Sifting through and understanding the US taxes for Americans abroad code can be a daunting task. And when you are a US expat, the information is even more difficult and confusing.
We have compiled a list of the top things all expats should keep in mind when filing US tax returns to help you sort through the huge number of information!
Expats Must File US Taxes If You Have Income, Receive Certain Credits, or Other Special Situations Apply
If your global income exceeds the filing threshold (which differs by filing status), you must file a US abroad Tax Return each year.
Income includes:
- Wages/Salary from US and non-US sources
- Interest
- Dividends
- Rental Income
If you are self-employed, the threshold is four hundred dollar, regardless of filing status. If you are eligible for certain credits as well as refunds, you may want to file even if you do not otherwise have to file. Certain other circumstances, such as owing special taxes may make you subject to filing needs as well.
Expats obtain a repeated Tax Filing Extension Until June 15th
US taxpayers living abroad the US on the tax deadline of April 15th obtain an extension until June 15th to file. However, any US taxes owed are due by April 17th to evade penalties along with interest.
If you move back to the US, you may still be entitled to use definite US expat deductions as well as exclusions that year, but you will need to file by April 17th because you are now a US inhabitant.
You Can Amend a Previous Return if You Made a Mistake
Errors happen. If you discover that you have failed to account some income on your return, or else if you didn’t take all the deductions authorized, you will necessitate filing an amended return for that tax year utilizing form 1040X.
Filing an alteration before the IRS catches the error is the best alternative, as penalties are frequently less. Once the original return has been filed, the clock starts ticking, as well as amended returns will usually need to be filed before a certain date to seek a credit or else refund.
The Foreign Tax Credit is One approach to Lower Your US Expat Taxes
If you reside in a high-tax country or else your income exceeds the Foreign Earned Income Exclusion (FEIE), the Foreign Tax Credit (FTC) may assist you offset or abolish your US tax liability.
The FTC is a dollar-for-dollar credit on the taxes you pay to a overseas country. You must file Form 1116 to vote for it.
Many taxpayers are eligible for both the foreign tax credit and the foreign earned income exclusion; however, if taxpayers can also claim the child tax credit, choosing the foreign tax credit over the exclusion will often acquiesce better tax savings.
Excluded Income Can’t Be compensate with the Foreign Tax Credit
If you decide to prohibit some of your income with the Foreign Earned Income Exclusion (FEIE), you can’t utilize the Foreign Tax Credit (FTC) on that excluded income.
If you discover that you were not able to claim the full quantity of foreign income taxes you paid or else accrued, you can take these over for the next ten years, and even carry back to the preceding year.