Does a US Citizen Living in Australia need to Pay Taxes?

 If you are a US citizen but living and working in Australia, Then you have to pay US taxes. When it comes to individual income tax filing, the United States takes a relatively unique approach. For nations that do tax income don't tax income at all. Also, there are two used systems: 1) territorial based and 2) residence based. In the territorial based taxation system, countries like Singapore tax individuals only on income from sources inside borders of the country. On the other hand side, countries like France and Germany tax their local residents on all income earned from both overseas and local sources under the residence based taxation system. For non residents in these countries, income earned locally only is taxed similar to the territorial based system.

Do you know that about 244 sovereign territories employ territorial, residence or non income taxation at all? But there are only two countries that have citizenship based taxation systems: the US and Eritrea. 

Do all US citizens living in Australia have to file income tax return?

If you are an American living In Australia, it means as a US citizen; you have to file a US tax return and pay US taxes. You are subject to the same rules about income taxation as people living stateside. Also, Americans living and working in Australia must report all their overseas income based on US tax law. Remember, this can be complicated than preparing and filling taxes for US citizens living in Australia  by filing an IRS form 1040. This is because there are often calculations and disclosures in an expatriate tax return that national tax accountants might unfamiliar with that. These are: you have to mention amounts you report on your tax return in dollars. If you receive all your income or a part of it or even pay some or all your expenses in overseas currency, you should translate the overseas currency in to the US dollars.

Why you might not have to pay US tax for US citizens living in Australia?

    • The foreign earned income exclusion rule

Average income receivers who are US citizens living abroad take heart. But, you still have to undertake the administratively burdensome job of filing every year with the internal revenue system, you likely will not have to pay a fine in most cases exclude from your income for US expat tax return purposes upto a certain amount of overseas income  and in many cases exclude or even deduct income that comes in the form of overseas housing. To qualify for this exclusion, you must have a tax income in a country other than the US, you must receive income that qualifies as overseas earned income and you must be either a bona fide resident of a country  other than US for an uninterrupted period that includes a whole tax year. Or have been physically present in a nation or nations other the US for at least 330 days during and any period of 12 consecutive months.

5 Tax Filing Tips to Help Taxpayers American Living Abroad

 

Are you preparing for US income tax filing? Filling US tax for US citizens living abroad is mandatory for everyone these days. If you don’t know “How to file US income tax return online”, then this post is for you. ITR filing online is a simple and easy process and saves you both time and energy. 

Also, if you file your US income tax return before the deadline, you can void a penalty and heavy interest as well. Filing tax returns personally is a time consuming as well as a lengthy process which involves filling plenty of pages of tax forms, which are acquired through email. Also, you need to collect the forms themselves through standing in long queues to file on time if you're unable to obtain the forms. On the other side, filling online enables you to create e-file with computer/laptop and a web connection in an easy and systematic method. In addition to this, step one of filling US income tax return online would be to set up an account with a user name, and password. Once done, the system will show you some forms that you have to complete. Keep in mind that each step contains a few but important guidelines that assist you in what to do from start to end.

We have mentioned some key steps that will help you in filing the US income tax return online. Before you start the process, you need to make sure that you have got yourself registered on the electronically filing site of the income tax department of United States Of America. 

1. Taxpayers American living abroad have to assemble all the required documents to file online. For example- Salary slips, rental income, interest certificates documents that indicate capital gain/loss. Any other document that proves any income earned during the financial year. 

2. Once you have assembled all the essential documents, now login to the e-filing account on the website of the income tax department. Later than you login, you will see 'filing of the income tax return' on the dashboard, now click on it. Choose the assessment year for which you want to submit it. When you submit it, ensure that you are using the right form.

3. Remember you have to verify all the details carefully such as name, address, etc. After verifying the details, you need to fill other details in the form using the documents you assembled in the beginning. Also make sure that you fill the right details under every head of income, exemptions, and deductions.

4. Once you have verified all the details, now you can file. It is the final step of the online process of filing an Income tax return. However, the return you filed needs to be verified, particularly if you want to get the ITR processed by the income tax department. Income tax department starts its processing after the verification of return.

5. Once it is processed, now income tax department informs you about this simply by sending a mail on your registered email ID. In vase they found any mistakes or errors, they will ask you to correct that or explain them about that.

If you are not familiar with the process of filing ITR online, hire professional of  American Expat tax services who have knowledge and skills of the e-filing process.

Let's Know about UAE tax for US citizens living in UAE

 

The UAE (United Arab Emirates) has an expatriate population about 10 million and is globally known as the center for finance and commerce in the middle East. The UAE is increasingly promoting itself as a tax haven. If anyone who is an American expat, but he or she continues to be subject to US expat taxes no matter where that person lives. This somewhat dilutes the low tax appeal of the United Arab Emirates. This post will help you understand your tax responsibilities as a US Expat else in the UAE.

Know about taxes for US citizens living in UAE

There is no federal tax legislation in the UAE, and the UAE is considered a non tax nation. Currently, there is no income tax, corporate tax with no withholding and capital gain tax. Some businesses, particularly in the finance and petroleum producing industries are subject to taxation but most corporate entities are exempt. But, the United Arab Emirates has introduced s value added tax (VAT) of upto 5 percent on goods and services since Jan 2018 unless a special exemption applies.

