# Is it possible to avoid US income tax while living is Dubai?



## goflyinbna (Apr 5, 2010)

My wife and I are considering moving to Dubai to a accept a position offered to me. The position indicated "tax free" income, but upon further investigation, I understand that my worldwide earnings are taxable per the IRS. Is it possible for me to create an off-shore entity that actually receives my compensation that is not taxable per IRS regs? Would like to know if others have been creative and can communicate back channel if preferred. Thanks.


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## cobragb (Mar 15, 2010)

IRS Publication 54 will answer your tax questions, but basically your foreign earnings up to $89,500 is tax free. Anything you make above that is taxable.

I can't speak to the off-shore question - Big brother may be listening. Ha-ha.


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## Vetteguy (Jan 3, 2010)

There are no W-4 forms filled out here so, therefore there are no W-2s therefore, Uncle Sam has no idea of your earnings unless you wire transferr more than $5k at a time back to the USA. All of you salary here is direct deposited into a local bank not a bank in the good old USA.
There are ways around the IRS if you do your homework......
You're not an IRS Agent are you?


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## Vetteguy (Jan 3, 2010)

cobragb said:


> IRS Publication 54 will answer your tax questions, but basically your foreign earnings up to $89,500 is tax free. Anything you make above that is taxable.
> 
> I can't speak to the off-shore question - Big brother may be listening. Ha-ha.


For the 2009 Tax Season the exemption is $91,700......Look into it.. If you are new to this game and want to pay taxes hire a competent CPA who is experienced in Expat Taxes..., I can sugest one if needed.


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## goflyinbna (Apr 5, 2010)

Vetteguy said:


> There are no W-4 forms filled out here so, therefore there are no W-2s therefore, Uncle Sam has no idea of your earnings unless you wire transferr more than $5k at a time back to the USA. All of you salary here is direct deposited into a local bank not a bank in the good old USA.
> There are ways around the IRS if you do your homework......
> You're not an IRS Agent are you?


No, I know it is a sensitive subject.

I'm not an IRS agent nor employed or otherwise affiliated with any US government agency. I'm considering what on the surface looks to be a pretty good job opportunity in Dubai. I need to make sure my wife (a LPN) can find employment as well. We hope to travel over in late May/early June to see about housing and finalize the offer before making a final decision later this summer.

I tried to do some research on my own and was concerned about some reciprocal reporting of wages earned. If my employer does not ask for my SSN#, then there is really no way of knowing exactly what I make... or if I make anything at all.

I wondered if by no longer filing a tax return, it would trigger some notification from the IRS gestopo or if when I returned to the states many years later, the IRS would want to know how I had been living for the past several years.

I did read somewhere about creating a Panamanian Company, but thought it would be more work than I was able to do. Maybe I'll be able to meet some other US Expats on our trip to get more ideas. 

Any advice (back channel and annonymous) would be appreciated.


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## goflyinbna (Apr 5, 2010)

Vetteguy said:


> For the 2009 Tax Season the exemption is $91,700......Look into it.. If you are new to this game and want to pay taxes hire a competent CPA who is experienced in Expat Taxes..., I can sugest one if needed.



I thought the exemption was for housing only. The offer I am looking at is above $90K base + housing (although I do not know the exact allowance yet or if they have a company owned house that is provided to executives).

If I have to pay, I have to pay. But, it affects my decision as to my net income and whether or not to accept the job, etc.


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## Bevdeforges (Nov 16, 2007)

goflyinbna said:


> I thought the exemption was for housing only. The offer I am looking at is above $90K base + housing (although I do not know the exact allowance yet or if they have a company owned house that is provided to executives).
> 
> If I have to pay, I have to pay. But, it affects my decision as to my net income and whether or not to accept the job, etc.


Basically, you gotta pay. But, if your wife is working, she is entitled to her own earned income exclusion up to the full $91,700 (or whatever it will be next year). You can't combine the two exclusions if one of you makes less than the allowed amount, but each one can take up to the full exclusion against their own income.

