What You Need to Understand about US Expat Taxes

What You Need to Understand about US Expat Taxes


One of the few countries that taxed people on their worldwide income is- The United States, no matter where that income is earned and where you live. This informative post will help you make sense of the complicated issues related to US expat taxes.

This post mainly focuses on the major areas that you have to be aware of. So take a look at them.

• The Foreign Earned Income Exclusion

 If you are a qualified US citizen live and work abroad then you can save a big amount of money on your expatriate tax return by filling out the form of the foreign earned income exclusion. A US resident or citizen alien should have earned income in a foreign country, should meet the bona fide residence or physical presence test or a regular place of business outside the US. The exclusion is claimed on form 2555 as well as attached to form 1040. You may qualify for the foreign housing credit in case you qualify for the foreign earned income exclusion on your US expatriate tax return that will let you deduct up to $27450 of your housing cost.

• Do You Need To File State Taxes?

Each state varies in how they find out the filling needs of your US expat taxes. In addition to this, some states have no personal tax like Texas, Washington, and Florida while some States like Virginia and California consider whether you have retained certain rights as a citizen of US like financial accounts, ownership of assets and a driver's' license to find out your future. If they find that you intend to return to the state you resided in previously, they still need you to file a big tax return

•  Foreign Bank Accounts

A US citizen who has one or more foreign account(s), as well as the cumulative balance of these accounts, exceeded $10,000 at any time during the calendar year, in this case, that person has to file Form TDF 90-22.1 Report of Foreign Bank plus Financial Accounts (FBAR) by June 30 every year. Keep in mind that this form is filed separately from your US Expat taxes, and must be received by the Treasury on June 30th.

• Dates For Filing

Generally, as a US citizen, you are required to file your US income tax returns by April 15. But, a US Citizens Living Abroad Expat Taxes gets an automatic extension to file their US Expat taxes until June 15. In spite of the automatic extension, all US Expat taxes need to be paid by April 18 to avoid any late charges. You will get an automatic extension to file their US expatriate taxes by attaching a statement to Form 1040 when filed by June 15. Via Form 4868, an additional extension to October 15th can be requested.

The above is meant to be a general idea only- consult with a tax professional for filing your US expat taxes.

Why Hire A Specialized CPA To File Your Expat Taxes

One important thing that all the US expats must know is that the US uses a citizenship-based taxation system thus living in any other country does not exempt US expats from filing a tax return every year. You must report all your worldwide income on your taxes and also required to report your foreign bank accounts as well as financial assets like bonds, shares, etc., via FBAR ( foreign bank account report) or FATCA from 8938 if exceed the income threshold.

For US citizens living abroad, the tax return time is very stressful. This is where expat tax professionals can make a huge difference. In this post, we have mentioned a few reasons why one should hire a professional to file your tax return.

1. You Have To File US Taxes

It does not matter where you live and what currency you were paid as well as what taxes were paid to other countries or where the income earned, you are liable to file US expat taxes if earned over the minimum threshold.

2. Taxes Are Very Complicated

You may have to fill form 1040 but your tax return is going to require form 2555 and form 1116 for the foreign earned income exclusion, foreign housing exclusion, and deductions and foreign tax credit. Such forms can be confusing to interpret for taxpayers.

3. Currency Exchange

The internal revenue system (IRS) requires that your income is reported in US currency. Also, the IRS lets the opportunity calculate your income yearly, monthly and daily exchange rate. It can translate into big tax savings if the income you paid in fluctuated over the best year. A professional tax preparer can make sure that the right conversion rates are used and eliminating the hassle of looking for rates as well as converting your income and deductions.

4. States Taxes

We know that every state is different from another in terms of how they tax their citizens who live abroad. In addition to this, some states have no tax and so need no return for expats. While other States may still have you pay taxes as your domicile is in this state caused by a valid driver's license, bank account, voter registration on property. A professional tax preparer will know what each state needs and how to cut ties to avoid taxation with the state if desired by their clients.

US Citizens Living Abroad Expat Taxes have a responsibility to file their income tax return on time and are subject to civil or criminal penalties for failure to file. It can be tempting for US ex-pats to put off dealing their taxes as qualified tax help can be very hard to find outside the US.

What US Income Tax For US Citizens Living Abroad Must Need To Know About

Most of the Americans living abroad agree that US expat taxes can be daunting. There are the only two countries in the world (The U.S. and Eritrea), which impose taxes on their citizens despite their residence. Taxes are a complicated matter, but it’s even more difficult for US expats as they need to comply with 2 different tax systems and keep an eye on ever-changing US tax laws as well. Tax situations become more complicated when Americans abroad haven’t been filing for years. In this article, we’re going to tell you a few things about US income tax for us citizens living abroad you must know about

• Deadlines And Extensions

Americans living abroad can receive 3 filing extensions in a tax year: 1) Automatic filing extension until June 15th. Taxpayer does not need to file any form or submit any letter to the Internal Revenue Service (IRS) as long as he or she resides abroad.

2) If anyone is not ready to file before June 15th, then he or she can file for an additional extension until October 15th. Also, you will need to file and send Form 4868 before June 15th. The form is an Application for Automatic Extension of Time to File U.S. Tax return.

3) The final extension available will push the deadline to file a US expat tax return to December 15th. In order to get one, send a letter to the IRS explaining why you need the additional two months. You have to do this by October 15th.

• Have To File A State Income Tax Return If Living Overseas

If you are a US Citizen living abroad, then you have to make sure that you file an income tax return with the IRS every year if you meet the minimum filing requirements,  then you may have to file a state tax return. You may have to file a non-resident state income tax return even if you are living abroad depending on which state you most recently lived in before your move. Do not assume that as you have left the US you are not obligated to file a state tax return. Keep in mind that each state has its own set of rules about whom it considers a “resident” as well as their minimum filing requirements. In the US, most states allow the foreign earned income exclusion in determining taxable income

• What Else To US Citizens Living Abroad Need To Report?

US citizens living abroad are required to report their foreign bank accounts and investments only if their combined total values exceed certain value thresholds. In addition to this, the rules for foreign account (FBAR) reporting are complex, and penalties for not doing correctly, accurately and fully are high, thus it’s not a requirement that Americans with foreign-registered bank or investment accounts should pay no attention to. You may have to report your foreign-registered businesses and financial assets as well.