live out of the US, earn money in the US

No truth whatsoever.

Katie in San Diego

Who's "he"?

No. My son lives overseas for 12 months of the year, he still has to file US income tax. He does not have to pay any, but that's only because he does not earn anywhere near the top Hollywood stars.

That's because money earned in the US is taxable regardless of where the person lives?. EVen if he lived 363 days a year somehwere else and flew in for 2 days, money earned in the US would be taxable, right?

This guy often makes nonsense statements, in an otherwise serious forum, but they are usually hard to prove incorrect, So I'd like to be as clear as possible when contradicting him.

"Someone elsewhere."

Only on the money earned in the US?

If you are unwilling to provide complete information there is no way a useful, complete answer can be provided to your question beyond Katie's response of "No truth whatsoever."

U.S. Citizens and resident aliens are taxed on income earned in the US or anywhere else. Non-resident aliens are taxed on income earned in the US unless it's a small amount or exempt by treaty. In other words, income tax applies to US here, US there and Them here.

The UK system has a "non-domicilliary" concept which might allow the UK equivalent of Hollywood stars to avoid tax by going abroad. But not the US.

Here I refer to "he".

And that's who the "he" was. Please don't be so suspicous, Bill. And what does it matter who said it anyhow?

Thanks again, all.

Huh?

No, on all his income, earned worldwide. As an American you have to pay taxes wherever it's earned.

Let me be more specific, and clear up any confusion that may still exist.

US citizens and US resident aliens (green card holders) are taxable in the US on ALL income, from all sources. See Treas. Reg §1.1-1(b). If such a person pays income taxes to a foreign country on income earned there, generally a credit for the foreign tax is allowed against the US tax; in effect, the US cedes the tax to the foreign jurisdiction. IRC Sec. 901; Sec. 936 for taxes imposed by US possessions. But any US person must report all worldwide income, and receives credit only for taxes paid to foreign countries.

There are special rules for taxpayers who renounce US citizenship with the principal purpose of avoiding US taxes. See IRC Sec. 877(h) for expatriations before June 16, 3008; IRC Sec. 877A for expatriations on or after June 17, 2008.

A US citizen or resident alien who is a bona fide resident of a foreign country can exclude up to $91,400 (for tax year 2009) of foreign earned income from the US tax base. IRC Sec. 911. The exclusion amount is indexed for inflation and changes every year.

Non-US resident aliens are taxable on income from US sources. Fixed or determinable income (e.g., dividends, interest, rents) are taxable at a flat rate of 30% or lower rate established by treaty with the alien's country. IRC Sec. 871(a). Income effectively connected with a US trade or business is taxed at normal graduated US income tax rates. IRC Sec. 871(b).

Katie in San Diego

Let me be more specific, and try to clear up any confusion that may still exist.

US citizens and US resident aliens (green card holders) are taxable in the US on ALL income, from all sources. See Treas. Reg §1.1-1(b). If such a person pays income taxes to a foreign country on income earned there, generally a credit for the foreign tax is allowed against the US tax; in effect, the US cedes the tax to the foreign jurisdiction. IRC Sec. 901; Sec. 936 for taxes imposed by US possessions. But any US person must report all worldwide income, and receives credit only for taxes paid to foreign countries.

There are special rules for taxpayers who renounce US citizenship with the principal purpose of avoiding US taxes. See IRC Sec. 877(h) for expatriations before June 16, 3008; IRC Sec. 877A for expatriations on or after June 17, 2008.

A US citizen or resident alien who is a bona fide resident of a foreign country can exclude up to $91,400 (for tax year 2009) of foreign earned income from the US tax base. IRC Sec. 911. The exclusion amount is indexed for inflation and changes every year.

Non-US resident aliens are taxable on income from US sources. Fixed or determinable income (e.g., dividends, interest, rents) are taxable at a flat rate of 30% or lower rate established by treaty with the alien's country. IRC Sec. 871(a). Income effectively connected with a US trade or business is taxed at normal graduated US income tax rates. IRC Sec. 871(b).

