Sunday, April 15, 2007

The vagaries of being an expat taxpayer

The U.S. is the only country I know of that requires you to file taxes even if you don’t actually live there. I know people who haven’t been back home to the states in some 10 years, but are still diligently filing their returns every April.

Today is tax day, and I haven’t even begun to start the process of estimating my taxes for this year. There are a lot of little rules and regulations regarding American citizens who live abroad. What I’ve been able to glean is:

  • I must report all the income that was paid to me by a foreign agency (I get paid tax-free by my employer)
  • If I am in the US for fewer than 30 days in the last year, I don’t pay any taxes on the first 80,000 of my income (hehe. The “first” 80,000. I want that job.)
  • On the other hand, if I am home for more than 30 days, I owe Uncle Sam all the taxes I didn’t pay during the year.

In 2006, I was home for about 6 weeks. Bugger.

So now the tricky part is: How much did I get paid last year? I didn’t save all of my paystubs, and my bank account that I got paid into has been closed, so I have no record of my income. I think I’m just going to give the IRS a ballpark figure and hope they don’t audit poor broke aid workers like me.

The good news is that next year we’ll be totally tax-free. I just have to figure out how file for an extension today before the internet goes out…


Gwyneth said...


I don't understand how to file for an extension, because they keep saying that I still have to let them know how much I will owe. If I haven't done the return, how am I supposed to know that?

And even though I qualify for free e-filing, no company will do my return because it's "too complex".

So I am just going to write a very nice, polite letter to the IRS and file my return late. And hope that I owe no tax this year so they don't charge me interest...

Dad said...

If you do end up paying taxes, the IRS will charge you interest at only a slightly exorbitant rate if you pay your taxes late. What you need to avoid is paying penalties, and a polite letter explaining the situation and saying that you believe that your tax liability will be zero should be enough to avoid them. The main thing is to show due diligence and not to try to evade taxes that really are owed.
A tax return based on a reasonable estimate of your income is the best way to go if possible.

chris said...

It wouldn't be a bad idea to get Quicken (or MS Money) and track your income and expenses. It's a good habit to be in when you start getting into bigger purchases (like a house).