Global Tax Forum: Make the Most of Your Holiday Stateside Visit
Tracy Byrnes
11/24/99 - 01:00 PM EST
Hey expatriates! Heading home for the holidays? Before you sit down to Thanksgiving dinner, here's a tax tip to chew on: Get your tax situation in order while you're home. We'll show you how.
But first, some great ongoing conversations from the
last installment of Global Tax Forum.
Anything else you'd like the Global Tax Forum to tackle? Send your questions to
taxforum@thestreet.com. Please remember to include your full name and resident country.
F-1 Follow-up
Reader
Francesco Topino, a foreign student, asked about his F-1 visa in the
last edition of Global Tax Forum. We responded that "for U.S. tax purposes, an F-1 visa holder is considered a nonresident alien for the entire length of stay."
But reader
Tunga Kiyak wrote in, noting that "this is only true for the first five calendar years" and referred me to a passage from
Publication 519 -- U.S. Tax Guide for Aliens. (I'm always impressed when people read these things.)
You will not be an exempt individual as a student if you have been exempt as a teacher, trainee or student for any part of more than five calendar years unless you establish to the satisfaction of the IRS district director that you do not intend to reside permanently in the United States and you have substantially complied with the requirements of your visa.
Great point, Tunga. But after the five years are up, if the student can prove he's truly still in school, he can reapply for F-1 status and shouldn't have a problem getting approved, says Nick Morrow, foreign-tax specialist at
Martin Geller, a New York accounting firm.
I was assuming students still finish college in four years. Silly me.
Foreign Income Exclusion
Reader
Karen Meek's company sent her overseas for 10 months and she wanted to know the tax implications. We noted in the previous Global Tax Forum that U.S. citizens are taxed on their worldwide income, no matter where they live.
But reader
Lewis Cohen says we should remind Karen that she may qualify for the foreign earned income exclusion. This allows qualified U.S. citizens and resident aliens who work in a foreign country to exclude up to $74,000 in foreign earned income from their tax returns for 1999. It includes wages, salaries, professional fees, sick pay and vacation pay from sources in a foreign country. It doesn't include dividends, interest and capital gains.
For more on this exclusion, check out our
Overseas Assignment Tax Checklist.
More Home-for-the-Holidays Tips
Besides visiting your tax adviser while you are home for the holidays, here are a few more things to think about in between the turkey and the stuffing.
Make sure everyone has your correct address.
The various institutions that provide tax information to you -- banks, brokers, partnerships -- need your correct foreign address. Why not give them a call while you're home to make sure they do?
Dig up your home-purchase documents.
If this is your first year outside the U.S. and you're renting out your U.S. home, your tax preparer doesn't have any of the information he or she will need to figure out your rental expenses and determine the depreciable amount of the house for your tax return, says Arthur Hayes, national tax technology director at
PricewaterhouseCoopers in Stamford, Conn. Pull out your home-purchase documents and closing statement while you're home.
Also, be sure to include a list of improvements you made to your house before your overseas transfer. Those improvements will be added to your basis in the home, and that will increase the depreciable amount you can deduct on your tax return.
Check your portfolio.
If you bought or sold any securities during 1999, make sure you have all the necessary cost-basis information your accountant will need.
Keep track of time spent in the U.S.
This is probably the most important thing you need to do. Your tax bill is most affected by the days you spend in and out of the States. For example, your foreign earned income exclusion is calculated based on the number of days spent in and out of the country.
Whether you are considered a resident or nonresident of a particular U.S. state will depend on how many days you spent there.
And finally, you may well be considered a resident of the foreign country in which you now reside -- again, depending on the number of days you spend there.
Keep a daily diary. Keep your time and expense reports, along with airline tickets, as proof of your travel in and out of the country.
Here are two quick tips for determining days in and out of the U.S.:
1. A full day is a 24-hour period commencing at midnight. So a day you travel to or from the U.S. is not a full day in the foreign country, according to the
Ernst & Young's Tax Guide.
2. When you travel between foreign countries, the travel days will qualify as full days in a foreign country, provided the time spent outside of either foreign country during the journey (i.e., time is spent over international waters or time spent in the U.S.) is less than 24 hours.
Show your face at the office.
Most likely you took this overseas rotation with the intent of coming back to the U.S. eventually. So don't let "out of sight, out of mind" apply to you.
Stop in at the office. Put pictures of your family in your new home up in the coffee room. Make sure your face stays fresh. It can't hurt.
Have a happy Turkey Day -- wherever you are!
