Curriculum

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====== Income Tax ======

[[American Expat Retiree Financials | contents]]


===== Key Ideas =====

The IRS does not care where you live.  A US citizen always pays income tax on all income everywhere.

Foreign investments.  Too scary, not included here.

1040 plus
  * Schedule 1A, new "enhanced" senior deduction.  (Lots of voting power in us seniors.)
  * Schedule B, interest and dividends, for 1099-INT and 1099-DIV, plus foreign bank account interest.
  * Schedule D, capital gains, if you receive a 1099-B.

Foreign bank accounts.  
  * Add interest income to Schedule B.  
  * Add tax withholding to Foreign Tax Credit.  
  * File FBAR to FinCEN.  
  * Maybe report to IRS on attachment to 1040.

DIY.  Use Free File Fillable Forms.  bottom line legal IRS requirements and instructions.

Use a tax prep assistant to minimize stress.  Choose among human consultants like Greenback and Bright!Tax for $500, or automated online systems like H&R Block Expat and expatfile.tax for 100 to 200.

Inputs and calculations.

===== Tax Minimization =====

It is legal to minimize taxes by maximizing expenses.\\
It is NOT legal to //avoid// taxes by //failure to report// income.\\

The wealthy can create businesses, organized as LLCs, and write-off most of life's expenses, until their is no tax to be paid. 

The super wealthy can create a charity, a bank, a church, or a nation-state and create money out of thin air, all tax-free.

This document does not cover any of that.  The author is a sucker who dutifully obeys all the rules to avoid the stress of possibly getting caught.

===== State Tax =====

This chapter is about US Federal Income Tax administered by the IRS.  There is only one thing we want to point out about state income tax, and that is, that seven states have no income tax: 
  - Alaska
  - Florida
  - Nevada
  - South Dakota
  - Texas
  - Washington
  - Wyoming


===== Input Documents =====

There are two sources of data for input into the tax calculations.
  - 1099s - your brokers and financial institutions report your investment earnings on various kinds of 1099s
    - 1099-INT - interest income
    - 1099-DIV - dividend income
    - 1099-MISC - miscellaneous income
    - 1099-B - gain or loss from sales of assets
  - bank statements - foreign banks do not issue 1099s, obviously, but they sometimes pay interest and sometimes withhold tax from those payments, and all these transactions are recorded in bank statements and/or your passbook.

===== Record Keeping =====

Keep one folder in the cloud for each year.  And within each year, keep folders for all your input documents, especially one for 1099s and one for bank statements.

1099s show income and withholding.

Bank statements show balances, interest payments, and sometimes withholding from those interest payments.

===== Attaching Documents to the Return =====

There are two cases when a 1099 must be attached to the return.

1. Any 1099 that shows tax withholding must be attached to the return.

2. A 1099-B showing capital gains must be attached to show transaction detail.  An active trader, a mutual fund, or an ETF.


===== 1099s =====

Gather all your 1099s that you receive from banks and brokers.

1099-R - distributions from an IRA or 401K

1099-B - gains and losses on sales of investments

1099-DIV - dividends

1099-INT - interest

1099-CONS - consolidated.  I got this from eTrade.  It was very nice to have all the data in one document.

===== Statements =====

Year-eend balance for each account.

Interest payments in June and December.

===== Tax Forms =====

Form 1040 - the basic form with income, credits, tax due or refund, and signature.

Schedule 1a - new deductions as of 2025, including the enhanced elderly deduction.

Schedule 3 - Additional Credits and Payments.  Line 1 is Foreign Tax Credit.  Like for example tax withheld from interest payments from foreign bank savings accounts.

Schedule B - Part I interest from 1099-INT forms and also interest from foreign bank accounts, Part II dividends 1099-DIV, Part III declare foreign bank accounts.

Schedule D - capital gains and losses reported from 1099-B.  

Form 8949 - capital gains detail data.  Often, the data from 1099-B goes to form 8949 to Schedule D and ending up on the 1040 line .

Form 1116 - Foreign Tax Credit.  Starts with your total foreign tax paid and goes thru a calculation to determine how much of that can be claimed as a credit.

===== Terms =====

Adjusted Gross Income (AGI) - This is a fundamental number, and some tax software systems ask for last year's AGI to prove your identity.

Taxable Income - AGI less some more adjustments.

Tax - The amount of tax you owe, calculated against your Taxable Income.

