1. Do expats need to file a US tax return?
Yes, U.S. citizens and green card holders are required to file a U.S. tax return regardless of their country of residence or where their income is earned once they meet the filing threshold.
| Filing Status | Taxpayer age at the end of the tax year | Filing threshold | |
|---|---|---|---|
| Single | Under 65 | $12,950 | |
| Single | 65 or older | $14,700 | |
| Head of Household | Under 65 | $19,400 | |
| Head of Household | 65 or older | $21,150 | |
| Married Filing Jointly | Under 65 | $25,900 | |
| Married Filing Jointly | 65 or older | $28,700 | |
| Married Filing Separately | Any Age | $5 | |
This table shows the minimum income levels for US expats, based on their filing status, at which they are required to file a US tax return.
IMPORTANT: Individuals who work for themselves must submit a US tax return and make estimated tax payments if they earned $400 or more in net income from their self-employment.
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2. What are the 2023 tax deadlines for U.S. expats?
Are you filing U.S. taxes from abroad? You have 4 important deadlines to remember if you are filing U.S. expat tax return as an American or dual citizen living overseas. As a U.S. person in the U.S. who files their tax returns on a calendar year basis, the due date is April 15th of the following year (April 18th for 2023). But if you file on a fiscal year basis, meaning a year ending on the last day of any month, except for December, then the due date is 3 months and 15 days after the close of your fiscal year. An important rule to remember is that you will need to pay your tax by the April 18 deadline. The extensions of time for filing your return don’t apply to the time that is given to pay taxes.
As an American abroad, you can automatically get a two-month extension to file your U. S. taxes from abroad. For the calendar year 2023, the dates are as follows:
- April 18, 2023 – Regular Federal Tax Return Deadline. Any tax owed must be paid by this date.
- June 15, 2023 – US Expat Federal Tax Deadline. You can request an additional extension. Contact us today and we will file one for you free of charge.
- October 15, 2023 – October 15th Federal Tax Return and FBAR deadline with an automatic six-month extension. You can still request another extension on paper –We can help you with the additional extension free of charge.
As a U.S. expat, you will automatically qualify for a two-month extension for filing U. S. taxes from abroad. That’s why your return is due by June 15, 2023. However, the date to pay your taxes is April 18, 2023, even if you are an expat. If you fail to pay your taxes on time, there will be interest charged on the unpaid amount.
U.S. taxpayers can receive an additional extension until October 15, 2023, if they aren’t quite ready to file their tax returns by the June 15 deadline. You can request the additional four-month extension by filing form 4868 (via paper or electronically) by the due date of the return. Note, that this is not an extension to pay the taxes due.
As a reminder, you must file an FBAR if you’re a U.S. citizen with overseas financial accounts that total more than $10,000 at any point during the year. The FBAR filing deadline is no longer June 30. Starting in 2017, it coincides with the general U.S. tax deadline of April 15 but U.S. expats get an automatic six-month extension to Oct 15.
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3. What documents and information are needed to file my U.S. expat tax return?
Gathering documents is just as important as filing your U.S. taxes from abroad (expat tax returns). We strongly recommend that you keep all the documents and information, as the IRS may audit your return and you will need to prove your numbers. To make your life easier, collect and store your documents and related forms in the order that is shown below:
Basic information includes the tax questionnaire, prior year tax returns, and a travel journal.
- A tax questionnaire is a form that your tax preparer will provide you with to complete. It asks you basic identifying information, as well as details about living and working conditions. You will need to fill out this form carefully as your tax preparer will assess your situation based on this information, and choose the best tax treatment to maximize your wealth while also minimizing your tax burden.
- The prior year tax return will help you to file your return for this year, as it already provides some of the important available information. For example, if you want to use the Foreign Tax Credit, then you need to know that it’s crucial to correctly carry it forward. It’s also important to check your returns from previous years for any mistakes that could be fixed now so that you will escape possible negative consequences or penalties etc.
- Keep a travel journal of your voyages as the IRS will ask for the exact dates of your travels. If you travel back to the U.S. for work, the dates will play an important role in prorating your income between U.S. and non-U.S. sourced. More importantly, a travel journal will help to determine whether you are eligible to use the Foreign Earned Income Exclusion or Foreign Housing Deduction under the Physical Presence Test or not. Keep track of the following things:
- The country or countries you’ve traveled to besides your host country and the dates of your arrival and departure
- If you have visited the United States, then include the exact number of business days you spent there and the exact amount of gross income earned in the U.S.
