Double Taxation: Paying taxes in Singapore and the U.S.

[RULDS]

I have been scouring posts for information about paying taxes in Singapore (where I will work) and in the U.S. (where I am a citizen)

I live in the U.S. and am in negotiations for a job opportunity in Singapore. I inquired about my company paying for any double taxation or tax equalization but they insisted that I will not be taxed double.

Does anyone have any experiences with this or pertinent information that would be of value?

Thank you.

[sundaymorningstaple]

This is patently not true. There is double taxation as there is not a Tax Treaty for Income Taxes between the US & Singapore. There is some tax treaties regarding import/export only.

However, what they might be on about is the fact that there is an Income Earned Abroad Exclusion of ~84K USD/year subject to calculations using form 2555 for the 1040. There is also an option of using tax credits but again, all these are subject to calculations and depending on where your income level is, does not alleviate the double taxation. Using the 2555 is the only break you will get and even that has been modified recently so that now, even after excluding the first 84,500 the remainder will be taxed at whatever rate it would have been taxed at without the deduction.

Pick up a copy of Publication 54 or view it online here or download a PDF copy here.

[auxilium]

I am a US residence thinking of working in Singapore and I have been reading this post and a few other posts in regards to US taxes. From what I have read, it seems that a US residence will be taxed if he earns over a certain amount. It doesn't make sense for the US to make me pay taxes in both countries if it is not a US company. Here are my questions.

1. Do I still report taxes and file Form 1040 if I earn below that amount?
2. Willl I be taxed by the US if I work for a Singapore-owned company and earn below the exclusion amount?
3. Will my capital gained for assets in Singapore be taxed by US?

I have asked 2 US tax accountants and they have said that I do not have to report any income or capital gain if they do not originate from the US. Also, I do not have to file Form 1040 annually. Please advise. Thanks in advance.

[Strong Eagle]

As below.

I am a US residence thinking of working in Singapore and I have been reading this post and a few other posts in regards to US taxes. From what I have read, it seems that a US residence will be taxed if he earns over a certain amount. It doesn't make sense for the US to make me pay taxes in both countries if it is not a US company. Here are my questions.

1. Do I still report taxes and file Form 1040 if I earn below that amount?

Yes. You must file a 1040 and a 2255 (foreign income) no matter the amount you made.

2. Willl I be taxed by the US if I work for a Singapore-owned company and earn below the exclusion amount?

No. It doesn't matter who you work for, only that you are American. But if you earn less than the exclusion amount you will not be taxed. But note that any non-earned income, or income earned by a spouse in the US is subject to tax.

3. Will my capital gained for assets in Singapore be taxed by US?

Your accountants don't know their ass from third base. Unearned income (ie, dividents, rents, etc) are taxed no matter where they are earned and this is true whether you are in the US or not. Think about it. You invest in a European company while living in the US. You will pay taxes on the income you receive.

I have asked 2 US tax accountants and they have said that I do not have to report any income or capital gain if they do not originate from the US. Also, I do not have to file Form 1040 annually. Please advise. Thanks in advance.

As I stated previously, you have encountered two very stupid accountants. You must file a 1040. You must pay tax on unearned income, no matter where it originated. No escaping Uncle Sam. With limited exceptions, only Indonesia and the US tax their citizens while residing abroad. Such is life.

[sundaymorningstaple]

First of all, I'd be a bit scared of any account who tells you you don't have to even file.

1. If you are a US Citizen, you are required to file if you meet the minimum filing requirement as stated by law.

2. All of your worldwide income is reportable. Whether or not it is taxable is another story. If you did not need to file there would be no need for the 2555 Income Earned Abroad Exclusion nor for the Foreign Income Tax Credit form 1116

3. If you don't file, and/or file without including all of your income to a amount that exceed 25% of the total income, you can be found guilty of tax evasion which is a lot more serious (jailable offence) than disallowed deductions.

4. Download Publication 54 then go to Chapter 4 Page 15 and start reading from there.

[auxilium]

Thank you Sundaymorningstaple and Strong Eagle for your prompt response! You guys are very helpful and really know your stuff.

[maneo]

You must pay tax on unearned income, no matter where it originated. No escaping Uncle Sam. With limited exceptions, only Indonesia and the US tax their citizens while residing abroad. Such is life.

Theoretically, China citizens are also liable for tax on worldwide income.

