U.S. Expats Residing Abroad
What You Need to Know About Expat Taxes
You may not live in the U.S. anymore but Uncle Sam hasn't forgotten about you. As a U.S. citizen or resident alien you have a legal obligation to file U.S. tax returns each year, reporting your worldwide income, regardless of where you reside. However, most countries tax people based on their residency or where they are earning money, so you likely will have tax obligations in two countries. How do you navigate that?
Your Expat Taxes: Breaking Things Down
If your worldwide income meets or exceeds certain filing thresholds (which are generally equal to the standard deduction for your filing status), you need to file a United States tax return as an expat — end of story. The fact that you're being paid by a foreign employer in another country doesn't change that fact. If you're self-employed, that threshold is even lower, at just $400.
Filing requirements include a standard U.S. Form 1040 income tax form (if applicable) and possibly even state tax returns depending on the specifics of your situation. In addition, if you have bank and/or brokerage accounts or other investments outside of the United States, you may have additional filing requirements.
While you have a requirement to file in the U.S. annually, the good news is that there are means to significantly reduce — or even eliminate — any U.S. tax liability. We will coordinate with your local tax advisor in your country of residence and determine the optimal use of exclusions and credits to achieve maximum savings and to minimize or ideally avoid double taxation on your income.
As mentioned above, if you have assets outside the U.S., you'll also have to concern yourself with some additional reporting requirements. The Foreign Bank Account Report, or FBAR, is required of all U.S. citizens and residents who hold accounts outside the U.S. that total more than $10,000. This includes, but is not limited to, things like bank accounts, investment accounts and pensions.
In addition, you may have additional reporting requirements, depending on the types of foreign assets you hold. Virtually any investment made outside the United States will have a U.S. disclosure and or tax implication. See our foreign investments chart for additional information.
Proactive planning can help you minimize disclosure and income tax obligations. As part of our introductory consultation with you, we perform an inventory of your assets, identifying additional reporting requirements. Then, as investment opportunities arise, we schedule a quick call to discuss the U.S. tax and reporting implications, making sure you have all the information needed to determine the viability of the investment.
At SDC CPA, we understand that living abroad can be an adventure — but when your taxes are concerned, it can quickly seem like a nightmare. We help you plan and manage your U.S. obligations, freeing up your time and giving you peace of mind.
See our foreign investments chart for potential reporting obligations.