Posted on November 30, 2006 at 16:51:04:
The 2006 tax bill that offered a lot of tax savings added one “kicker”: a provision that retroactively raised the taxes of Americans living and working abroad.
Their basic tax “package” credits them dollar-for-dollar for the income taxes they pay to foreign countries. It also allows them to exclude $80,000 – up to $82,400 this year – from the income they report to the IRS, supposedly to cover higher expenses overseas. The new tax provision focuses on the subsidies for housing, schools and trips home that the company pays, often pushing the workers into higher tax brackets. In many cases, the company will pay the higher costs – and deduct them from their corporate taxes.
At the same time, the IRS is increasing its audits of Americans working overseas. Some have stopped filing tax returns because they think all foreign income is not taxed. Others have gotten into trouble making and deducting IRA contributions on their income.