Regarding the overseas exclusion, this can be less than the $84K based on number of days worked in the US.
One must keep track of work days and vacation days in US, days overseas, travel days. etc.

[sundaymorningstaple]

Yeah, but it's obvious once you read the 2555 instructions. If you read Publ 54 you have 99% of your answers already. Not that difficult. Even for someone who has no background in taxation.

[maneo]

Filling out IRS forms are not so straight-forward as it seems.
I remember some finanacial magazine article years back that gave the same situation to 5 different tax accountants in the US and received 5 dramatically different results.
And that did not even include the complication of a taxpayer living overseas.

The "Foreign Income Tax Credit" is not so easy.
I have used a major tax accounting firm (PWC) for 10 of the past 11 tax filings from Asia.
Every year that I calculated my own taxes in parallel I calculated that I owed more by difference greater than what I paid them.
They are not cheap, but the one year I didn't use them I paid even more in the end.
Went back and am staying with what works.

[Strong Eagle]

Regarding the overseas exclusion, this can be less than the $84K based on number of days worked in the US.
One must keep track of work days and vacation days in US, days overseas, travel days. etc.

This is only true, generally, for someone out of the US for the first year. After that, the "bona fide residence test" is followed.

[Strong Eagle]

Filling out IRS forms are not so straight-forward as it seems. The "Foreign Income Tax Credit" is not so easy.
I have used a major tax accounting firm (PWC) for 10 of the past 11 tax filings from Asia.
Every year that I calculated my own taxes in parallel I calculated that I owed more by difference greater than what I paid them.
They are not cheap, but the one year I didn't use them I paid even more in the end.
Went back and am staying with what works.

The reason the foreign tax credit form is hard to use is that it assumes you are in the US and not taking the foreign income exclusion. If you try to use this form as the instructions say, you won't get the right number. Instead you must build a worksheet that returns something similar to the 2555 income amounts.

Let's say your foreign earned $100,000. You had rents and dividends of $50,000 for a total income of $150,000. You paid (in US$) $10,000 in Sing income tax. Since $85,700 is excluded you have only $14,300 of income that is subject to a credit. $14,300/$150,000 = 9.5 percent, which means that of your total Sing tax paid you would be able to take a $950 credit.

[sundaymorningstaple]

I would have liked to get into this but I wont as I do have an unfair advantage insomuch as I was once the District Director for H&R BLock for 8 years in Washington DC. Granted it was several lifetimes ago, but between CCH & Prentiss Hall, they have always held me in good stead even till today. I've been doing my own since 1969 and have never had any problems, even with the new changes every year. Suffice it to say, it's really not that hard. Oh yeah, I've filled out my own every year for the past 25 years while in Asia and that also includes a farm as well in the US and I've paid virtually no taxes for a long long time. With a little reading it is not that hard.

[maneo]

Regarding the overseas exclusion, this can be less than the $84K based on number of days worked in the US.
One must keep track of work days and vacation days in US, days overseas, travel days. etc.

This is only true, generally, for someone out of the US for the first year. After that, the "bona fide residence test" is followed.

Are you an IRS agent?
You shouldn't be misleading people like that.

Since many US expats have been sent out by MNC's operating in the US, they should know that the amount of their income eligible for exclusion will be reduced proportionally by the amount of work time spent in the US (vs. total days worked).
This applies even beyond the first year, even after you qualify for the "bona fide residence test."
This would also apply anyone visiting the US for business purposes (e.g. drumming up business, conferences, etc.).

Anyone with any questions or doubts about tax issues should check with a credible tax accountant or with the resident IRS agent through the consulate.
Don't just take my word nor that of any other anonymous poster.
Do your own proper research.
Use these responses only as a guide to know what to ask for.

[Strong Eagle]

Are you an IRS agent?
You shouldn't be misleading people like that.

I'm not an IRS agent and I am not misleading anyone. Perhaps you need to do a bit more homework. The bona fide residence test clearly states that there are no specific tests to be met but that acts and intentions are examined. It also clearly states that if you have a long term residence outside the country for an indefinite period of time you meet the requirement. So, for people like me, with a company here, a residence here, and the intention to be here much longer, I qualify. It really doesn't matter how often I go to the US because I meet the bona fide residence requirements.

For someone on short term assignment, or of a known duration, this test may not apply. But how am I being misleading?

And say... aren't you the guy that has to rely on tax accountants?

[sundaymorningstaple]

That is obviously why he has to rely on tax accountants.