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Behind with Your U.S. Expatriate Tax Return?
Let’s Answer Some Questions…

By David McKeegan, Director,
Greenback Expat Tax Services

Greenback Expat Tax Services is a U.S. expat income tax preparation service

If you have not filed your expatriate tax return with the IRS, you are not alone. This situation is actually quite common, and expat tax experts have a great deal of experience with it. Although the thought of getting caught up with the IRS can be intimidating, most likely it will be easier than you think. Here are answers to frequently asked questions to put your mind at ease.

Let’s start by getting one thing out of the way – do I even need to file?

If you have been paid more than the current thresholds the IRS has in place, then you do need to file an expatriate tax return. It does not matter what currency you were paid in, which country you worked in, what taxes have already been applied, or if you haven’t been in the U.S. in years – you still need to file as a U.S. citizen or permanent resident.

The current IRS thresholds are:

Single: $9,350 and above
Married, filing jointly: $18,700 and above
Married, filing separately: $3,650 and above

Any years you have lived abroad and made over your respective threshold, you need to file an expatriate tax return. Typically the IRS will ask for an expatriate tax return for the last 6-8 years, but it does depend on each individual situation.

What does the government want to know about my money abroad?

The tax obligation suggested by your expatriate tax return is not the only thing the American government wants to know. If you have had overseas bank accounts that, collectively, have had a balance of over $10,000, you will need to report all of them to The Treasury Department. This Report of Foreign Bank and Financial Accounts (FBAR) is due to The Treasury Department on June 30th of every year. Failing to do so could result in The Treasury Department seizing up to 50% of each account. If you are delinquent with these reports, you need to get your FBAR to The Treasury Department as soon as possible – and be sure to include a letter explaining why the forms are late, even if it is simply negligence.

What if I am already confused?

The laws applied to U.S. expatriate tax returns are extremely complex and can leave expats confused. If you find that you need to file delinquent returns, it is best to talk to an expat tax expert.

A tax expert will explain how you can save money by taking advantage of deductions and exclusions that your friends back in the states are not applicable for, as well as explain how your filing status can save you a significant amount of money.

In addition, experienced tax advisors will be familiar with the tax treaties between your host country and the U.S., which will further help reduce your obligations to the American government. Perhaps the best service a tax advisor can provide is helping you identify which of the countless forms you are going to need to file!

What information will I need?

Catching up with your expatriate tax returns will be an easier process if you have all the information you need on hand, so you can fill out the necessary paperwork.

The first things you need to find are any tax documents from prior years, even if these documents are not U.S. returns. The tax information from your host country likely will have much of the same information your U.S. expatriate tax return will need. If you do have them, any U.S. returns will also identify what deductions or profits or losses you are carrying over to the following year’s return.

You will need any information you have on:

Dependents
Individual deductions
Foreign bank accounts (to file the FBAR, if necessary)
Compensation
Interest earned on savings and bonds
Dividends or capital gains
Real-estate
Social security and other income
Interest paid for mortgages
Taxes paid to your host country
Foreign housing expenses (rent, utility bills)
Travel calendar (to qualify as an expat)

Gathering all this information beforehand can make the process of filing your taxes much easier.

I have the information - what forms do I need to fill out?

When you talk to a tax expert, he or she can identify which forms you are required to file for your expatriate tax return, considering your specific circumstances. Most expats need to file form 1040 (same form that you file at home), form 2555 (foreign earned income exclusion), form 1116 (foreign tax credit) and, in many cases, form TD F 90.22.1 (FBAR). Note that there are multiple schedules that you may need to file for your expatriate tax return.

While filling out these forms can be time consuming and tedious, taking the time to prepare them correctly and completely is important. Mistakes can be even more time consuming and possibly very expensive.

My tax forms are all filled out – now what?

Once your expatriate tax return is complete, submit your return(s) to the IRS as soon as possible to avoid increased interest or penalties. Most important, once your returns are submitted, stay compliant! The IRS is increasing efforts to track down, identify and prosecute expatriates living abroad who are avoiding their U.S. taxes. Believe the tax experts – you will enjoy your expat life more if you follow the rules and stay compliant. Don’t get caught red handed!

For more information regarding a U.S. expatriate tax return, please visit us at www.greenbacktaxservices.com. Don’t hesitate to contact us with specific questions about your US expat taxes.