Us expat taxes explained


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Us expat taxes explained

  1. 1. The Documents You Need to Make Expat Tax Preparation Easy US Expat Taxes Explained
  2. 2. US Expat Tax Preparation can sometimes feel like an overwhelming process.  It doesn’t have to be though! Understanding what documents to provide to your American tax services preparer for your US Expat Taxes will make the process go smoother on both sides. Introduction
  3. 3. Tax Questionnaire <ul><li>When you engage an accounting </li></ul><ul><li>practice for your Expat Tax </li></ul><ul><li>Preparation, you will likely be </li></ul><ul><li>provided with a “Tax Questionnaire.” </li></ul><ul><li>This questionnaire will ask you to </li></ul><ul><li>Provide basic information such as: </li></ul><ul><li>Name </li></ul><ul><li>Address </li></ul><ul><li>Identification Numbers and; </li></ul><ul><li>Dependent Information </li></ul>
  4. 4. <ul><li>It will also ask you a series of questions about other activities in which you may have engaged that could have US Expat Tax implications. </li></ul><ul><li>Although it is tempting to gloss over this form, filling it out properly upfront usually saves plenty of time and hassle in the long run! </li></ul><ul><li>The thorough and attentive completion of this questionnaire is crucial to smooth Expat Tax Preparation. </li></ul>
  5. 5. Prior Year’s Tax Return <ul><li>It will supply a cross reference point for the </li></ul><ul><li>basic information provided in the tax </li></ul><ul><li>questionnaire. </li></ul><ul><li>The preparer will also use it to compare </li></ul><ul><li>against your current year return to look </li></ul><ul><li>for drastic changes or potentially </li></ul><ul><li>overlooked income or deductions. </li></ul><ul><li>And to electronically file after your </li></ul><ul><li>current year’s Expat Tax Preparation is </li></ul><ul><li>complete. </li></ul>Providing your prior year tax return will assist with your current year’s Expat Tax Preparation in many ways.
  6. 6. Travel Calendar <ul><ul><li>A detailed Travel Calendar will help you: </li></ul></ul><ul><li>Determine all exclusions that are </li></ul><ul><li>available to you. </li></ul><ul><li>Determine your residency . </li></ul><ul><li>Determine if any of your income is </li></ul><ul><li>taxable in the US. </li></ul>
  8. 8. Wages, Compensation or Tips <ul><li>The most important document required for Expat Tax Preparation for self-employed are : </li></ul><ul><ul><li>Records of earnings </li></ul></ul><ul><ul><li>Records of deductions for the calendar year. </li></ul></ul>Wages from an employer are typically reported to you on a W-2, P60, P45 or your host countries equivalent.
  9. 9. <ul><li>If you live in a country that does not have any income taxes you may need to: </li></ul><ul><li>Self report your income and; </li></ul><ul><li>Potentially back it up to the IRS with bank statements or </li></ul><ul><li>something similar. </li></ul>
  10. 10. Interest or Dividend Income <ul><li>Please provide the information on: </li></ul><ul><li>Interest and/or; </li></ul><ul><li>Dividend Income </li></ul>These are typically provided on the Form 1099 or the foreign equivalent for Expatriate Tax Services. Have one of these statements for each interest bearing account you maintained even if the account was closed in the current year.
  11. 11. Stocks and Other Securities <ul><li>Generally, at the end of each year, your investment broker </li></ul><ul><li>will provide you with a statement detailing all stocks and </li></ul><ul><li>securities that were sold or purchased in the current year. </li></ul><ul><li>This information is necessary for your Expat Tax Preparation.  </li></ul><ul><li>Please ensure that the statement supplies the original basis such as; </li></ul><ul><li>Purchase price plus any transaction fees paid of securities sold </li></ul><ul><li>The sale / purchase dates. </li></ul>
  12. 12. Real Estate Transactions <ul><li>If you bought or sold real estate in the current year, </li></ul><ul><li>The purchase price </li></ul><ul><li>Date of the transaction and; </li></ul><ul><li>The purpose of the property </li></ul><ul><li>If you own rental property, </li></ul><ul><li>A financial statement detailing the income and applicable expenses. </li></ul>The following may be necessary for your Expat Tax Preparation.
