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The IRS has FAQs for a whole lot of things. I have a question about their FAQs: How can you come up with a new program, issuing FAQs before a question has even been asked? Their FAQs are, by and large, impersonal, confusing, not user-friendly. My FAQs, on the other hand, are the opposite!

I’ve spent a bit of time listing – and hopefully answering to your satisfaction - the most frequently asked questions I’ve encountered over the years. Does a question here fit within the things you probably should know about but never asked or researched? Quite likely. Look through this section – it might prove to be very, very helpful to you!

• Where can I get good, readily available information about U.S. taxes, no matter where I am?

Where is your computer, my friend? Are you online? Then go to www.irs.gov and take a brief look at this website. Everything you conceivably would like to know (at least, the way that the IRS wants you to know it); every form and set of instructions that is currently available can be found off of this site. The site is a bountiful of item availability, though its sheer volume is also its downfall because sometimes it really is a task to find what you want – and these searches, unless you have plenty of patience, can likely end in frustration. Throughout this book, as I refer to either a tax form, the form instructions or an IRS publication, I will list the URL because while containing an abundance of information, the IRS site is too damned difficult to navigate and access – even for me!

Throughout this book, you’ll see me suggesting that you lok at IRS Publication 54. Yes, indeed, do so!! Look at Publication 54 – the ‘official’ set of guidelines for overseas U.S. tax filers – written for your benefit (if not enjoyment in reading) by your friends at the Internal Revenue Service! http://www.irs.gov/pub/irs-pdf/p54.pdf

And now…..those FAQs…..

• My spouse is not a U.S. citizen and has never lived in the U.S. How does this affect my federal tax status?

It’s one thing if you lived in the U.S. and something entirely different if you reside overseas. You might file a joint tax return. If so, then you’re going to have to get either a taxpayer identification number or a social security number for your spouse if you want to be able to take an exemption for her or maintain the MFJ standard deduction. Look up Form W-7 on the IRS site for getting a Taxpayer Identification Number if your spouse is not a U.S. citizen. http://www.irs.gov/pub/irs-pdf/fw7.pdf.

On the other hand, you might choose to file as married, filing separate or head of household. Obviously these would not give you the same standard deduction as you would get if you filed married, filing jointly..........but you would not be required to list either a social security number or a tax payer’s identification number for your spouse, your spouse’s income would not be reported on the U.S. tax return. Yes, I do know some U.S. taxpayers (either husband or wife) married to foreign citizens who earn income that, because the expat excludes them from her/his U.S. tax return, does not include that income for tax purposes, either. But read on, later on, in a section of this book devoted to planning necessary to avoid the pitfalls and problems encountered if you are planning upon a move back to the U.S. .....!

• I keep on getting threatening letters from the IRS. I answer them but they seem to ignore my correspondence. What do I do?

Once again, go to www.irs.gov and look at the home page – somewhere on that front page is a listing about the Taxpayer Advocate Service – click upon that section. I can only tell you mixed results about using that ‘interface’ with the IRS – it’s a good idea but it has not always worked well at all.

• When I depart from the U.S. with my family, we will be living overseas in a small community provided by my employer. My employer requires this so that we can be close to work. Will this affect my income tax liability?

It might affect your taxes. There are special rules for excluding the value of housing in this type of situation. This is called ‘camp’ housing and is usually provided for work in remote areas where satisfactory housing is not otherwise available. Employers must meet specific requirements for you, the employee, to be exempt from showing the value of housing as income – if you are going into this situation, you should look into this.

• Are all U.S. taxpayers abroad subject to the same tax rules?

No! There are numerous categories. Self-employed individuals are subject to different tax treatment than employees of foreign corporations. Employees of U.S. corporations, with W-2s at the end of the year will still have Social Security and Medicare deductions from their gross pay check. Members of the armed forces are treated differently than other U.S. government employees....and other rules apply, as well, to taxpayers living in U.S. possessions like Guam or for those working for certain qualifying international organizations. Ah, if only it were so cut and dried and simple....alas, this is the real world and we are stuck with a cumbersome, semi-intelligible (at best) tax system. This is further ‘exacerbated’ because of double tax treaties with various countries. Should the tax system be trashed and redone? Absolutely! Will that ever happen? I definitely would not bet on it!! And let us not forget F(u)BAR and the FinCEN114 – if you live in the United States, do you need a separate filing for all of your bank and brokerage accounts where you live? Hell no! But if you live outside the U.S. , there is much more than a better chance that you have to report all of your accounts in your new jurisdiction on a new, efiled form that is difficult, at best, to access. Read on, my friends – there’s a section of this book that covers this area.

• I am a U.S. government employee. Am I affected by these exemptions and deductions when I work outside of the U.S.?

Generally, no. You are treated like all U.S. citizens living in the U.S. Some cost of living and foreign area allowances might be excludable but by and large, you’re not going to get any tax advantages working overseas.

• I am not employed by the U.S. government – I am not a government employee. But I do earn income from the U.S. government. Do I qualify for exclusions and deductions?

Yes!

• Can I claim the housing deduction or exclusion for two foreign households if I cannot take my family to my new employment location because of adverse conditions? Can I house my family nearby so I can visit them regularly?

Yes! Under these circumstances, expenses for the second household may be included in your reasonable-foreign housing expenses.

• Is it possible to use my foreign income tax as a deduction under itemized deductions instead of a credit if it would be more advantageous?

Of course you can – but you have to make that choice! Remember, the chances are that you are not going to have a large mortgage interest deduction, living overseas. Consequently, the chances of your being able to advantageously use itemized deductions over the standard deduction are going to be very difficult. And remember – you cannot claim a deduction for foreign taxes paid on the income excluded under the foreign earned income exclusion or housing exclusion. Thus, unless there are ‘exceptions’, plan on using the standard deduction and the foreign tax credit!

• Because of the differences between the U.S. tax year and the tax year of the foreign country I currently reside in, I cannot be certain, now, that the choices I make regarding tax credits or tax deductions are the best ones for me. Can I change my mind?

Yes you can! Simply file an amended tax return within three years of the due date of the tax return in question or within two years of the date you paid the U.S. tax.

• Apart from the special exclusions for foreign earned income, will I apply the rest of U.S. tax rules the same way as I did when I lived in the states?

Alas, no. Unfortunately, areas of U.S. tax laws draw a distinction between taxpayers inside and outside of the U.S. In many cases, this is an economic disincentive to living and working abroad. For example, contributions to foreign charities generally cannot be deducted. If you own rental property overseas, you are subject to entirely different depreciation rules and regulations than you have back home in the states.

• Can I pay my taxes in a foreign currency?

Sorry, my friends – check or credit card, only – the U.S. government does not accept foreign currencies – and you might have difficulties, as well, with foreign cashiers checks. – if you are that Hong Kong teacher, recently moved from the U.S. – do not close your U.S. bank account – it will come in handy, in the long run!

* What happens when I move back to the U.S. to reside with my non-resident, foreign spouse, who has all of the family business and investments in her/his name?

Don’t walk - run - to a specialist before you decide you want to live back in the States. There are some serious tax problems you are going to be confronted with in an all too familiar scenario that has become a nightmare for many who did not plan.......!!! This is planning you need – you are going to have to pay more – a heck of a lot more – for this planning than the cost of this book!

*What happens if I haven’t filed in many years and I have been told that it is hell to get back into the system?

Read the section about the Offshore Voluntary Disclosure Program (which you want to avoid – if at all possible) and the Streamlined Foreign Procedures about alternative for filing the past three years tax returns and six years FinCEN114. This brand new alternative is made just for you…..but take advantage of it, if you can, before they end allowing for this!