USA Citizens and Income Tax

Anyone who is a citizen of the USA is required to file and pay taxes on their worldwide income, no matter where they live or earn the money.  There are rules that allow many retired citizens to have an income liability of zero.  For many it just got a little better in 2019 for 2018 income taxes.
               Going forward single taxpayers will have a standard deduction of $12,000, and if you turned 65 or are older than 65, then your standard deduction is $13,600.  This means that if your adjusted gross income is equal to or less than the standard deduction, no tax is owed.  The tax laws get more complicated when calculating the amount of Social Security benefits which are taxable.  The general rule is that if one half the SSA income plus other non-social security income (interest, dividends, pensions etc) is $24, 000 or less, then none of the SSA is taxable.
               For example, a citizen who receives $1,500/month in SSA benefits plus $1,000/month in pensions or investment income would owe no income taxes.  The total SSA for the year would be $18,000, the total other income $12,000.  One half the SSA ($9,000) plus the other income, $12,000, gives a total in calculating taxable SSA of $21,000.  Since this is less than $24,000, none of the SSA is taxable, so the adjusted gross income is only $12,000.  So no matter how old the citizen is, the tax liability is $0
               For married filing joint returns the standard deduction is $24,000, $25,600 If one of the filers is 65 or older and $26,600 If both are 65 or older.  The amount to use to calculate how much, if any, of the SSA is taxable is $32,000 Instead of $24,000.  I will give an example of married filing joint and the calculations involved in a future post.

They have no tax treaty, do you also have to do Ecuadorian income tax?

Per IL (which I would not rely upon as gospel, but here it is FWIW):

"Foreign residents of Ecuador are taxed on their Ecuadorian-sourced income but not on income earned outside of the country."

From this article:

https://internationalliving.com/countri … dor/taxes/

Thanks, and what income from stock investment if broker in USA

Bigbrad2008 :

Thanks, and what income from stock investment if broker in USA

You are taxed only on Ecuadorian-sourced income.  A stock investment on a USA stock, and/or from a USA broker, would not be considered Ecuadorian-sourced income.

But if it was an Ecuadorian stock?  I'd check with a Ecuadorian tax professional.

If a US Citizen pays foreign income taxes on foreign income then said citizen can take a credit against US taxes, an extra form is required.  Not familiar with Ecuador income tax rules.

If your worldwide income is under the income threshold, you are not required to file a return to the IRS.

Check irs.gov to figure the threshold that applies, which may be based on age (over-under 65).

The threshold may change from year to year.

cccmedia

cccmedia :

If your worldwide income is under the income threshold, you are not required to file a return to the IRS.

Check irs.gov to figure the threshold that applies, which may be based on age (over-under 65).

The threshold may change from year to year.

cccmedia

It is true that certain income levels do not require filing.  Of course if any taxes were withheld, then one must file to get the refund.  Also, if one has self employment net income of $500 or more then a return must be filed because self employment (SS + Medicare) taxes are due even if the only taxable income was the Schedule C of $500.  In addition it may be in one's best interest to file even if the income says a tax return is not required.  That way there is record of your income and no taxes for the year.  Nothing is not the same as zero.

I tend to concur with mugtexh. It is often free and easy to file electronically and the record then exists.

There are other examples when one does not file the IRS will construct a return based on their information and send one a tax bill.  I saw one where a taxpayer sold stock for $20,000, his basis was $17,000, so he had a gain of $3,000.  However, the IRS got the info of the $20,000 sale but not the cost basis of $17,000.  So the IRS showed a basis of $0 And a gain of $20,000.  IRS always calculates a worst case scenario for the taxpayer, so their tax return would show it to be a short term gain. Another time a taxpayer got married, and that year they were not required to file, even though taxpayer had about the same income as when he had been single.  The IRS sent him a letter with his numbers in a single, no other dependents income tax filing and showed he owed taxes. So the newlyweds had to file a joint return to shut up the IRS, a lot of extra time involved.

New topic