# Do I need to file US return - technical question



## GeneM (Mar 12, 2014)

I have lived overseas for 35 years and have dual citizenship. It has only occurred to me know that I may have a US tax obligation. However, my income may be below the minimum filing requirements but interpretation is critical. Pub 54 states, "For purposes of determining whether you must file a return, gross income includes any income that you can exclude as foreign earned income or as a foreign housing mount." 

If my foreign earned income is low to zero as defined as salary and wages, commission, bonus, etc. am I exempt from filing? I understand that I cannot claim the foreign earned income exclusion of $97,600 (2013) if my income is zero but the question is "can I avoid filing" as Head of Household, age 65+ ($14,350 limit) with foreign earned income of very low to zero according to the definition of foreign earned income? 

Appreciate any advice. 

Gene


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## DavidMcKeegan (Aug 27, 2012)

Hi Gene,

From the sounds of things, you have a pretty good understanding of what is needed to trigger a reporting requirement. You are correct that if your earned income is above $14,350, then you will have to file a return.

If that is not the case, there may still be special circumstances which would require you to file a return. For example, if you owed taxes on a retirement plan, received distributions from a health savings account or received more than $400 in self employment income...Then you must file a return.

Hope this helps.


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## BBCWatcher (Dec 28, 2012)

I'm not sure I follow your question exactly, so I'll just explain the threshold.

For tax year 2013, if you're 65 or older (in 2013 or on January 1, 2014), and you would qualify to file Head of Household, you do not need to file a tax return unless your income was $14,350 or more. You completely ignore the Foreign Earned Income and Foreign Housing Exclusion when making this determination -- pretend they don't even exist. That is, yes, earned income you might exclude if you have to file does count toward the $14,350 figure. Tally up all your income, from all sources, and if you hit $14,350 then file -- whereupon you may owe zero tax or even, better yet, get a refundable tax credit.

You can file even if you're not required to, and for the reason I just described that might be a very good idea, specifically to claim the Earned Income Tax Credit and/or Additional Child Tax Credit if you're eligible. You may not be, though, and you cannot take the FEIE (but can take the Foreign Tax Credit) if you're trying to claim the EITC and/or ACTC. But it's worth a quick read through the rules for those two credits to see if you've got a shot at qualifying.

One final wrinkle. If your earned income was from self employment, and if your earned income was (I think) $400 or more, then you're required to file in order to pay the U.S. self-employment tax. Though there might be a rule that gets you off the hook for this if you're 65 or older -- not sure about that. South Africa doesn't have a Social Security treaty with the U.S. as far as I know, so that doesn't get you off the hook. But age might -- check me on that. If you worked for an employer, then no worries here.


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## GeneM (Mar 12, 2014)

Hi David and BBCWatcher,
Thanks for you reply. I will try to expand on my issue.

I used the Pub 54 quote on page 3 regarding foreign earned income for a reason. It references non filing by describing gross income using the "foreign earned income exclusion.as described above and the various thresholds based on ones circumstances. Earned and Unearned are later described in Pub 54. I believe that sentence infers "earned income" and not "unearned income" therefore if my "earned income" is less than the threshold I'm assuming I do not have to file if at zero or close to it But again my interpretation could be wrong.


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## BBCWatcher (Dec 28, 2012)

Your interpretation is wrong. 

Just tally your income from all sources, earned and unearned, compare it to the threshold figure, and file if at or above the threshold. Simple.

This is the general case. You may still have to file if you have special types of income (e.g. self-employment income). And you may want to file even if you aren't required to. As another example, if you want to sponsor someone for immigration to the U.S. then you'll need one or more years of tax returns to submit to USCIS, even if you weren't required to file. Or you may want to "bank" excess Foreign Tax Credits for use in future years if you're paying income tax elsewhere (such as to South Africa).

There's no harm in filing even if you're not required to (other than perhaps the time you spend preparing your tax return), so if you're not sure then file.


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## Bevdeforges (Nov 16, 2007)

Basically, this is the requirement, direct from the horse's mouth (read whatever puns or bad jokes into that that you like):
Publication 554 (2013), Tax Guide for Seniors

The amounts in the filing threshold table refer to gross income - which is earned and unearned income from all sources (including international).
Cheers,
Bev


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## GeneM (Mar 12, 2014)

Thanks for the clarity. 

Sorry for 1 more try at this with regards to the Self Employed limit of less than $400 which I qualify in terms of "earned income". Can one use this option, file anyway and claim the "Foreign Earned Income Exclusion of $97,600?" Specifically I provide a "technology consulting" service in my private capacity but income has not been good lately. Thanks again.


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## Bevdeforges (Nov 16, 2007)

You can only claim the Foreign Earned Income Exclusion (FEIE) up to the amount of your earned income - which does include self-employment income.
Cheers,
Bev


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## GeneM (Mar 12, 2014)

Sorry again for another follow up question.

Given earned and unearned income is included to determine if one meets a minimum threshold is the same true if taking the "foreign earned income exclusion" and one reports both earned and unearned income and if your reported claim is less than the exclusion you are limited to that amount?


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## Bevdeforges (Nov 16, 2007)

GeneM said:


> Sorry again for another follow up question.
> 
> Given earned and unearned income is included to determine if one meets a minimum threshold is the same true if taking the "foreign earned income exclusion" and one reports both earned and unearned income and if your reported claim is less than the exclusion you are limited to that amount?


Yup. Whether or not you have to file is determined by your total gross income - before any exemptions, deductions or exclusions. 
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

I think you're going to have to rephrase that question. It's difficult to understand.

Set aside the threshold -- it's a completely separate issue. Let's assume you must file, or you want to file.

OK, now, let's suppose you had $1000 in earned income (income from work) and $8000 in other income. No surprise, the Foreign Earned Income Exclusion only applies to your earned income, and only if you qualify for the FEIE. If you qualify for the FEIE, then you can apply it to that $1000 of earned income. That's it, that's all.


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## GeneM (Mar 12, 2014)

Hi Bev,
Are you saying if I'm required to file I must report Gross Income including earned and unearned BUT I can exclude up to $97,600 (2013) of that Gross Income? Sorry for being pedantic but a minor misunderstanding can have major implications.


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## GeneM (Mar 12, 2014)

Got it. The threshold definition of global income includes earned and unearned and if filing and claiming the FEIE only includes earned income NOT unearned. That was my problem in understanding I did not think they would be inconsistent with each other. I assumed same rules.


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## BBCWatcher (Dec 28, 2012)

Sure, they're two different rules. You will find there are many more than two rules in tax filing, though, so don't assume separate rules are linked or related unless the IRS says they are.

For example, the IRS is pretty good at using different terms to mean different things. If they refer to "earned income" and not "income" (or vice versa) then the word "earned" has meaning, and earned income must be different than income. I won't say they're always 100% perfect, but they do a pretty good job even when Congress gives them some very complex tax laws to administer and explain.


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## GeneM (Mar 12, 2014)

Thanks for sticking with my roller coaster questions. I unfortunately had a mind set these rules must be identical and consistent which caused a back and forth session. By the way great site and very informative.


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