I might be misunderstanding this somehow, but does it imply that Americans living abroad are not entitled to a Foreign Earned Income Exclusion?
Corporations have used numerous and creative means to avoid their tax responsibilities. They have about a year’s worth of profits stashed untaxed overseas. According to the Wall Street Journal, about 60% of their cash is offshore. Yet these corporate ‘persons’ enjoy a foreign earned income exclusion that real U.S. persons don’t get.
Source:
Ayn Rand USA: In 20 Years Corporate Profits Are Up 4X and Their Taxes Have Fallen by 50% — Meanwhile the Workers’ Payroll Tax Has Doubled
AlterNet
On this, Wiki writes:
Citizens and residents living and working outside the U.S. may be entitled to a foreign earned income exclusion that reduces taxable income.
Huh?
Their point is that the exclusion exists, as long as the money doesn’t return to USA. Many people are currently looking for some sort of punishment for those companies so that they can be forced to take the money home and force them to be taxed. (This, in lieu of actually correcting the problem)
@Mark Twain, I think that the domestic focus is cute. The professor seems to be focusing on stateside issues in relation to foreign earned income without considering that “real US persons” exist outside of US jurisdiction. My comment is even becoming unpopular for pointing out that Americans abroad are indeed real people!
I left a comment. I don’t do this normally because sites like Alternet are pointless venues for any meaningful dialogue about anything. Anyone who reads there already has their pov set.
It’s difficult to get homelanders to distinguish between corporations, the rich/famous and average people when the topic is living overseas. The USG with the help of the corporate media has written and promoted a narrative that lumps us all together.
It peeves my husband to no end that Canada is considered “overseas” when we actually share the same landmass with the US. But it’s a narrative that serves the USG well. Canada is foreign when it suits and “just like us” when it suits. No rhyme or reason.
Well, there is some truth in some of their observations…
Corporate Paper Persons are definitely treated more favorably than real DNA persons. Their income can remain offshore untaxed by US authorities until repatriated onto U.S. shores, exactly the way it should be for DNA persons living abroad, but never mind. If that was the case for us now, there would be NOT any FBAR penalties necessary, and no tax filings required to declare the income from any associated accounts for Americans living abroad!
@YogaGirl, fight the battle where it hurts the most, focusing on the stronghold! 🙂
@Just Me, as I understand this, it is a clear violation of the Equal Protection clause of the United States Constitution and a violation of US federal laws prohibiting National Origin Discrimination. All we need now is a lawyer!
The article has also been posted here:
The Biggest “Takers” and Societal Parasites Are the Rich, Not the Working Class and Poor
http://truth-out.org/buzzflash/commentary/item/17960-the-biggest-takers-and-societal-parasites-are-the-rich-not-the-working-class-and-poor
Good God they are sick on that AlterNet web site. As I posted there … entering that web site is like entering a Victorian Opium Den awash in insanity and hallucinations.
Looks like Salon posted it too:
We’re living in an Ayn Rand economy
http://www.salon.com/2013/05/18/were_living_in_an_ayn_rand_economy_partner/singleton/
THE REFERRAL PROCESS FOR EXAMINATIONS OF TAX RETURNS CLAIMING THE FOREIGN EARNED INCOME EXCLUSION NEEDS TO BE IMPROVED
Issued on September 27, 2013
Highlights
Highlights of Report Number: 2013-30-112 to the Internal Revenue Service Commissioner for the Large Business and International Division.
IMPACT ON TAXPAYERS
To alleviate double taxation of taxpayers earning foreign income while residing overseas, Internal Revenue Code Section 911(a) provides for the Foreign Earned Income Exclusion (FEIE) and the Foreign Housing Exclusion/Deduction. For Tax Year 2012, the FEIE allowed taxpayers to exclude foreign earned income of up to $95,100. Qualifying taxpayers living and working in a foreign country may also claim a limited exclusion or deduction for the amount of their housing expenses. These benefits can significantly reduce or eliminate taxpayers’ United States (U.S.) income tax liabilities regardless of whether they paid any foreign income taxes.
