# Some tax questions for American abroad



## Tomas123 (Sep 6, 2012)

I'm not an expat, but nonetheless I hope I can get some help. Due to a "lucky" situation, I am an american citizen (dual citizen to be exact). I have not been to the U.S since my birth, and I don't consider myself to be an american - can't remember ever being there, don't have family there, my english definitely doesn't make me sound american. Regardless, I have recently been made aware that I need to file a U.S tax return. Luckily I'm young (23) and haven't not filed tax returns that I was supposed to ( I'm a student, only make about 2000 per year). I've really tried to find answers to the question I ask through reading IRS documents and rules, but my english simply isn't good enough to comprehend such advanced and technical language. Also, I do realize that I'll need to consult a tax professional at some point. If I make the median salary for the degree I'm getting, I'll start at about $100,000/year and top out late in my career at $250,000. 

I keep reading about foreign tax credits and how it might trigger the AMT. The way it's talked about one would think the AMT is the worst thing that could possibly happen to a human being (haha, I hope not) But won't foreign tax credits also be usable in the AMT? So if you live in a country with a higher tax rate than both the AMT and regular tax, no taxes would be due, right? Or am i missing something?

Another thing, in Norway we have two types of private pensions. One where the company promises to pay a certain percentage of ones final salary in retirement, and another where the company puts away a certain percentage of ones salary in a retirement fund, investing in stocks and bonds. Both of these are not taxed in Norway and the company pays all fees. These retirement funds aren't considered personal wealth, just like social security isn't. Will these be taxed in the U.S? I don't even know how I would repport it, we aren't allowed much insight in what they invest in (there are strict laws about what they can invest in, so most people aren't scared for their money). 

Thank you


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## Tomas123 (Sep 6, 2012)

I somehow posted this in the wrong section. Could a moderator move it to the expat tax sub-forum?


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## Bevdeforges (Nov 16, 2007)

OK, here we are over in the tax section. Now for your questions...

Wow, you definitely like to plan ahead! Most folks don't bother worrying about taxes on those larger incomes until they have finished school and found a job. (Also, congratulations on finding a career that is so lucrative.)

Quite honestly, most folks in your situation would probably just lay low and stay off the IRS radar - unless they have career ambitions of making use of their US nationality to someday live and work in the US. But that's your decision to make.

OK, AMT isn't necessarily the worst thing that can happen to someone. And, don't forget that the first $92K of your earned income (i.e. salary) is excludible using the FEIE, which simplifies life a bit. 

The simplest explanation of the AMT is here: Tax Topics - Topic 556 Alternative Minimum Tax and the key passage is:


> The AMT is a separately figured tax that eliminates or reduces many exclusions and deductions. In addition, certain credits (generally, business-related credits) cannot be used to offset the AMT.


Basically, foreign tax credits you take on your regular 1040 cannot be used when you figure the AMT. You figure your regular tax, then if you've used any of the various deductions or credits that make you subject to the AMT, you do a separate calculation to assure that you are paying a certain minimum. You pay one or the other, but not both. However, Congress is always talking about "adjusting" or "fixing" or even sometimes doing away with the AMT, so no point getting too involved in it until you have the salary and credits/deductions that may call it into play.

On pensions, a fixed benefit pension isn't subject to tax in the US until you start receiving it. (That's the one you mention where your benefit is based on a percentage of your final years' salary.) The other sort (where the company invests the money for you) probably isn't subject to taxation until you start receiving benefits - though if the employer is taking money out of your salary to invest, your contributions won't be deductible for US tax purposes, either.

Wealth per se isn't taxed in the US, but there is the matter of reporting your "foreign accounts and assets" under the FBAR and FATCA legislation. The fixed benefit pension plan isn't reportable, but the investment pension plan may be, depending on a number of factors. That's another one of those things I would hang tight on until you have the income and the wealth to have to worry about it.
Cheers,
Bev


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## Waldemar22 (Oct 27, 2011)

Hei Tomas, the us embassy in Oslo has links to tax advisors in Norway who can help you with your questions. 
U.S. Tax Information | Embassy of the United States Oslo, Norway

hope this helps...


