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Question for the Money Doctors

Question submitted on Dec 13, 2012.

Question

My wife is a US Citizen by birth (1983). She lives and works in foreign country, earning $42.675 annually. She never been in US except for few months visit, and has no Social Security Number.

She's never planing to go back to live permanently in the US in near future. She will continue to work abroad until she retired.

Is she required to pay tax or file every year?

Thanks,

Ziad

Answer

Because she is a US citizen, she is required to file an annual tax return. She may also be required to file a Form TD F 90-22.1 if she is an owner of a non-US account with over $10,000 in it at any time during the year. As far as her income tax filing obligation goes, she is likely to qualify for a foreign earned income exclusion which would mean in her case that she would not actually owe any tax. The foreign earned income exclusion eliminates income tax on $95,100 of earnings if the taxpayer is eligible to claim it. You should review IRS Publications 94 and 519 (both are available online at ) to see if she meets the eligibility requirements for the exclusion. If she does, she will probably have to include Form 2555 or 2555-EZ as part of her income tax return. Publication 94 includes a discussion of how to file any delinquent returns in case she has not filed in any prvious years when she should have. So to summarize, she needs to file a US tax return but is not likely to actually owe any taxes to the IRS.


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