US Expat Tax Help

If you are a citizen of the United States living in another country, then you will face a different set of tax laws compared to those living within the US. Today, there are many thousands of Americans who are working or living in retirement overseas that still fall under US tax guidelines, also known as expatriates.

In this post, a US expat is not someone who has relinquished their citizenship and now abides by the tax laws of the country in which they permanently reside. Instead, this will focus on Americans living abroad who are earning an income and must pay US taxes as applicable and seeking professional expat help.

Because of the different tax laws, having an experienced tax accountant and law team by your side is helpful, only an EA, CPA or attorney can represent you. This is because the laws are relatively complex and subject to change. Plus, there are certain deductions that may apply to you and not to those currently living in the US. It is why you should consider hiring knowledgeable, experienced tax firm help and assistance. Contact us at 562-204-6700.

What follows are some tips you can follow to help make the process of filing your taxes easier and with less chance of being audited.

Statistically speaking, most US expats do not owe federal taxes, although they will need to file their taxes. This is because certain laws are in place to ensure that you do not pay twice for the same taxable income. Such laws include the foreign earned income and housing exclusion along with the foreign tax credit.

• Earn Income Exclusion: Up to $107,600 for 2020
• Housing Exclusion: Spend 330 days minimum living in foreign country
• Tax Credit: Matches dollar for dollar taxes paid in foreign country.

You must earn the income exclusion by filing a 2555 or 2555-EX form each year. Plus, the housing exclusion does not count the travel time between the foreign country and the US. And, the you must file Form 1116 to qualify for the foreign tax credit. Keep in mind that if you have a child, the child tax credit may be a better option.

Depending on where you live, there may be a tax treaty in place that reduces even further the taxes you pay in the US. Currently, 68 countries have tax treaties with the United States. Knowing this will help you shape your tax return to include the provisions from the treaties which have been signed.

Because your host country has most likely taken such taxes from you, the US will not ask you to pay them once again. However, to fully understand what you can deduct so that you pay little to no US tax, you will need to consult or seek help from a tax professional (EA, CPA or attorney) who is helpful, knowledgeable and experienced in filing taxes for US expats like yourself.

If you earn an income that exceeds the threshold for taxation, then you will need to file your taxes. This means that if you have an income which originates from a wage, salary, interest, dividends, or cash flow such as rental sources, you will need to file for your federal taxes.

Because you live overseas, you have until June 15^th to file your taxes as opposed to April 15^th. The extra time is allotted to ensure that you have collected all relevant information that applies to your tax filing. If you have moved back to the US, then you may need to file by April 15^th depending on when the move was completed.

Just like if you were filing taxes in the US, children that are your dependents can be included as well. In some cases, you may earn a substantial refund depending on the number of dependents you have. Keep in mind all children must have a social security number.

In addition to the deductions for having a child, you may be able to deduct the cost for child care. However, if you have excluded your income using the Federal Earned Income Exclusion (FEIE), then you cannot claim the child care tax credit.

One twist to the filing of taxes is reporting balances in bank accounts that are overseas. Known as the Foreign Bank Account Report (FBAR), this law was designed to catch people, cheating on their taxes by hiding money in bank accounts in countries other than the US. If you have more than $10,000 in all your bank accounts overseas combined, then you must file a FBAR.

The FBAR is separate from your tax return, can be filed electronically, and is due on April 15^th. You can file for an extension that will push back the date to October 15^th if you desire. 

The Federal Account Tax Compliance Act (FATCA) is akin to FBAR and designed to catch tax cheats. The requirements for both FATCA and FBAR are similar and you may have to file one, both or neither depending on the amount of money you are holding in foreign bank accounts.

What if you moved overseas and simply forgot to file your taxes in the US? That is an issue many US expats face when they discover one day that they have missed one, two, or more years of filing and seek professional help.

The good news is that the IRS does have forgiveness programs in place that allow you to file for the past three years of tax returns and up to six years of FBAR which will catch you up no matter how long it has been. In such cases, a tax professional (EA, CPA or attorney) can be of great assistance.

If you are an American expatriate, then you should hire the right tax help for your needs. Our knowledgeable, experienced tax firm can help you in preparation, planning and representation. Contact us today at 562-204-6700 to take advantage of the different deductions and benefits available to expatriates, prepare and file your taxes to ensure that they comply with the law.

We are here to help you make sense of what is a complicated set of tax laws. If you are a US expat, call today at 562-204-6700 and find out more about how we can assist you with your taxes.