Tax Form For U.S. Expats
FAS CPA & Consultants
We show you the main tax forms that US expats need to take into account when filing their taxes.
Form 1040 – U.S Individual Income Tax Return
This form for reporting your income tax, is the summary of all the income and taxes that you paid from the different sources, it reflects your income, deductions and taxes to pay.
1040 Schedule A
Some expenses related to being overseas may be able to be claimed as itemized expenses such as certain foreign taxes, certain moving expenses and travel, mortgage interest, medical and dental expenses etc.
1040 Schedule B
Part III of Schedule B has information related to foreign trusts and foreign bank accounts. Make sure you check these correctly.
1040 Schedule C
If you live overseas and are self-employed, you will still have to file a Schedule C.
Form 1116 – Foreign Tax Credit
This form is used when you pay taxes in a foreign country. Since every US Citizen and any US president is obligated to report the worldwide income earned they report that income in the US with the form 1040, they can claim a credit for the taxes paid over that income reported in the foreign country using this form.
Form 8833 – Treaty-based Return Position Disclosure
This form is only used when you are receiving income or living in a country that has a tax treaty with the US like Spain, Mexico, UK, if you have income there and you pay taxes the tax treaty will help you not to pay taxes again for the same income in the USA.
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Form 5471 – Information Return of US Persons with Respect to Certain Foreign Corporation
This form is when US Citizens or Residents own companies outside of the US. This is only for corporations and you have stock over 10% in any corporation and in any foreign country you have to use this form to report the balance sheet, assets and liabilities, equity, profit and loss and income and expenses and you have to report the transaction between the company and yourself. If the company has given you loans, payments and dividends you have to report that in a yearly basis.
Form 8865 – Return of US Persons with Respect to Certain Foreign Partnerships
This is for partnerships, when you own LLC in a foreign country and you receive income and have transactions with that LLC or partnership you have to report with this form. In addition to that you also need to report the assets, liabilities, equity, income, expenses, profits and loss and any transactions between you and the LLC like distributions, loans, interests received and paid, provided that you own 10% or more of the partnership.
Form 8621 – Information Return by a Shareholder of a Passive Foreign Investment Company (PFIC)
This is for both partnerships and corporations, passive income is any entity that own real estate or receives royalties, anything that is not actively producing income. You use this form to report distributions, dividends or any other type of income like interest that you have with this company.
FBAR Form FinCen 114
This form is independent of the tax return and a separate filing requirement. The FBAR applies to any U.S. person who owns, has beneficial interest or signature authority over foreign financial accounts that exceed $10,000 in the aggregate in value at any time during the year.
Form 2555 & 255-EZ
These forms are for calculating your Foreign Earned Income Exclusion (FEIE) and to calculate your Foreign Housing Exclusion or Deduction. If you meet certain foreign residency requirements, you may be able to exclude up to $99,200 of earned income in 2014 and a portion of your foreign housing expenses from U.S. income tax. Note that this exclusion does not apply to self-employment taxes. If you are self-employed abroad, you are still subject to U.S. Social Security taxes unless you live in one of the 25 countries with which the U.S. has a Social Security totalization agreement. The FEIE is generally advantageous to use when income tax rates in the foreign country are lower than in the U.S. and/or your total earned an income is below the exclusion threshold.
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Form 3520 – Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts
This form has 2 parts. The first is if you have a foreign trust, if you are a US Citizen and you are a beneficiary of the foreign trust you have to report that position to the IRS using this form because the IRS will otherwise penalize you for $10,000 even if you don’t receive any money yet. You report the interest and the location of the trust. The other part is when you receive gifts from other individuals over $100,000, any US Citizen or Resident can receive any amount of money from foreign individuals and pay no taxes because he doesn’t live in the US, what matters is that you can go without reporting below $100,000 if you receive over that amount in any type of assets, either liquid or cryptocurrency, you use this form to report the entire amount with the objective of that you include the income that this asset is going to produce in the future in your income tax return in the US. Because the asset is going to produce income the IRS will want to know.
Form 3520A – Annual Information Return of Foreign Trust with a US Owner
This form is when you as US Citizen or Resident creates a trust in a foreign jurisdiction, called the grantor. This means that you are granting your assets to a foreign trust and have to report to the IRS.
Form 8832, 5471
The Form 8832 is for you if you run your own business in a foreign country, you may have established a company to conduct your business. Depending on the entity’s classification for U.S. tax purposes, which will be a corporation by default or will depend on the classification election or Form 8865 if classified as a partnership. Transactions between you and your foreign company may have to be reported on Form 926.
Form 8938
This form, also known as the FATCA form, is used to report Specified Foreign Financial Assets and the income derived from them. There is some overlap with the FinCEN 114 Form (FBAR), but the filing thresholds are higher, and depend on the taxpayer’s residency and marriage status, with different thresholds for the highest value reached during the year and on the last day of the year. These thresholds range from $50,000 for US Residents and $200,000 for Expats for balances at the last day of the year. These thresholds double if you report as MFJ.
Readers should note that this article is only intended to convey general information on these issues and that FAS CPA & Consultants (FAS) in no way intends for the contents of this article to be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. This article cannot serve as a substitute for such professional services or advice. Any decision or action that may affect the reader’s business should not rely solely on the contents of this article, but should rather be consulted on with a qualified professional adviser. FAS shall not be responsible for any loss sustained by any person who relies on this presentation. This article is subject to change at any time and for any reason.
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