Credits and payments - Amounts you've already paid in advance, including the amount overpaid last year and estimated payments you made throughout the year.

Due or Refund - Tax minus credits and payments.

===== IRAs and Pensions =====

1099-R
===== 1099 =====

===== Foreign Bank Accounts =====

Schedule B.  Checkboxes.

Interest Income.

Tax withheld from interest income.  Foreign Tax Credit.

Schedule D. Part III is a worksheet.

publication 514
Publication 514 (2025), Foreign Tax Credit for Individuals
see How To Figure the Credit

Form 1116 






move to Foreign Banks
Every time I receive an interest payment from a Thai bank, it comes along with a charge for tax withheld.  These tax withheld charges can be counted as a Foreign Tax Credit.  Report on Form 1116, Schedule 3, and 1040 line 20.


===== Qualified Dividends and Capital Gains =====

1040 line 16

Qualified Dividends and Capital Gain Tax Worksheet.

qualifed dividends and capital gains are taxed at lower tax brackets

Schedule D worksheet

Form 8849

===== Estimated Payments =====

===== Revise and refile previous years =====





=====Huh=====

No I think the income would be earned in the place where the investment is registered That’s the whole point of Schwab international they give international people access to US investments

Deferred vs Taxable Accounts

The 1099-B

  * 1099-B is issued by the broker to both the IRS and the investor on the sale of the mutual fund. Not on the buy. There is no tax event on the purchase of the shares.
  * capital gains reported on form 8949 -> schedule D -> 1040

==== Foreign Income ====

For a USA citizen living abroad.\\
The source of his income will be designated USA or foreign.\\
The source is not affected by whether he is living in the USA or abroad at the time.\\
If a USA citizen receives a salary from a foreign company, that income is foreign income, regardless of whether the investor is living in the USA or abroad.\\
Similarly, if a USA citizen sells a USA mutual fund, the capital gain is USA sourced income, regardless of whether the investor is living in the USA or abroad.

The source of income.\\
Mutual funds are registered by a country.

Is there a situation in which selling shares of a mutual fund or ETF would be considered foreign income?

If the mutual fund was held in an international account by a USA taxpayer living abroad, the income is still USA income.

On the sale of a USA mutual fund, the capital gain is considered USA income. Regardless of the

Regardless of the address of the investor.



===== Strategies =====

==Tax Gain Harvesting==
A strategy to reset the basis of assets to a higher value.\\
Applies to long-term capital gains on taxable assets.\\
Long-term capital gains tax has 3 brackets.  The 0% bracket goes up to 48000.\\
In a year with low income, you can reset the basis of taxable investments for zero gain.\\
Sell assets and buy them back.  This resets the basis of those assets.\\
And if you do it so that you have less than 48,000 gain, you pay 0% tax.\\
[[https://www.schwab.com/learn/story/how-to-save-money-with-tax-gain-harvesting | Schwab: tax gain harvesting]]

==Tax Loss Harvesting==
Similar to Tax Gain Harvesting but applies to assets that are now in a loss position.\\
Sell the assets, take the loss, apply it to gains on other investments, but the stock back to maintain your position.\\
This strategy is tricky and comes with multiple caveats and IRS rules.\\

===== Updates =====
2025 - new senior deduction.\\
The One Big Beautiful Bill Act (OBBBA), credited to the Trump administration, contains a "senior deduction" of $6000 for persons over 65 with income below 75,000.\\
{{https://www.hrblock.com/tax-center/irs/tax-law-and-policy/one-big-beautiful-bill-senior-tax-deduction/?srsltid=AfmBOorbiAOpS1TtiC81MQg4nVxdpdQV8kkHNKpNLRS69eGhGj97LQ8b | H&R Block: senior deduction}}


===== Tax Advisor/Preparer =====

==== How to Hire a Tax Advisor ====

advisor vs preparer\\
Prices\\
flat-fee\\
per form:\\
hourly consulting fee

per-form pricing would mean 1040, schedule D, form

Do I need to file a Kansas tax return? The preparer makes more money if the answer is yes.

CPA vs “IRS Enrolled Agent”

tax preparer

  * should be in Kansas?
  * should have a specialty with expats
  * must know about resident vs non-resident status

What is resident vs non-resident as regards the federal 1040? and for Kansas?

How do you take your compensation? Tax form preparation? Hourly consulting?

