When answering the question below, I left the earned income
exemption at $80,000 (rather than the new $82,400). I was
referring to the back taxes that needed to be filed. However,
Ted Kleinman a CPA in Redmond with his own newsletter and an
excellent website at www.ustaxhelp.com pointed out the higher
limit. Canadian / American taxpayers do not need to worry about
the higher tax on the excess (28%) because they can still claim
foreign tax credits against it but those in Kuwait, Saudi, Dubai
and other countries with no tax will face a significant tax
increase for the most part.
-----Original Message-----
From: Theodore Kleinman [mailto:ted at ustaxhelp.com]
Sent: Friday, January 05, 2007 1:34 AM
To: taxman at centa.com
Subject: RE: US USA / CANADA Income Tax Help - Offshore
investments
-international non-resident cross border income tax help estate
family
trust assistance expert preparation &immigration consultant david
ingram,income trusts experts on rentals mutual funds RRSP RE
Hi David,
The exclusion for 2006 is $82,400 plus there's a new twist on how
the tax on
the excess is calculated and a dramatic change in how the housing
exclusion/deduction is calculated. See attached, please.
I hope you are over your recent illness.
Best...
Theodore "Ted" Kleinman, CPA
195 Scenic Ridge Ct
Redmond, OR 97756-7417
(888) 297-6001
(503) 296-2603 facsimile
(541) 923-0903 direct
http://www.ustaxhelp.com/
To ensure compliance with requirements imposed by the IRS, we
inform you
that any U.S. federal tax advice contained in this communication
(including
any attachments) is not intended or written to be used, and
cannot be used,
for the purpose of (i) avoiding penalties under the Internal
Revenue Code or
(ii) promoting, marketing or recommending to another party any
transaction
or matter addressed herein.
Theodore Kleinman CPA
ted at ustaxhelp.com
Tax Increase Prevention and Reconciliation Act of 2005
Public Law 109-222
New law, IRC §911: The new law includes the following reforms:
- The $80,000 is adjusted for inflation beginning
in 2006 and the cost-of-living adjustment under Section 1(f)(3)
is determined by substituting "2004" for "1992" in Section
1(f)(3)(B). Thus, the $80,000 is adjusted to $82,400 for 2006.
- The employer-provided housing exclusion is tied
to the foreign earned income exclusion cap. The base housing
amount used in calculating the foreign housing cost exclusion in
a taxable year is 16% of the amount (computed on a daily basis)
of the foreign earned income exclusion limitation (instead of the
present law 16% of the grade GS-14, step 1 amount), multiplied by
the number of days of foreign residence or presence in that year.
- An objective standard is applied in determining
the amount of reasonable housing expenses. The amount of the
exclusion is limited to 30% of the maximum amount of a taxpayer's
foreign earned income exclusion. Thus, the maximum amount of the
foreign housing cost exclusion in 2006 is $11,536 [($82,400 X
30%) minus ($82,400 X 16%)].
- A stacking rule is applied to ensure that
citizens living and working abroad are subject to the same U.S.
tax rates as individuals living and working in the U.S. Thus, any
income in excess of the exclusion amount is taxed by applying to
that income the tax rates that would have been applicable had the
individual not taken the foreign earned income exclusion or
housing exclusion. For example, a single individual with $82,400
of foreign earned income in 2006 that is excluded under Section
911, and $20,000 in other taxable income after deductions, is
subject to tax at the marginal rate of 28% on the $20,000 of
excess income.
These new rules are effective for taxable years beginning after
December 31, 2005.
-----Original Message-----
From: centapede-bounces+ted=ustaxhelp.com at lists.centa.com
[mailto:centapede-bounces+ted=ustaxhelp.com at lists.centa.com] On
Behalf Of US
/ Canada Income Tax Help - CEN-TAPEDE
Sent: Friday, January 05, 2007 12:50 AM
To: CENTAPEDE; Webmaster at Jurock. Com
Subject: US USA / CANADA Income Tax Help - Offshore investments
-international non-resident cross border income tax helpestate
family trust
assistance expert preparation &immigration consultant david
ingram,income
trusts experts on rentals mutual funds RRSP RESP I
ted at ustaxhelp.com: Please see bottom of message if you wish to
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------------------------------------------
My_question_is: Applicable to both US and Canada
Subject: Offshore investments
Expert: taxman at centa.com
Date: Friday January 05, 2007
Time: 03:14 AM -0500
QUESTION:
I'm a born US citezen. I moved to Canada at two years of age. I
spent the
next 22 years of my life there. I now have both passports. I
now live in
Dubai. I do not have a social security card from the US. Should
I file US
taxes? I never thought of it while paying taxes in Canada. I
also have
invested in offshore funds. As an American can I be exempt from
tax on my
investment earnings if my gross income is less than $82,000 US?
-----------------------------------------------------
david ingram replies:
As a non-resident of Canada, you do NOT have to file or pay taxes
to Canada
unless you are in Kuwait very temporarily and left a house, car,
spouse and
kids or some combination in Canada.
However, Lucky you "ARE" taxable in the US as a US citizen. NO
investment
income is exempt from US tax under those circumstances.
Currently, up to
$80,000 US of wages or self-employed income can be exempted from
US tax by
filing US form 2555.
Interestingly, I had a Canadian (living in Dubai for five years)
at my home
office today.
You should be filing a 1040 with 2555 for every year you have
worked.
Go to www.centa.com and read the "US/Canada Income Tax" section
in the
second box down on the right hand side. It mainly deals with
Americans
living in Canada so it will tell you what you should be doing
backwards. In
one example like yourself, the client "ML" was taxed over
$218,000 US
retroactively after he used his US passport at the US Embassy in
Paris. That
was in 1995 and they went back to 1986. It behoves you to bring
your old
returns up to date. If they catch you and go back, they do NOT
have to
allow the exemption.
I / we would be pleased to look after them for you of course.
------------------------------------
David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa
Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA)
time -
(please do not fax or phone outside of those hours as this is a
home office)
email to taxman at centa.com <mailto:taxman at centa.com>
www.centa.com <http://www.centa.com/> www.david-ingram.com
<http://www.david-ingram.com/>
Disclaimer: This question has been answered without detailed
information or
consultation and is to be regarded only as general comment.
Nothing in
this message is or should be construed as advice in any
particular
circumstances. No contract exists between the reader and the
author and any
and all non-contractual duties are expressly denied. All readers
should
obtain formal advice from a competent and appropriately qualified
legal
practitioner or tax specialist for expert help, assistance,
preparation, or
consultation in connection with personal or business affairs
such as at
www.centa.com <http://www.centa.com> . If you forward this
message, this
disclaimer must be included."
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