US Expat Taxes Series Overview


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US Expat Taxes Explained is a summary overview of our new series about US Expatriate Tax Returns and have the components work. By Greenback Expat Tax Services

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US Expat Taxes Series Overview

  1. 1. Helping you piece together the US expat tax puzzle Your US Expat Taxes Explained - An overview of our new series
  2. 2. Introduction The US is one of the few countries that taxes its citizens on all of the income they earn - even if they live out of the country. Our New Series, Your US Expat Taxes Explained is designed to give you a brief introduction to the key information you need to know about your US Expat Taxes. Including: <ul><li>The Foreign Earned Income Exclusion </li></ul><ul><li>The Foreign Tax Credit </li></ul><ul><li>The FBAR and the Voluntary Disclosure Program </li></ul><ul><li>What happens is your Spouse is not a US citizen </li></ul><ul><li>Key Filling Dates </li></ul><ul><li>Getting an extension, and more </li></ul>
  3. 3. Foreign Earned Income Exclusion <ul><li>The Foreign Earned Income Exclusion (FEIE) is one of the forms you can use to lower your US Expat Tax burden while living abroad. American tax service providers should advise you to complete Form 2555 along with your Form 1040 if you meet: </li></ul><ul><li>The Physical Presence Test – i.e. live out side the US for 330 days, or </li></ul><ul><li>The Bona Fide Residence Test – i.e. be a resident in a foreign country, and recognized as such in that country </li></ul><ul><li>If you qualify for the FEIE you will be able to: </li></ul><ul><li>Exclude up to $91,500 of your foreign earned income on your US expatriate tax return </li></ul><ul><li>Qualify for foreign housing deductions , which can save you even more </li></ul>
  4. 4. Foreign Tax Credit It is common for a US citizen living abroad to be taxed by their host country as well as being required to file a US expat tax return. In these cases the IRS allows individuals to file for the Foreign Tax Credit – Form 1116 . This form allows you to: <ul><li>Claim a credit for the foreign taxes you have paid </li></ul><ul><li>Avoid double taxation on your foreign earnings </li></ul><ul><li>Save a substantial amount of money if you live in a high tax area such as the EU </li></ul>Like the FEIE you will need to qualify for this credit by meeting either the Physical Presence Test or the Bona Fide Resident Test .
  5. 5. Foreign Bank Accounts – AKA FBAR <ul><li>Many American tax service providers – and their customers – find the FBAR requirements quite confusing. Basically, if you are a US citizen with: </li></ul><ul><li>One or more foreign bank, brokerage, or financial accounts , with a </li></ul><ul><li>Cumulative balance over $10,000 at any time during the calendar year, or </li></ul><ul><li>Business accounts you control meeting the above criteria </li></ul><ul><li>Then you need to file Form 90-22.1 Report of Foreign Bank and Financial Accounts (FBAR). </li></ul><ul><li>NOTE: This form is due by June 30th each tax year and is filed separately from your US expat taxes. </li></ul>
  6. 6. 2011 Offshore Voluntary Disclosure Initiative <ul><li>The IRS is currently offering an opportunity for people who’ve failed to report their foreign financial accounts to get current on their US expat taxes and FBAR forms. This initiative offers three key provisions: </li></ul><ul><li>A reduced penalty to those who are out of compliance </li></ul><ul><li>Avoidance of criminal prosecution </li></ul><ul><li>Certainty about how your case will be handled </li></ul><ul><li>US expatriate tax services providers can tell you if you are eligible for this programs, but in short you are eligible if: </li></ul><ul><li>You are not already under review by the IRS </li></ul><ul><li>You can file all original and amended tax returns by August 31 st </li></ul><ul><li>You can pay any / all taxes due including interest and penalties by the deadline. </li></ul><ul><li>Deadline for this Voluntary Disclosure Program is August 31, 2011 </li></ul>
  7. 7. Married to a Non-US Citizen <ul><li>In order to file jointly with your spouse you will need to: </li></ul><ul><li>Apply for an Individual Taxpayer Identification Number (ITIN) through the IRS via Form W-7 </li></ul><ul><li>Consider the tax implications – if your non-US spouse is the main bread winner this may not be the right choice for you </li></ul>You can file your US expat taxes jointly return with your non-US citizen spouse , but it will mean that you need to do so for all future years. This election allows the US to tax both your worldwide income and your spouses, but it also gives you both access to the US expat tax breaks (such as the FEIE) and if you want to apply for a green card for your spouse this may help.
  8. 8. Dates for Filing The Key US expat tax deadlines are as follows: April 18 th – Usually this is April 15 th and this is the US tax deadline for people living in the USA June 15 th – This is the US expat tax deadline June 30 th – This is the FBAR deadline October 15 th – This is the final due date for US expat taxes April October June M T W T F S S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 M T W T F S S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 M T W T F S S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
  9. 9. State Taxes Each of the 50 states varies in how they determine the filing requirements of your US expat taxes. <ul><li>Some states such as Florida and Nevada have no personal income tax at all, so no need to file a State return </li></ul><ul><li>Other states such as California, New Mexico and Virginia are very difficult to avoid filing in , especially if you: </li></ul><ul><li>Own property in the State </li></ul><ul><li>Maintain a bank account in the State </li></ul><ul><li>Maintain a Drivers License from the State </li></ul>We recommend speaking with an expatriate tax services specialist regarding filing your State taxes
  10. 10. Please contact us with any questions or concerns you have regarding your US expat taxes Your US expat Taxes Explained