US Expat Taxes 5 things to know before you go


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US Expat Taxation for Americans - 5 Things To Know Before You Move Abroad

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US Expat Taxes 5 things to know before you go

  1. 1. Helping you piece together the US Expat tax puzzle US Expat Taxes - 5 Things to Know Before You Go
  2. 2. Introduction <ul><li>In this article we will go over five key points, including: </li></ul><ul><ul><ul><li>Special Tax Credits and Exclusions, </li></ul></ul></ul><ul><ul><ul><li>State regulations, </li></ul></ul></ul><ul><ul><ul><li>How to get important mail, </li></ul></ul></ul><ul><ul><ul><li>US filing dates, </li></ul></ul></ul><ul><ul><ul><li>US income vs. Foreign income </li></ul></ul></ul>The more you know about US expat tax preparation before you move abroad, the better prepared you will be.
  3. 3. Tax Credits and Exclusions <ul><li>US expats get two special tax breaks that can help you save a lot of money: </li></ul><ul><li>Form 2555 – the Foreign Earned Income Exclusion – allows you to earn up to $91,500 free of US taxation </li></ul><ul><li>Form 1116 – gives you a tax credit for the taxes you paid to the foreign government </li></ul><ul><li>In order to be eligible for these US expat tax benefits you must meet either: </li></ul><ul><li>The Bona Fide residence test – by being a resident of a foreign country, or </li></ul><ul><li>The Physical Presence test – by living outside the US for a minimum of 330 days each year </li></ul>
  4. 4. US State Regulations Some States make it very difficult for US expats to not file taxes, including: <ul><li>California </li></ul><ul><li>New Mexico </li></ul><ul><li>South Carolina </li></ul><ul><li>Virginia </li></ul><ul><li>Especially if you maintain things like: </li></ul><ul><li>Rental property – in the State </li></ul><ul><li>A State Drivers License – from the State </li></ul><ul><li>Bank accounts – within the State </li></ul>You should check with your accountant or your State Treasury department before you leave to see if you will be required to file once you leave.
  5. 5. Getting your mail <ul><li>It is very important to consider how you will deal with your US mail while living abroad. We suggest: </li></ul><ul><li>Get electronic statements for everything you can </li></ul><ul><li>Call 1-888-5OPT-OUT to prevent the credit rating bureaus from selling your details, so you won’t receive credit card offers and similar junk mail </li></ul><ul><li>Hire a mailbox forwarding service* which receives your mail items, scans them and emails them to you </li></ul><ul><li>These three things will greatly reduce the time and energy you will spend pulling together your US expat tax documents </li></ul><ul><li>*(see our sites we like page for our mailbox forwarding recommendation) </li></ul>
  6. 6. Notify the IRS You need to notify the IRS that you are planning on changing your address <ul><li>The easiest way to do this is to have your address officially changed before you file your first US Expat tax return. You can do this by changing your address on the mailing label that you send back to the IRS with your tax return- before you leave the US. </li></ul><ul><li>If you change your address after you file your taxes, you need to notify the post office and send a completed form 8822 to the IRS. </li></ul>
  7. 7. US Expat Tax Deadlines <ul><li>Unlike folks in the US, expats have different and multiple tax deadlines : </li></ul><ul><li>April 18 th 2011 – Standard US tax deadline </li></ul><ul><li>June 15 th 2011 – US expat tax deadline </li></ul><ul><li>June 30 th 2011 – Due date for the FBAR </li></ul><ul><li>October 15 th 2011 – Final US tax deadline if you filed for an extension (using Form 4868) </li></ul>
  8. 8. US Income vs Foreign Income One final item that is pertinent to the US expat tax preparation process is to consider how US income will be treated differently than foreign earned income. <ul><li>US Sourced Income such as: </li></ul><ul><li>Rental income </li></ul><ul><li>Dividends </li></ul><ul><li>Interest </li></ul><ul><li>Salary paid for working in the US </li></ul><ul><li>Will still be taxed in the US, by the IRS! </li></ul>Only foreign sourced income is eligible for the credits and exclusions on your US expat tax return.
  9. 9. Conclusion As you can see, there are a lot of things to consider and plan for before you move moving abroad and have to file your first US expat tax return. Your US expat tax preparation can be a very important and financially significant decision for you. Please make sure you find a preparer who understands how US expat taxes work and is able to guide you through the process.