US taxes are very complex. Do you know the tax code od US contains more than 74,000 pages, and most of them are hard to understand even for experts? In this post, we are going to provide you some information on various forms that you will most likely have to file as a U.S. person living and working abroad.
Form 1040
This form has three different versions- 1) 1040, 2) 1040A, and 3) 1040EZ, but US expats always use the original that is Form 1040. Keep in mind that this form reports your names, address and Social Security numbers to the IRS, and has been two pages that summarize your income & deductions as well as calculate the amount you owe and the amount you will receive as a refund. You have to attach all other schedules and forms to Form 1040 and then submitted when you are Filing US Tax Returns When Living Abroad.
Form 1116 – Foreign Tax Credit (FTC)
This form calculates how much your US tax liability can be reduced because of the taxes you paid to your country of residence. Also, multiple 1116 forms can be included with your tax return, because different types of income have to be categorized in different ways. It will show the amount of foreign taxes paid or accrued on that income, your income that is subject to foreign taxes and the calculation that takes place to find out how much your current year taxes will be lowered by the Foreign Tax Credit.
FinCEN Form 114
This is not technically a tax form, because the IRS does not need it. But, most of the US expats will need to file –FinCEN Form 114 or Foreign Bank Account Reporting (FBAR). FinCEN is a division of the US Treasury Department and the form reports your foreign financial account information as well as the highest balance of the accounts during the year. FinCEN Form 114 is required if you have any foreign bank accounts with $10,000 or more balance during the year.
Form 2555 -Foreign Earned Income Exclusion (FEIE)
It calculates the amount of FEIE allowed on your US tax return and shows your foreign earned income amount, your employer’s address, the dates you traveled to the US and your foreign address during the year. Apart from this, Form 2555 calculates out the number of foreign housing expenses that you may be able to exclude in addition to your Foreign Earned Income Exclusion.
Form 8938
It is Statement of Specified Foreign Financial Assets (FATCA and you must file this form as well as attach it to your US TAX return if you have an interest in foreign assets. Apart from this, if you are an American expat living abroad, then must file form 8938 with your tax return under the following conditions:
- You are married and filing jointly:The aggregate value of your foreign financial assets has to exceed $400,000 on the last day of the tax year or more than $600,000 at any time during the year.
- You are single, married and filing separately, or head of the household:In this case, the aggregate value of the stated foreign assets has to exceed $200,000 on the last day of the tax year or over $300,000 at any time during the year.
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