I haven't had to work with the housing allowance in quite a while, but it used to be that that was another excluded amount over and above the earned income exclusion - and again, I believe each spouse can take their own housing allowance. But check pub 54 on that.

A couple things to be aware of:

If you have income above and beyond the exclusion amount, taking the exclusion will probably trigger the Alternative Minimum Tax calculation. A royal PITA, but you're still getting a break on the first $90K or so (plus whatever you can get from the housing allowance).

If you don't file from overseas and the IRS later gets wind of the fact, you may not be able to claim the overseas earned income exclusion at all against whatever earnings the IRS thinks you made. 

By not filing a return (and not declaring the income) you leave those unfiled years forever open to review and/or audit by the IRS. There is no statute of limitations on unreported income. If you file a return, the clock starts running on the statute of limitations - and the IRS has something like four years to find and take exception to what you filed. (If you file, but leave out certain income, there's no statute on the part you failed to declare.)

Offshore accounts are coming under much more intense scrutiny this year. US citizens are also supposed to report any and all overseas accounts if the combined balance in the accounts totals more than $10,000 at any point in the year. Even if they don't have your social security number, the Treasury Dept. works very closely with many overseas banks - and if they find you have an undisclosed bank account, they may start asking questions. (The forms for reporting overseas accounts have become enormously more detailed all of a sudden this year...)
Cheers,
Bev


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## goflyinbna (Apr 5, 2010)

Bevdeforges said:


> Basically, you gotta pay. But, if your wife is working, she is entitled to her own earned income exclusion up to the full $91,700 (or whatever it will be next year). You can't combine the two exclusions if one of you makes less than the allowed amount, but each one can take up to the full exclusion against their own income.
> 
> I haven't had to work with the housing allowance in quite a while, but it used to be that that was another excluded amount over and above the earned income exclusion - and again, I believe each spouse can take their own housing allowance. But check pub 54 on that.
> 
> ...



thank you very much. this has been very helpful.


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## cobragb (Mar 15, 2010)

Very good info here by everyone, I'll add some more thoughts.

As long as you file "something" reasonable, that shouldn't raise any red flags from your previous earnings, you have nothing to worry about. I've worked outside the IRS realm for many years and an file my returns every year with no problems. But, I work for a company that does not report my earnings and I always bank with small institutions that does not report to the treasury deparment (Islamic banks here). It is up to me to report my earnings to the IRS and as long as I report under the ~$90k/yr, no red flags are raised. Also as someone else mentioned, keep the swift account transfers to less than $5k/month to USA banks.

Good luck!


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## goflyinbna (Apr 5, 2010)

cobragb said:


> Very good info here by everyone, I'll add some more thoughts.
> 
> As long as you file "something" reasonable, that shouldn't raise any red flags from your previous earnings, you have nothing to worry about. I've worked outside the IRS realm for many years and an file my returns every year with no problems. But, I work for a company that does not report my earnings and I always bank with small institutions that does not report to the treasury deparment (Islamic banks here). It is up to me to report my earnings to the IRS and as long as I report under the ~$90k/yr, no red flags are raised. Also as someone else mentioned, keep the swift account transfers to less than $5k/month to USA banks.
> 
> Good luck!


Thanks. Now, if I can find my wife a nursing job that pays comparable to what she makes in the U.S., I'll be happy. Please send me a recommendation for a bank(s) back channel, [my screen name @gmail.com]. Thanks.


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## bgmccarthy (Jul 19, 2009)

Vetteguy said:


> For the 2009 Tax Season the exemption is $91,700......Look into it.. If you are new to this game and want to pay taxes hire a competent CPA who is experienced in Expat Taxes..., I can sugest one if needed.


yes please suggest a competent CPA experienced in expat taxes I am looking for one. thx


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