Here are two more frequently asked tax questions from Americans living abroad. I know that sometimes the answers lead to more confusion or questions. Please feel free to post any questions you have so that I can clarify.
Question: If I am a permanent resident of the U.S. am I always a resident for tax purposes?
Answer: You are considered a lawful permanent resident if you have been given the privilege, according to the immigration laws, of residing permanently in the United States as an immigrant. You generally have this status if the US Citizenship and Immigration Services (USCIS) has issued you an alien registration card, also known as a green card. You are a U.S. resident for tax purposes beginning on the first day you are present in the U.S. as a lawful permanent resident. Therefore, for the first year of your residency, if you were a nonresident prior to obtaining permanent residency status, you will be classified as a dual-status alien for tax purposes. As a dual-status alien you must file a separate return, cannot claim the standard deduction, and generally cannot claim dependency exemptions.
As a resident taxpayer you must report, for U.S. tax purposes, your worldwide income. You are also eligible to claim the deductions and credits available to U.S. citizens once you are a full-year resident.
Question: What is foreign earned income? Is it income from a foreign source or income paid by a U.S. company while living abroad?
Answer: Earned income is pay for personal services performed, such as wages, salaries, or professional fees. Foreign earned income is income you receive for services you perform in a foreign country during a period when your tax home is in a foreign country and during which time you meet either the residence test or the physical presence test. It does not matter whether earned income is paid by a U.S. employer or a foreign employer.
The previously excluded value of meals and lodging furnished for the convenience of your employer.
Pension or annuity payments including social security benefits.
Payments by the U.S. Government, or any U.S. government agency or instrumentality, to its employees.
Amounts included in your income because of your employer's contributions to a nonexempt employee trust or to a nonqualifying annuity contract.
Recaptured unallowable moving expenses
Payments received after the end of the tax year following the tax year in which you earned the income.
