How Expatriate Taxes Affect Citizens Living Abroad

For most taxpayers, completing and filing an income tax return is relatively simple.

However, there are some tax situations that affect a small number of taxpayers, and it is important to understand these issues, especially if they apply to you.

One of these more unusual situations is filing expatriate taxes.

Often, Americans who live in other countries feel that they should not owe income tax in the United States.

However, this information is false.

The US is one of two countries who tax their citizens regardless of where they live.

Depending upon how much money you earn, you may still have to file a tax return in the United States.

The cap is over $100,000, so for some, Uncle Sam will still be just a memory.

Residency tests do apply, so keep an accurate record of your travels in and out of the country.

Residency in a foreign country must be over 330 days.

If you pay foreign taxes on your income, that amount can offset the amount you owe the IRS.

If you do not owe the IRS, it is still necessary that you file an income tax return in the United States, as the fees for not filing can be steep, even if you owe no money.

Currently, the IRS has been lenient on citizens who live abroad, allowing them to file past returns without incurring a penalty.

However, it is not known how long this feeling of goodwill will last, so it is always preferable to file in a timely manner.

The United States and the IRS have an agreement with many other countries in regards to sharing financial information.

Therefore, if you are living abroad and trying to avoid paying taxes, the chances are now greater that you will get caught.

Serious delinquency can result in your passport being cancelled.

Filing dates are often extended, however, to a couple of months past the April deadline in the states.

This does not mean that payment can be delayed, however, only the filing of the return.

An extension can be filed that moves the due date to October, however, interest still accrues on late payments.

Expatriates that are married to someone who is not a US citizen, who may or may not have children, can file using the head of household status, which increases their standard deduction.

Children can possibly still qualify as dependents, further decreasing tax liability.

Expatriates can even possibly benefit from credits such as the additional child tax credit, further decreasing liability.

It is also possible to receive an income tax refund while living abroad.

Some tax information can be confusing, and the subject of expatriate taxes is one that has many twists and turns.

This is one reason to consult a professional tax accountant who is well-versed in the tax laws that impact US citizens who live in other countries or those who have never lived in America but received their citizenship from their parents.

In the state of Washington and the Seattle area there are several accountants who specialize in income tax.

Take advantage of their services and avoid a tax filing headache.

About the author
Margaretha Valderas