  13. 13. Distributions from Pensions, Annuities, Profit Sharing, IRA or Other Accounts <ul><li>Withdrawals from your: </li></ul><ul><li>Pension </li></ul><ul><li>IRA </li></ul><ul><li>Equivalent Retirement Account(s) </li></ul><ul><li>are important to report to your </li></ul><ul><li>preparer for your Expat Tax </li></ul><ul><li>Preparation.  </li></ul>The financial institution or your employer will usually send you a 1099-R or equivalent for withdrawals at the end of each year.
  14. 14. Social Security Benefits <ul><li>Your preparer should also </li></ul><ul><li>double check the Social Security </li></ul><ul><li>agreement between your host </li></ul><ul><li>country and the US as this can impact your US taxes </li></ul><ul><li>Services especially if you are self employed. </li></ul><ul><li>Social Security benefits </li></ul><ul><li>will be reported to you via </li></ul><ul><li>Form 1099 SSA </li></ul><ul><li>This should be given to </li></ul><ul><li>your preparer for your </li></ul><ul><li>Expat Tax Preparation.   </li></ul>
  15. 15. Other Income <ul><li>If you have business, trust or partnership interests, you will </li></ul><ul><li>typically be provided with a Schedule K-1 or equivalent.  Be </li></ul><ul><li>sure to send any miscellaneous income that may have been </li></ul><ul><li>reported to you on Form 1099 MISC or foreign equivalent. </li></ul><ul><li>Other sources of income required for your expat tax preparation </li></ul><ul><li>include unemployment reported via 1099-G or any alimony or </li></ul><ul><li>child support received. </li></ul>
  17. 17. Interest & Taxes Paid <ul><li>Interest that you paid on: </li></ul><ul><li>Mortgages </li></ul><ul><li>Student Loans </li></ul><ul><li>Taxes such as: </li></ul><ul><li>Foreign Income Taxes </li></ul><ul><li>Real and Personal Property Taxes </li></ul><ul><li>Local Excise Taxes </li></ul>Deductibles on your Expatriate Tax Return:
  18. 18. Foreign Housing Expenses Qualified individuals may elect to exclude or deduct a certain amount for foreign housing expenses. The details of your foreign housing expense that will be asked during your Expat Tax Preparation includes: <ul><li>Rent </li></ul><ul><li>Utilities </li></ul><ul><li>Property Insurance </li></ul>To learn more about the foreign housing expenses, see our US Expat Taxes Explained series .
  19. 19. Dependents Children and other dependents are a great source of deductions. <ul><li>You need to provide: </li></ul><ul><li>Name </li></ul><ul><li>SSN or TIN </li></ul><ul><li>Ages </li></ul><ul><li>Child Care Expenses if under 15 </li></ul><ul><li>Education Expenses for higher </li></ul><ul><li>education </li></ul>
  20. 20. Other Deductions <ul><li>Other potentially deductible expenses that should be provided </li></ul><ul><li>for your Expat Tax Preparation include: </li></ul><ul><li>Medical expenses not covered by insurance </li></ul><ul><li>Charitable donations </li></ul><ul><li>Alimony and Child support paid </li></ul><ul><li>Gifts to relatives or others and; </li></ul><ul><li>Unreimbursed business expenses. </li></ul>
  22. 22. Foreign Bank Accounts <ul><li>If you are a US person that has foreign bank accounts whose cumulative balances exceed $10,000 at any one time during the calendar year, you must report these account(s) to the IRS by June 30 of each year.  </li></ul><ul><li>Although this is not technically part of your Expat Tax Preparation requirements, most preparers will use the Form 90-22.1 Report of Foreign Bank and Financial Accounts (FBAR). </li></ul>For more information on the FBAR or the Voluntary Disclosure Program the IRS is offering please visit our FBAR article.
  23. 23. PIECE OF ADVICE <ul><li>If you have completed the questionnaire and dug through all your documents, but feel as if you are still missing a tax document, don’t ignore it! Contact the issuer to have it resent.  It may have been lost in the mail, but still reported to the IRS. </li></ul><ul><li>If it was reported to the IRS but omitted in your Expat Tax Preparation, the omission may be caught by the IRS which could, in turn, prompt an audit of your Expatriate Tax Return. </li></ul>