All Americans living outside of the United States, anywhere in the globe, must file US taxes. This is because the United States taxes its residents on their worldwide income, regardless of where they live. Unfortunately, international tax treaties do not alleviate the need for American expats to file from abroad, even if they must also submit foreign taxes. Tax filing for US citizens living abroad is more challenging than filing taxes in the United States since there is additional paperwork to fill out, and we at USA Expat Taxes are here to help.
7 tips you can use to make your filing experience much better:
- If you make more than the tax filing level, you must file to keep the IRS informed that you are still doing your American obligation. Expat tax guidelines in the United States might help you save on track and avoid penalties and repercussions. You must submit Expat taxes if your total income (including income earned in foreign currencies translated to US dollars) exceeds the minimum IRS limits in a given year.
- If you must file foreign income taxes in the nation where you live, claiming the US Foreign Tax Credit by completing IRS Form 1116 with your federal tax return is usually the most straightforward approach to avoid double taxation.
- To use the Foreign Earned Income Exclusion (FEIE), you must first qualify and then elect it by completing Form 2555 or 2555-EZ. Once you’ve decided to use the FEIE, you’ll have to include it on your tax return every year. If you opt not to utilize it, you will be unable to claim the exclusion for the next five tax years unless the IRS permits you.
- The Physical Presence Test requires you to spend 330 days of any 365 days physically present in a foreign nation. Temporary overseas contractors and those on assignment will not qualify under the Bona Fide Residency Test because they must have resided abroad for at least one calendar year and have no urgent plans to return to the United States.
- Income tax treaties assist avoid double taxation for Americans living abroad by lowering or eliminating US taxes on certain forms of income for expats. The United States now has tax treaties with over 60 nations. Because tax advantages differ by government, expats should check their host country’s treaties to see how they’ll be taxed. Tax treaties can be complicated and challenging to comprehend, like any legal agreement. Consult an accountant if you’re unsure about which rules apply to you.
- If you’re thinking of retiring overseas, be assured that you’ll be able to receive your Social Security benefits in almost any nation. You can only get your gifts in a few countries, but you can always collect any cash you owe if you move to a country that accepts US Social Security payments.
- A critical factor in determining whether or not you must submit a state tax return as an expat is whether or not you intend to return. Every state has standards for domicile and permanent place of abode, which influence whether or not you are deemed a resident and must file.
For more exciting tips, feel free to contact us at USA Expat Taxes.