# How to pay tax on non-US income



## brz8

I am a US citizen working for several months in Europe but also spending several months in the US. I am planning the sale of a property in Europe, which will generate some income and possibly result in about $40,000 in US taxes. 

I had some questions about this.

1. Do I have to pay this using money I have saved in the US or do I have to send it from Europe?

2. Is there some bilateral arrangement to send money from Europe to the US for tax payments? With strict foreign exchange regulations, sending that much money out is usually difficult.


----------



## Bevdeforges

I may be misunderstanding the question, but I'll give it a shot.



> 1. Do I have to pay this using money I have saved in the US or do I have to send it from Europe?


If you owe the taxes, you are expected to pay them according to the regular schedule. Where you get the funds from is really no concern of the IRS. But, if you're selling a property in Europe, you may owe taxes (first) to the country in which the property is located. Then, those taxes paid may serve as a foreign tax credit against your US tax liability. The idea is that you normally pay tax on income from real property to the country where the property is located.


> 2. Is there some bilateral arrangement to send money from Europe to the US for tax payments? With strict foreign exchange regulations, sending that much money out is usually difficult.


No. Basically, the options are outlined here: https://www.irs.gov/payments
From overseas, your options are basically to use a credit card (for which there is a fee) or to make a wire transfer (for which there is a bigger fee). If you have a US bank account, it's probably easiest to transfer the funds from that account to the IRS.
Cheers,
Bev


----------



## brz8

Thank you, Bev. You answered my questions.

This is inherited property with no US funds associated with it and it's free of tax here, so it seems rather bizarre that the US would tax it and n fact even be allowed to levy a tax on it, since it is really a tax on a foreign country.


----------



## BBCWatcher

It's perfectly common. Most countries with income taxes (or wealth taxes) tax income (or wealth) no matter where it is earned or received if you are subject to that country's tax system, although practically all of them (including the U.S.) give credit for any income tax paid to the source country. Otherwise everyone would just move everything they possibly can that generates income to other countries, particularly the low or zero income tax countries. Enough people already do that as it is.


----------



## maz57

Only the US claims taxing rights on the wealth of other countries on the basis that one of the residents of that other country also happens to be a US citizen. It amazes me that other countries continue to allow the US to get away with this. Taxing the world-wide income of residents is commonplace; taxing the world-wide income of the residents of other countries is something only the US tries to do.

Now if you are "lucky", your country of residence will tax that income and that tax paid can then be used to offset the US tax. At least the money stays in your home country and is hopefully put to useful purposes. But if, by chance, your home country has decided to give you a tax break, the US will be happy to step in and divert that money to the US Treasury instead. What a system!


----------



## BBCWatcher

maz57 said:


> ....taxing the world-wide income of the residents of other countries is something only the US tries to do.


Well no, Hungary, Eritrea, and (lately) Singapore also do that. (In Singapore's case it's a flat fee that escalates with age, so that's pretty quirky and regressive!) But that's not even the point I made anyway, so let's try to steer back to the topic at hand.

Canada, for example, taxes the overseas source income of all persons subject to Canadian income tax, less a foreign tax credit, and also taxes the Canada source income of practically everybody. That's not unusual.


----------



## Bevdeforges

The point here being that it's "normal" to have your country of residence expect to tax your "worldwide income." At least according to the OPs flags, it appears this is a clear case of CBT kicking in. Regardless of how you justify it, it can be annoying in a case like this, where the US is neither the jurisdiction where the property is located nor your country of residence. 

Shall we move on?
Cheers,
Bev


----------



## Nononymous

brz8 said:


> Thank you, Bev. You answered my questions.
> 
> This is inherited property with no US funds associated with it and it's free of tax here, so it seems rather bizarre that the US would tax it and n fact even be allowed to levy a tax on it, since it is really a tax on a foreign country.


First off, are you sure there would be US tax owing? If you're selling an inherited property, would it only be capital gains on the increase in value since the date of inheritance, or something like that? Not the full value of the property itself.

