We have extensive experience with preparing US tax returns for people living abroad. We have prepared returns for our clients living in Italy, The Caymen Islands, Mexico, Ireland, Brazil and other countries and are well versed in the ins and outs of the foreign income exclusion, foreign tax credits and the reporting requirements for foreign bank and investment accounts.
Here are just a few of the questions you know the answers to.
Q.) I am an American living and working abroad. Do I need to file a US tax return?
A.) Regardless of where you live now, being a United States citizen requires that you file a yearly tax return with the IRS. Green card holders and all US citizens are required to file a US return, no matter where they live, as long as their income (earned in the US and abroad) is just over $9,000. Many people wrongly assume that because they have never owed money to the IRS, they simply don’t have to file. Earning anything over $9,350.00 does require you to file, however. The US has treaties with many foreign countries that will reduce or even eliminate actual owed tax. You cannot, however, take advantage of these benefits if you don’t file.
Q.)Do I need to file a State Tax Return?
A.) As is the case with many legal matters, each US state sets its own rules regarding state taxes and expats. Some states do demand that you file a state return, while others release you when you move away. The rules can be complicated, so be sure to ask your tax preparer before making assumptions as to the requirements of your former home. The most stubborn states are New Mexico, California, Virginia and South Carolina. If you moved abroad from one of those states, it is unlikely that you have been released from the obligation of filing.
Q.) What forms do expats need to complete for their Federal Income Tax Return?
A.) Just as you did when living in the US, you need to fill out a 1040 form. The forms specifically applicable to your life as an expat are 2555 and 1116. These are the forms by which you declare your foreign earned income and qualify for the Foreign Tax Credit. The Schedules differ depending on your situation.