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As an ex-patriot, must I pay taxes United States taxes on Social Security Benefits? My income is simple: Soc Sec $15,288, Pension $7,644. According to the Notice 703 I get every year from Soc Sec, I then take one half of the Soc Sec, $7,644 add that to my pension of $3,785.76 and the total is $11,429.76. This is far below the base of $25,000 beyond which I would have to pay taxes. I have no income from the Philippines, no business, no job, and nothing from the gov't here.
I have read Pub 54 and Pub 915 but do not see how they apply to me.
Is this not right?
What forms in addition to 1040 do I send in with my return?
Thanks.

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Dave, like some of us told you 3 days ago, you need to see an Accountant or CPA with your question as it is quite complex. We suggest the same when it comes to legal and medical matters that we feel need a higher level of expertise.

Sorry you didn't like some of the answers you received. igloo572 is a storehouse of information and we are grateful whenever we see one of her answers as she can direct us into the right direction.
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You probably need a CPA or tax atty to deal with this as its likely not a DIY. Pay IRS now or pay later with interest & fines / fees later or have your SS debited. IRS doesn't want to hear your dramarama on wife's (domestic or imported), old car situtations or whatever else. It's income with taxes owed.

Yours isn't really an aging " what to do about our parents " concern which this forum is geared to. Perhaps hit up the debt collection forums.
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Sorry, didn't read the all the posts. First, I don't think its up to a person to determine when he stop paying taxes. Both my Mom and MIL received letters from the IRS telling them because of their income they no longer need to pay. If under a certain income, you don't fully pay taxes on pension or SS. A certain amount of your pension is tax free. I suggest that you see a CPA to determine all this. It will cost you but they will exxplain it all to you. You can then use this years taxes as a basis for the next few years. Do not use a tax preparer who hires for the tax season. These people are not trained for all the ins and outs.
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Thanks for the reply. I read over Pub. 54 and 119 that pertains to expats and they talked mainly about expats that have a job, investments, business, or other income from the Philippines. I didn't think it applied to me but I may be wrong.

Even though I have not heard from the IRS yet as to exactly what this cancel debt is I have a hunch. I have been in the Philippines since 2003. Before I left the States I paid all my balances and came to the Philippines. I had one credit card but paid that off.
In 2014 I was doing research on places to rent because I planned to return to the States to get a divorce from my Philippine wife. I took advantage of a free credit search just to see what it said. I found that there was a credit report of an unpaid balance on my account which had been reported to the credit bureau. It was for $800. I called the credit card company and the lady said that my account had been closed in 2006 for none payment and the balance was written off. I did not know of any charges other than what I paid off. I found out that my separated wife did some jewelry buying to the tune of $800 that she never told me about. I immediately sent a letter to the card company and told them it was an honest error and that I would pay the balance just send me the paper work. I never heard back from them.

I believe they re-opened that suspended and written off account, charged me interest for the last ten years and wrote it off on their 2014 income tax which of course showed up on my IRS account as a cancel debt which I must figure as income on my 2014 tax return.
This is a big crisis for me because I live on my social security benefit and a small $320 pension. The card company charged interest on that $800 balance and it turned into $24,041 that they took off their tax and advised IRS and I got the cancel debt.
When I wrote the letter to them in 2014 they had my address yet I never received a notice of this action and did not find out about it until my 1040 was sent back by the IRS and the cancel debt revealed.
I earn approx $15,000 on social security, and $320 in a small pension. I have no job here in the Philippines, investments, business or any other income.
This means my income goes from about $18,000 paying no taxes to $49,000 and owing the IRS about $12,000. It will take me likely the rest of my natural life to pay this off, that is if they let me make payments on it. I am 70 years old now.

Is this right for a credit card company to do? It seems to me if they absorbed the $800 in 2005 that they would have had to take the $800 off their taxes as a loss in that year and not re-open the case ten years later or so adding interest to their advantage and taking off $24,000 in 2014 on their taxes.
Any advice? Thanks, Dave
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AKdaughter - that is really great info. I just did a google on 43 large to get the 13k. Taxes for me...well I just rely on entering into quick books and emailing to our tax pro.

