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Staying On Top of Your Expat Tax Obligations

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This guest blog was provided by Juan Montes, JD, EA and owner of TheTaxProblem.com. He was named an NTPI Fellow in 2016, and has 12 years experience as a tax professional. Juan has been quoted numerous times in the San Francisco Chronicle and U.S. News & World Report and specializes in helping expats and others maintain compliance with the complexities of the U.S. tax code.

Staying on top of your expat tax obligations can be challenging if you are an American. The most common required filings for U.S. expats living abroad are: 1) U.S. income tax return; 2) FBAR; and, 3) FATCA. Each has its own requirements and nuances, and mistakes can be costly.

The first thing expats need to be aware of is filing dates.

Important Due Dates

U.S. Tax ReturnFATCAFBAR
Original Filing DeadlineApril 18, 2017Filed with Tax ReturnApril 18, 2017
Automatic Two-Month Extension*June 15, 2017Filed with Tax ReturnNA
Automatic Six-Month Extension**October 15, 2017Filed with Tax ReturnOctober 15, 2017
Discretionary Two-Month Extension***December 15, 2017Filed with Tax ReturnNA

* Tax return filed between April 18 & June 15 requires statement that taxpayer qualifies for two-month extension.

** U.S. tax return requires Form 4868 be filed. FBAR has no filing requirement for extension.

*** Requires a letter be sent explaining the need for an additional two months.

The second consideration for expats is who must file by type of return.

U.S. Personal Income Tax Return

Filing requirement is based on your filing status and income. In general, the U.S. requires expats to report their worldwide income. If your income is more than your standard deduction plus personal exemption, you must file a tax return even if there is no tax liability.

Filing StatusFiling ThreshholdNotes
Single or Married Filing Separate                     US$10,350– If MFJ or MFS, add US$1,250 if 65 or over, or blind, per person, per event.
– If Single or HOH, add US$1,550 if 65 or over, or blind, per person, per event.
Head of Household                   US$13,350
Married Filing Joint                     US$20,700
Examples
John is 64 and Lilly is 64, and they file a joint return: Return required if income is over US$20,700
John is 66 and Lilly is 65, and they file a joint return: Return required if income is over US$23,200
John is 64 and is single: Return required if income is over US$10,350
John is 65 and is single: Return required if income is over US$11.90

FBAR – Report of Foreign Bank and Financial Accounts

  1. You’re a U.S. Citizen or U.S. Resident (Green Card holder)
  2. You have an interest in, or signature authority over, a bank, securities or other financial account in a foreign country.
  3. Aggregate account balance exceeds US$10,000 at any time during the calendar year.
    1. Example: Bank account A has US$7,000 and bank account B has US$4,000 on same day – there is a filing requirement.
  4. Penalties for Failure to File:
    1. Civil penalty assessment, if non-willful, up to US$10,000
    2. If willful, up to the greater of US$100,000 or 50 percent of account balances; criminal penalties may also apply.

FATCA – Foreign Account Tax Compliance Act

  1. You have an obligation to file a U.S. tax return (filed with tax return)
  2. You’re a U.S. Citizen or U.S. Resident (Green Card holder)
  3. You have an interest in specified foreign financial assets required to be reported.

A specified foreign financial asset is:

  1. Any financial account maintained by a foreign financial institution, exceptions apply.
  2. Other foreign financial assets held for investment that are not in an account maintained by a U.S. or foreign financial institution, namely:
    1. Stock or securities
    2. Any interest in a foreign business.
  3. If living abroad and filing a Joint tax return:
    1. The value of your specified foreign asset is more than US$400,000 on the last day of the tax year, or
    2. More than US$600,000 at any time during the year.
  4. If living abroad and filing anything other than a joint tax return:
    1. The total value of your specified foreign assets is more than US$200,000 on the last day of the tax year, or
    2. More than US$300,000 at any time during the year.
  5. Penalties for Failure to File:
    1. Up to US$10,000 for failure to disclose and an additional US$10,000 for each 30 days of non-filing after IRS notice of a failure to disclose, for a potential maximum penalty of US$60,000. Criminal penalties may also apply.

This information is not intended to be tax advice, nor should it replace your Enrolled Agent. Always consult your Enrolled Agent before making decisions that affect your tax liability.

 

 

 

 

 

 

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