Let's know about the tax due date in the UAE

There is no income tax collected from individuals, and filing a return is not needed. Overseas income is not taxed by the UAE that means you just need to worry about your US taxes.

Let's know about taxation of US expat in the UAE

If you are an US expat or permanent resident, you are obligated to file US expat taxes with the federal government every year whether you live in Abu Dhabi or Albuquerque. You could be required to file an informational return on your assets held in overseas bank accounts. Also, while the US is one of the few Governments that tax worldwide income of its citizens as well as permanent residents.

The overseas earned income exclusion let's you decrease your 2020 taxable income by the first $105,900 earned as a result of your labor while a resident of an overseas nation.

 The foreign tax credit that could let you lower your tax amount on your remaining income by certain amounts paid to an overseas government. On the other hand side, a foreign housing exclusion let's an additional exclusion from taxable income for certain amounts paid for household expenses that happen as a consequence of living abroad. With right planning and tax preparation, you must be able to take benefits of these and other strategies to reduce or even eliminate your liability on US expat taxes.

What US Expats Need to Know About Taxes in Hong Kong?

 

Hong Kong, among the most favorite destinations particularly for US expats but how does living here affect their US expat taxes? Being an economic hub of SouthEast Asia and China, Hong Kong is respected as one of the most vital cities in the world. Remember, taxes are low here but the taxes for US citizens living in Hong Kong is different from the US. Americans living in Hong Kong have to consider their US taxes too.

In this post, we will come to know about the tax system and cross border issues between Hong Kong and the United States of America.

No matter whether it is dealing with the issue of having a different tax year than the US standard year or ensuring US expats are maximizing their overseas housing exclusion because of the high cost of renting,  we ensure our clients optimize their tax situation.

Let's know about the tax rates in Hong Kong!

Net Chargeable Income          Rate

0– 50,000 HKD                 2%

50,001– 100,000 HKD     6%

100,001– 150,000 HKD    10%

150,001– 200,000 HKD    14%

Above 200,001 HKD    17%

Net total income (no allowances)    Standard rate 15%

Individual income is taxed at a progressive rate on net chargeable income in Hong Kong or at a standard rate of 15 percent on net income. So, you can pay whichever is less than the other. As you can see above, income tax rates in Hong Kong are not the lowest but competitive. It is true when compared to American tax for US citizens living in Hong Kong which is top out at 37 percent.

Exclude HK income from US income tax with foreign earned income exclusion ( FEIE)

With FEIE, US citizens living abroad can exclude upto $107600 in foreign earned income from their income taxes. But, they should meet the bona fide residence test or the physical presence test to qualify. As taxes in Hong Kong are lower than US, US expat living there benefit from  the Foreign earned income exclusion.

Social security number

Remember, Hong Kong doesn't have a social security system but they need a mandatory provident fund that provides the framework for a privately managed fund to accrue financial advantages for the workers in the City when they retire. Presently, the minimum contribution bis 5 percent of income from both the employee and employer and is subject to a maximum yearly contribution of HK $1200. If you earn less than HK$5000 every month, no payment is needed.

People who are on temporary stay in Hong Kong or pay into the US social security scheme, they do not need to pay into the mandatory provident fund. Keep in mind that the contribution to mandatory provident fund and other occupational retirement schemes are tax deductible upto 12000 Hong Kong dollars.

The US Expat Tax Filing Considerations for Americans Living in Hong Kong

Hong Kong is one of the most popular places for American expats but how does living in this beautiful city affect their US expat taxes? Hong Kong is an economic hub of China and SouthEast Asia, is respected as one of the most important cities in the world. Additionally, living there as an American, you will think about your home country now and again plus rest assured that it has not forgotten you particularly when it comes to file US taxes.

What you should know?

American citizens and green card holders living in Hong Kong must continue to file a US tax return every year. But filling while living abroad comes with new considerations and questions like do I have additional info to report to the internal revenue system or how do my Hong Kong financial accounts affect my tax filing? How can I reduce my tax return?

In this post, we have outlined some considerations for US citizens working in Hong Kong, thus you know what affects the taxes for US citizens living in Hong Kong they pay as well as which forms taxpayers need to file American Tax for US Residents Living Hong Kong.

U.S expat tax filing considerations

Working as an American in Hong Kong can affect your taxes even if you do not stay for a long time. For instance- if any person earns income while on a short term assignment, that person will need to report that income on his or her US taxes. As you establish deeper financial roots in the city, you will have more considerations for your filling.

You have to report your Hong Kong financial accounts and assets. Usually US taxpayers with over $10000 in foreign bank or financial accounts are subject to FBAR filing and reporting needs. Furthermore, you may be subject to FATCA reporting needs if you have foreign assets valued at $200000 and higher. Taxpayers can reduce their US bill and avoid dual taxation with some tax strategies. You may take advantage of one of two options to lower your taxes. These options are mentioned just below:

    • The foreign earned income exclusion lets you exclude your wages from your US taxes. Keep in mind that this option is available to those individuals who meet certain time based residency needs. The foreign tax credit allows you to claim a credit for income taxes paid to an overseas government. It is usually more favorable for Americans living in Hong Kong to use the foreign earned income exclusion because of lower rates in Hong Kong. Your tax advisor can confirm the best option for you.

