Ok, that is interesting. Let’s say I move back to the US and have an effective tax rate of 20%, if I withdraw SRS and pay the 15+5%, then it could be a dollar for dollar credit?
Backing up here, there's no Foreign Tax Credit if all your foreign income is excluded via IRS Form 2555. The foreign income tax rate could hypothetically be 90% on, say, US$100K (leaving you with US$10K take home). But if you're excluding all that US$100K via Form 2555, the FTC is zero. (Thus it'd be unwise to take the FEIE in that case. The FTC would be much more valuable.)
OK, let's suppose you have unexcluded, foreign taxed income. There is a FTC in that case, with an adjustment for the FEIE. But there's no
unspent FTC if you cannot use it to offset U.S. income tax -- if you have no U.S. income tax left to pay in that year on income in the same FTC category. You then get to "bank" the FTC in that income category for spending in other tax years (up to 1 year backwards, up to 10 years forward). Let's further suppose you have S$300K of total income of which S$150K is excluded and the other S$150K (miraculously, because you're just so clever) is U.S. taxed at zero. The 20% Singapore tax on S$15K would effectively be diluted by half, so you get to bank a S$1,500 FTC. (I'm oversimplifying only slightly, but I think that's how it works.) The S$1,500 FTC (banked as U.S. dollars according to the official IRS exchange rate for the tax year when it was banked) you can then spend to offset U.S. income tax in the future as long as the U.S. income tax is on the same category of income, which in this case should be "General Category."
Does it matter that the “income” on which the tax was paid was only considered income (deferred) in Singapore but not the US in the year the tax was paid?
I think you're asking whether it matters when you exclude income (IRS Form 2555). Yes, it does matter. This is all moot if you're at or below the FEIE/FHE. The Foreign Tax Credit and the Foreign Earned Income Exclusion are mutually exclusive across the same income. All income at or under the FEIE (and the FEIE taken) = zero FTC.
If you have variable income, unfortunately the IRS doesn't let you pop in and out of taking (and not taking) the Foreign Earned Income Exclusion. So the basic strategy is to skip (and keep skipping) the FEIE when you live in a comparatively high income tax rate country and to take the FEIE when you live in a comparatively low income tax rate country. Singapore is in the latter category, or at least one would think so.
Since you can control the timing of premature SRS withdrawals, conceivably you could "batch up" such withdrawals when you expect to have a surge of taxable income above the FEIE. For example, if you have highly variable income year to year but suddenly close a big deal and have a million dollar pay day -- wouldn't that be nice? -- then that'd be a great year to make your premature SRS withdrawal for Foreign Tax Credit purposes.
I don’t know where to ask this but I need some advice regarding a cheque.
Its a motor accident insurance payout to me, in my name and it includes 3 portions; workshop fees, lawyer fees, my compensation.
The cheque is sent to the lawyer and they want me to fork out cash for their portion + workshop portion, before they will release the cheque to me.
So I find it uncomfortable to do that. Is this normal practice?
I suppose it's normal if the law firm doesn't think it'll get paid. But the law firm may not have much leverage because presumably you could just say, "That's nice, now come back when you're more reasonable. Two separate checks from the insurance company would be more reasonable." And then
neither of you get paid unless and until they do that.
If you want to get fancy there's something called a third party/independent "escrow service" that's designed to handle this sort of thing. However, what you might call "pseudo escrow" ("poor man's escrow") is possible if you and a representative from the law firm agree to go to
your bank branch together. You fill out both a deposit form and a transfer form (with the transform form for the payment amount to the law firm and their account), and you review both of them with the law firm's representative to make sure they're accurate. Then you ask the bank if you can sit at one of their desks, together with the representative, to arrange the deposit and transfer. You hand the deposit and transfer slips to the bank employee and ask him/her to review them to make sure they're filled out correctly. The law firm's representative then hands the teller the check, and the teller has you sign it. The law firm's representative then hands you a receipt marked "Paid in Full." I'm assuming here that the insurance company's check is actually a bank check, so it's immediately negotiable.