# U.S. Tax ?



## 197649 (Jan 1, 2013)

Learned a lesson. 
From my IRA Rollover I drew money out to improve and pay off the house, pay off our car. 

I also received my SSDI and retirement benefits. Now I am being taxed 85% of my SSDI because of the money I drew out of my Rollover. It may be lees than what I would have paid in interest on the 2 loans but WOW I was not expecting that. 

What's concerning is with my SSDI and my retirement. I can't touch my Rollover as it put me paying taxes. Yes I paid the taxes already on the Rollover. 
Sadly we can't take the Foreign Earned Income.

Anybody know any loopholes I am unaware of.


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## Asian Spirit (Mar 1, 2010)

c_acton98 said:


> Learned a lesson.
> From my IRA Rollover I drew money out to improve and pay off the house, pay off our car.
> 
> I also received my SSDI and retirement benefits. Now I am being taxed 85% of my SSDI because of the money I drew out of my Rollover. It may be lees than what I would have paid in interest on the 2 loans but WOW I was not expecting that.
> ...


Ouch!!! Man that really hurts. Only thing I can think of unless someone here has a better idea--is that some time ago we had a premium advertising member that does US taxes. Have a look at the top of the page in the classified section and perhaps their advertisement is still there. Hope you can escape the hard grasp of good ol' Uncle Sam!!!


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## bbazor (Nov 18, 2013)

c_acton98 said:


> Learned a lesson.
> From my IRA Rollover I drew money out to improve and pay off the house, pay off our car.
> 
> I also received my SSDI and retirement benefits. Now I am being taxed 85% of my SSDI because of the money I drew out of my Rollover. It may be lees than what I would have paid in interest on the 2 loans but WOW I was not expecting that.
> ...


I am not a tax expert by any means. but I have done my own taxes for years using TT. I do know that if you go exceed a certain amount of total income that they will tax 85% of your SS income. I don't think that there is any way around it. You can TT does have a tool that I will use after I retire that will allow you to plan better. It is called Taxcaster and it is free for anyone to use. I plan to use it to prevent incidents like this from happening to me in the future. You might want to take a look at if so you will be aware of implications before taking an IRA distribution next time. Good luck!


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## Asian Spirit (Mar 1, 2010)

c_acton98 said:


> Learned a lesson.
> From my IRA Rollover I drew money out to improve and pay off the house, pay off our car.
> 
> I also received my SSDI and retirement benefits. Now I am being taxed 85% of my SSDI because of the money I drew out of my Rollover. It may be lees than what I would have paid in interest on the 2 loans but WOW I was not expecting that.
> ...


Just had another idea that might lead to a solution. The next time you are up this way, stop into the VFW Post in Angeles. Visit with the RAO and even other expats that would be there eating or having a drink. It might pay off with some usable information..


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## Bevdeforges (Nov 16, 2007)

The other kicker is that if you're married to an NRA (i.e. non-resident alien), your social security benefits are taxed (well, 85% of them) just for filing Married, Filing Separately - no matter what your other income.

You may want to try posting a question in the Expat Tax section of Expat Forum. Someone may have an idea for you there. Expat Tax - Expat Forum For People Moving Overseas And Living Abroad
Cheers,
Bev


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## 197649 (Jan 1, 2013)

Well I read and read Generally, up to 50% of your benefits will be taxable. However, up to 85% of your benefits can be taxable if either of the following situations applies to you.
The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly).
You are married filing separately and lived with your spouse at any time during 2013.
So bottom line is the most you can earn is 44000 a year including 1/2 your benefits. THAT JUST SUCKS. IF you draw from an IRA that has already been taxed and added to the 1/2 SSDI plus your retirement.


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## jon1 (Mar 18, 2012)

You can get a Tax ID number from the states for your NRA spouse. If they are not earning money (i.e. a house wife) then you would be able to file jointly and get the better tax rate.


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## 197649 (Jan 1, 2013)

jon1 said:


> You can get a Tax ID number from the states for your NRA spouse. If they are not earning money (i.e. a house wife) then you would be able to file jointly and get the better tax rate.


You can file jointly at the same time applying for a ITIN.


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## jon1 (Mar 18, 2012)

If your NRA does land a job, she would be able to deduct any taxes paid to the RP from the taxable income correct?


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## bbazor (Nov 18, 2013)

c_acton98 said:


> Well I read and read Generally, up to 50% of your benefits will be taxable. However, up to 85% of your benefits can be taxable if either of the following situations applies to you.
> The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly).
> You are married filing separately and lived with your spouse at any time during 2013.
> So bottom line is the most you can earn is 44000 a year including 1/2 your benefits. THAT JUST SUCKS. IF you draw from an IRA that has already been taxed and added to the 1/2 SSDI plus your retirement.