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## Tomas123 (Sep 6, 2012)

Bevdeforges said:


> OK, here we are over in the tax section. Now for your questions...
> 
> Wow, you definitely like to plan ahead! Most folks don't bother worrying about taxes on those larger incomes until they have finished school and found a job. (Also, congratulations on finding a career that is so lucrative.)
> 
> ...


The reason why I'm asking is that I might have to file a tax return for 2012. Few from my class are getting hired at this stage (we don't graduate for 2 more years), but some are. A sign-on bonus would then make me need to file.

If I do file, I'm assuming I can't go back to being "hidden", I'll be on their radar, as you say. I'm looking into my options, potentially renouncing my US citizenship before I have assets that they can take for the renunciation.

So I can't get foreign tax credit on the AMT? I was certain I read somewhere that that was possible. 

So say I make $200,000 and pay 40% tax to Norway in 2012, and have no deductions (but would naturally have the foreign income exclusion). What kind of tax-hit would I be looking at from the US?


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## Tomas123 (Sep 6, 2012)

Waldemar22 said:


> Hei Tomas, the us embassy in Oslo has links to tax advisors in Norway who can help you with your questions.
> 
> hope this helps...


Thank you!


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## Bevdeforges (Nov 16, 2007)

Tomas123 said:


> The reason why I'm asking is that I might have to file a tax return for 2012. Few from my class are getting hired at this stage (we don't graduate for 2 more years), but some are. A sign-on bonus would then make me need to file.
> 
> If I do file, I'm assuming I can't go back to being "hidden", I'll be on their radar, as you say. I'm looking into my options, potentially renouncing my US citizenship before I have assets that they can take for the renunciation.
> 
> ...


The way US taxes work, you wouldn't have "no deductions." You get a personal exemption plus at least the standard deduction according to your filing status. Then you take the FEIE (foreign income exclusion), but the taxes you pay to Norway then have to be allocated to the income you've excluded (the $92K) and to the rest to determine how much of the tax you've paid to Norway can then be taken as a credit against your US taxes due.
Cheers,
Bev


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## Tomas123 (Sep 6, 2012)

Bevdeforges said:


> The way US taxes work, you wouldn't have "no deductions." You get a personal exemption plus at least the standard deduction according to your filing status. Then you take the FEIE (foreign income exclusion), *but the taxes you pay to Norway then have to be allocated to the income you've excluded (the $92K) and to the rest to determine how much of the tax you've paid to Norway can then be taken as a credit against your US taxes due.*
> Cheers,
> Bev


So this is the calculation for the regular tax? If I understand you correctly, I'd always end up with owing $0 using the regular tax calculation, because I can get a tax credit for all of the taxes I pay on my norwegian income that is above the foreign income exclusion. 

But how would the AMT be calculated? If I can't use foreign tax credits, wouldn't I need to pay a lot of taxes? 

Thank you for the help!!


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## Bevdeforges (Nov 16, 2007)

The AMT is a separate calculation, where you have to back off certain deductions and credits. You then apply a minimal tax rate (it used to be something like 10% - may be a bit more now). If your AMT calculation is greater than what you owe under the regular tax calculation, then that's what you wind up paying. 

But if your salary income is greater than the $92K exclusion, there's a reasonable chance that you'll owe something, though not normally all that much. It's hard to explain without having all the numbers to hand. Go through the calculations and see what results you get. 
Cheers,
Bev


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## swisspinoy (Jun 3, 2012)

Tomas123 said:


> I'm not an expat, but nonetheless I hope I can get some help. Due to a "lucky" situation, I am an american citizen (dual citizen to be exact). I have not been to the U.S since my birth, and I don't consider myself to be an american - can't remember ever being there, don't have family there, my english definitely doesn't make me sound american.


If you file the past 3 years of tax returns and the last 6 years of FBARs within the IRS's latest program for those who never filed, you might not get penalized.

Other than that, if you want to be a US citizen and don't mind spending a lot of time trying to figure out complex tax forms, then it sounds like you'll be given the opportunity to pay US taxes. If that's what you want, then go for it.


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