Katie in San Diego

The exemption for non-domiciled persons only applies to foreign source income not remitted to the UK. UK source income would be taxable in the UK for everyone unless exempt by treaty.

It matters, in general, because people come here and post questions with incomplete information. Answers to those questions, including yours, require complete information. You refuse, for whatever reason, to supply complete information. Who said it could be useful information. What else "he" said is more likely to be useful.

By the way, even non-resident aliens have to pay U.S. income taxes on income earned by working in the United States.

To add:

A US Resident Alien also includes those who pass the substantial presence test (Sec. 7701(b)(3)(A) and who do not file a closer connection statement (Sec. 7701(b)(3)(B)). Certain individuals are considered exempt from the substantial presence test for a defined period of time and would not be considered Resident Aliens regardless of the number of days of physical presence. E.g., those holding F, J, Q or M visas.

Normally, US Resident Aliens may not avail themselves of Tax Treaty benefits due to the "savings clause" (right to tax citizens and residents as if the treaty did not exist) in the treaties. However, I know of at least one treaty that allows a US resident alien to exclude certain income. See Paragraph 2 of Protocol 1 of the treaty with China (PRC).

Thanks, Katie. This does answer questions I was just about to ask. You beat me to it.

Any other questions are not as important, if you are short of time.

So if a US citizen or a dual citizen lives and pays taxes where the tax rate is higher than the US's, they won't owe any US income tax, iiuc. But they will have to file?

I'll have to go look at this. But in short, if it's possible to be short, if a citizen renounces his citizenship and then lives somewhere else all the time (not counting maybe a two-week visit to see family) and earns all his money outside the country all the time, he doesn't owe US income taxes, does he?

(I'm not going to do this. Just curious. :) )

Do you want me to give you the name of the person who said it? I'm not going to do that. I'm also not going to quote your name somewhere else. I'll use it in this group, where everyone had the chance to read what you wrote, but I'm not going to go to another forum, online or in person, where you haven't agreed to be discussed and say "Bill Brown of Longwood University said this:"

He has said thousands of things. He didn't say anything else about taxes that would be useful. AFAIK, who has to pay taxes and how much is a matter of law and it is not dependent on anything I say, or anything this other guy says.

Thank you.

True - but it is a very complex situation.

There use to be a 10 year tax provision. But since it was being ignored, I am told (which means I have no cite) there is now a prepayment of future taxes provision.

You had better have citizenship in a foreign country before you renounce your US citizenship.

Dick

My guess is that he's as wrong on most of the other "thousands of things" as he was about tax law. I wouldn't give much credibility to anything he says since he has demonstrated that he is quite willing to make assertions in areas of which he is pretty much completely ignorant.

I didn't want his name as much as I wanted his credentials. You provided that information; he has none.

Yes.

Under Sec. 877, effective for expatriations before June 16, 2008 (not

3008!), there is a 10-year period during which an individual may owe US income taxes under an "alternative tax regime." The rules are complicated and apply mainly to fairly high income individuals. So yes, a person who gave up US citizenship or residence for the purpose of avoiding US taxes may be subject to US taxes for up to 10 years after the year of expatriation. Whether or not a tax is due, such an individual is required to file a US federal income tax return every year in which he or she is subject to the alternative tax regime.

Sec. 877A, effective for expatriations on or after June 17, 2008, applies a "mark to market" approach to an individual who would formerly have been subject to the alternative tax regime, effectively treating the expatriate as if he or she had sold all assets at fair market value at the date of expatriation, and taxing the net gain at that date to the extent it exceeds $600,000. The $600,000 exclusion is indexed annually for inflation. After the year of expatriation such a person is treated like any other nonresident alien, i.e., taxable in the US only on US source income.

Sec. 877A was enacted as part of the Heroes Earnings Assistance and Relief Tax Act of 2008 (how in the world do they come up with these names??), P.L. 110-245.

Katie in San Diego

I'm guessing the names are created using something like the following, where you pick items from the indicated columns.

"Column A" "Column B" and "Column B" tax act of YEAR

A Americans veterans heroes mothers orphans dog lovers family farmers workers senior citizens retirees apple pie

B assistance aid relief fairness reduction simplification

;-)