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Old 10.11.2016, 19:16
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US tax returns

Hey, I went through a number of useful discussion here on the forum, and wanted to confirm my understanding of the US taxation on my Swiss income before negotiating my salary:

Basically, I'd have 2 options (assume exchange rate = 1):

1) Claim foreign tax credit on the Swiss taxes I've paid: e.g. I owe IRS X$, paid to Switzerland Y CHF, hence will pay to IRS $X - YCHF, or
2) I claim income and housing deductions: e.g. if my salary is G CHF, then I can subtract $D = $100K + (my rent in Zurich) , and pay to IRS taxes on G - D (with the original tax bracket for exchange rate * G).

Given much lower tax rates in Switzerland, (2) should be a much better option, unless the salary number is ridiculously high. However, to use (2) I'd pretty much have to live in CH for a year, and won't be able to use during my 1st year here. Presumably I can still go with (1) for the year, when I get the salary both in US and CH. Also, I will be eligible for 6 months tax return extention from IRS to somewhat mitigate the higher effective tax rate for the moving year.

Does it sound right?
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Old 11.11.2016, 18:50
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Re: US tax returns

You can qualify for FEIE retroactively. Apply for an extension to file. It's all in the IRS guidance notes for overseas filers.

If your pay exceeds FEIE ($100,800 in 2015) you get tax credit for the rest, also for tax on unearned (non-wage) income.

No credit for Swiss wealth tax -- which is why federal + cantonal + commune income tax may be less than US federal.

TurboTax is great.
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Old 11.11.2016, 19:01
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Re: US tax returns

Hi Caryl, thanks! -

Are you saying, that "bona fide"/"physical present" tests are not for the tax year, but as of the moment of the tax filing? Because otherwise, I don't see how an extension could make me qualify for the tax year which I split between US and Switzerland.

Does the rest of my post sound correct?
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Old 11.11.2016, 19:17
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Re: US tax returns

Part-year exclusion. If the period for which you qualify for the foreign earned income exclu- sion includes only part of the year, you must ad- just the maximum limit based on the number of qualifying days in the year. The number of qualifying days is the number of days in the year within the period on which you both:
Have your tax home in a foreign country, and
Meet either the bona fide residence test or the physical presence test.

https://www.irs.gov/pub/irs-pdf/p54.pdf
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Old 11.11.2016, 19:43
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Re: US tax returns

I see, - right, by the end of the 6 months extension, I pass the physical presence test.
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Old 11.11.2016, 20:08
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Re: US tax returns

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I see, - right, by the end of the 6 months extension, I pass the physical presence test.


It is your Status at the end of the year. At the end of three months, you


must have a green card to stay in Switzerland.
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Old 11.11.2016, 20:30
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Re: US tax returns

HollidayG, -

I assume, you mean just a permit to work/stay in CH for more than 3 months, right? I don't think it has to be a permanent Swiss residentship.
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Old 12.11.2016, 02:10
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Re: US tax returns

All the US citizens who are thinking about moving to Canada would be well advised to bone up on their obligations to the US tax authorities.
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Old 12.11.2016, 09:23
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Re: US tax returns

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Sorry it's a bit off topic but it's such an insane fact that IRS still collects your tax while you are not living and earning money in the US. The more problematic fact is you will need to do the tax return forms every year even you earn $100 per year in a poor country. How reasonable is this.
And to stoke the fire, there's no representation for expats abroad. One's representation is linked to a state with no other options available.

Unfortunately, the Swiss government signed FATCA despite the implications of the unfair tax system, thus sealing the fate of any American citizen working and living in their country.
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