Yes, I read the same thing. I am single so my situation is different. The real kicker is when you hit 70.5 and have to take the RMD;s from your IRA;s and 401K's. For me, it will put me in a higher bracket than I want to be in. My plan is to hold off on SS and IRA withdrawals until at least 67 and maybe 70. I will live off of non-retirement savings for a few years and convert a little of my IRA to ROTH IRA every year (while in a 10% or 15% bracket). Then down the road when I hit 70.5. my RMD's will be smaller and I won't get hit as hard on taxes. Hopefully, it will allow me to be in a lower marginal bracket. There are some major benefits to doing it this way. 
1. Lower tax bracket later
2. If you have an medical or other emergency, you can withdraw from Roth without a big tax hit.
3. If you want to make a big withdrawal to purchase a house, you will not get a big tax his if from Roth.
4. You do not have to take RMD's from Roth IRA (be careful because if it is a ROTH 401K, you still have to take RMD's at 70.5).
5. You can pass the Roth on to your heirs with no tax consequences to them.

We all know that everybody in in a different situation. I just hope that Turbo Tax works OK for me when I am there. I heard that some expats use it with no problem, but some have problems. My fingers are crossed.

Let us know how your situation turns out and good luck.


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## jon1 (Mar 18, 2012)

I have been using TurboTax since 2007 without issues in the PI. I even filed this year's while I was in North Africa without issue.


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## JimnNila143 (Jul 23, 2013)

One of the things that I noticed, even while I was on SSRDI aka SSDI, at this stage you are usually under US Full Retirement Age [66] and in receiving SSRDI you do have the option to work, for a limited amount of time, and there was an extra earnings ceiling of $14,400 a year. Any amount over and above this amount, for every $2 you earned, $1 was taken away from your pension benefits. You also, unless you made more than $25,000 a year, didn't have to nor wasn't required to file a tax return. The only time you needed to file a return was if you earned additional monies, i.e., IRA, ROTH, or even a military pension or teacher's pension, or you received oil and gas income or any kind of investment income. The paying of an 85% tax on SSDI pension money because you had an IRA Rollover is nuts. There may be an advantage if you filed jointly with your NRA spouse, especially if you live overseas. My wife works here in the Philippines so her income will be taxed only by the Philippine IRS but my money comes from the USA and I pay no taxes nor am I required to file a tax return because I'm below $25,000 a year. Hope everything works out for you.


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## 197649 (Jan 1, 2013)

bbazor said:


> Yes, I read the same thing. I am single so my situation is different. The real kicker is when you hit 70.5 and have to take the RMD;s from your IRA;s and 401K's. For me, it will put me in a higher bracket than I want to be in. My plan is to hold off on SS and IRA withdrawals until at least 67 and maybe 70. I will live off of non-retirement savings for a few years and convert a little of my IRA to ROTH IRA every year (while in a 10% or 15% bracket). Then down the road when I hit 70.5. my RMD's will be smaller and I won't get hit as hard on taxes. Hopefully, it will allow me to be in a lower marginal bracket. There are some major benefits to doing it this way.
> 1. Lower tax bracket later
> 2. If you have an medical or other emergency, you can withdraw from Roth without a big tax hit.
> 3. If you want to make a big withdrawal to purchase a house, you will not get a big tax his if from Roth.
> ...


Good points I'll look into Roth. When I retired my 401k did a rollover and I had the broker take over 
managing the investment and to be honest they are
doing a great job. I am also thinking about taking
a monthly stipend. Only big expenditure is a vacation
unless something tragic happens.


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## bbazor (Nov 18, 2013)

c_acton98 said:


> Good points I'll look into Roth. When I retired my 401k did a rollover and I had the broker take over
> managing the investment and to be honest they are
> doing a great job. I am also thinking about taking
> a monthly stipend. Only big expenditure is a vacation
> unless something tragic happens.


Good luck with it. I wish they had started a Roth 401K sooner. They started it in 2006, but only a small number of companies had that option then. I was lucky that mine did. For the last 3 years, I have done 100% Roth for my 401K contributions.

If you are happy with your advisor then great. I decided to manage my own around 2002 because I finally woke up and realized that the expense ratios in the funds they had me in were too high. They also charged me an arm and a leg for purchases and sales. I switched over to Vanguard then and it has worked out great for me.


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