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at 8:27 am #87608ExpatInfoDeskKeymaster
Posted by Peggy , 2 replies
US Citizen lives in Australia. Which country should she pay tax to on the US pension?
As a U.S. citizen you are required to file taxes in the U.S. every year no matter where you live. That is the U.S. taxes worldwide income (source of country does not matter) and therefore you must file a tax return in the U.S. on your U.S. pension and any other income that you receive. I am not sure if Australia also does the same. Generally speaking you get a credit for any taxes paid to a foreign country against any taxes due to the U.S. on income (i.e. you won’t be taxed twice). Also if you are a foreign resident (do not spend more than 30 days a year in the U.S. or other methods of qualification) and earn foreign income, the U.S. does not tax that income up to a maximum of about $100K a year (changes every year). You should get on line and look at the IRS rules on this. You can get taxes filed in the U.S. by H&R Block or another party. You can file for a late extension on filing (if you live abroad) put you will be liable for late penalties if you do not file. Good luck.
I’ve been filing both U.S. and Australian taxes for about 12 years now, and my method is as follows:
All U.S. pension income, IRA distributions, etc. are paid into my U.S. credit union account.
I have a direct debit set up with OFX (previously OzForex) to transfer a set monthly amount to my Australian bank from my U.S. credit union account.
I keep a detailed spreadsheet with each pension, IRA distribution tied to the exchange rate on the day it is paid.
I do my U.S. tax return in March/April or earlier each year, using the foreign earned income exclusion, and paying my taxes on the pension/IRA income from my U.S. credit union.
I declare all my U.S. pension/IRA income in my Australian tax return in July/August the same year and get a Foreign Income Tax Offset on tax owed, calculated using the exchange rate on the day the U.S. tax is paid.
Admittedly this is a bit of a pain, but it has worked for me, and does require very detailed record keeping. I have spreadsheets detailing both U.S. and Australian income going back 12 years.
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