As a US citizen, you are subject to US taxes on your income, regardless of your age and regardless of where you live or where your income is earned.
However, if this person lives and works overseas, and he is out of this country for at least 330 days in a 12 month consecutive period, then he may claim the Foreign Earned Income Exclusion. For the 2009 tax year, that amount is $91,400.
What that means that if he satisfies the 330 day requirement for being out of the country, then the first $91,400 he has in foreign earnings will not be subject to US income tax. He would still need to file a return with the IRS and report his income, but he would then claim the foreign earned income exclusion credit by filing Form 2555 with his return.
If he earns more than $91,400, he would owe tax on the excess earnings, but at the same time the US will allow him a credit for any tax he paid to Singapore on that same income, thereby eliminating any double taxation.
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Thank you Rowes
Thank you. I have further questions:
1) As he has been receiving Social Security, is social security tax-exempted?
2) He has not been filing US income tax since he was 70 as he thought that filing was not necessary for senior citizen, would retroactive filing be a problem ?
3) Where can he download the form 2555?
4) Would you be able to service him in the retroactive filing or can you refer someone in Singapore for the service?
Hello again Rowes,
1. When you receive SS benefits, you are only allowed to have a certain amount of other income before part of your SS benefits also become subject to tax. If he has been making in the area of $75,000 each year, then it is very likely that 85% of his SS benefits will be taxable. There is a SS worksheet which needs to be completed in order to determine the exact amount that would be taxable.
2. If he has not filed for the last 5 years, he can file now and would have no penalties, as long as no taxes were owed. If he fills out tax forms for the last 5 years and it ends up that he owes taxes for those years, then he would also owe penalties and interest for the late filing and payment.
3. The form 2555 or any other tax forms along with their instructions can be downloaded from the IRS website at www.irs.gov He will need separate forms for each tax year he plans to file as the forms change each year.
4. Unfortunately due to the terms of service with this website, I am unable to offer services to the customers outside of this forum. And I am personally not familiar with anyone in the Singapore area that prepares US tax returns.