxation wise.