===== IRS =====

U.S. citizens and resident aliens abroad\\
https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad\\
“If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad.”

“You are subject to tax on worldwide income from all sources and must report all taxable income and pay taxes according to the Internal Revenue Code.”

“If you are a U.S. citizen or resident alien residing overseas or are in the military on duty outside the U.S., on the regular due date of your return, you are allowed an [[https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad-automatic-2-month-extension-of-time-to-file|automatic 2-month extension]] to file your return without requesting an extension.”

Publication 54 (2023), Tax Guide for U.S. Citizens and Resident Aliens Abroad\\
https://www.irs.gov/publications/p54#en_US_2023_publink100047317\\
“This publication discusses special tax rules for U.S. citizens and resident aliens who work abroad or have income earned in foreign countries.” Does not apply to me.


===== Advisors =====

Jeff Chaney, Bright Tax, 23 Jan 2025\\
really great conversation, he recommended:

  * keep the US address, for SSA, banks, brokers, etc
  * move it to florida or wyoming
  * https://www.creativeplanning.com requires firefox, Creative Planning, an investment advisor company that helps with more complicated address issues, like for mutual funds,

1099-R

===== 5498 =====

https://www.irs.gov/pub/irs-pdf/f5498.pdf

The custodian sends us a 5498 for each IRA, but not until May of the following year.\\
Therefore,\\
At the end of each year, we must calculate and generate a 5498 for each IRA.\\
We use this in preparing our next 1040.\\
When we eventually receive the custodian’s 5498 (after the 1040 has already been filed), we compare it to our own and make sure the calculations match.

The 5498:\\
1. contributions\\
2. rollover contributions\\
3. roth conversions\\
4. recharacterized contributions\\
5. end-of-year FMV\\
6. life insurance cost\\
7. type: IRA, SEP, SIMPLE, ROTH\\
8. SEP contributions\\
9. SIMPLE contributions\\
10. ROTH conversions\\
11. If checked, rmd for 2026 (indicates the taxpayer’s age 73+)\\
12a. RMD date\\
12b. RMD amount\\
13a. Postponed/late contributions\\
13b. year\\
13c. code\\
14a. Repayments\\
14b. code\\
15a. FMV of certain specified assets\\
15b. Code(s)

In our case\\
rollover contributions (only in 2025)\\
roth conversions (2025 - 2029)\\
end-of-year FMV\\
RMD amount (due in the following tax year)

Notes

  * During the tax year of a rollover, the owner has activity in two IRAs, the old one and the new one. He will always get a 5498 for the new IRA.

===== How to File =====

DIY.  PDF forms and instructions.  When you make changes, you have to re-do all the downstream calculations.  Can only be filed by mail.  Print, sign, and mail.  No upload or email filing capability.

FreeFileFillableForms - similar PDF forms with some calculations built in. Nice idea, but not yet ready. Buggy and incomplete. You have to double check all the calculations anyway, so it's not much help.   However this system is connected to eFile, so you can file the forms electronically.

H&R Block Expat - $109

expatfile.tax $259 depending on your circumstances.




=== Hard Way ===

DIY.  Print and mail.
  - Download the PDF forms and instructions from https://www.irs.gov/forms-instructions
  - Fill out the forms, following the instructions, and making the calculations by hand.
  - Print it all out, sign and date the 1040 with a wet signature, and mail it in.  Note: there is no way to email or upload the documents.

=== Easy Way ===

Login to {{https://expatfile.tax}}, follow the instructions.  
Pay their fee just under $200.

=== Expensive Way ===

Hire one of the firms listed below in the Resources section, and let them guide you through it.  Though they might charge a fee of $500 or more, this could turn out to be the most cost-effective method because they might suggest strategies that can save you a lot of tax money in the long run.

=== Other Ways ===

  - Free File Fillable Forms
    - A system provided by OLT, Online Taxes, a company based in Missouri.
    - Maximum AGI $51,000.  A limited system with only basic calculations.
  - 


https://www.irs.gov/filing/individuals/how-to-file\\
https://www.irs.gov/filing/irs-free-file-do-your-taxes-for-free

Ways to file:

  * Fill out the forms and mail it in.
  * Direct File - experimental, only if you have lived and worked in one of 25 participating states
  * Free File, 2 versions:
    * IRS Free File - for AGI under 84K, using “guided tax software” from one of eight trusted partners
      * [[http://1040.com|1040.com]]
      * [[http://TaxSlayer.com|TaxSlayer.com]]
      * [[http://OLT.com|OLT.com]]
      * [[http://FreeTaxUSA.com|FreeTaxUSA.com]]
    * Fillable Forms - for any income level, using [[http://www.freefilefillableforms.com|www.freefilefillableforms.com]]

== My own procedure ==

1. Fill out the forms manually until I understand it.\\
2. Use Direct File, Free File, or Fillable Forms, to do the actual filing.

