Our team knows that it can be hard to keep track of all the tax laws and requirements. It can get even harder and more confusing if you’re an expatriate or an American living abroad. That is why we have come up with some questions that people ask often when it comes to international tax preparation. Remember, it is important to contact an international tax advisor so you can avoid possible penalties.
What are the tax requirements for expatriates?
Regardless of what country you work in as an expatriate of the United States, you must report your income as if you worked within the United States. This is because U.S. citizens and residents are taxed based on their total income worldwide. If you do not pay both, you may be penalized thousands of dollars and you’ll be unable to take advantage of reductions that expatriates can benefit from.
What are some of the tax benefits when you are an expatriate?
- Most expatriates can exclude a fixed amount of their foreign earned income from their total income. This is more formally known as the Foreign Earned Income Exclusion (FEIE). However, you can only claim this after you file a tax return and elect the exclusion.
- You can get a tax credit or an itemized deduction for the foreign income taxes that you pay.
- You may be able to reduce your foreign tax liability.
Keep in mind that you must pass a series of tests in order to quality for these benefits, but an international tax consultant can guide you in the right direction.
What is an FBAR?
The FBAR stands for the Foreign Bank and Financial Accounts Report. Basically it is where the IRS reports all of the requirements of United States citizens or residents that have signature authority over financial accounts located in foreign countries. This also includes foreign branches of banks that are headquartered in the United States. Therefore, if the total value of the foreign financial accounts exceeds $10,000 at any time during the calendar year, then you are expected to file an FBAR. If you aren’t sure this applies to you, contact us!
Get ready for 2016: Expatriate Foreign Earned Income Exclusion Increased
Earlier this month, the International Revenue Service said that the foreign earned-income exclusion amount under tax code Section 911(b)(2)(D)(i) will increase in 2016 to $101,300 from $100,800. Ask us if this applies to you!