From the Irs : Tax for USA Citizen abroad and 2007 form
Q.I have been living in thailand for over 8 years. I am loaning some money to someone that is in the USA. The money will come from my bank in thailand and the repayments will be paid to my bank in thailand. I don't know much about Irs Tax in 2007 year. My question is 1) do i have to pay taxes on it in the USA. 2) If i do then is it subject to the $ exclusion for taxpayers abroad or will i have to pay taxes on it all since the people i am loaning it to are in the USA ? They are going to file a form 1099 in the USA.
A.If you become a citizen of Thailand the U.S. can no longer tax you. Otherwise you not going to get out of paying taxes. You may even owe taxes for money you make overseas, and if you come back to the U.S. you may be considered a tax cheat for not filing or paying taxes while overseas. With the IRS always always always assume the worst unless they or a qualified tax expert can tell you differently. If you are a US Citizen or resident, you cannot simply get out of owing US Income tax simply by becoming a citizen of another country. A green card holder has an easier of giving up is green card and tax obligations than does a US citizen. Renouncing US citizenship, or leaving the US after lengthy legal residence (as other a diplomat or staff member of an international organization) can result in liability for tax under the law relating to EXPATRIATION TO AVOID TAX. This generally applies to US-source income and capital gains. You also need to satisfy some constitutional and administrative requirements to renouce citizenship and avoid future tax on foreign income and on US income outside the scope of the above law: http://uniset.ca/misc/css/TCM1992-187.htm Long residence abroad without payment of tax may leave you off the radar; but if you don't file with Form 2555 before the IRS catches up with you, you could forfeit the foreign earned income exclusion (but not the foreign tax credit). In real life the IRS rarely goes back beyond six years. You may want to assure yourself 40 quarters (ten years) of SET/FICA in order to qualify for Medicare and to get at least a minimum social security pension. And that is true even if a totalization agreement excuses you from coverage. Medicare only covers you while in the USA, but if you contracted a chronic illness you might choose to be repatriated. US citizens and green-card holders are taxed on their worldwide income. Only a minority of US citizens abroad file and pay tax, but many of them may be below the tax threshold. See the GAO report: http://www.gao.gov/archive/1998/gg98106.pdf Lending money to a US person from abroad will mean you need to file form W8 or else be subject to withholding tax on the interest. If you are an absconder who owes tax, the IRS may levy against the loan. If you have filed tax returns regularly, or begin fiing them now, you should have little to worry about. On 29/7/07 08:29, in 12f63$46ac41c8$4b5b201a$10...@ALLTEL.NET, Robert Mille
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