I am a US citizen who spent all of 2008 abroad, what is my tax obligation?
I am a grad student and spent the entire year in Turkey. I took on a management consulting job that payed 'under the table' and I am wondering what my obligation is to the IRS (the position didn't pay well, just enough to keep me afloat). Thanks for your advice, I am having a time trying to solve this puzzle. I am sure your answer will be of great help to others in my position.
United States - 2 Answers
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1 :
Congratulations, you have self-employment income. As a US citizen, you are taxed on worldwide income. See IRS publication 54. You will file a 1040 tax return, reporting the income on schedule C (or C-EZ) and fill out schedule SE. If you spent 330 days out of 365 in Turkey, you will also use form 2555 (or form 2555-EZ) to exclude up to $80-85K of the income. This means you will probably owe $0 income tax and 15.3% SE tax on the money. PS, if you had a foreign bank account and it had $10,000 or more in it at any time, you need to file a form TDF 90-22.1 in June. No tax, but it creates a papertrail and the fines if you don't are horrible.
2 :
All income earned, foreign or domestic, legal or illegal, above board or under the table is taxable. If your are "in" a foreign country for 330 of any 365 day period, yoiu may apply for an exclusion. Some accountants may tell you that you do not owe Self Employment Tax...ie, if you were an employee, not an independent contractor, you would fail the government's own Self Employment test, so if you were not self employed, you would not owe the tax...your foreign employer was not required to pay FICA ...this is a 'grey' area
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