Tax Planning for U.S. Expats

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Even as an Expat, you still need to file a tax return and, depending on your income, pay taxes, as long as you have a U.S. citizenship. Your worldwide income is taxable even if you filed a tax return and paid taxes in the country where you reside. If your taxable income is over $20,000 a year and you are married; or $10,000 and single; or made over $400 per year as self-employed or contractor, you need to file a tax return.

There is a long list of tax filing requirements the IRS has determined for Expats:

Automatic Extension until 6/15 but pay taxes on 4/15
Foreign Earned Income Exclusion (FEIE) of $104,100 only if the return is filed
Spouses get another $104,100 of foreign earned income exclusion (FEIE)
If your income is over the FEIE amount, claim a house deduction
Credit for taxes paid in your country of residence
Foreign Account Tax Compliance Act (FATCA) reporting requirements
Foreign Bank Accounts Reporting (FBAR) requirements
Foreign companies ownership involves more IRS reporting
Foreign trust creation involves more IRS reporting
Self-employment income is subject to FICA (social security and medicare taxes)
The IRS is watching you
IRS special programs for Expats
Passive Foreign Investment Company (PFIC)

Foreign Tax Credit (FTC)

Foreign Tax Credit can be claimed if you have income that you earn outside of the United States and you also pay income taxes in your country of residence. You can still claim even if you don’t personally earn income abroad but your spouse does and you file jointly. However, there are more requirements you need to cover if you want to claim FTC.

Foreign Earned Income Exclusion (FEIE)

FEIE is another method introduced by the IRS to avoid double taxation. It is generally meant for self-employed individuals who live and work abroad. FEIE does not exempt you from your Social Security tax liability. Tax credits can do that. With the new tax reform, it would be much more beneficial for expats to claim FTC than FEIE, since they can’t be received together. Here’s why:

FEIE:

There’s quite a lot of uncertainty to the exact changes that are coming with the tax reform.
Earnings under $100,000 a year qualify for FEIE.
Adjusted annually.

FTC:

Some countries have higher taxes than the U.S., especially after the tax reform.
Foreign Tax Credits will be worth more because the they can be used upon the taxpayer’s return to the U.S.

The Foreign Account Tax Compliance Act (FATCA)

Was signed into law in 2010 and codified in Sections 1471 through 1474 of the Internal Revenue Code. The law was enacted in order to reduce offshore tax evasion by US persons with undisclosed offshore accounts. There are two parts to FATCA – U S taxpayer reporting of foreign assets and income on Form 8938 and reporting by a Foreign Financial Institution or FFI of foreign bank and financial accounts to the IRS. It is the latter that is resulting in FFI’s sending out that dreaded letter to suspected US account holders requesting US taxpayer identification and information referred hereafter as the FATCA letter.

FATCA generally requires an FFI to identify certain US accountholders and report their accounts to the IRS. Such reporting is done either through an FFI Agreement directly to the IRS or through a set of local laws that implement FATCA. If an FFI refuses to do so or otherwise does not satisfy these requirements (and is not otherwise exempt), US source payments made to the FFI may be subject to withholding under FATCA at a rate of 30%. Note that FATCA information reporting and withholding requirements generally do not apply to FFI’s that are treated as deemed-compliant because they present a relatively low risk of being used for tax evasion or are otherwise exempt from FATCA withholding.

Foreign Bank Accounts Report (FBAR)

If you are US citizen, Resident or Expat and you hold accounts in a foreign bank or foreign financial institution with a balance that exceeds $10,000 at any time of the year, you are obligated to file Foreign Bank and Financial Accounts Report (FBAR).

Five Elements of FBAR Filing:

1. You must file if you are a citizen or US Person.

2. You have a financial interest in or signature authority over an account.

3. That account is a Foreign Financial Account(s).

4. The aggregate value of the account(s) exceeds $10,000 at any time during the calendar year.

5. FBAR deadline to file is April 15. There is an automatic extension for October 15.

Being an U.S. Expat can be difficult in terms of tax returns and bureaucracy, but this is why we are here. There are no industry secrets for us and we are always ready to enlighten you about the IRS requirements and procedures you are obliged to follow.

Our U.S. Expats Tax Planning Services Includes:

Silver

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For Non-willful Unreported Offshore Holdings

Tax Return Filing

FBAR Foreign Bank Account Filing

Controlled Corporation Foreign Filing

Gold

Yearly

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For Non-willful Unreported Offshore Holdings

Tax Return Filing

FBAR Foreign Bank Account Filing

Controlled Corporation Foreign Filing

Platinum

Yearly

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Tax Planning For U.S. Expats Platinum Package

For Non-willful Unreported Offshore Holdings

Streamlined Program

6 Years Foreign Bank Account Filing

Tax Return Amended 3 Years filing

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