Living Abroad: Do Expats Owe Taxes?

October 16, 2019 by Susan Paige

The American tax code can be really difficult to understand, and even more so if you’re a US expat. There is a lot of information to sort through, but it doesn’t have to be super laborious and stressful. If you’re looking for a simple solution or if you’re new to expat filing, Expat Tax online is more than happy to help you sort it all out. Here’s what you need to know.

Do You Have to File?

The answer to this question depends on the amount of your income and your filing status. A US Federal Tax Return is required if your income is higher than the filing threshold. It’s imported to note than income includes various sources, including rental income, interest, dividends, and wages (regardless of their source).

What’s the Timeline?

In case you were wondering if the dates for filing are any different for expats, the answer is yes. The deadline for most Americans to file their tax return is April 15, but as an expat, the deadline to file is June 15. Expats are granted an automatic filing extension. This only applies to filing, not paying. Any taxes owed to the US government still need to be paid by the April 15th deadline to avoid any penalties and interest. But if you relocate back to the US during the year, you will need to comply with the April deadline because you are once again a US resident.

What If You Mess Up?

“To err is human…” so if you discover that you made an error in your taxes, you can amend it to reflect any changes in income, missed deductions or any other oversights. Of course, you will want to do your best to file your amendment right away. It is always better to catch a mistake before the IRS catches it. This way, you can spare yourself any penalties or interest accumulation or get your refund in a more timely manner.

Do You Owe?

It is very common for US expats not to owe any US taxes, but this may not be your case. Here’s why. The government doesn’t want your income to be repeatedly taxed. There are several credits, exclusions, and deductions in place to prevent this. Some of these include the Foreign Tax Credit, the Foreign Earned Income Exclusion (FEIE) and the Foreign Housing Exclusion. Be sure to check if you are eligible for any of these exclusions or credits.

The FEIE is a favorite tool among expats filing taxes. If you qualify for this exclusion, you have to elect to use it by filing form 2555 or 2555-EZ. You will only have to elect to use it once, but once you opt out, you won’t be able to use it again for 5 years unless you’re granted permission by the IRS.

It may seem very complicated on the surface, but once you understand a few basic principles, living abroad and filing taxes doesn’t have to be so scary. If you need more time, you can always file for an extension. And don’t hesitate to seek professional tax help if you need it.

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