  * 2024, AGI = 20K, used expatfile.tax, filed 4 Apr 2025, paid ฿5,646.22 = $174
  * 2025 AGI ≈ 145K, use Fillable Forms
  * 2026 AGI ≈ 150K, use Fillable Forms
  * 2027 AGI ≈ 20K, use whatever is the latest, probably Direct File




=== Estimated Tax for Roth Conversion ===

(generally, 90% of your current year’s tax or 100%–110% of last year’s tax, depending on your adjusted gross income).\\
**Note**: Ensure you make payments by the quarterly deadlines (typically April 15, June 15, September 15, and January 15 for calendar-year taxpayers) to avoid penalties. Direct Pay allows scheduling payments in advance, which can help meet these deadlines.

Calculate Tax using rmd_roth_model.\\
Initiate payment at IRS, from SDFCU checking to IRS.\\
Note. We could pay from IBKR, but that would expose our account number to a third party.

https://www.irs.gov/faqs/irs-procedures/address-changes\\
f8822.pdf\\
to change address

to make a payment\\
type (checking or savings), routing number, account number

=== IRS Free File ===

https://www.irs.gov/filing/irs-free-file-do-your-taxes-for-free


===== Resources =====

==== Online Guided Tax Software ====

**H&R Block Expat**\\
https://www.hrblock.com/expat-tax-preparation/\\
file online $109, with advisor 219, plus 49 per FBAR\\
consulting?\\
recommended by expat.com\\
20-things-americans-overseas-should-know-about-taxes-for-expats

**expatfile.tax**\\
[[https://expatfile.tax/pricing/|https:%%//%%expatfile.tax/]]\\
online service to prepare return and file via eFile $200, or with an advisor 500, no state returns\\
My experience:\\
  - Finished return is static PDF.  No way to edit it.
  - Failed to include my middle initial.
  - Failed to click the "Rollover" checkbox on my Pension line.
  - Required to receive refund via direct deposit or mail.  No option to apply to next year.
  - Schedule B part III, checked No instead of Yes for FBAR reporting, because I declined their FBAR service and refused to give them my bank account numbers.
  - Multiple times per day getting interrupted with demand to "Refresh" to download new version of the software.
  - Login requires clicking on a link provided in an email.

compare expatfile.tax return to Tax Worksheet, 6 issues with expatfile.tax:
  * middle initial missing
  * province name missing
  * Pensions checkbox 5ac1 Rollover - should be checked
  * total income 4 dollars short because of rounding
  * Form 1116 presents eTrade long term gains as foreign sourced because I was living abroad at the time of the sale.  So I removed the claim of 65 foreign tax credit.
refresh button


**TurboTax**

efile.com - It looks like a IRS site, but it's a separate commercial business.\\
1040.com - It looks like a IRS site, but it's a separate commercial business.\\


==== Human CPA ====

^ company  ^ contact   ^  1040 prep ^ consulting  ^  
| Bright!Tax   |  Marina Di Domenico, PR  |  530 | 260/30min  |
| Greenback    | Jean Venter, PR          |  530 | 250/30min  |
| 1040 Abroad  | Olivier Wagner, founder  |  500 | 500/hr     | 

Bright!Tax and Greenback are large companies.  Every time I email them the reply is from a different person.  An individual accountant will be assigned to me once I create an account, complete an interview questionnaire and upload the documents.  The process may take two to three weeks.  Bright!Tax will not start until 15 Mar.

Some preparers charge a flat fee.\\
Some charge per form. Capital gains will require schedule D, form 8949 and supporting doc\\
Most charge additional fee for each state return.

