Paying estimated taxes as an expat - best way to estimate?

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Hi,

I recently started a new job in Australia (Jan 11, 2017).

My employer paid out my unused vacation days and my 2016 bonus in 2017 in the US. The total was about $20k in bonuses (so net $10k) and then about 4 weeks of pay. They withheld US & NY State taxes.

I'm currently paying taxes on my salary in Australia and I'm not on an expat package. My employer is also withholding Medicare & FICA taxes at the legal rate because they are a US based employer and I'm not eligible for exemption or AU superannuation based on my contract.

Based on the reciprocal tax agreements, the fact that I was not a US or NYS resident in 2017 (I actually left NYC on 12/30/16), the Foreign Earned Income allowance and the foreign housing allowance, I anticipate little to no taxes on my Australian income. The income that I earned in the US had taxes already taken out. The only additional income I anticipate is interest income and any profit from any stock sales I may do - unlikely to exceed $10k total based on history.

I think estimated taxes are based on previous years payments (and I received a refund of a little more than what I payed in estimated taxes last year due to making less money YOY).

Although my income is going up, with the exclusions, my taxable income will go down - and with the tax agreement with Australia - I'm not expecting to owe much (if anything).

So - should I be paying any sort of estimated taxes?

Should I try to find an expat tax service (and if so, any recommendations?)?

My company has indicated they'd help with 2017 taxes in 2018 - but no assistance is provided this year (though I sent an email to VP of HR asking for help) - as it wasn't in my contract.

Thanks!

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samirb said:   ................................................................

I think estimated taxes are based on previous years payments ............................

Although my income is going up, with the exclusions, my taxable income will go down - and with the tax agreement with Australia - I'm not expecting to owe much (if anything).

So - should I be paying any sort of estimated taxes?

..................................................

Don't know about the expat part but generally, estimated taxes are based on the minimum of 1) 100-110% (depends on AGI) of last yrs taxes or 2)90% of this yrs taxes.
If you think your taxes will be zero this yr, then I would guess no estimated taxes will be needed.        http://fairmark.com/estimate/whomust.htm
 

samirb said:   
Should I try to find an expat tax service (and if so, any recommendations?)?

 

  Not paying estimated taxes simply results in you paying interest (~4%) on the taxes , which is unlikely to be more than the cost of a tax pro 

As long as you don't spend a lot of time back in the USA this year, you'll easily have your 330 days for the foreign earned income exclusion by the time the tax years ends so claiming the exclusion should be pretty simple (TurboTax does the forms readily). And given the taxable income you had this year (vacation + pay) has already had taxes withheld, you should theoretically get a refund since your effective tax rate will be fairly low.

No Federal taxes due on first $102k of foreign income. If your income is significantly above that, might be reasonable to look into professional tax advice and calculate estimated quarterly payments. If it is about or less then than, you should have no reason to pay estimated taxes.

I am not a tax advisor but have spent significant time living and working overseas.

What I recommend you do is see if any colleagues at your new work site have gone through similar and can let you know what they went through. Failing that, based on facts given, keep your pay stubs (or what have you) and take up your companies offer to help you with the filings due in 2018 for tax year 2017. Great question to ask, thanks for good amount of info, but don't worry too much about it.

Pro tip: If the AUD swings heavily during the year, and your income isn't fairly level (e.g. seasonal, bonuses, commissions, etc) you do not HAVE to use the average annual exchange rate (https://www.irs.gov/individuals/international-taxpayers/yearly-a... You can calculate AUD:USD per pay check and use that total. This was helpful to me one year when the local current changed significantly (30%!!) during the year and and helped me save a decent chunk of money on taxes. But if you're mostly salaried and don't expect huge income or currency swings, don't worry too much about.

Thanks - I'm keeping track of USD to AUD rates. My company uses their internal treasury rates & updates 1x per month - but I'm tracking on a bi-weekly basis to see where it ends up.

I'll be more than 330 out of the US. Regarding the $102k - I'm a bit more than that overall base salary - but I'm paying taxes to Australia as well. My understanding is that based on a reciprocal tax treaty, the only taxes I'd pay in the US would be on US based earnings only as I won't be double taxes on my Australian earnings.

Does that seem right?

samirb said:   Thanks - I'm keeping track of USD to AUD rates. My company uses their internal treasury rates & updates 1x per month - but I'm tracking on a bi-weekly basis to see where it ends up.

I'll be more than 330 out of the US. Regarding the $102k - I'm a bit more than that overall base salary - but I'm paying taxes to Australia as well. My understanding is that based on a reciprocal tax treaty, the only taxes I'd pay in the US would be on US based earnings only as I won't be double taxes on my Australian earnings.

Does that seem right?

  
Usually you get credit for what you pay to the foreign country.  So if you file and have to pay 20K in AU taxes and then you file in the US and your US tax bill ends up being 22K then you end up paying 2K.  Tax treaties usually vary a bit country to country, sometimes you even get credit for SS for what you pay into the other countries equivalent system.

In your case you probably won't have any US taxes after filing AU due to the 102K exclusion and tax credits.  Best is to look for an expat forum/tax service specific to the country you are going to.  (Google: US Expat taxes "country name")  

From what I have read AU has "special" tax rates for Expats.  (basically an extra 10% on the first $80K of income, same rate after that)   Expect to get hit for about a third of your income.

Don't forget the FBAR form and the separate IRS tax forms for having >$10k in a foreign bank account!



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