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Question for the Money Doctors

Question submitted on Apr 9, 2012.

Question

Hello there,

My name is Luqman Haroon and I am a dual citizen of the US and the Kingdom of Bahrain.

I am currently seriously considering an employment offer to move to Dubai, UAE, to take up full time employment in June of 2012. My salary will work out to a megre $57,446 once it is converted from AED to USD.

I am currently employed in the US with a Gross Annual Income of $45,000. I obviously pay both Federal and State taxes on a regular basis out of my paycheck and consistently receive a refund on my taxes ($6,400 federal and $380 state for 2011). I am married, file jointly, and have two young daughters (3 yr old and 7 month old), which helps out with our refund as well.

My question is based on the information that I have read thus far, to claim exeptions from US Taxes while overseas I know that I have to live there for 330 days out of a tax year. This will obviously not be the case should my wife and I pack our bags and move to Dubai in June with our kids.

I was playing around with TurboTax when after I completed my 2011 return to get an idea of what my tax liabilty might be and with some guess-timated #s I input it stated that I should file for an extention for 2012 so that I am a resident of the UAE for 330 days before I file for 2012. Does this make sense? What would your recommendation be?

Then in 2013, when I have lived there a full year, can I file prior to the 04/15 deadline instead of filing another extention?

Finally, in regards to Social Security taxes, do you know if the UAE has a treaty with the US and if I will have to pay Social Security taxes?

Thanks for your help and clarification on this, I really appreciate it!

Answer

Hi Luqman.  Your question is a difficult one to answer and involves many moving parts.  I think it would serve you well to talk to a CPA who has experience in expatriate tax issues.  I am positive that the extra expense of hiring a CPA would more than offset the tax savings ideas that a CPA would provide you.  To find a CPA/PFS in your area, please visit www.findapfs.com.  I am sorry that I cannot answer your questions more specifically in this forum but I think a good local CPA/PFS could help.  Good luck!


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