Do All American Expats Need to File a US Tax Return?
If you are a US citizen, or you have a Green Card, and you earned more than about $10 thousand in the last tax year from your employer (or just $400 if you are self employed), then the answer is yes, you do need to file a US Federal Income Tax Return. You may also have to file a State Return, depending on which State you last lived in.
For your Federal Return, you need to file the same 1040 form as usual, as well as 2 more forms, the 2555 and the 1116, which are just for expats …
Expats may also need to file an FBAR form to the Treasury by October 15th, with details of their foreign financial accounts, including bank and investment accounts. The threshold for filing FBARs is if you have held more than $10 thousand in total in foreign registered bank and investment accounts during a given tax year.
Additionally, a FATCA form must be attached to your 1040 with further details of any foreign assets or investments. The threshold for filing FATCA reports is if you have more than $50 thousand in total accounts outside the States during a given tax year.
Now for some good news!
If you are a permanent resident in another country then you qualify for the Foreign Earned Income Exclusion. This allows you to earn up to around $100 thousand in another country without paying tax on it in the US. Beyond this, the US has income tax conventions with many countries, so that if you have already paid tax on your foreign income abroad you won’t have to pay tax on it twice. But you still need to file!
You are also still entitled to all the usual exemptions: spouse, children, medical, mortgage interest, and property taxes.
Expats have an automatic extension for filing their Federal Return until June 15th, so there’s no need to panic as April 15th approaches, however it’s always better to act rather than leave it to the last minute of course. If you need to, you can extend your extension too, up until October 15th, online. Any taxes due should still be paid by April 15th though.
Between all the different form numbers and acronyms, it can seem like the IRS isn’t making life as easy for expats at tax time as they might; we at Bright!Tax however, are.