Understanding the tax code alone is already an intimidating task, add being a US Expat in the mix, and it becomes even more complex and confusing. To avoid committing mistakes or missing deadlines and forms to file, follow our series of blogs where we discuss important things expats should keep in mind!
Expats Must File US Taxes If You Have Income
If you are a U.S. citizen or resident alien living outside the United States, you generally are required to file income tax in the same way as those residing in the United States.
Amend Tax Returns from Previous Years If You Noticed a Mistake
Preparing and filing US expat tax return is undeniably complicated and it’s not uncommon for taxes to be filed incorrectly or incomplete. If you find that you have failed to report some income on your return or missed filing some forms, you should file an amended return for that tax year.
Form 1040X, Amended US Individual Income Tax Return, is the form you need to file. Make sure to clearly indicate the year for which you are filing an amended return at the top of Form 1040X and you should file different Form 1040X if you are filing amended returns for multiple years.
In the form, you will need to include the information on your original return, the difference between the original and the amended amount, and the actual amended amount. There is also a section on the form for you to state the reason why you are needing to file an amended tax return.
Check If You Qualify for Foreign Tax Credit
If you paid or accrued foreign taxes to a foreign country or U.S. possession and are subject to U.S. tax on the same income, you may be able to take either a credit or an itemized deduction for those taxes. Taken as a deduction, foreign income taxes reduce your U.S. taxable income.
Generally, the following four tests must be met for any foreign tax to qualify for the credit:
- The tax must be imposed on you
- You must have paid or accrued the tax
- The tax must be the legal and actual foreign tax liability
- The tax must be an income tax (or a tax in lieu of an income tax)
On the other hand, there are the Foreign Taxes for which you CANNOT take a credit. Make sure you familiarize yourself with those.
The Foreign Earned Income Exclusion
You may qualify to treat up to $105,900 of your income as NOT taxable by the United States. This is a benefit is called Foreign Earned Income Tax Exclusion. To qualify for the exclusion, you must have foreign earned income and must be one for the following:
- A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year.
- A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year.
- A U.S. citizen or a resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.
If you qualify for the exclusion, be sure to elect it by filing Form 2555
If you are an expat and need help with your taxes, our Enrolled Agent can help you! Contact us today at firstname.lastname@example.org or at 713-855-8035.