If you’re looking for information on how to file U. S. taxes from abroad, please know that your documents about income, including wages, self-employment, pensions, interest income, capital gains (security and real estate sales), real estate rental etc. are all vital elements. Below we’ve detailed some of the most important documents that you will need for your tax return:
- Wages, salaries, and compensation. Even if you’re filing U. S. taxes from abroad, it’s necessary that you provide all W-2, P60, P45 and any other wage reporting forms. If you are a self-employed U.S. person abroad, then you will need to give your tax specialist precise and detailed records of your earnings before deductions and total expenses, which should be grouped.
- Interest and dividend income. If you deposited money into a (foreign) bank or other financial institution, and they pay you interest, then this will be classified as interest income. Dividend income refers to any distribution of a company’s earnings to shareholders from stocks or mutual funds you own. Foreign banks usually do not have reporting forms that show the amount of income that is paid to you. That’s why for the purpose of filing U. S. taxes from abroad, it’s essential to keep your bank statements and reports of income from your foreign bank, even if this type of income is not taxable in your tax home country. American banks, on the other hand, provide you with year-end reporting forms and you will receive the 1099 forms.
- Securities and stocks. If you own investments in any country, including the U.S., then you will need to report this on your tax return in the form of the capital gains and losses during the year. Your broker will send you a statement with accurate information regarding each of the transactions and you will need to make sure it has the purchase/sale price, transaction fee, and purchase/sale date. You may want to let your foreign broker know that this income is taxable in the U.S. Therefore, you will need all of this information when filing U. S. taxes from abroad.
- Real estate. Any real estate bought and sold is pertinent to your tax return. Make sure that you have the following information: date of sale/purchase, the purpose of property, total costs, and proceeds, any improvements made etc. If you own a rental property, then you will also need to provide your income and your expenses during the year, which will be reported separately on Schedule E.
- Distributions, including pensions, annuities, profit sharing plans and IRA. The U.S. government will send you an SSA 1099 form if you receive Social Security payments from the US. If you have payments coming from a foreign social security and/or pension and do not have an end-of-year statement, you will have to keep track of the payments and report them as income if you’re filing U. S. taxes from abroad.
- Another type of income. You will need to report any partnership, trust, and business interest that you hold, as well as all other types of income that have not been mentioned. If you are a partner in a partnership or a shareholder of a corporation, your foreign partnership or corporation will provide you with an end-of-year statement that reports the income and expenses allocated to you. If you are a partner in a U.S. partnership or an S corporation, then you will receive a form Schedule K-1.
Whether you’re filing U. S. taxes from abroad or the U. S., deduction documents will help to reduce your taxable income. These include interest and taxes paid, foreign housing expenses, dependents, and a few other deductions.
- Interest and taxes paid. Under the expat tax laws, mortgage interest, property taxes paid and income taxes paid are all deductible expenses. You must be able to prove that these payments were paid or accrued. Keep track of your bank account statements, and transactions made directly to the governing agency, etc. When filing U. S. taxes from abroad, you can avoid double taxation on your income taxes if you live in a country that assesses income tax on your income.
- Foreign housing expenses. You may be able to deduct the cost of your housing as a U.S. expat abroad. Ask your tax preparer whether you qualify, when filing U. S. taxes from abroad.
- Dependents. You must provide information, such as SSN or ITIN if it is applicable for all of your dependents. Your tax preparer will help you to claim the available deductions and credits if qualified.
- Other deductions. Did you know that gifts to family members and charitable contributions to a qualified charity can lower your taxable income? Alimony and child support payments, as well as unreimbursed business expenses, are deductible expenses. They are subject to limitations, but can still significantly lessen your tax burden. Keep track of all your expenses and when filing your U. S. taxes from abroad, pass them on to your tax preparer, who will help you to lower your taxable income.
Foreign Bank Accounts are a big chunk of your tax return. If the aggregated value of your foreign bank accounts exceeds, or is equal to $10,000, on any given day during the year, then you must report this amount to the IRS. Are you ready to start filing your U. S taxes from abroad with 1040 Abroad? Let us do what we do best: take care of your tax returns while you enjoy your U.S. expat life abroad.
