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emily.37643

Filing Taxes as a US citizen in Turkey

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Hi all,

 

I'm sorry if this topic has been beaten to death, but I recently realized that I was very mistaken about filing taxes. I was under the impression that if you made less than a certain amount abroad, you weren't obligated to file taxes and would not meet any problems with the IRS.

 

The truth is that the best thing to do is file a tax return every year to keep records, even if you owe no tax. In this way the IRS can only ever investigate up to 3 years back. So, if one day you have to pay fines or penalties, you've prevented a very serious situation by at least having filed a tax report every year.

 

So, about my situation: I was contracted as an employee of a company based in the tax-free zone of Dubai Media City (the company has an office in Istanbul). I didn't pay taxes anywhere and I was considered an employee. Then, the company changed our contracts so that we would be considered "independent contractors." This happened mid-way through 2012.

 

I filed a tax report in 2013 (for 2012) as an "employee," making approximately $20,000 per year. However, I now realize that if I'm ever asked to prove that by the IRS, they will undoubtedly find that I was actually working as an "independent contractor" and should have filed as "self-employed" (which, by the way, would require me to pay upwards of $3,000 in taxes...money that I definitely do/did not have)!

 

Now I'm working for a new company under a similar premise. This means I do not pay taxes in Turkey, do not have a work visa, and should most likely be filing as a "self-employed" person abroad for 2013. I am exempt from normal taxes since I make under $95,000, but I still have to pay self-employment tax for earning a profit of over $400.

 

Every month, I send most of the money I make in Turkey to a US account in order to pay my college loan, which runs me about $1000/month. The remainder I use for everyday expenses in Turkey, leaving me with nothing at the end of each month. I have no savings in Turkey and have barely ever saved any money since I moved here: it all goes to my loan (which I also claim on my tax return). I wouldn't really consider this tax evasion, since my loans are owned by the government, anyway!!

 

So, the question is: am I going to wind up in serious trouble? What are the chances that I get flagged by the IRS? What do you guys do?

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Actually I think you are required to file a tax return every year. It's more than a record-keeping thing.  You can be fined for not filing, whether you owe anything or not. I have never heard that self-employed people overseas have to pay taxes if they earn less than $95,000. I thought that was for all overseas earnings. Are you sure that you owe additional money under your circumstances?

 

Something doesn't sound right, because if you file as an employee, I believe you're supposed to have a pay statement from your employer. If you don't submit that the IRS would ask for that.  It sounds to me like you should talk to a tax expert, there are several companies who specialize in expat taxes which you can find in Google.

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atayavie, see some of the links below and read them carefully, the answers you seek are there I am sure about your particular status. You can file for previous years with an explanation about why you did not file and if you do not owe any taxes you will not be liable for any penalties. Otherwise you may need to shell out the money for a good tax lawyer.

 

"What are the chances that I get flagged by the IRS?" That you are sending money each month to a US bank account means that the tax folks could find you eventually and then hammer you. They probably also hook into the NSA snooper-dooper files so they can run after tax dodgers. Posted Image

 

Ken, there are excemptions to filing. If you are below a certain income level as determined by the IRS you do not have to file.

If you are below maximum earned amounts you must file but you will not have to pay taxes if ALL your income was earned overseas and by a non-US company.

 

"Every U.S. citizen or resident who receives income must file a U.S. income tax return unless total income without regard to the foreign earned income exclusion is below an amount based on filing status." (Those amounts are pretty low, poverty level for the US. A single person under age 65 must have made less than $ 9,750 for the year) Posted Image

 

2012 Filing Requirements Chart for Most Taxpayers-(Click on Table 1 for amounts)

 

Start here for the IRS FAQ: Filing Requirements—Where, When, and How

 

Tax Guide for U.S. Citizens and Resident Aliens Abroad

 

IRS Announces Efforts to Help U. S. Citizens Overseas Including Dual Citizens and Those with Foreign Retirement Plans
"the IRS will provide a new option to help some U.S. citizens and others residing abroad who haven’t been filing tax returns and provide them a chance to catch up with their tax filing obligations if they owe little or no back taxes."

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Thanks guys, this was super informative and helpful.

