As an ex-patriot, must I pay taxes United States taxes on Social Security Benefits? My income is simple: Soc Sec $15,288, Pension $7,644. According to the Notice 703 I get every year from Soc Sec, I then take one half of the Soc Sec, $7,644 add that to my pension of $3,785.76 and the total is $11,429.76. This is far below the base of $25,000 beyond which I would have to pay taxes. I have no income from the Philippines, no business, no job, and nothing from the gov't here.
I have read Pub 54 and Pub 915 but do not see how they apply to me.
Is this not right?
What forms in addition to 1040 do I send in with my return?
Thanks.
And if you calculate all your income, it is a determinant of whether your adjusted gross income rises to the threshold of taxation.
I don't know, however, what you mean by ex-patriot, nor am I sure that term has any legal or tax implication, unless you're referring to yourself as an Ex-Pat, something like the creative writers of Hemingway's and Fitzgerald's era and others who lived abroad. This is not a criticism of your spelling, but that word would be expatriate, which makes more sense. And that may or may not have tax implications, including whether or not you've renounced American citizenship, what your status is in the Phillipines, and similar issues.
Because of your expatriate situation, I agree with FF; you really need to consult with a tax pro as this could be a complicated issue. If you can't find one in the Phillippines, e-mail the IRS, fully explaining the situation and enumerating your questions. IRS will answer, but not always quickly, and you'll then have written advice on which you can rely.
I wouldn't call with a question like this; you need to have something in writing if the issue arises again.
This is what I am trying to do, find someone with knowledge about this. A very difficult task in the Philippines and virtually impossible on the tiny island I live on. As far as the IRS is concerned I can only contact them by mail and that takes weeks. They just now got back to me about my 1040 of 2014 and they re-worked my calculations to include my social security benefit. They never said, oh no you don't have to file because you don't owe anything. A tax man in Honolulu did look at my calculations in an email and said they were correct as I gave them, yet the IRS is different as they included my social security into my earnings. I always thought in the States social security benefits were exempt from US taxes. I may be wrong. They just told me to read Pub. 54 and 119 as if I could figure out the "IRS Speak" myself. The IRS will always come to a conclusion that benefits the IRS. I know that after more than fifty years of tax returns.
I just wanted to find a consensus perhaps of those who have had similar problems. My return has already been filed so none of the online tax people will tell me anything unless they can file for me. Anyway, Thanks.
Sometime in your past there was debt that was written off. Could have been credit card debt, or medical debt or foreclosure or short sale or really any debt over $ 600.00 that the issuer could not collect on and was written off. Credit card companies and mortgage lenders do 1099-C routinely as a normal part of business. What they can do and have to do to be able to recoup this loss on their corporate taxes is issue you a 1099-C Cancellation of Debt. It will be for the amount walked on by you and then can have interest and fees added in. If it was several years old, it could be several thousand in fees and interest so it ballooned up from maybe 19K to 24K.
Whatever the case, it is totally reportable AND TAXABLE income to the IRS and you owe taxes on whatever the 1099-C and your regular income totaled too. Yeah, it's in a way phantom income but nevertheless income in which taxes are due. And again, it is added into whatever income you got paid. So probably pushed you out of low income no taxes due to having taxes due. That would be my guess & this is what Babalou is getting at as well.
For 1099-C situation, you can file a IRS form 982, which is worksheet like form use to offset income. The 982 is kinda best designed for those getting a 1099-C from a foreclosure and short sale as a lot of the examples are about costs of house repairs, depreciation, etc. If yours was income from walked on credit card debt, those deductions won't be there. You may need to look to medical debts to offset the income. You just may not have anything to be able to deduct. The 982 is not a DIY project. Really you need a tax pro - like a CPA to deal with it to get it right. There is going to be somebody in Manila or close to a military base who is understanding of US tax codes & filings.
Now you don't want to ignore this. Why? well you will owe taxes to the IRS and if you don't pay, the IRS as a super-creditor can seize your SS till they get repaid in full for taxes due and any interest or fines. You don't get an opt-out of paying, IRS will just attach your SS with or without your agreeing to this. Understand???
If you need every penny of your SS to live, or in the future could need to come back to the states and apply for Medicaid and need to show an history of being low-income, this could be a real problem no matter how low your cost of living is now as an ex-pat.
If you have, this is a section that you really need to read:
https://www.irs.gov/Individuals/International-Taxpayers/Expatriation-Tax
If the filters delete part of the URL, Google the section after the .gov and read the page - there are different classifications for people who've renounced citizenship before or after certain dates.
Pub. 54 is for "US citizens and Resident Aliens", and Pub. 119 is for "Foreign Person’s U.S. Source Income Subject to Withholding."
1099-C $24,081.00.
Soc Sec 15,288.00
pension 3,785.76.
Total $43,154.76.
Single tax rate on 43K about $ 13K.
Really unless you have a possibility of doing a successful IRS form 982 - Reduction of Tax Attributes Due to Discharge of Indebtedness, you probably just need to file and deal with IRS to do a payment plan on your taxes due. Delaying all this is just going to increase interest and fines…..it won't be pretty. Pay now or pay even worse hurt later.
https://www.irs.gov/Advocate
Maybe the best thing I can do is just let the IRS re-figure the 1040 I filed and ask them to take my $320 pension check monthly in payment until it is paid.
