Yes, if you make more than a specific amount of money (domestic and international) and are a U.S. citizen, you must submit a tax return in the United States. The US is one of only two countries that levy Americantaxes based on citizenship rather than residence. That implies that no matter where you live if you're a lawful U.S. citizen, you owe taxes to the United States.
While U.S. citizens must submit an annual tax return even if they live overseas, most U.S. ex-pats do not owe any money. While there is no blanket tax exemption for Americans residing overseas, there are several systems in place to prevent Americans from being taxed twice on income earned abroad. The Foreign Tax Credit (FTC), the Foreign Earned Income Exclusion (FEIE), and the Foreign Housing Exclusion can all be used to offset foreign-earned income in most cases.
Living in a foreign country does not automatically exempt you from paying state taxes; it all depends on the state where you resided before relocating abroad. If you're unclear if you'll be required to pay state taxes while residing overseas, we recommend speaking with an ex-pat tax practitioner. You can always reach out to us at USA Expat Taxes.
Wondering about what might happen if you don't pay your US ex-pat taxes? You risk losing your passport. Yes, you heard it right. For major tax evaders, fines and penalties can range from a few thousand dollars to prison time. The easiest method to avoid tax penalties is to use a service like USA Expat Taxes, which provides a 100 per cent accuracy guarantee.
One question that might be popping into your mind is that you can end up paying twice the taxes on the same income with this. But this is not the case. The United States has a few perks and treaties in place to help U.S. citizens residing overseas avoid double taxation and a high tax burden.
Whether you claim the FEIE, FTC, or both will have a significant influence on the outcome of your tax return, so think about all of your alternatives before filing. It can surely get confusing at times to decide what exemptions you must use and in what circumstances, we understand that, that is why we have a broad base of in-house experts who understand these provisions in detail.
When it comes to filing your US ex-pat taxes, be cautious. Tax law is complicated (at best) for most Americans, and adding a foreign spouse to the equation doesn't make it any easier. Because making a mistake might result in years of financial sorrow, it's always preferable to entrust it to a tax specialist who specialises in US taxes for ex-pats.
If you and your family live in a foreign country, you may be wondering if you may claim the child tax credit. To begin, keep in mind that your eligibility may vary depending on where you live. If you claim the FEIE, for example, you won't be able to claim the refundable component, thus the child tax credit won't result in a refund on your return.
There are many such complexities involved with Expat taxes, IRS is trying its best to resolve them, but by the nature of the tax, it is complicated, and that is why we are here to assist you, feel free to reach out to us.