Dave - the 1099-C may be old, like a few years old and with interest & fees added atop the amount due. Any person or biz that is owed more than $ 600 can issue one. My experience with them was due to mil that was a financial terrorist but also due to dealing with post Hurricane Katrina stuff as if you were a business registered in or with recovery programs we got info on doing 1099-C to deal with losses. People went everywhere and it was just not simple to get invoices out to where clients actually were or get paid timely. It was very much character building admist chaos! I recall info about how you could spread out the 1099-Cs and carry some bad debt longer if it was better financially to do this. My point is it could be older debt that morphed into a much much larger debt.
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I was an expat for many years. I believe that you must file a tax return even if you owe nothing. Expats have a large deduction if they are full time residents outside the US. That will probably mean you will not have to pay unless you have income you have not mentioned. Look at form 2552
I can recommend a cpa but he is expensive.
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I guess I better write a letter to the Ombudsman right away then. That way they will get all the documents I have and the worst is they come back to me with more information.
I have a special delivery to the IRS now to find out about the Cancel debt so I may find out soon.
Thanks again for the advice. God bless.
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Dave, I'm sure the Ombudsman suggestion by the IRS is to minimize the workload on those people. But you needn't be that concerned about going through all the prerequisite steps first, especially since paying a large delinquent tax would be financially and emotionally devastating.

And given the difficulty of communication since you're overseas, and what seems to be kind of a "you work it out by reading the publications" attitude, I'd say you could consider that you are pretty close to exhausting options.

Another issue which would concern me is that the IRS could interpret any lack of aggressiveness in resolving the issue as delay or dilatory tactics.

I'd jump on the Ombudsperson option very aggressively, asserting if you have to that there's nothing stated on the web site that their services aren't available to ex-patriates. If the IRS has publications dealing with ex-pats' obligations, then it needs to be prepared to address any issues that arise therefrom.

My experience has been that once the IRS makes what I consider a mistake, or wants additional information, the best thing to do is get it resolved as quickly as possible before someone else makes another mistake and compounds the issue.
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As far as contacting the US Embassy here in the Philippines, they simply refer me to the IRS. They used to have a service that helped US Citizens with tax problems but that program closed in Oct, 2015.
It is still a question if I can use the Ombudsman services. According to the web site it is used after all other options have been used. I am just now in the information phase. If I get to the point where I am told I owe thousands of dollars because of this cancel debt then that will be a financial hardship and I can contact them. When I visited the Ombudsman site all the options to contact them were for the States (local offices) so I am not even sure they will help a citizen living overseas. I may contact them by letter once I get an idea of what this cancel debt is and what problem I face because of it. I have not been back to the States since 2003. I can't imagine what it is but have a possibility in mind. I am still working on the military option. Thanks.
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Very good advice. The debt might even be a mistake. I will look into the military aspect also. I did send a special delivery package by LBC to the IRS so they should get it in a week or so and maybe then they will call me with some info. Thanks and take care.
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Can you contact the US Embassy and find out how to contact the IRS employees stationed abroad who work with US citizens living overseas? When I worked for IRS there was an international branch meeting people inmany parts of the world helping expats resolve their tax issues.
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I should have added a couple of things. First of all, if you do not think that you received a 1099 for the forgiven debt, you should ask the IRS to send you a copy of whatever they received. It is possible that this debt was not yours (someone may have entered a wrong SS number on the 1099),which would make your tax liability for 2014 zero. If it is your loan, you would probably owe some interest and penalty for the late payment in addition to the tax owed.
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Dave, AKDaughter is a mathematical genius with extensive knowledge in tax issues. She's highly qualified to give legal and tax advice. Take her advice.

Amy, I don't wish to contradict you, but my experience has been different. We've been through a number of issues, which have been resolved satisfactorily, although not without a lot of annoyance and aggravation. However, I do my research, document and take IRS head on.

