As an ex-patriot, must I pay United States taxes on Social Security Benefits?

From your description of the calculation, it sounds as if you're using a form included in the 1040 instructions to determine whether or not your SS and pension and other income added together rise to the threshold of tax obligations. I use that form every time I file.

And if you calculate all your income, it is a determinant of whether your adjusted gross income rises to the threshold of taxation.

I don't know, however, what you mean by ex-patriot, nor am I sure that term has any legal or tax implication, unless you're referring to yourself as an Ex-Pat, something like the creative writers of Hemingway's and Fitzgerald's era and others who lived abroad. This is not a criticism of your spelling, but that word would be expatriate, which makes more sense. And that may or may not have tax implications, including whether or not you've renounced American citizenship, what your status is in the Phillipines, and similar issues.

Because of your expatriate situation, I agree with FF; you really need to consult with a tax pro as this could be a complicated issue. If you can't find one in the Phillippines, e-mail the IRS, fully explaining the situation and enumerating your questions. IRS will answer, but not always quickly, and you'll then have written advice on which you can rely.

I wouldn't call with a question like this; you need to have something in writing if the issue arises again.

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.

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.

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.

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.

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

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.

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."

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.

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.