Paying Annual Income Tax, USA vs Singapore

One of the astounding things about Singapore is the ease with which an individual pays income tax. Since I have now filed in both countries, I thought I might show the difference using my own, previous tax situation. You must understand that mine is relatively simple and straightforward. Some individual tax situations are much more complex than mine.

Note: The tax return process in the US is so mindboggling that most people do not even attempt it. They hire one of the various services to do it for them. Many of these (H&R Block comes to mind) are staffed by poorly trained people who sometimes do not even understand the basics of tax computation. I always felt that it was my money, and I wanted to understand how, why and where it was going. So I did my homework and always did my own. In fact, until I came to Singapore, I prepared the taxes of many friends and family members. My point is, I really TRIED to understand it and it is still mind numbing. This, ofcourse, is by design. Ok, on with the comparison.

USA – I am an employee of a mid-sized company in the sales department. Many of my sales are in the field so I use my personal vehicle for work and my employer reimburses me for that. I own my home. Indeed, this tax year I sold one and purchased a new one in another city, as I had to move due to a work transfer. I do some work from home and have a computer, printer and fax machine for both personal and business use. I have three minor children. I give a small amount to charity each year. We were burglarized during the year and several pieces of jewelry were stolen (no surprise in the US).My wife (now exwife) runs her own business providing daycare services in our home. She gets paid in cash each week from the 4 children’s mothers. She uses part of one room as an office for recordkeeping. Our combined income is in the 60-70k range. Ok, that’s it.

Now, it’s tax time. Firstly I must get the necessary instructional publications that I will need and the associated forms. Now kind reader, there are literally hundreds of these just for individual filers, but I only need a few. Forms and publications are available at libraries and post offices (this is before PC’s so I cannot simply download these as one can now). I end up having to travel all over the city because no single library or post office has everything I need. Some have nothing. Jeez! But finally I have what I think I will need.

Publications – These are booklets telling me how to fill out the forms needed for my tax return.
552 – Recordkeeping Requirements
553 – Tax Changes from Previous Year
334 – Guide for Small Business
463 – Travel and Car Expenses
501 – Exemptions, Deductions and Filing Instructions
503 – Child Care Expenses
517 – Social Security Taxes
521 – Moving Expenses
523 – Selling Your Home and Capital Gains
526 – Charitable Contributions
529 – Miscellaneous Deductions
533 – Self Employment Tax
535 – Business Expenses
547 – Casualties and Thefts
587 – Business Use of Home
936 – Home Mortgage Interest Deduction
946 – Depreciation and Amortization
972 – Child Tax Credit

I spend about a week reading up on this and now I am ready to start filling out the forms. Now, you must understand that the forms are not all independent, meaning that many entries go onto different forms with different calculations involved using still other entries.

Forms:

1040 – Individual Income Taxes – this is the cover sheet form. Front and back, about 50 line items.
Schedule A – Itemized deductions this is the cover form for all deductions from other forms (casualty loss, other taxes, interest, medical, charitable, etc)
Schedule B – Interest
Schedule C – Profit and Loss from Business (for the daycare business)
Schedule D – Capital Gains and Losses (for selling the house)
Schedule SE – Self Employment Tax (for the daycare business)
2106 – Employee Business Expenses (for my car use for business)
2441 – Child Care Expenses
3903 – Moving Expenses
4562 – Depreciation and Amortization (for my home office equipment)
4684 – Casualty and Theft Losses (for the burglary)

My tax return is 11 pages long, most on both sides. But I am not done yet. Now I have to do my state taxes. Most of the state information comes from the federal return and is only 2 pages (both sides) long so it only takes a few hours.

Up until about 2000 I did these all by hand and it would take me another 2 weeks to complete and check and double check. Then a wonderful thing happened. Someone invented TurboTax software which you buy each year and it does all the calculations for you.

SINGAPORE

In Singapore it is a little different. I receive a notice showing my income and any “reliefs” I have coming. If it is correct I do nothing. If it is incorrect I change it and mail it back. Later I receive an “assessment” form which shows how much tax I owe. I pay via Nets online. That’s it. Oh, one last thing. In the US I would end up paying around 15% to the federal government and about 3% to the state. In Singapore I pay 4-6% total because after being here just a little while, you are considered a resident for tax purposes. Yeah, I know…one more thing I appreciate about Singapore.

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2 Comments on “Paying Annual Income Tax, USA vs Singapore”

  1. Mickell Says:

    The US tax system sure is mind-boggling ;p

  2. Bella Says:

    Hi Brian, Thanks for stopping by my blog. I just wrote you a long comment about Australian tax, but when I hit PUBLISH it dissapeared?


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