Second, not that it matters thanks to CBT, but it sounds like you're dividing your time between the US and Europe so really couldn't consider yourself non-resident as far as the US is concerned. 

Third, if (1) you did owe a non-trivial amount of US tax and (2) you have no FATCA risk (banks in the non-US country aren't aware of your US citizenship or any other US indicia) and (3) you don't need to bring the money back into the US, then you have the option of not reporting the sale and keeping the money in an offshore vacation fund. It's an idea.


----------



## BBCWatcher

Nononymous said:


> It's an idea.


An illegal one.

These guys posted about illegal acts pseudonymously. It didn't work out so well.


----------



## Bevdeforges

There is a difference in degree between running a prostitution ring and "neglecting" (for whatever reason) to report something on your tax return. (Particularly if you have some basis for believing that the item you're not reporting might possibly not be considered "income" for tax purposes.)

Let's try to avoid over dramatizing tax compliance (or lack thereof).
Cheers,
Bev


----------



## Nononymous

BBCWatcher said:


> An illegal one.


Yes of course this violates US law. But it's still an option one might choose to pursue.


----------



## celticweb

If someone thought that they might owe tax from a sale of property or stock that was tax free in the country of residence but taxable by the IRS. How does it work with giving charitable donations abroad? Can you offset some tax in this way or does that only work if you are actually resident in the USA? Or is this even legal?

If I thought I was going to get a big tax bill, I would rather donate some of the money to a charity I support to pay less tax? So if i sell a property abroad, can i donate to charity with some of the proceeds of the sale to owe less tax?


----------



## Nononymous

celticweb said:


> If I thought I was going to get a big tax bill, I would rather donate some of the money to a charity I support to pay less tax? So if i sell a property abroad, can i donate to charity with some of the proceeds of the sale to owe less tax?


Personally, I'd donate the money to myself by not telling the IRS anything about it.

I'm not actually sure how it works in the US, but typically a charitable donation reduces taxable income, so you only save at the tax rate, and is not a tax credit. In an overly simple example, if your tax rate is 30 percent, donating $100 to charity will only save you $30, not $100 on your tax bill. So it's not the most effective way to keep the money out of Uncle Sam's undeserving hands.


----------



## JustLurking

celticweb said:


> How does it work with giving charitable donations abroad?


If by 'abroad' you mean non-US... with a few exceptions, none of which apply to you, the US only allows tax deductions for donations made to _US charities_ (or to the _US government_ itself -- as if!).


----------



## Bevdeforges

And the quick and dirty answer is that any "good cause" you would be able to use as a deduction would have to be a US 501 c 3 (I think it is) entity - i.e. recognized by the IRS as eligible for charitable/deductible donations. Foreign entities don't count for US taxes.

To be honest about it, you probably need to determine how likely it is that the IRS would get wind of the transaction in the first place.
Cheers,
Bev


----------



## BBCWatcher

Bevdeforges said:


> Foreign entities don't count for US taxes.


Purely foreign ones do not. However, there are many, many international charities that do as long as you give to the U.S. 501(c)(3) affiliate. Here are a few examples:


Doctors Without Borders (Médecins Sans Frontières) - select "MSF USA" at the top left
UNICEF U.S.A.
CARE
If in any doubt you can confirm the international charity's 501(c)(3) status directly with the charity. Contact the U.S. affiliate's office, often in New York. You can also mail donation checks directly to the U.S. affiliate's office. Keep a receipt (an electronic one is fine), and you're all set. You can even transfer an asset to a charity, and the value of that donation for tax purposes is based on its fair market value. For example, if you donate shares of stock that have appreciated in value you don't pay capital gains tax on that donation, and you get credit for the full fair market value of that donation to a 501(c)(3) registered charity.


----------



## Bevdeforges

Correct - basically you must make your donation to the US based office of the organization. If you're interested in not-for-profits groups in your country of residence, it won't do anything for you on your US taxes.
Cheers,
Bev


----------



## ForeignBody

Nononymous said:


> Yes of course this violates US law. But it's still an option one might choose to pursue.


WOW! So now a willful act of failing to comply with the law because we don't like it is an option??