I've had more problems with people in the Michigan Treasury Department, under the current Republican administration.

I have worked for a tax attorney who I believe was also an enrolled agent, and he was very, very good and worked out good resolutions. But he, as some other tax attorneys, generally have clients of "high individual net worth". Knowing these kinds of attorneys, they might not be as inclined to take a case like Dave's.

I am sorry to learn though that you've had trouble with IRS, and you are right in that a professional knows how to "speak IRS language."
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I don't know much about taxes, but from experience, I know about the IRS. They will hound you until the end of time unless you get a good tax attorney to straighten it out for you. Its amazing how quickly things are resolved when you have a professional tax person representing you. Trying to do it yourself is not worth the rings the IRS will run you around. A one time use of a tax attorney will fix it, and he/she will explain in "normal person's language" the whole thing.
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Hi Dave - first of all, I am not a tax accountant, but I try to keep up on tax stuff for my own benefit. I made some assumptions and calculated what I think your tax liability would be in a "worst case" scenario. I assumed SS income of $15,000, pension of $4,000 and forgiven debt of $24,000. I agree that a debt from 2003 is unlikely to show up in 2014, but if it is due to the car loan it is possible that the loan company kept the loan on the books all this time and just wrote it off in 2014. Using the above round figures, I calculate that part of your SS would become taxable, about $5,775. This amount, when added to your pension income and forgiven debt would give you adjusted gross income of $33,775. After subtracting your standard deduction and personal exemption, your taxable income would be about $23,475 and your tax liability about $3,000. If you were over 65 at the end of 2014, your standard deduction would be about $1,200 higher, which would reduce your tax liability by about $120. I should add that these figures apply to a citizen living in the US, and the rules may differ for you. I do not know anything about ex-pat status. If you can get the name and phone number of a tax accountant in the US, I would think that this could be done using email and FAX communication.
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Follow Ruthie's advice and contact the IRS Ombudsperson, who is tasked with helping people resolve problems with the IRS.

You definitely need to determine what the cancelled debt is!

But you might not need to go to a military facility in person; life in America is so much more electronic these days, so take advantage of that. Contact the base and see if you can get any information, or if there's any help through the JAG service. In fact, I might contact JAG first anyway.

Another option is that if you have friends or family you trust in the States, give them a limited power of attorney to address the issue, primarily for information gathering purposes. At least then you'd be able to expedite the mystery of what the cancelled debt it.
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Thanks ruthieruth, I think I need to find out just what the cancel debt is. Being here in the Philippines makes getting a response from the IRS take a long long time. I have not even been in the States since 2003 so whatever it is is at least that old or belongs to someone else.
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you can call the taxpayer advocate their number is on the IRS webpage. if you had no cancelled debt and only income then soounds to me like someone may have you confused with someone else.
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Thanks GardenArtist. I never received the notice for the 1099. I am really guessing as to what it could be. The car is the only thing I can think of. It takes nearly a month to get any information from the IRS and I can't really call from here. The connections to the US are bad but the connections are good from the States to the Phils so I gave them my number and hope they call. There is 12 to 13 hours difference in time so calling is hard but I will wake up in the night and take their call.
I actually am a veteran but I would need to travel to Manila and that is like 7,000 islands away from Camiguin, really!
If I really do owe thousands of dollars, maybe they will just take my $320 pension for a while until it is paid off. I just don't know what credits or other deductions I could take to offset this higher tax. The IRS of course would not give me those on their own that's why i hesitate to just tell them to figure it for me.
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Dave, I just skimmed over some of the earlier posts and see that the 1099 was for tax year 2014, so it probably isn't for the car that was repossessed.

Was there any other info on the 1099 on what debt was cancelled? If not, I think I'd address that and find out exactly what it is as it could be an error. The IRS has been known to screw up!

A few years ago they sent my father a letter telling him he had to sign a specific form to collect a refund for a dead person, but my father was and is very much alive! How some idiot concluded he was dead is beyond me. (I was tempted to get a sheet, paint some ghost like features on it, hang the sheet over my father's head and go down to the IRS and tell them my father's ghost was there to collect his refund!)

