Know About Some Common Us Expat Tax Forms US taxes are very complex. Do you know the tax code od US contains more than 74,000 pages, and most of them are hard to understand even for experts? In this post, we are going to provide you some information on various forms that you will most likely have to file as a U.S. person living and working abroad. Form 1040 This form has three different versions- 1) 1040, 2) 1040A, and 3) 1040EZ, but US expats always use the original that is Form 1040. Keep in mind that this form reports your names, address and Social Security numbers to the IRS, and has been two pages that summarize your income & deductions as well as calculate the amount you owe and the amount you will receive as a refund. You have to attach all other schedules and forms to Form 1040 and then submitted when you are Filing US Tax Returns When Living Abroad. Form 1116 – Foreign Tax Credit (FTC) This form calculates how much your US tax liability can be reduced because of the taxes you paid to your country of residence. Also, multiple 1116 forms can be included with your tax return, because different types of income have to be categorized in different ways. It will show the amount of foreign taxes paid or accrued on that income, your income that is subject to foreign taxes and the calculation that takes place to find out how much your current year taxes will be lowered by the Foreign Tax Credit. FinCEN Form 114 This is not technically a tax form, because the IRS does not need it. But, most of the US expats will need to file –FinCEN Form 114 or Foreign Bank Account Reporting (FBAR). FinCEN is a division of the US Treasury Department and the form reports your foreign financial account information as well as the highest balance of the accounts during the year. FinCEN Form 114 is required if you have any foreign bank accounts with $10,000 or more balance during the year. Form 2555 -Foreign Earned Income Exclusion (FEIE) It calculates the amount of FEIE allowed on your US tax return and shows your foreign earned income amount, your employer’s address, the dates you traveled to the US and your foreign address during the year. Apart from this, Form 2555 calculates out the number of foreign housing expenses that you may be able to exclude in addition to your Foreign Earned Income Exclusion. Form 8938 It is Statement of Specified Foreign Financial Assets (FATCA and you must file this form as well as attach it to your US TAX return if you have an interest in foreign assets. Apart from this, if you are an American expat living abroad, then must file form 8938 with your tax return under the following conditions:
You are married and filing jointly:
The aggregate value of your foreign financial assets has to exceed $400,000 on the last day of the tax year or more than $600,000 at any time during the year.
You are single, married and filing separately, or head of the household:
In this case, the aggregate value of the stated foreign assets has to exceed $200,000 on the last day of the tax year or over $300,000 at any time during the year.
Tips That Will Make the US Expat Tax Filing Process Seamless Filing taxes in your native country can be a bother, but filling taxes as a US expatriate can be even more daunting of a task. You will need to do lots of research both online and off-line to ensure you don’t miss any important steps while filling taxes. You must grasp the law, understand the loopholes and know the exceptions to make sure that you aren’t taxed twice, and ensure you don’t face severe tax penalties. In this, informative article, we are going to provide you some tips that will make the US expat tax filing process seamless. Automatic Extension The federal deadline for filing US taxes is April 15th but Taxpayers American Living Abroad have an automatic extension to June 15th. They have the opportunity to request an extension to Oct 15th. Keep in mind that Foreign Bank Account Report (FBAR) returns are due April 15th with an automatic extension to Oct 15th as well. Report Rental Property Income Your U.S. tax return should include any income earned from rental properties both domestic and foreign. Some expenses like rental property repairs are deductible. Some repairs are promptly deductible, while others take more time to process. If You Need Time To Qualify For The FEIE, Request An Extension You may be eligible for the FEIE (Foreign Earned Income Exclusion), depending on how late in the calendar year you moved out of the U.S. If you expect to move soon, then file an extension request so you can use these benefits. Also, you will receive an extension to Oct 15 if the IRS grants your request. The other option is to file Form 2350 as it allows you to buy some time while working on your Foreign Earned Income Exclusion. Keep in mind that the FEIE is not automatic which means you have to qualify for it. Also, you must opt-in by completing Form 2555 or 2555-EZ. As soon as you receive FEIE approval, it will appear on your tax return every year afterward. Think Twice Before You Surrender Your Citizenship You can’t surrender your citizenship and wash your hands of U.S. tax obligations. You have to prove that you have filed U.S. taxes for 5 years before the date you plan to surrender your citizenship. You may have to pay an exit tax after you renounce your citizenship but it depends on your net worth and income. The IRS uses it to ensure you’re not trying to get out of paying your U.S. taxes The Internal Revenue Service offers many exclusions, credits and deductions to help expats avoid double taxation. The Foreign Earned Income Exclusion is one of them. It allows US expats who meet certain residency needs to exclude up to $104,100 (for 2018) of foreign income from US taxation. You have to meet the physical presence test or the bona fide residence test to qualify for the exclusion. For exclusion purposes, keeping a travel log is important so as to track your days and travel to and from the United States Of America. Apart from this, another thing that is available for expats is The Foreign Tax Credit. This gives expats the opportunity to offset US tax with a credit against income that has already been taxed in the country they are living in.