- quote -

I believe that it does not matter if the company is US based or not.
It depends on the residency status of the income earner. If the US
citizen passes the bona fide residency test or the physical presence
test then a certain amount of their income is excludable from US
taxation under the Foreign earned income exclusion. If he can exclude
all of his income (I think the limit is around $82,400) then he would
show no US income and could not contribute to a qualified US
retirement plan.

I would look up "foreign earned income exclusion" on the IRS website.
Once you know what his US taxable income will be, you will know what
he can contribute to an IRA or Roth. He still needs to answer the
questions from my earlier post before he knows which is best, but I'm
betting on the Roth being numero uno.

"kastnna" <kastnna[at]auburnalum.org> wrote in message
news:1170275098.521202.79350[at]p10g2000cwp.googlegroups.com...
- quote -

That was my problem when I worked overseas. No US earned income, just
interest income. Couldn't invest in a Roth IRA so I used tax-managed funds
instead.

On Jan 31, 12:25 pm, "kastnna" <kast...[at]auburnalum.org> wrote:
- quote -

I have not thought of that. The company he works for is a US company
with multi national offices. So I am not sure whether his income is
considered US income. He is a citizen filing US income tax. Does
that not make him eligible for an IRA?

Where would I look for answers?

Oops, forgot all about that.

An interesting question is whether the foreign income deduction must
be taken in it's entirety or not. I know some business owners will not
take deductions to avoid declaring losses and possible audits from too
many years of losses. Is it possible to just accept just enough of the
deduction to have income for a Roth IRA?

On Jan 31, 12:25 pm, "kastnna" <kast...[at]auburnalum.org> wrote:
- quote -

I don't deal much with overseas income, so I ask this question. If he
shows no US income, how can he contribute to any US retirement
account? IRA contribs are limited to the current maximum + any
applicable catch-up amounts OR 100% of your reported compensation,
whichever is less. His US income is 0.00, he shouldn't be able to
contribute at all, right?

Just curious.

On Jan 31, 8:04 am, w...[at]talisys.com wrote:
- quote -

Thanks. I'll advise him to max out his Roth IRA first, then anything
left over would go to his regular investment account.


======================================= MODERATOR'S COMMENT:
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On Jan 31, 5:30 am, "raylopez99" <raylope...[at]yahoo.com> wrote:
- quote -

Thanks but there is no chance that this person would do anything
illegal. I don't know about the bonus issue. Hopefully this will
happen to him.

No brainer. His U.S. Tax bracket is 0% right now. That means his
retirement tax bracket is guaranteed to match or be higher than his
current bracket. Roth IRA is the best option for this scenario (higher
taxes in retirement than now).

China is also facing the looming baby boomer retirement issue just
like other countries around the world. It's actually much worse since
the 1-child policy means the coming generation is much smaller
percentage compared developed countries. They're rapidly trying to get
people to contribute to their own pension/retirement plans so there
may be some investment-based tax shelters available for China taxes.
Of course, you have to be comfortable enough with China's future to
leave money invested directly overseas to wait out possible penalties
for early withdrawal.

On Jan 30, 4:12 pm, "PeterL" <po.n...[at]gmail.com> wrote:
- quote -

On Jan 30, 6:12 pm, "PeterL" <po.n...[at]gmail.com> wrote:
- quote -

I think it would depend on a couple of things. Does he plan on being
in a higher or lower tax bracket at retirement? Does he expect an
inheritance that may provide large unearned incomes later in life?
Does he expect a large bonus or income increase that could phase out
his "Rothability"? Can he predict or dictate how US tax policy will
change in the next 50 years (I'm guessing No)?

We diviersify investments on a sector risk/return level, maybe he
should also diversify his tax risk and invest in multiple vehicles.

On Jan 30, 4:12 pm, "PeterL" <po.n...[at]gmail.com> wrote:
- quote -

This doesn't answer your question, but a lot of people working
overseas in Asia find out some interesting things, such as: 1) they
often pay a year end bonus often equal to at least two months salary
and sometimes almost all your salary; 2) people open off-shore, secret
(and illlegal) local currency accounts to stash away such bonuses; 3)
up to $80k or so of salary is tax-except by the US, if the US expat
works at least 11 months out of 12 outside the USA.

RL

Scenario: 30 year old will be working overseas (China). Annual
income of $60,000 US. His local tax bite will be about 30%. He will
owe no US taxes.

Unfortunately his company does not offer a 401K option. So should he:

1. Max out his Roth IRA? Extra funds into taxable account.
2. Max out his regular IRA? Extra funds into taxable account.
3. Put all his investment into a taxable account? No IRA account?