Are you a veteran? If so, you might have access to someone on one of the bases - as I recall there is tax help for veterans on military bases.
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Thanks GardenArtist for the info. I think the best thing to do is try to find a CPA maybe in Cebu, the island is not too far from Camiguin Island where I live. I have the 915 and read over it but found no application to my situation since I have no income from the Philippines, interests, job, business or assets. I may be wrong so that's why I need to speak with a pro. It is just very hard to find one over here. Thanks.
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Dave,

1. If the car was repossessed in 2003, I'm wondering if that's the real reason for the 1099 as it's my understanding that IRS audits only up to 6 years back. But there is a qualifier if more than 25% of income was omitted, but this is a qualified, specific exception.

2. I think you're incorrect that the publications don't apply to you, as when I did a quick check, one of them applied to ex-patriates, which I believe you are.

3. As I also recall, ex-pats were distinguished by whether they retired before or after the year 2008.

4. Inclusion of SS as income is dependent on your other income. W/o going back to the figures, and without getting out the forms to check the worksheet on calculation of whether SS is taxable, an amount such as the forgiven debt can change the calculation to the point that your SS becomes taxable.

Although it doesn't apply to your situation, capital gains and dividends have the same effect. In a bad stock year, SS can be under the threshold for taxation. In a good year, abundant cap gain distributions and dividends can push the income level up into the taxable range.

5, If you left the car with a friend, did you change the title, or was the car still titled in your name? I assume also that your friend didn't assume the loan on the car?

6. Someone really needs to get the 2014 worksheet and go through the calculations with you to help put this in perspective. I did find it online:

https://www.irs.gov/publications/p915/ar02.html
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I believe everyone is correct. I did research on just what "cancelled debt" meant and then realized the car I left with a friend to use and make payments on was evidently repossessed and a 1099 sent to the IRS. I moved around so much when I got to the Philippines I never received a notice. It was back in 2003. I had actually forgotten about it.
Maybe the best thing I can do is just let the IRS re-figure the 1040 I filed and ask them to take my $320 pension check monthly in payment until it is paid.
Igloo, I truly hope the figures you listed are not correct because there is no way I can pay $13. Why do you include the social security as income? I have no business, interest, assets or job here in the Philippines so Pub 54 and 915 do not apply to me. This is the part I do not understand. I can see adding the $24,041 to my pension of $3,785.76 making total income $27,826.76. Subtracting that total from the standard deduction of $6,200 equals $21,626.76. In line 42 of the 1040, Exemptions, if line 38 is less than $152,235 or less, multiply $3,950 by the number on line 6d ( which is 1) So subtracting $3,950 from the $21,626.76 is $17,676.76. I do not have the tax tables for 2014 and I cannot find them on the IRS Pub site but the tax on $17,676.76 is far less than on $43,154.76. The whole thing hinges on whether or not to count the entire social security amount as income.
That is what I do not know about. On the work sheet Notice I get every year to fill out and see if any of my social security is taxable, in line A I list the the total of benefits ($15,288) In line B I am told to enter one half of line A or ($7,644). Line C is line A and B added together ($27,826.70). Line E is B,C, and D added ($35,470.70). That is my total income. I am confused as to how much of my social security is taxable. The total is above the $25,000 thresh hold for Single filing separately so I know at least part of the benefits are taxable but why all?
I have to do this myself or let the IRS do it and they of course could not take any offset into consideration such as a 982 (which I must research) and try to use. A tax man at this point is not possible in my situation.
I truly thank everyone for there help. Dave
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Oh, it's free.
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You might also check with this service. The IRS TAX Advocate's office. I dealt with them once and they were quite helpful.

https://www.irs.gov/Advocate
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Income reported:
1099-C $24,081.00.
Soc Sec 15,288.00
pension 3,785.76.
Total $43,154.76.
Single tax rate on 43K about $ 13K.
Really unless you have a possibility of doing a successful IRS form 982 - Reduction of Tax Attributes Due to Discharge of Indebtedness, you probably just need to file and deal with IRS to do a payment plan on your taxes due. Delaying all this is just going to increase interest and fines…..it won't be pretty. Pay now or pay even worse hurt later.
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I don't at all disagree with Babalou or Igloo, but I still do think there's an issue of whether or not as an ex-pat you've renounced your citizenship.