WHY TIGTA DID THE AUDIT
Because of the large dollar amount of this exclusion, it has a significant impact on an individual’s tax return. It is important for the IRS to ensure that taxpayers are properly qualified for and accurately claiming this exclusion. The overall objective of the review was to provide an overview of tax returns claiming the FEIE and the Foreign Housing Exclusion/Deduction.
WHAT TIGTA FOUND
Of approximately 140 million Tax Year 2009 individual income tax returns filed during Processing Years 2010 and 2011, 372,119 (0.27 percent) tax returns included a Form 2555/2555-EZ, Foreign Earned Income/Foreign Earned Income Exclusion. The exclusions, credits, and deductions claimed were as follows:
$23.3 billion in the FEIE.
$5 billion in Foreign Tax Credits.
$2.7 billion in Foreign Housing Exclusions.
$102.6 million in Foreign Housing Deductions.
From a statistical sample of 150 tax returns from a population of 331,405 Tax Year 2009 individual income tax returns claiming the FEIE and/or the Foreign Housing Exclusion/Deduction filed during Processing Year 2010, TIGTA estimated that U.S. taxpayers living and working in foreign countries who claimed the FEIE reduced their Federal income taxes by $562 million. Taxpayers claiming the Foreign Housing Exclusion/Deduction reduced their Federal income taxes by an additional $174 million for Tax Year 2009.
In addition, during Fiscal Years 2009 through 2011, 2,851 (99 percent) of the 2,876 individual income tax returns examined where a Form 2555/2555-EZ was present were not referred to an international examiner as required by IRS procedures. TIGTA estimated that improving the audit referral process could result in approximately $2.7 million in additional tax assessments, or $13.5 million over five years. Moreover, 1,583 examinations that were not required by the IRS to be referred might warrant referral to international examiners. Referral of these tax returns could potentially result in approximately $1.5 million in additional tax assessments, or $7.5 million over five years.
WHAT TIGTA RECOMMENDED
TIGTA recommended that the IRS ensure that: 1) domestic examiners and their managers are aware of the international referral criteria and a cross reference to those criteria is incorporated into the Campus Reporting Compliance section of the Internal Revenue Manual and 2) the international referral criteria process is evaluated to determine if it should be expanded to include the Wage and Investment Division.
In their response to the report, IRS officials agreed with the recommendations and plan to take corrective actions.
READ THE FULL REPORT
To view the report, including the scope, methodology, and full IRS response, go to:
http://www.treas.gov/tigta/auditreports/2013reports/201330112fr.html.
@Just Me
There are a few interesting stats in that document.
Of the 372k tax returns for 2009 that claimed the FEIE, 298k reported Adjusted Gross Income (AGI) of $100k or less. That’s 80% of all tax returns claiming the FEIE. Within this 80%, the average FEIE claim was $58.7k. Of the 298k in the $100k or less AGI category, 63% paid no additional US income tax. However, that also means that 37% of the people with average employment income of $58.7k had to pay US income tax in addition to the income tax in their country of residence.
“as I understand this, it is a clear violation of the Equal Protection clause of the United States Constitution and a violation of US federal laws prohibiting National Origin Discrimination. All we need now is a lawyer!”
A fat lot of good it did to get a lawyer, eh?
(Feel free to bopp me on the head for necroing this thread.)
“However, that also means that 37% of the people with average employment income of $58.7k had to pay US income tax in addition to the income tax in their country of residence.”
Here, I’ll almost raise my hand. As far as I could figure out in doing my 2009 US tax return, I thought I owed money on capital gains, even though employment income was less than $58.7k. The instructions for three worksheets needed for line (I think) 44 seemed to contradict each other fewer times for 2009 than for 2008, but I still had to do a lot of guesswork about which instructions were wrong. Finished the worksheets and some instruction said that some number was the amount of interest taxed at 10%, but that number was around 100 times higher than the amount of interest I had. Anyway, I figured out the amount of tax that I thought I owed, and asked for it to be deducted from refunds owing for previous years.
I figured out that “interest” meant interest and capital gains, but even that turned out to be wrong. The IRS, in an uncharacteristic moment of honesty, reduced my US taxes to zero because capital gains weren’t taxed that year. I couldn’t find that in the instructions. However, I still didn’t get my refunds owing for previous years, nor for that nor later years. Later I learned that Monica Hernandez had stolen the withholding.