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4. I want to file for an extension, how do I do it?
If you are an American citizen or a U.S. person abroad, then you can get an extension of time to file your U. S. taxes from abroad. There are a few options available for you as a U.S. expat but you need to remember that you still must pay the tax due on the regular due date, otherwise, there will be interest charged until the date the tax is paid.
An automatic two-month extension is available by default to U.S. citizens or resident aliens who live outside of the United States (including situations when you are in military or naval service overseas). They have two more months to file the tax return, but the federal income tax must be paid on the regular due date of your return, April 18, 2023. Otherwise, the interest charge is assessed.
The regular due date of your return for the tax year 2022 is April 18, 2023, and the extension will allow you to extend the due date to file your return to June 15th, 2023. If you are a married couple filing a joint return, then either you or your spouse can qualify for an automatic extension. However, if you file separately, this extension applies only to the one who qualifies for it.
There is another extension that gives you to have more time to file your U. S. taxes from abroad if you can’t complete it by the June 15 due date. Again, it doesn’t apply to the time to pay your taxes. To get this extension, you need to file Form 4868.
If you need additional time to file your U.S. Expat Tax Return,
contact us today and we’ll file an extension for you free of charge.
The IRS offers yet another two-month extension of time to file your return (to December 15th for the calendar year taxpayers who live abroad) if you cannot meet the October 15th deadline. To request it, you must send a letter to the IRS explaining the reasons why you need the extra two months.
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5. Can I file a tax return on my own or do I need a U.S. tax specialist?
The United States is only one of two countries in the world whose taxes are based on citizenship. If you are a U.S. person abroad, there is a whole different system of requirements, tax laws, deductions, credits and exceptions available. You may not benefit or utilize most of them if you decide to prepare taxes on your own. Hiring a U.S. tax preparer will save you time, nerves and money when filing U. S. taxes from abroad. They will minimize your tax burden or even gets you a refund if you qualify, while you can focus on your income producing activities. The introduction of FATCA (The Foreign Account Tax Compliance Act) in 2010 changed the game for a lot of Americans abroad.
Expats who prepare their own returns have to figure out the best strategy to minimize their U.S. tax liability on their own. It is not impossible! In fact, it’s really fun if you are a tax geek like us. However, it can be a complex, time-consuming task without any guarantee that knowledge and experience will produce the most beneficial outcome. You may want to do your own taxes when you have a really simple return, meaning that you do not have any investments, rental properties, own a business or face another complex tax situation. In this case, tax software can walk you through. As they use different kinds of tax return preparation, the software can sometimes lead to different results because of the way the wizards are set up, so if you have a complicated return with a lot of deductions it can pay to try two or more kinds of tax software.
If you are self-employed, have a freelance income or own a business, then you may consider hiring a U.S. Tax specialist who will file a return on your behalf and take care of all the available deductions and credits. Hiring an expert costs money, but it will save you even more. Any tax professional with an IRS Preparer Tax Identification Number (PTIN) is authorized to prepare federal tax returns. However, tax professionals have differing levels of skills, education, and expertise. Your CPA back home might not know about all of the available tax treatments for you as they have very little or no experience of working with U.S. international tax law.
It makes a big difference when you find a tax expert who will eventually become your personal financial advisor and help you to save more money and make better decisions while being fully tax compliant with U.S. tax laws. 1040 Abroad was founded by a U.S. expat who has been involved in the tax industry for over 10 years both within and outside the US. He particularly specializes in International U.S. Tax Law and shares his true passion through his work. You can contact us anytime for advice and we will be more than happy to help you!
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6. What forms do you need to file US expat taxes?
Form 1040 is a U.S. federal income tax form used for individuals to report their annual income and calculate the amount of tax they owe. It is the most commonly used tax form for individuals. It is divided into several parts, including sections for reporting income, calculating and claiming deductions and credits, and calculating the amount of tax due or refund owed.
Form 1040 is used by taxpayers to file their annual income tax return and is generally due on April 18th of each year. There is an automatic two-month extension for those who live abroad to June 15, 2023, and there is a further extension that is available until October 15, 2023. Shall you need one, contact us today and we’ll file one for you free of charge.
Form 2555 is the form used to claim Foreign Earned Income Exclusion (FEIE). You will need to provide your amount of foreign-earned income, foreign address, employer’s address and the dates you have travelled to the U.S. during the year.
