For SugarlandTX, I have a question about the Hypo tax. I am assuming that if you're paying the hypo tax, the foreign income exclusion doesn't apply, and therefore, the requirement to stay out of the US for 330 days doesn't apply either. Is that true?
I have another question regarding U.S. taxes, since there are many changes being discussed for the U.S. tax system:
* What happens to the hypo tax when the U.S. tax tables and rules are changed in the future? The offer letter is unclear. The footnotes in my offer letter almost sound as if the basis for the hypotehical tax is 'locked-in' to a certain year.
* Can there be a case where U.S. AMT (Alternative Minimum Tax) takes effect in the hypothetical tax calculation? I hope not.
I think this is the information that i need. Thank you for clearing things out. I don't have any questions for now. Just in case i don't understand some things again i will bump this thread or create a new thread for my concerns.
So having now been through it once this is my understanding:
Basically you end up with: Base less hypo tax, which is calculated as the tax you would pay if you were earning your base salary in the US, taking into account your # of exemptions, the foreign earned income exclusion, and assuming you have 20% of base in itemized deductions. plus your expat premium, C&S, other benefits on which they pay the taxes.
If you have other non-Aramco income it will be taxed at the marginal rate you would be paying if you were earning all salary + expat premium + benefits in the US (ie 33% if $172k for example). The FEI exclusion doesn't affect your marginal rate. If you get any pay raise in future it is effectively taxed at the high marginal rate (e.g. 33%)
State taxes are your responsibility.
If you have / had a green card you have to declare to PWC each year whether you have given it up. If you don't use PWC you are 'obliged' to fill in Form 8??? on request which allows Aramco to see your 1040. If you are on the US payroll and give up your green card Aramco you will stay on the US payroll but Aramco will stop paying your taxes. As I don't have 20% of base in itemized deductions this leads to a small benefit for me, but basically its a wash.
If you have a green card you are 'supposed' to surrender it if you plan to reside long-term outside of the US. If you surrender it voluntarily you can reapply again from scratch in future without any prejudice. If they suspect you are residing outside the US they can take it away. If it is removed this way it may harm your chances of reapplying. Rule of thumb seems to be you are OK for the first year, but they recommend you apply for a 'permit to reenter' which seems to extend it to about 2 years. Beyond 2 years you likely need some evidence of US residency such as home ownership etc, and you are taking a risk.
NOTE - If you give up/lose the green card and then return to the US less than 3 clear calendar years after the year in which you give it, you may have to pay back-taxed for the time you were away.
If you are in a very high tax bracket you should also check the expatriation tax rules.
What if you have very significant deductions (i.e. charitable contributions, rental loss) amounting to more than 20% of gross income, which means your actual tax is less than what is assumed by Aramco? Is there any way to get a tax refund?
o, I just joined Aramco about 2 months ago. Currently 2 tax items are being deducted from my paycheck: (1) Hypothetical Tax, and (2) FIT Withholding.
I wonder why do I need FIT Withholding. Isn't Hypo Tax supposed to represent the actual amount of tax burdens that I'm ultimately liable to pay (while the rest will be covered by Aramco)? Is this an accurate statement or not?
Can I ask for a little clarification? I’ve tried to read through the many tax-related posts online, but I’m confused on a few things:
1. Can someone define C&S, expat premium, repat, and EAP? These look to all be taxable benefits…but what are they? I assume “repat” is the travel money received to return to place of residence – what about the other terms?
2. Also, if Aramco doesn’t use the Foreign Earned Income exclusion when calculating the tax we owe, does a US expat not need to worry about the 330 day rule? Because the 330 day rule applies to the FEI exclusion, is that correct? That means I could spend more than 35 days/year in the US and not worry about the FEI rules, if I’m understanding correctly.
Thank you for any clarifications if I’m misunderstood something.
o everyone! I have a question regarding the Tax Balancing Calculation. A family member started worked for Aramco in late 2012. Being a CPA here in the States he had asked me to continue preparing his tax return. The family member's tax return is quite complicated ( multiple real estate properties, equity and bond investments, partnerships, etc. ). 2013 is his first full year at Aramco that I am preparing his tax return.
Question: Regarding the Tax Balancing Calculation Schedule: To compute the Total Tax Burden, do I add the Net Hypothetical Tax and Tax Per The Tax Return and then subtract the Theoretical Tax. Since he started late in 2012, net hypothetical tax was zero. I cannot determine from the worksheet how this computation was handled.
On Schedule 1; what is the Aramco Exclusion From (Form)? I understand that the Tax Return Exclusion represents the adjusted Foreign Earned Income Exclusion.
The rest of the calculation is straightforward. With all things considered, from a tax perspective; working for Aramco is a sweet deal. I have over 300 clients here in Southern CA and it seems like the tax burden for the "working poor" is getting heavier and heavier each passing year. Thank you everyone.