If you have, this is a section that you really need to read:

https://www.irs.gov/Individuals/International-Taxpayers/Expatriation-Tax

If the filters delete part of the URL, Google the section after the .gov and read the page - there are different classifications for people who've renounced citizenship before or after certain dates.

Pub. 54 is for "US citizens and Resident Aliens", and Pub. 119 is for "Foreign Person’s U.S. Source Income Subject to Withholding."
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Dave - Babalou is on track with the issue…..it's probably the cancel debt total in the amount of $24,081.00 for the tax year 2014 that is the glitch.

Sometime in your past there was debt that was written off. Could have been credit card debt, or medical debt or foreclosure or short sale or really any debt over $ 600.00 that the issuer could not collect on and was written off. Credit card companies and mortgage lenders do 1099-C routinely as a normal part of business. What they can do and have to do to be able to recoup this loss on their corporate taxes is issue you a 1099-C Cancellation of Debt. It will be for the amount walked on by you and then can have interest and fees added in. If it was several years old, it could be several thousand in fees and interest so it ballooned up from maybe 19K to 24K.

Whatever the case, it is totally reportable AND TAXABLE income to the IRS and you owe taxes on whatever the 1099-C and your regular income totaled too. Yeah, it's in a way phantom income but nevertheless income in which taxes are due. And again, it is added into whatever income you got paid. So probably pushed you out of low income no taxes due to having taxes due. That would be my guess & this is what Babalou is getting at as well.

For 1099-C situation, you can file a IRS form 982, which is worksheet like form use to offset income. The 982 is kinda best designed for those getting a 1099-C from a foreclosure and short sale as a lot of the examples are about costs of house repairs, depreciation, etc. If yours was income from walked on credit card debt, those deductions won't be there. You may need to look to medical debts to offset the income. You just may not have anything to be able to deduct. The 982 is not a DIY project. Really you need a tax pro - like a CPA to deal with it to get it right. There is going to be somebody in Manila or close to a military base who is understanding of US tax codes & filings.

Now you don't want to ignore this. Why? well you will owe taxes to the IRS and if you don't pay, the IRS as a super-creditor can seize your SS till they get repaid in full for taxes due and any interest or fines. You don't get an opt-out of paying, IRS will just attach your SS with or without your agreeing to this. Understand???
If you need every penny of your SS to live, or in the future could need to come back to the states and apply for Medicaid and need to show an history of being low-income, this could be a real problem no matter how low your cost of living is now as an ex-pat.
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Did you recieve a 1099 for tax year 2014 for $24,000 in cancelled debt charges? Like a credit card, or loan that was not paid back? It looks like irs is including that in their calculation of your income, which would bring you over the threshold.
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Yes, pardon my spelling it is not my strong suit.
This is what I am trying to do, find someone with knowledge about this. A very difficult task in the Philippines and virtually impossible on the tiny island I live on. As far as the IRS is concerned I can only contact them by mail and that takes weeks. They just now got back to me about my 1040 of 2014 and they re-worked my calculations to include my social security benefit. They never said, oh no you don't have to file because you don't owe anything. A tax man in Honolulu did look at my calculations in an email and said they were correct as I gave them, yet the IRS is different as they included my social security into my earnings. I always thought in the States social security benefits were exempt from US taxes. I may be wrong. They just told me to read Pub. 54 and 119 as if I could figure out the "IRS Speak" myself. The IRS will always come to a conclusion that benefits the IRS. I know that after more than fifty years of tax returns.
I just wanted to find a consensus perhaps of those who have had similar problems. My return has already been filed so none of the online tax people will tell me anything unless they can file for me. Anyway, Thanks.
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