Question about filing US taxes when abroad

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Mapnerd11
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Question about filing US taxes when abroad

Post by Mapnerd11 » Thu Mar 15, 2018 11:04 pm

Hello,

I moved to Cambodia about 7 months ago and am just now finding out about the Foreign Earned Income Exclusion for US taxpayers. I have read through every bit of information available, but still have a few questions. I’m hoping someone can help.

I am currently still getting paid by a US non profit and getting income taxes withheld. I plan on qualifying for the Foreign Earned Income Exclusion in 2019 after I’ve been here a full year. I found an IRS form I can provide to my employer to request that they stop taxing me. My question with this is: I’ve already paid some taxes this year, so if I file in 2019 showing some tax paid, does that get refunded?

Also, if I just keep paying income tax and file for the Exclusion next year, would I receive all of that paid tax back? My income will be far lower than the exclusion amount.

I am worried to stop paying income tax in case I’m misunderstanding something about the whole process, and then will owe thousands next year! If anyone has experience with this, please let me know! Thanks!
Khmer_Risotto
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Re: Question about filing US taxes when abroad

Post by Khmer_Risotto » Fri Mar 16, 2018 2:32 am

In short, yes you can prorate your FEIE for the 2017 tax years for the days you were in the country. It will exclude a portion of your 2017 income from Federal income tax. If you are actually working for a company here in Cambodia and NOT self-employed you don't need to pay SS and Medicare either.

http://premieroffshore.com/how-to-prora ... exclusion/

Now and in the future you can either do the physical presence test which is being out of the US for at least 330 days in any 12 month period, or the bona-fied foreign residency test. The physical presence test is more straight forward, so probably just go with that.

https://www.irs.gov/individuals/interna ... sence-test

Form 2555 is pretty easy to figure out, and things like TurboTax can do all the calculations for you. You just answer some basic questions.
Mapnerd11
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Re: Question about filing US taxes when abroad

Post by Mapnerd11 » Fri Mar 23, 2018 4:07 pm

Khmer Risotto - thanks so much for answering some of those questions. I still have a few though, if you have any knowledge about the following:

I have not yet asked my US based employer to stop taxing my paychecks. I realized I can submit a form to them furnished by the IRS saying that I expect to be eligible for the FEIE moving forward. If I don't stop having taxes taken out, and then file the FEIE for the full calendar year of 2018 (in 2019) would I receive all of my paid taxes back as a refund? Would you suggest that I stop having taxes withdrawn from my paycheck and anticipate qualifying for FEIE or just keep paying taxes and get a refund?

Also, I am still navigating my 2017 taxes as I haven't filed them yet. I understand I could get an extension if I'm living abroad (normally due in April), but still haven't totally figured out the pro rated scenario yet since I moved here halfway through the year in 2018.
Mapnerd11
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Re: Question about filing US taxes when abroad

Post by Mapnerd11 » Fri Mar 23, 2018 4:10 pm

Sorry, I mean when I moved here halfway through the year in 2017!
Khmer_Risotto
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Re: Question about filing US taxes when abroad

Post by Khmer_Risotto » Fri Mar 23, 2018 11:37 pm

Mapnerd11 wrote:
Fri Mar 23, 2018 4:07 pm
Khmer Risotto - thanks so much for answering some of those questions. I still have a few though, if you have any knowledge about the following:

I have not yet asked my US based employer to stop taxing my paychecks. I realized I can submit a form to them furnished by the IRS saying that I expect to be eligible for the FEIE moving forward. If I don't stop having taxes taken out, and then file the FEIE for the full calendar year of 2018 (in 2019) would I receive all of my paid taxes back as a refund? Would you suggest that I stop having taxes withdrawn from my paycheck and anticipate qualifying for FEIE or just keep paying taxes and get a refund?

Also, I am still navigating my 2017 taxes as I haven't filed them yet. I understand I could get an extension if I'm living abroad (normally due in April), but still haven't totally figured out the pro rated scenario yet since I moved here halfway through the year in 2018.
I think the easiest step from here is just to start doing your 2017 taxes in TurboTax. I know they handle the FEIE well, I'm sure there are others if you prefer. See what you come up with there. I think that will answer a lot of questions for you. As far as I remember they don't charge you until you actually file, so you can do all your taxes and see what numbers it spits out for free.

As far as 2018, I'd go ahead and file the form with your US employer so they don't withhold taxes anymore unless you want to give the US gov't an interest free loan ;) Maybe keep your tax savings in your bank account (don't spend it) just in case of any issues when you are doing your 2018 taxes next year. I don't think you will have any issues though.

Disclaimer: I am not a lawyer, tax specialist or CPA :)
Mapnerd11
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Re: Question about filing US taxes when abroad

Post by Mapnerd11 » Sun Mar 25, 2018 4:50 pm

Great - thanks so much for the feedback! I really appreciate it and am taking your advice, even with the disclaimer :)
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