Expat tax advice for US citizens



Expat US citizens who live and work overseas, must always file a tax return to inform the IRS on their globally-sourced income. Whether you work overseas full time or part time, no matter where the destination is and regardless of how the money is earned- be it interest/dividends/capital gains, retirement benefits, from an employer, or your own business you must always file a return.

US tax is based on the expatriates’ citizenship, which is why there is sometimes confusion amongst expats over whether or not they have to file a return.

Expats must file US tax return if any of the following apply to you:

You are a dual citizen, you are the spouse of a foreign taxpayer, you are the child of a US citizen who has inherited US citizenship, you were born or have lived in the US and now are working abroad.

If you’re a US citizen expat and you haven’t filed a return yet, then be aware there is a six-year statute of limitations. Meaning you are able to file for the previous six years.

It is vital that all US expats stay on top of this issue and file their returns. Not doing so can lead to a number of consequences, including difficulty in renewing your passport, and even difficulty in being admitted into the US.

Generally, US expat tax returns purely request information, and you will not always owe tax. US expats are often entitled to foreign income exemption totalling at around $92,000. There are also foreign tax credits based depending on tax paid in your new country of residence.

You may also be able to claim housing credits to lessen your US tax liabilities, however these will depend on your individual circumstances.

Expats who are completing their US tax return must pay specific attention to the residency requirements associated with foreign income exemption.

US expats must remain overseas for at least 330 consecutive days. Now, what’s interesting to note is that it can be 330 days in the time that the return is due to be filed.

For instance, an expat leaving on the 15th of April has until 15October of the next year to meet the 330 day residency test.

US expats have until 15 June to file a return. Preparing a US expat tax return varies significantly from a traditional US return, and with limited experience doing so it’s not surprising that US expats often encounter difficulty when completing one. For this reason it’s always important to consult with an Independent Financial adviser who has with US tax issues. Get in touch with a recommended international IFA today.