    • Your Hong Kong pension is nog tax free in the US. If you participate in a mandatory provident fund or MRP through your employer, you can deduct your contributions from your taxes in Hong Kong. But your contributions are not deductible and your employer's contributions are taxable for the US tax purposes. 

Does US expat taxes rules changed after US election?

 About 9 million US expats live and work in another country but they retain their federal government tax reporting as they retain their US citizenship. With the global pandemic (COVID 19) hit the global economy and after the change in the US government, US citizens living abroad may wonder how the US election will impact expats and taxes. You can expect to have certain change in the expat rules and policies with the win of the democratic party. Irrespective of who wins the US presidency, US taxes will still be a key factor of US expats. US expat tax service providers want to ensure you will always be safe and in good standing with the internal revenue system, thus you don't face unnecessary issues in life. Their tax software makes it simple and easy.

Tax Deadline for Individuals living abroad:

The deadline for filing and pay 2020 federal US tax for US citizens living abroad  is June 15, 2021.

There has been thinking whether expats taxes rules will undergo change or not with the claims that new US government will raise taxes. Joe Biden, the newly appointed president of US, does have some good plans to roll back some changes from earlier president ( Donald Trump) signature tax law, jobs act and tax cuts.

The tax cuts and jobs act signed by former US President Trump on December 22, 2017, was one of the most comprehensive and ambitious tax reform bills in the history of America. It provides many US taxpayers and investors with lower taxes and increased incentives to invest in the US. But, the TCJA was controversial due to its favorable corporate tax provisions and estate tax changes, aa a result culminating with several democrats was focusing their 2018 congressional campaigns on repealing or amended the bills.

Joe Biden government wants to double the GILTI  (global intangible low taxed income) rate from 10.5% to 21% if you want to register an overseas business with a US parent company. GILTI is a concept from the tax cuts and jobs act and this makes corporate taxable income gets added from overseas income. Also, there are lawsuits against this GILTI tax for US expats being examined.

Also, the new government want to raise overall corporate tax (21% to 28%). The political party doesn't want to repeal citizenship based taxation. The newly appointed US president reached out to democrats abroad that he will work with Americans overseas and address expatriate issues.

The majority of Americans expats won't to see any big changes about US taxes. But, the democratic party has won the US election and so there could be some new rules regarding foreign registered businesses. So, American living abroad must look for advising from professional expat tax individuals to make sure that they avoid penalties, adhere to expat tax laws and file US tax in the beneficial way provided their circumstances.

You must do some research online to find the best US tax advice professional, do not forget to ask your friends and business partners for the same.

How to Save Money on US Expat Taxes Return Filing While Living in Australia

 

If you are a US citizen and living in Australia  then filing  Federal tax for non residents is a necessity. It doesn't matter where you are living in the world, but you can save money on your expat taxes. Here are all the details you need so you can save the most money on your US expatriate taxes.

The foreign earned income exclusion

When it comes to reducing American tax for US citizens living Australia,   the most common way US expats reduce their US tax liability. It lets you exclude the first $99,200 of foreign earned income from US taxation. This exclusion is not automatic, but you need to both qualify for and elect it using form 2555 or 2555 EZ as well. You have to pass one of the two residency test to be eligible for the FEIE. 

1) the physical presence test and 

2) the bona fide residence test. Under the first one, you have to physically present inside a overseas country for at least 330 of any 365 day period. But anytime you spend travelling to or from the US can't be included in those 330 days. Track your time very carefully as spending one day too many in the US can cost you big amount.

The foreign housing exclusion

It works in conjunction with the first one ( FEIE) to reduce your income by using your housing expenses you have paid to increase your FEIE for the year while reducing your income. Also, qualify for and claim the FEIE. Have to qualifying foreign housing expenses such as house rent, insurance, furniture rentals and certain utilities. Have paid your housing expenses from employer provided funds that can be designated as housing funds or part of your regular wages. Have housing expenses that exceed the base amount is 16 percent of the FEIE.

The foreign tax credit (FTC)

There are a few of amazing reasons to use the foreign tax credit. The FTC does not need you to have overseas earned income and you don't need to qualify to use it. Thus, if you don't qualify as a US expat and pay taxes on overseas income than you use FTC as a dollar for dollar credit on those taxes you paid to overseas country. Those residing in high tax countries may find that using the FTC can save them more. This is because you may pay more in overseas taxes than you would owe in US taxes that leaves you with additional foreign credits. Also, one can use those additional credits to offset future taxes or could carry back the credits and amend last year's return to potentially get a refund from the internal revenue system.

Those who qualify for the FEIE could use the FTC in conjunction with the FEIE if income exceeds the $99,200 thresholds. In this case you may be able to offset the US taxes on the money of unexcluded income.

These tips will help you save on your expatriate taxes and filing as close to the first deadline as possible. They can also help you save big if you will owe taxes to the IRS.