Form 1116 is used to claim Foreign Tax Credit. It should be used only by individuals, trusts, and estates. Form 1116 allows you to avoid double taxation by reporting the taxes paid or accrued to a foreign country and offsets them against the U.S. tax liability.
Form 8938 is Statement of Specified Foreign Financial Assets (FATCA). So, when filing U. S. taxes from abroad, you must file this form and attach it to your return if you have an interest in specified foreign assets. If you are an American expat living abroad, then you must file form 8938 (FATCA form) with your tax return under the following conditions:
- You are married and filing jointly: the aggregate value of your specified foreign financial assets have to exceed $400,000 on the last day of the tax year or more than $600,000 at any time during the year.
- You are either single, married and filing separately, or head of the household: the aggregate value of the specified foreign assets have to exceed $200,000 on the last day of the tax year or more than $300,000 at any time during the year.
You will list your bank account information, balances and the income earned from those accounts during the year. Make sure this information matches the amount you have put in Schedule B (interest and dividends).
FinCEN 114 is the Report of Foreign Bank and Financial Accounts (commonly known as an FBAR). If you have any foreign bank accounts or signature authority over them, and the aggregate value of your foreign financial accounts exceeds $10,000 at any time during the year, then you must file this form.
Form 3520 is designed for Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. You need to file this form if you are a U.S. expat who owns the assets of foreign trusts or receives distributions from foreign trusts, and you have received more than $100,000 from a foreign individual/estates or over $15,601 from a foreign corporation. This form requires information from the foreign trust and the taxpayer.
Form 5471: If you own at least 10% of a Controlled Foreign Corporation, then you will need to file form 5471 for every year this continues to be true. A Controlled Foreign Corporation is a corporation where more than 50% of the shareholders are U.S. persons. This is an extensive form with multiple pages, and usually, requires the corporation’s financial documents. Filing this form doesn’t mean the corporation is being taxed; it merely discloses the taxpayer’s interest/ownership in the corporation. Any income received from the corporation will be reported elsewhere on your 1040.
In addition to disclosing ownership in a Controlled Foreign Corporation, Form 5471 also requires reporting of any Global Intangible Low-Taxed Income (GILTI) earned by the corporation, which may be subject to U.S. taxation for U.S. shareholders.
Form 8858 is used by U.S. persons that have interests in foreign disregarded entities (FDEs) or foreign branches for income tax purposes. The form requires information about the entity, including its name, address, and Employer Identification Number (EIN) or foreign tax identification number, as well as the type of entity, ownership percentage, and income earned. Additionally, the form requires disclosure of any transactions between the FDE and its owner, and any related entities. U.S. persons must file Form 8858 if the total value of their interests in the FDE exceeds $10,000 at any point during the tax year.
Form 8621 is designed to disclose Information Return by a Shareholder of a Passive Foreign Investment Company (PFIC), including foreign mutual funds and other investment vehicles. It doesn’t have a minimum threshold and requires information regarding the amount of income or proceeds that have been received from each account each year. This form calculates the tax due on investment income. You will need to remember that income earned from a PFIC account is taxable in the U.S.; therefore, you must file form 8621 for each account when filing U. S. taxes from abroad.
Form 8854 is the Initial and Annual Expatriation Statement, which is used by people who have renounced their U.S. citizenship or ended their long-term resident status, including covered expatriates, to confirm that they are compliant with the U.S. tax system.
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7. Will I get notified if the IRS has received and processed my documents?
The IRS doesn’t notify you, nor let you know if they have received your documents. In fact, it’s better not to hear anything from the IRS because they only notify you when they encounter problems with your tax return in the following cases:
- You have a balance due
- You are due a larger or smaller refund
- IRS has a question about your tax return
- IRS needs to verify your identity
- IRS needs additional information
- IRS changed your return
- IRS needs to notify you of any delays in processing your return
However, you can check the status of a refund from the IRS by clicking this link https://www.irs.gov/refunds.
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If you need help filing US taxes from abroad, you shouldn’t waste any time in finding the right professional resource to allow you to continue to live somewhere “else” in the world free from the stress that often comes with tax time. The fewer entanglements you find yourself ensnared in at home, the better, and we’re here to help make sure that doesn’t happen. Contact us today if you need information or help with your tax situation, and we’ll be happy to jump in and work through it with you.
