Filing Taxes as an American Expat

Filing taxes as an American expat can feel very confusing and overwhelming. If you are a United States citizen, you have a tax obligation to the United States. In this article, we will go over the basics of filing taxes as an American expat.

Paying Taxes When You Live Abroad

If you make foreign income and meet certain income thresholds you could be subject to paying U.S. taxes. Whether or not you need to file a tax return is based on your citizenship, not your country of residence. Some foreign income you may earn includes wages, interest, dividends, rental income, and qualified retirement account distributions. Additionally, if you have a foreign bank account with a value of $10,000 or more you will need to report it.

Exemptions

When it comes to filing taxes as an American expat there are exemptions. These help to reduce the burden of double taxation. For example, the foreign earned income exclusion allows you to exclude up to a certain amount of income if you meet the requirements. There is also a foreign tax credit with which you can claim a dollar-for-dollar credit on foreign taxes paid. Lastly, the United States has tax treaties with other countries that help prevent an undue tax burden.

Common Forms

As an expat there are common forms you need to know about. These include:

• Form 1040: This is the form everyone must file with the IRS to report their income.
• Form 1116: Here you can claim the foreign tax credit.
• FBAR (FinCen Form 114): If you have more than $10,000 in foreign accounts you must file these forms to report your accounts to the IRS and FinCen.
• Form 2555: With this form you can claim the foreign earned income exclusion.
• Form 8938: Here you can report funds held with foreign financial institutions to the IRS.
• Form 5471: This form is for citizens who are officers, shareholders, or directors of a foreign corporation.
• Form 8621: You need this form if you are a shareholder in a passive foreign investment company or mutual fund.
• Form 3520: This form is to report certain transactions involved with foreign trusts or large gifts from foreign powers.

Successfully Filing Your Taxes as an American Expat

If you are unsure how to file for your taxes, you should hire a qualified tax preparer to help guide you through the process. This can prevent any issues and keep your taxes as accurate as possible.

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