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Turkey taxes

Hello M.T.M.,

I hope some kind soul can help me a bit with this or point me in the right direction.

I've always done my daughter's taxes which were fairly simple: wages, interest, dividends, some capital loss/gains from stocks and mutual funds.

However, in 2012 she is planning to move (she may or may not become a permanent resident) to Turkey where she will take a teaching job for a Turkish company. She will be paid a wage, lets say 1000L$ (L$=Turkish Lira) per week. She will receive the full 1000L$ direct deposited weekly into a bank account in Turkey. The company in Turkey will pay a tax to the government of 300L$ per week (30% of the wage).

I am told that this is a wage tax on the company payroll and not a tax on the employee, much like the employer FICA in the U.S. I don't know how accurate a description that is.

Assuming it's accurate, how would I handle this situation? Is there a special form or pub?

I realize she will probably have to find someone else, possibly in Turkey, to do her taxes, but I would like to educate myself a bit as to what may be involved.

Thanks.

Reply to
Vic Dura
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According to Deloitte Touche

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employees are subject to withholding at the source for income taxes, unemployment insurance and social security. They state that the employee contribution for social security is 14% and unemployment insurance is 1%. They state that income tax withholding ranges from 15% to 27%. Assuming her income is at the lower end, it appears that the 30% you reference consists of 15% income tax and the rest is for social security and unemployment insurance. It is the 15% in income taxes that can be used as a foreign tax credit on her US return. If she can meet the physical presence test for 2012 (See IRS Pub 54), she would be eligible for the foreign earned income exclusion rather than the credit. Please note that the earned income exclusion requires that her tax home (See IRS Pub 54) be in Turkey.

Reply to
Alan

On Sat, 15 Oct 2011 16:31:03 EDT, Alan wrote Re Re: Turkey taxes:

Reply to
Vic Dura

Reply to
Alan

The Turk you got your information from sounds like the US taxpayer who will say, "Oh, I didn't have to pay taxes last year. I got a refund." From what Alan posted it sounds like this is tax withheld from the employee and paid to the government just the same as it works in the US. Regardless, this distinction will resolve itself when she gets there. The important thing is for her to get familiar with how things work for US citizens abroad, and Alan gave you the Pub reference for that.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

Reply to
Phil Marti

With all due respect, you are in over your head and need professional help. Foreign earnings can get tricky real fast. She may, or may not, qualify for the Foreign Earned Income Exclusion. She may qualify for this exclusion LATE - for example, if she has to spend 300 days overseas and moved there on October 1, 2011 she will NOT qualify by the time she would normally file her return on April 15 BUT could qualify by July/August, so she might need to extend her return. I've also see cases where qualification for the exclusion happens AFTER the extended due date of the return, meaning she'd need to file then amend later.

The currency conversion issue is relatively simple and can be handled via an online currency converter. And you'll need to determine if she reports the Turkish income as wages or as self employment income.

IMNHO, unless you do this kind of work regularly its more likely that you'll miss something. And consider, if YOU miss something on your daughter's return what recourse does she have? On the other hand, if a PAID PRO misses something, especially if it results in penalties, interest or some lost benefit she'll have less "ethical/family" issues to consider when seeking resolution.

Good luck, Gene E. Utterback, EA, RFC, ABA

Reply to
Gene E. Utterback, EA, RFC, AB

On Thu, 20 Oct 2011 11:47:43 EDT, "Gene E. Utterback, EA, RFC, ABA" wrote Re Re: Turkey taxes:

Thanks for the reply. I agree completely with the need for a paid-pro to work on this. However, before searching for a pro (I will probably be back in this NG asking for referrals in my geographic area) I like to try to educate myself about the issues so that I can discuss the issues intelligently with the pro. That saves everyone time and frustration.

Thanks again for the comments.

Reply to
Vic Dura

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