Igloo, I truly hope the figures you listed are not correct because there is no way I can pay $13. Why do you include the social security as income? I have no business, interest, assets or job here in the Philippines so Pub 54 and 915 do not apply to me. This is the part I do not understand. I can see adding the $24,041 to my pension of $3,785.76 making total income $27,826.76. Subtracting that total from the standard deduction of $6,200 equals $21,626.76. In line 42 of the 1040, Exemptions, if line 38 is less than $152,235 or less, multiply $3,950 by the number on line 6d ( which is 1) So subtracting $3,950 from the $21,626.76 is $17,676.76. I do not have the tax tables for 2014 and I cannot find them on the IRS Pub site but the tax on $17,676.76 is far less than on $43,154.76. The whole thing hinges on whether or not to count the entire social security amount as income.
That is what I do not know about. On the work sheet Notice I get every year to fill out and see if any of my social security is taxable, in line A I list the the total of benefits ($15,288) In line B I am told to enter one half of line A or ($7,644). Line C is line A and B added together ($27,826.70). Line E is B,C, and D added ($35,470.70). That is my total income. I am confused as to how much of my social security is taxable. The total is above the $25,000 thresh hold for Single filing separately so I know at least part of the benefits are taxable but why all?
I have to do this myself or let the IRS do it and they of course could not take any offset into consideration such as a 982 (which I must research) and try to use. A tax man at this point is not possible in my situation.
I truly thank everyone for there help. Dave
1. If the car was repossessed in 2003, I'm wondering if that's the real reason for the 1099 as it's my understanding that IRS audits only up to 6 years back. But there is a qualifier if more than 25% of income was omitted, but this is a qualified, specific exception.
2. I think you're incorrect that the publications don't apply to you, as when I did a quick check, one of them applied to ex-patriates, which I believe you are.
3. As I also recall, ex-pats were distinguished by whether they retired before or after the year 2008.
4. Inclusion of SS as income is dependent on your other income. W/o going back to the figures, and without getting out the forms to check the worksheet on calculation of whether SS is taxable, an amount such as the forgiven debt can change the calculation to the point that your SS becomes taxable.
Although it doesn't apply to your situation, capital gains and dividends have the same effect. In a bad stock year, SS can be under the threshold for taxation. In a good year, abundant cap gain distributions and dividends can push the income level up into the taxable range.
5, If you left the car with a friend, did you change the title, or was the car still titled in your name? I assume also that your friend didn't assume the loan on the car?
6. Someone really needs to get the 2014 worksheet and go through the calculations with you to help put this in perspective. I did find it online:
https://www.irs.gov/publications/p915/ar02.html
Was there any other info on the 1099 on what debt was cancelled? If not, I think I'd address that and find out exactly what it is as it could be an error. The IRS has been known to screw up!
A few years ago they sent my father a letter telling him he had to sign a specific form to collect a refund for a dead person, but my father was and is very much alive! How some idiot concluded he was dead is beyond me. (I was tempted to get a sheet, paint some ghost like features on it, hang the sheet over my father's head and go down to the IRS and tell them my father's ghost was there to collect his refund!)
Are you a veteran? If so, you might have access to someone on one of the bases - as I recall there is tax help for veterans on military bases.
I actually am a veteran but I would need to travel to Manila and that is like 7,000 islands away from Camiguin, really!
If I really do owe thousands of dollars, maybe they will just take my $320 pension for a while until it is paid off. I just don't know what credits or other deductions I could take to offset this higher tax. The IRS of course would not give me those on their own that's why i hesitate to just tell them to figure it for me.
You definitely need to determine what the cancelled debt is!
But you might not need to go to a military facility in person; life in America is so much more electronic these days, so take advantage of that. Contact the base and see if you can get any information, or if there's any help through the JAG service. In fact, I might contact JAG first anyway.
Another option is that if you have friends or family you trust in the States, give them a limited power of attorney to address the issue, primarily for information gathering purposes. At least then you'd be able to expedite the mystery of what the cancelled debt it.
Amy, I don't wish to contradict you, but my experience has been different. We've been through a number of issues, which have been resolved satisfactorily, although not without a lot of annoyance and aggravation. However, I do my research, document and take IRS head on.
I've had more problems with people in the Michigan Treasury Department, under the current Republican administration.
I have worked for a tax attorney who I believe was also an enrolled agent, and he was very, very good and worked out good resolutions. But he, as some other tax attorneys, generally have clients of "high individual net worth". Knowing these kinds of attorneys, they might not be as inclined to take a case like Dave's.
I am sorry to learn though that you've had trouble with IRS, and you are right in that a professional knows how to "speak IRS language."
It is still a question if I can use the Ombudsman services. According to the web site it is used after all other options have been used. I am just now in the information phase. If I get to the point where I am told I owe thousands of dollars because of this cancel debt then that will be a financial hardship and I can contact them. When I visited the Ombudsman site all the options to contact them were for the States (local offices) so I am not even sure they will help a citizen living overseas. I may contact them by letter once I get an idea of what this cancel debt is and what problem I face because of it. I have not been back to the States since 2003. I can't imagine what it is but have a possibility in mind. I am still working on the military option. Thanks.
And given the difficulty of communication since you're overseas, and what seems to be kind of a "you work it out by reading the publications" attitude, I'd say you could consider that you are pretty close to exhausting options.
Another issue which would concern me is that the IRS could interpret any lack of aggressiveness in resolving the issue as delay or dilatory tactics.
I'd jump on the Ombudsperson option very aggressively, asserting if you have to that there's nothing stated on the web site that their services aren't available to ex-patriates. If the IRS has publications dealing with ex-pats' obligations, then it needs to be prepared to address any issues that arise therefrom.
My experience has been that once the IRS makes what I consider a mistake, or wants additional information, the best thing to do is get it resolved as quickly as possible before someone else makes another mistake and compounds the issue.
I have a special delivery to the IRS now to find out about the Cancel debt so I may find out soon.
Thanks again for the advice. God bless.
I can recommend a cpa but he is expensive.