I retired in Ecuador in August 2016. One of the last things on my list to follow up on at the time was paying my income taxes for that year in the U.S.
I had done enough research to know that Ecuador does not tax international income and that my personal tax situation was quite simple in regard to filing as a retiree. My retirement income was earned and paid to me by Social Security in the U.S.
Fast forward to April of 2017. I was having lunch with another retired friend and brought up the subject about completing my tax return for 2016. She told me she was not going to file as it was her understanding from her accountant that she did not have to file a U.S. tax return as long as she was living abroad and owed no taxes which she had been doing for the past year or two.
I am sure she misunderstood her accountant.
Yes, you must file your U.S. income tax return in the U.S. if you received any income in the country during the taxable year. That is the law in Ecuador.
Proof of income
But there is another reason to keep current on your income tax returns. They are viable proof of your income. Once you leave the U.S. and start applying for residency visas (and sometimes bank accounts and rental leases) that may be the most recognizable way to prove your income.
Then there is the question of residency which can also affect the way in which you file your taxes and what your tax burden will be. As a general rule, the country you live in the most days of a single year is your country of residency no matter what your citizenship or residency status is.
For example, if you live for 185 days a year in Ecuador and 180 days in the U.S. your primary residence is in Ecuador. This is basic information and, of course, you should contact a qualified tax professional for individual tax advice.
And, if your tax situation is a bit more complex, it is probably a good idea to consult with a tax preparer in both the U.S. and whatever country you currently reside in.
Had any taxing experiences you’d like to share? We want to hear from you.
By: Cathy McKay