A question for Americans --- Do Americans who work in Qatar (for at least a year) have to pay taxes in the US?

There are two ways to qualify for the exemption. One is to be out of the US for 330 of 365 days, the other is to establish "bonafide residence". If you do the latter, you can still qualify for the exemption, even though you were in the us for more than 35 days in the year. Bonafide residence means that you are out of the US for an indefinate period and have established residence in the other country. With the housing deduction (which is capped for Qatar at around $35k--an unrealistically low amount for expat housing in Doha), you would exempt around the first $100 of income (but as has been mentioned, perks such as airfare home, tuition paid for your kids and the fair market value of housing provided, are all taxible income). State rules vary. Usually if you have established residence overseas, you would not be subject to US state taxes unless you are considered to maintain an "abode" in that state. The US is the ONLY country to tax its expats on this basis. I hate writing the check, but that's the price we pay for the priveleges. Good luck.

Also, to get the tax break on the $87K, the wage earner must be outside the US for 330 out of 365 days. That's a rolling calendar; if you left for Qatar on April 1, that period would end on March 31 of the next year. But be careful - if the IRS finds out you were out for only 329 days, they will hit you with a back tax & penalties bill!

Please refer to IRS publication 54 (2008), tax guide for U.S. citizens and resident aliens living abroad for filing. Also check out Section 911.

www.irs.ustreas.gov

If you are a U.S. citizen or resident alien, your worldwide income generally is subject to U.S. income tax, regardless of where you are living. Also, you are subject to the same income tax filing requirements that apply to U.S. citizens or resident aliens living in the United States.

Foreign earned income exclusion and housing exclusion and deduction. Chapter 4 discusses income tax benefits that apply if you meet certain requirements while living abroad. You may qualify to treat up to $87,600 of your income as not taxable by the United States. You may also be able to either deduct part of your housing expenses from your income or treat a limited amount of income used for housing expenses as not taxable by the United States. These benefits are called the foreign earned income exclusion and the foreign housing deduction and exclusion.

Exclusion amount: For 2008, the maximum exclusion has increased to $87,600.

Figuring tax on income not excluded: If you claim the foreign earned income exclusion, the housing exclusion, or both, you must figure the tax on your nonexcluded income using the tax rates that would have applied had you not claimed the exclusions.

Have fun reading!

PM and Mandi are correct, you have to file and depending on your income level you may have to pay taxes. However, one thing I didn't see mentioned was in addition to the $87K limit they also add a "cost of living" for housing, so while you have to include any perks (tickets home, housing, vehicle, etc) as income your actual limit should be higher than $87K.

http://www.irs.gov/pub/irs-pdf/i2555.pdf

I totally agree with PM. I am an American and have lived outside the US for 10+ years & have had to pay taxes every year. The 85,000 and 87,500 mentioned in the other emails is true, but are applicable for various years. The amount increases each year and you need to double check with your tax person. In regards to the individual states, each state is different due to various personal factors. There's no way around it. The IRS will find out somehow. I've been audited once before, due to my taxes varying wildly from year to year. If you end up being flag'd for an audit, they can tear your life apart for the previous 7 years. Also, there is no automatic extension from April 15. You have to apply for it. I use this option every year so that when I go home during my midyear break I can sign my tax return in person. A few times, my tax person has had to FEDEX it over here. They need your original signature. Good luck!

I agree with Mandilular. From my understanding, the IRS and U.S. government requires you to FILE your taxes even though you are earning income outside of the country. I also believe there is an automatic extension of the deadline (I think 2 months from April 15) but of course you will have to fill a special form out too.

Most likely you will not have to pay any taxes and you will not get a return but still they want you to file your taxes. Check Form 2255 and 2255EZ for information.

I hope this helps!

I agree with Mandilular. From my understanding, the IRS and U.S. government requires you to FILE your taxes even though you are earning income outside of the country. I also believe there is an automatic extension of the deadline (I think 2 months from April 15) but of course you will have to fill a special form out too.

Most likely you will not have to pay any taxes and you will not get a return but still they want you to file your taxes. Check Form 2255 and 2255EZ for information.

I hope this helps!

Yes, you DO have to pay taxes on income earned outside the US. If your state has income tax you are usually responsible for that as well. If you meet the criteria for an overseas exemption - legally establishing a foreign domicile or staying outside the country for over 330 days out of 365 in a full calendar year - you MAY be eligible to exclude the first $87,500 of your income from federal taxes. This will generally not apply to state taxes and certainly not local or property taxes.