 

Yeah, I'm not sure what would happen if the IRS checked out my case. I'm sure they would just be really confused. The fact is that even if I'm supposed to be paying some tax back home, it's a really small amount. Don't they have bigger fish to fry?

 

:)

 

I was kind of hoping someone else doing freelance/independent work here in Turkey had experience with this. It would be so much easier to just say I'm an employee abroad. Obviously that means no W-2s or any other paperwork. Hell, even when I had a work visa teaching English I didn't get a pay stub.

 

I'll let you know what happens and whether or not the IRS ever finds me. Thanks again, guys. :)

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Yeah, I'm not sure what would happen if the IRS checked out my case. I'm sure they would just be really confused. The fact is that even if I'm supposed to be paying some tax back home, it's a really small amount. Don't they have bigger fish to fry?

 

I was kind of hoping someone else doing freelance/independent work here in Turkey had experience with this. It would be so much easier to just say I'm an employee abroad. Obviously that means no W-2s or any other paperwork. Hell, even when I had a work visa teaching English I didn't get a pay stub.

 

I'll let you know what happens and whether or not the IRS ever finds me.

I would be very careful about posting on a public forum any comments about efforts to evade the US tax people. They are vicious and cunning and will attempt to squeeze every last penny out of you if they find you.

 

If they want to find you, they will and if you decide to return to the States and work, they most assuredly will. Not paying a small amount of taxes is not worth an extradition but if you ever return, the incurred penalties can be many times more than you originally would owe! Posted Image

 

To the IRS, it is not the amount, it is to create a climate of fear so pervasive that no citizen will "dare" to fail to pay their amount due (and sometimes a lot more). Posted Image

 

Income from Abroad is Taxable

 

If you really read the links I sent you please notice that IF you work only for a foreign company in a foreign country and IF you make above a large amount ($80,000 USD+ I believe) you are legally obligated to pay taxes on that amount. Also remember that IF you make below that large amount and are above the minimum (poverty) levels I mentioned previously you are also legally obligated to file a tax form annually. The IRS never wants you to escape as long as you are a US citizen. Posted Image

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Hey HobbitTR,

 

I get the whole "they will find you" thing. I guess my point is that when they do, they won't find much. I've filed every year and I never owe tax. My concern is whether or not saying I'm an employee is enough, when my contracts say "independent contractor."

 

The IRS very clearly states that employees living abroad, making less than $95,000, do not owe tax. I've read and re-read the definition of employee, and I fit it. But will the IRS somehow deduce that I should be filing as self-employed? (I don't even know if I should be!) If that's the case, I will be in trouble.

 

My whole point with the original post was basically "has the IRS ever approached you while living in Turkey." Because if none of you have been questioned, and no one you know of has been "found out," my guess is that this is not one of the countries they are worried about.

 

And I am definitely not trying to evade anything. I'm just trying to figure out how careful I have to be. Is this a walking on eggshells situation, or is the risk relatively light for not being 100% sure I'm doing it right.

 

If you don't mind my asking (and assuming you're a citizen who files every year), how do you file? As an employee or a self-employed? 

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I was audited for a couple of years because I filed a complaint against the IRS for improper charges of a penalty fee! Posted Image  I had to use the office of my US Senator and still had a fight! Posted Image We won but then I was audited for a couple of years afterward. I was "asked" to come to their office and I brought a cardboard box full of receipts (I was declaring some deductions then) and put them on the auditor's desk. He was aghast, he said I had to sort those out, I told him that was my filing system and he could sort it out. He sent me home. Pure harassment. Posted Image

 

That small anecdote out of the way, you should have no problem with the IRS since you have been filing every year. If it is true that you fit "the definition of employee" then why worry? I never plan to return to the States so that is not an issue with me. US citizens who wish to return can always be summoned and dealth with in the usual harsh manner of "The Tax Man."

 

Take a nap, when you nap is over, forget the IRS. Continue as you are and you will probably have no worries.

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Hahah you guys rock. And I can't believe that story, Hobbit. That's nuts! I've taken a couple of naps and I already feel fine. Hahah.

 

I do plan to return to the US, but in like...a million years. Thanks for the advice, again...

 

xx

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