List of tax preparers from American Embassy Bangkok\\
https://drive.google.com/drive/my-drive tax-consultants-2017.pdf\\
[[http://www.usglobaltax.com|www.usglobaltax.com]] new zealand, one person in california\\
https://expattaxfirm.com Mitch Propster, Florida, 2 hr consultation $250, fed filing 295\\
https://aitaxadvisers.com/ Bangkok, Chiang Mai phone, Thomas Carden, Chris\\
https://www.us-taxman Dan Gordon, Seattle, Bangkok

**Greenback Expat Tax Services**\\
https://www.greenbacktaxservices.com/\\
1040 prep: 530usd \\
consulting: 250usd/30min\\
https://www.greenbacktaxservices.com/knowledge-center/state-residency-while-abroad/\\
“South Dakota is recommending itself as traveler friendly”\\
email received from Jean Venter, Customer Champion\\
https://mail.google.com/mail/u/0/#inbox/FMfcgzQXKqkbsDGVdwxBZNLdNCmHPjfm\\
recommended by expat.com \\
{{https://info.greenbacktaxservices.com/hubfs/Expat-Tax-Planning-Documents-Checklist.pdf | sales brochure - checklist}} \\
{{https://info.greenbacktaxservices.com/hubfs/Tax-Guides/Final/15%20Essential%20Things%20to%20Know%20About%20Expat%20Taxes.pdf | sales brochure - 15 tips }} \\

**Bright!Tax**\\
https://brighttax.com/\\
fed $500, state 180, fbar 110, 260/30min consulting\\
Gregory Dewald, founder\\
Jeff Chaney, CPA, free consultation 23 Jan 5:30\\
really great conversation, he recommended:

  * keep the US address, for SSA, banks, brokers, etc
  * move it to florida or wyoming
  * creative planning, a company that helps with more complicated address issues, like for mutual funds, creativeplanning.com requires firefox

**1040 Abroad**\\
https://1040abroad.com\\
Olivier Wagner, New Hampshire, lived in France\\
recommended by expat.com \\
1040 prep: 500usd \\
consulting 500usd\\
{{https://1040abroad.com/wp-content/uploads/2025/09/US-taxes-for-American-Expats.pdf | sales brochure}} \\

**Expat CPA**\\
https://www.expatcpa.com/\\
Irvine, CA\\
fed $379, state 189, plus more for each form, consulting 200/hr

**Taxes For Expats**\\
https://www.taxesforexpats.com \\
Federal return: $450

**Expat Tax Professionals**\\
https://expattaxprofessionals.com \\
prices not published on website

**Expat Tax**\\
https://expattax.com \\
prices not published on website, \\
but they do offer a Quote system, with 15 or 20 questions.

**CPAs for Expats**\\
https://www.cpasforexpats.com \\
federal tax return $329

**James Baker and Associates**\\
https://jamesbakercpa.com/\\
youtube channel: James Baker CPA\\
https:%%//%%www.youtube.com/watch?v=BgKMlih_tjU\\
works with non-citizens who want to start LLC businesses\\
he talks about opening US bank accounts\\
says: for individuals you need a US address, but for LLC you can use a foreign address\\
not appropriate for me because I am an individual and a citizen

==== Geo-specific CPAs ====

**expatglobaltax.com**\\
https://www.expatglobaltax.com \\
offices in UK, UAE
prices not published on website, \\
they want you to request a quote

**expattaxes.ie**\\
https://expattaxes.ie
Ireland, Irish taxes

**Expat US Tax**\\
https://www.expatustax.com\\
Expatriate Tax Professionals in UAE, AU & CA\\
15min free, 30min $247

**UK**\\
jaffeandco.com https://www.jaffeandco.com\\
arcostax.com https://arcostax.com\\
Phinch https://ukustaxspecialists.co.uk\\
harrisonswift https://harrisonswift.com

**Poland**\\
1040pl.com https://1040pl.com

===== Reviews =====

**expatfile.tax by anonymous** \\
  - Refresh
  - email link
  - forcing the fbar, greedy for financial data
  - schedule B part III inaccurate.  Solution, enter incomplete data to trick the software.
  - no middle initial.  No solution.
  - foreign tax credit.  The interview asked my where I was living at the time of the investment sale.  Because I was living abroad at the time, they erroneously classified my capital gains foreign-sourced income on the Form 1116.  Solution: I gave up trying to claim the foreign tax credit.
  - does not allow me to apply my refund to next year's estimated tax.  Solution: gave up and gave them my bank account number to accept a direct deposit.

**H&R Block online by anonynous** \\
They asked for the date I moved abroad.  I found this invasive.