Let me see which bank I might "visit" today. I don't like the fact that they have lots of money and I don't have much.


----------



## iota2014

ForeignBody said:


> WOW! So now a willful act of failing to comply with the law because we don't like it is an option??


If the property is in Belarus, any US claim to tax on the gain from the sale of real property would seem to rest on a treaty signed in 1973 between America and the USSR. It would certainly be entertaining to watch and see whether the IRS would have the courage or the budget to try to bring any such claim to court. Would Putin send representatives, I wonder? 

A charitable donation to the people of Belarus would certainly be a more right outcome than handing the cash to America, which has no right to the money. 20% to a trustworthy Belarussian charity, and the rest to the OP's vacation fund - sounds reasonable to me.


----------



## Nononymous

ForeignBody said:


> WOW! So now a willful act of failing to comply with the law because we don't like it is an option??


Certainly it is. I violate US law every day by willfully failing to comply with my tax and bank reporting obligations. For me, it's a reasonable strategy based on my assessment of the risks involved (morality doesn't really enter into the calculation).


----------



## Bevdeforges

Just to put this in perspective, thousands of little things people do every day are "illegal." (Running a yellow light, driving faster than the limit, putting jars and cans in the recycling bin without rinsing them, keeping quiet when you've noticed the cashier undercharged you for a purchase, etc.)

But people continue to do them, usually based on their estimation of the relative risk of getting caught and/or punished. We're all grown ups here and it's up to each and every one of us to decide what risks we are or are not willing to take based on our evaluation of the possible harm that will be done to both ourselves and/or others around us.

Now, can we please move on?
Cheers,
Bev


----------



## Nononymous

Bevdeforges said:


> Correct - basically you must make your donation to the US based office of the organization. If you're interested in not-for-profits groups in your country of residence, it won't do anything for you on your US taxes.
> Cheers,
> Bev


And, am I right, it will only save a percentage of the donation, not the entire amount - it's not a tax credit at 100 percent?


----------



## Bevdeforges

Nononymous said:


> And, am I right, it will only save a percentage of the donation, not the entire amount - it's not a tax credit at 100 percent?


Yup - you can deduct the amount of the donation (from your declared income), so the "savings" is only your marginal tax rate times the amount of the donation. (Donations are - or used to be - limited to something like 5% of your declared income, too.)
Cheers,
Bev


----------



## iota2014

Nononymous said:


> Certainly it is. I violate US law every day by willfully failing to comply with my tax and bank reporting obligations. For me, it's a reasonable strategy based on my assessment of the risks involved (morality doesn't really enter into the calculation).


It's hard to look indifferent to morality when you're disobeying an immoral law though.


----------



## Nononymous

iota2014 said:


> It's hard to look indifferent to morality when you're disobeying an immoral law though.


I think sometimes I must come across as anti-American. So in the spirit of fairness I'd like to also violate German and Turkish law today:

Sackdoof, feige und verklemmt 
Ist Erdogan, der Präsident. 
Sein Gelöt stinkt schlimm nach Döner, 
Selbst ein Schweinefurz riecht schöner. 
Er ist der Mann, der Mädchen schlägt 
Und dabei Gummimasken trägt. 
Am liebsten mag er Ziegen ficken 
Und Minderheiten unterdrücken... 
Kurden treten, Christen hauen 
Und dabei Kinderpornos schauen. 
Und selbst abends heißt's statt schlafen 
Fellatio mit hundert Schafen. 
Ja, Erdogan ist voll und ganz 
Ein Präsident mit kleinem Schwanz. 
Jeden Türken hört man flöten: 
Die dumme Sau hat Schrumpelklöten. 
Von Ankara bis Istanbul 
Weiß jeder, dieser Mann ist schwul, 
Pervers, verlaust und zoophil – 
Recep Fritzl Priklopil. 
Sein Kopf so leer wie seine Eier, 
Der Star auf jeder Gangbang-Feier. 
Bis der Schwanz beim Pinkeln brennt, 
Das ist Recep Erdogan, der türkische Präsident.​


----------

