Staying On Top of Your Expat Tax Obligations

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

* 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.

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.