As stated above. I work in Indonesia and pay all my taxes there, I pay no taxes to the US government, and would like to open an IRA. Can I do this?
Other - Taxes - 1 Answers
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Yikes!! A United States citizen working in a foreign country is not exempt from paying US income taxes. The US has tax treaties with most nations (Indonesia included). the way this works is that you must pay taxes in the country you are living and working in. After you pay your taxes in your host country you will receive an offsetting tax credit on your US tax return. If you opened up a Roth Ira without reporting income in the US you could find yourself in big trouble. If you filed your proper tax returns in the U.S. then there would be absolutely no problem with opening up a Roth. I think you should get hold of a qualified tax professional to help you. Someone who is an EA (Enrolled Agent) would be good. If this is your first year earning money abroad this will not be a big deal. Just file a return for 2008 with Uncle Sam and claim the credit for foreign taxes paid. If you have been doing this for many years, it could become a quagmire that is difficult to extricate yourself from. If this has been going on for a while than do not under any circumstances open a Roth until your taxes are up to date, This will be a huge red flag to the IRS. You must show earned income to open one. EDIT more info here: http://www.irs.gov/businesses/international/article/0,,id=169675,00.html
