Unique Situation....help!

[kal]

<p>hey all…i am a US citizin living abroad…i live in THE KINGDOM OF BAHRAIN…its a tiny little island in the middle of the persian gulf…and it is probably the only country in the world with ZERO PERCENT income tax. there are NO TAXES at all.</p>

<p>how am i supposed to fill out the FAFSA and CSS??</p>

[emeraldkity4]

<p>use the info from your US tax returns-</p>

<p>

Expatriate Exclusion</p>

<p>U.S. citizens working overseas must report their foreign income on their U.S. tax returns, as U.S. citizens are required to report their worldwide income. However, a U.S. citizen may avoid double taxation on that income if the taxpayer is considered a resident of a foreign country, pays tax to that country, or meets certain ?out of the U.S.? requirements.</p>

<p>The IRS allows an exclusion of $82,400 per year (for 2006 and inflation adjusted) to any U.S. citizen that has a bona fide residence overseas or is out of the United States for 330 days out of a 365-day period. Recent law changes have increased the tax burden on income that remains after the exclusion has been taken into account (i.e., salary above $82,400 and/or income from other sources). Prior to 2006, any remaining income was taxed starting at the lowest tax bracket rates (i.e., 10%, 15%, etc.). In 2006, however, taxpayers must calculate their tax under the so-called ?stacking rule,? where includible income will be taxed as if the lower tax rates are applied to excludible income first. For example, a single taxpayer with $87,400 of foreign wages would have $5,000 of U.S. taxable income if the taxpayer qualified for the entire exclusion amount. In 2005, this $5,000 of income would be taxed at the lowest tax rate, 10%. In 2006, the same income is subject to tax at the tax rate applicable to taxpayers with $87,400 of income, i.e. 25%. The result in this short example is that the tax liability increases from $500 to $1,250 due to the use of the higher tax brackets. (This example assumes that there are no other items of income or deduction.)</p>

<p>Certain housing allowance amounts may also be excluded from U.S. taxable income. Beginning in 2006, the first $13,184 (16% of $82,400) of housing allowance payments are not excludible. The next $11,536 (30% of $82,400, less $13,184) of housing allowance payments are excludible. Any housing allowance payments over 30% of the exclusion are not excludible. This changes the current law by implementing the 30% ceiling and by applying the 16% base housing cost percentage to the exclusion rather than to governmental pay grade GS-14.</p>

<p>Taxpayers who are paying tax in foreign countries may benefit from the foreign tax credit rather than the exclusion. As a general rule, if the tax rate of the foreign country is higher than the U.S. rate, the taxpayer will pay no additional U.S. tax on the income taxed in the foreign country, since it would be fully offset by the taxes paid abroad. If the tax rate is lower in the foreign county, the taxpayer will likely pay U.S. tax at a rate that approximates the difference between the U.S. rate and the lower foreign rate.

</p>

[kal]

<p>hmmm…thanks…but unfortunatily that dosent help me, i forgot to mention that my parents are british…so they dont file US taxes either…</p>

[3bm103]

<p>Bahrain might not have income tax, but the U.S. does. A U.S. citizen is required to report their world wide income. So if you have any income, even it it’s excluded, you should still file a return.</p>

<p>You might not be able to follow the lines on the FAFSA, but the income is still there.</p>

[hsmomstef]

<p>kal – my guess is that you are a teenager who does not have a job – thus neither you nor your parents file US income taxes.</p>

<p>This is my suggestion – email both the Profile and FAFSA people. Explain your situation – including the fact that your parents are British citizens and thus not required to file US income taxes and that you do not have a job.</p>

<p>You still have figures and such to go by when filling out the forms – they may ask your parents to fill out the US income tax paperwork just so that you can get the right figures (I don’t mean that you would send them in – just fill them out).</p>

<p>You are in a unique situation – but I assure you, this is not as uncommon as it seems. There are many students who are US citizens but whose parents are not – and who live outside the US. A quick email to both companies will clarify things for you.</p>

<p>If you are currently a senior and applying this year, you need to get moving! FAFSA needs to be filed as soon as possible after January 1st and many schools have a very early deadline for Profile. your financial aid package may not be as good if you delay.</p>

<p>by the way – if you do email them, please post their response. It will be good information for future students in the same position.</p>

[kal]

<p>thanks A LOT hsmomstef…ill give them a call tomorrow and post whatever they tell me here…</p>

[emeraldkity4]

<p>tommorow it will be the Saturday before the holiday of the Santa Claus in the United States.
If you don’t want to wait until after the holiday of the football games, I would call them ASAP
:)</p>

[kal]

<p>oh wups…the college application proccess effect…=p</p>

[OKgirl]

<p>call an accountant and they might be able to tell you what to do about income tax</p>

[kal]

<p>hey if anyone is interested i figured it out…CSS has a “non-tax filler” form that non-tax fillers have to file. My colleges also require a letter of income certificiation from my dads employer, and thats pretty much it!</p>

[shreya.iitk]

<p>I am in the same situation as you,- my parents are Indian citizens and I am an American citizen. I don’t work. I just converted the figures on my dad’s tax form into dollars.</p>

<p>ps- i have a friend who just shifted from bahrain last year and she is so shocked- the locality in which she lives is the size of bahrain! lol…</p>