FAQs about US Taxes for American Expats

The author of this article, David McKeegan, is Director and Founder of Greenback Expat Tax Services, a US Income Tax provider that specializes in tax preparation for Americans who live abroad. All information was correct at the time this article was written (February 2011).

The following is a list of the most commonly asked questions about US expat taxes according to the team at Greenback Tax Services:

• I am an American living and working abroad. Do I need to file US expat taxes?
• Do I need to file a State Tax Return?
• What forms do expats need to complete for their US expat taxes?
• How do I know if I qualify for the Foreign Earned Income Exclusion on my US expat taxes?
• Can housing expenses be excluded or deducted on US expat taxes?
• Can I deduct foreign taxes paid on my US expat taxes?
• When are my US expat taxes due?
• How do I file for an extension on my US expat taxes?
• What if I am behind with my US expat taxes?
• Do I need to report Foreign Bank Accounts with my US expat taxes?
• Where do I file my US expat taxes?

I am an American living and working abroad. Do I need to file US expat taxes?

If you were born in the US, you pretty much need to file a Federal Tax Return every year regardless of where you live. If you are a US Citizen or Green Card holder and have a world-wide income of over $9,350.00, as a rule, you will need to file US expat taxes. This does not mean that you will automatically owe money to the US Government; in fact the US Government is reasonably generous to US Citizens abroad and has Tax Treaties with a number of foreign Governments. These Treaties ensure you will not be "double taxed," meaning that the money you pay to the foreign government for income tax will offset what you would need to pay to the US Government.

Do I need to file a State Tax Return?

In many cases, you will not need to file a State Income Tax Return; however, each State has its own rules and some states require you file a Tax Return even if you have moved abroad. Your tax preparer will check the rules for your state when preparing your US expat taxes and let you know if you need to file a State Return. However, as a quick guideline, if you last lived in California, New Mexico, South Carolina or Virginia you will probably need to file a State return.

What forms do expats need to complete for their US expat taxes?

For your US expat taxes, you will need to complete a 1040 (which is the same form you would need to fill out if you were living in the US). In addition, you will want to complete Form 2555 (Foreign Earned Income) and Form 1116 (Foreign Tax Credit). The Schedules you will need to file depend on your personal circumstances, but the most common ones are:

- Schedule A for Itemized Deductions
- Schedule B for Interest and Dividend Income
- Schedule C for Income and Expenses from Self-Employment
- Schedule D for Capital Gains or Losses and
- Schedule E if you own a rental property

How do I know if I qualify for the Foreign Earned Income Exclusion on my US expat taxes?

According to the IRS you qualify if you are:

- A US citizen who is a bona fide resident of a foreign country (i.e. living in a foreign country) or countries for an uninterrupted period that includes an entire tax year
- A US resident alien who is a citizen or national of a country with which the US has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
- A US citizen or US resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months

Can housing expenses be excluded or deducted on US expat taxes?

You may be able to deduct or exclude some or all of your housing expenses such as rent, maintenance and repairs, utility costs, and insurance costs on your US expat taxes. Not all expenses will be considered deductible, such as mortgage interest payments and telephone charges. The best thing to do is compile a list of your expenses and give them to your accountant so they can ensure you are able to get the greatest number of deductions.

Can I deduct foreign taxes paid on my US expat taxes?

You generally can choose to claim income taxes paid to a foreign country as a credit against your US expat taxes, or you can deduct them as an itemized deduction. How this will work will partly depend on whether the country you live in has a tax agreement with the US and what that agreement consists of. If you are self-employed this becomes even more complex as you may need to pay or opt out of US Social Security (visit www.ssa.gov) and you run a much higher likelihood of being double taxed.

When are my US expat taxes due?

For most Americans, the deadline is April 15th, but for U.S. citizens living abroad or resident aliens (e.g. Green Card holders) an automatic extension is given to June 15th. If you need additional time, you can file for an extension until October 15th.

Please note: if you owe any taxes, then you will owe interest on this amount from April 15th to the date you pay the taxes. Therefore, it is in your best interest to file your US expat taxes as soon as you are able to.

How do I file for an extension on my US expat taxes?

Go to www.officialpayments.com and click "Federal IRS Payments"; Payment Category = "Personal"; Payment Type = "Form 4868" (Extension). For about $3.00 you will be able to file for an extension. The latest extension deadline you can file for is October 15th.

What if I am behind with my US expat taxes?

If you are behind with your US expat taxes, don’t worry, you are not alone. This is a situation that is more common than most expect, and getting back on track is not as much of a hassle as you may initially think.

In most situations, the IRS will require you to file between six and eight years of un-filed returns, however you would need to speak with a tax expert about your exact situation to be able to be able to determine how many years you will actually need to file.

Note that the IRS does have penalties in place for Failure to File and Failure to Pay, although they are not always applied to delinquent filers. You can expect to pay interest on underpayment from previous years, no matter the situation.

If you are behind on your US expat taxes, it is best to get in touch with an expert as soon as possible to avoid additional interest and penalties.

Do I need to report Foreign Bank Accounts with my US expat taxes?

Foreign bank accounts are not reported to the IRS, but rather to The Treasury Department. You are required to report these accounts if their balances, when added together, have been over $10,000 at any given point over the calendar year.

The accounts are reported with the Report of Foreign Bank Accounts (FBAR), which is then submitted to the Treasury Department. This is due to the Treasury Department by June 30th (no extensions allowed). Note that unlike the IRS, The Treasury Department only considers this filed when it is physically in their hands, not stamped by the post office.

The Treasury Department can and will seize up to 50% of the assets of unreported offshore accounts. If you are delinquent with your FBARs, it is best to get caught up with The Treasury Department and stay compliant in order to avoid seizure of assets overseas.

Where do I file my US expat taxes?

Your tax return should be mailed to:

Internal Revenue Service
P.O. Box 660406
Dallas
TX 75266-0406
USA

To be safe, please check the addresses on the IRS website prior to mailing in your Return.

About Greenback Expat Tax Services

The information above has been provided by Greenback Expat Tax Services. Greenback Expat Tax Services’ CPA's are experts with decades of experience completing US expat tax returns for American citizens living abroad. In addition, Greenback Expat Tax Services will not leave you with any nasty surprises since they charge an upfront, flat-fee to complete your US Federal tax return.

To find out more about US expat taxes or to get assistance in filing your expat tax return, visit www.greenbacktaxservices.com