US Expat Tax Tips

12 minute read

U.S. Citizens and Resident Aliens Abroad

U.S. citizens and resident aliens living abroad are required to file taxes with the Internal Revenue Service (IRS) each year. However, many people are unsure of what these terms mean and whether they apply to them. In order to better understand how the U.S. tax system works for expats, it is important to define these terms.

A U.S. citizen is a person who was born in the United States or who has become a naturalized citizen. This includes people who have dual citizenship with the United States and another country.

Resident aliens, on the other hand, are individuals who are not U.S. citizens but who have been living in the country for a certain period of time and have met certain criteria. This can include individuals who have a green card or who meet the substantial presence test, which means they have been physically present in the U.S. for at least 31 days during the current year and a total of 183 days during the current and two previous years.

While these terms may seem straightforward, there are some nuances that can make them confusing. For example, some individuals who are living abroad may not be sure whether they qualify as resident aliens or whether they are considered non-resident aliens for tax purposes. This can impact how they are taxed and what forms they need to file with the IRS.

US Expat Filing Deadlines

As a U.S. citizen or resident alien living abroad, it's important to be aware of the various U.S. expat filing deadlines to avoid penalties and interest charges. The general due date for U.S. expat tax returns is June 15th, which is an automatic extension for those living outside the United States on Tax Day (April 15th). However, if you owe taxes, interest will be assessed on the unpaid amount from April 15th. Additionally, if you are eligible for the Foreign Earned Income Exclusion, you can file for an additional extension until October 15th. This can be especially helpful for those who may need more time to gather the necessary documents or consult with a tax professional. It's important to note that even if you are not able to pay your taxes by the deadline, you should still file your return to avoid additional penalties.

US Expat Filing Forms and E-File

Filing taxes as a U.S. expat can be complicated, and it's important to use the correct forms and filing procedures to ensure that your taxes are processed correctly. Some of the most common forms for expats include the Form 1040, the Foreign Earned Income Exclusion (Form 2555), and the Foreign Bank Account Report (FBAR, Form 114). In addition, expats may need to file state taxes or report income from foreign assets or investments.

E-filing can help to reduce errors, streamline the filing process, and speed up your refund if you're owed one. However, it's important to ensure that any software you use is specifically designed for expat tax preparation, as some programs may not be able to handle the unique circumstances of U.S. citizens and resident aliens living abroad. 

Taxpayer Identification Number

A Taxpayer Identification Number (TIN) is a unique nine-digit number that the IRS assigns to individuals and businesses for tax purposes. As a U.S. citizen or resident alien living abroad, you will need a TIN to file your taxes and to open certain financial accounts, such as a U.S. bank account. The most common types of TINs for individuals are the Social Security Number (SSN) and the Individual Taxpayer Identification Number (ITIN). The SSN is generally only available to U.S. citizens, but resident aliens who are authorized to work in the U.S. can also apply for an SSN.

The ITIN is an alternative to the SSN and is available to resident and nonresident aliens who are not eligible for an SSN but who have U.S. tax obligations. To apply for an ITIN, you will need to fill out Form W-7 and provide supporting documents, such as your passport. It's important to note that applying for a TIN can take several weeks or even months, so it's important to plan ahead to ensure that you have your TIN in time to file your taxes. By obtaining a TIN and using it to file your taxes, you can ensure that you are meeting your U.S. tax obligations and avoiding potential penalties.

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15 Tips for US Expats Filing Tax Returns

Filing taxes as a U.S. expat can be complex and overwhelming. To help simplify the process, we've compiled 15 tips to keep in mind as you prepare to file your tax returns:

  1. Know your tax residency status
    • As a U.S. citizen or resident alien living abroad, it's important to determine your tax residency status for U.S. tax purposes. Your residency status can impact how you are taxed and what forms you need to file with the IRS.
  2. Understand the Foreign Earned Income Exclusion
    • The Foreign Earned Income Exclusion allows you to exclude up to a certain amount of foreign earned income from U.S. taxation. It's important to understand how this exclusion works and whether you are eligible to claim it.
  3. Keep track of foreign taxes paid
    • If you are paying taxes on your foreign income to a foreign country, you may be eligible for the Foreign Tax Credit. Keep detailed records of any foreign taxes paid so that you can claim the credit on your U.S. tax return.
  4. Consider the Foreign Tax Credit
    • The Foreign Tax Credit is a credit that allows you to offset the taxes you paid to a foreign government against your U.S. tax liability. This can be especially helpful if you live in a country with high taxes.
  5. Review your eligibility for deductions and credits
    • As a U.S. expat, you may be eligible for a variety of deductions and credits, such as the Child Tax Credit or the Foreign Housing Exclusion. Review your eligibility for these deductions and credits to help reduce your overall tax liability.
  6. Keep track of your bank accounts and foreign assets
    • As a U.S. citizen or resident alien living abroad, you may be required to report your foreign bank accounts and assets to the IRS. Keep detailed records of all of your foreign financial accounts and assets to avoid potential penalties.
  7. Be aware of the FBAR filing requirements
    • The FBAR (Foreign Bank Account Report) requires U.S. taxpayers to report their foreign bank accounts if the total value of their accounts exceeds a certain threshold. Make sure you are aware of the FBAR filing requirements and comply with them if necessary.
  8. Understand the difference between taxable and non-taxable income
    • Not all income is taxable, and it's important to understand the difference between taxable and non-taxable income. For example, some types of income, such as gifts or inheritances, may not be subject to U.S. taxation.
  9. Stay up-to-date on U.S. tax laws and regulations
    • U.S. tax laws and regulations can change frequently, especially as they relate to expats. Stay up-to-date on any changes that may impact your U.S. tax obligations.
  10. File your tax returns on time to avoid penalties and interest charges
    • Failing to file your tax returns on time can result in penalties and interest charges, so make sure you file your returns by the appropriate deadlines.
  11. Consider working with a tax professional who specializes in expat taxes
    • Filing taxes as a U.S. expat can be complicated, and it may be helpful to work with a tax professional who is experienced in working with expats. They can help you navigate the complex U.S. tax system and ensure that you are taking advantage of all of the available deductions and credits.
  12. Keep detailed records and receipts
    • Keeping detailed records and receipts can help you to support the deductions and credits that you claim on your tax returns. Make sure to keep all of your tax-related documents in a safe and organized place.
  13. Double-check your calculations and review your tax returns for accuracy
    • Before submitting your tax returns, double-check your calculations and review your returns for accuracy to avoid potential errors.
  14. Take advantage of e-filing options
    • E-filing can help to streamline the filing process and reduce the risk of errors. Consider taking advantage of e-filing options to help make the process of filing your U.S. expat tax returns a little easier.

US Expat Tax Services

US expat tax services can help to simplify the process of filing taxes as a U.S. citizen or resident alien living abroad. These services specialize in working with expats and are familiar with the unique tax laws and regulations that apply to this group. They can help you to navigate the complexities of the U.S. tax system, including determining your tax residency status, identifying deductions and credits that you may be eligible for, and ensuring that you are meeting all of your U.S. tax obligations.

Some services may also offer financial planning advice or assistance with estate planning for expats. Working with a tax professional can help to reduce your stress and anxiety around tax time and can help to ensure that your taxes are filed accurately and on time. If you are a U.S. citizen or resident alien living abroad, consider working with a US expat tax service to help ensure that you are meeting your U.S. tax obligations and taking advantage of all of the available tax benefits.

If you are looking to learn more about taxes visit our Tax Planning Strategy Hub!

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