Expatriates
American Tax:
Frequently Asked Questions
<I am working in
Asia, how does the tax preparation process
work?
<What Information
Do You Need From Me to Prepare My Return?
<I hear a lot
about foreign bank accounts reporting
requirement. what should I report?
<Is that true that
I Have to Report my worldwide Income
on my tax return?
<How Do I Know if
I Qualify for the Foreign Earned Income
Exclusion?
<I am a Green Card
Holder and live in Europe. I have not filed
my US taxes for few years. What are the
consequences?
<What is Audit
Shield?
<What
are the U.S. federal income tax
rates for 2010?
<Are
Green Card holders liable for filing
a U.S. tax return?
<Is
a U.S. citizen liable for a U.S. tax
return?
<I
am a Green Card holder working for
a foreign company, should I report
it to the IRS?
<What
is the foreign earned income
exclusion?
<Can
I deduct housing expenses I pay
abroad?
<Can
I deduct foreign taxes paid?
<When
should I file my U.S. tax return?
<Where
do I file my US Federal tax return?
<What
if I change my address?
I am working in
Asia, how does the tax preparation process
work?
We try to keep the
process extremely user friendly, simple and
at the same time detailed oriented to make
sure we cover all aspects of your taxes. Step 1 - one of our
accountants will contact you, introduce him
or herself, answer any preliminary questions
and learn a bit more about your particular
situation. Step 2 - a secure account will be
set up for you online where we and you will
upload a documents checklist and tax
questionnaire for you to complete.
Step 3 - At this point your accountant will
prepare an initial draft of your return and
send it to you for review. If there
are any open questions, from either you or
your accountant, they will contact you via
email to fill in the gaps. Step 4 - Once you
approve the return we will invoice you for
the completed tax return. Soon after you
will receive the final tax return with
detailed filing instructions and e-file
submission option.
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We have prepared a very
efficient checklist of documents and data we
require to prepare and finalize your return
while making sure you take advantage of each
and every tax break allowed to you by law.
Once you start the process you will receive
an email with the checklist and explanation
attached to each item. Your accountant will
further explain any issue that you have with
one or more of the items from that list.
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If you have foreign bank
accounts and they have had over $10,000.00
in them at any time during the tax year you
must report them to the US Treasury. Failure
to file may result in large penalties (i.e.
over $10,000) depending on the amount of
money you have in your accounts. You can
report your accounts using form
TD F 90-22-1. Make sure you also report
any income earned abroad from those
accounts, including interest, dividend,
capital gains, etc...
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Yes, it is correct.
The U.S. tax code requires a U.S. person
(for tax purposes) to report income earned
in or outside of the U.S. This means that as
an
Expatriate earning
monies in countries other the U.S., you must
report your foreign income on top of your
U.S. income. If you failed to so in previous
years, you will need to file
amended tax returns and report all of your
income.
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According to the IRS you
qualify if you are: • A US citizen who is a
bona fide resident of a foreign country
(i.e. living in a foreign country) or
countries for an uninterrupted period that
includes an entire tax year OR • A US
resident alien who is a citizen or national
of a country with which the US has an income
tax treaty in effect and who is a bona fide
resident of a foreign country or countries
for an uninterrupted period that includes an
entire tax year, OR • A US citizen or US
resident alien who is physically present in
a foreign country or countries for at least
330 full days during any period of 12
consecutive months.
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According to the IRS you
qualify if you are: • A US citizen who is a
bona fide resident of a foreign country
(i.e. living in a foreign country) or
countries for an uninterrupted period that
includes an entire tax year • A US resident
alien who is a citizen or national of a
country with which the US has an income tax
treaty in effect and who is a bona fide
resident of a foreign country or countries
for an uninterrupted period that includes an
entire tax year, or • A US citizen or US
resident alien who is physically present in
a foreign country or countries for at least
330 full days during any period of 12
consecutive months.
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As a Green Card holder,
you are considered a U.S. person for tax
purposes and liable for filing a U.S. tax
return if you meet the minimum income
requirements. If you have failed to do so
you may be subject to penalties that are
based on the actual tax due for each year.
If you are married to a non-US spouse and
considering moving to the US, you will
likely need to show (at a minimum) your last
three years of tax returns to prove that you
can provide support for your spouse. We
highly recommend you file the missing tax
returns as soon as possible and allow our
experts to represent you before the
IRS and bring your account with them to a
current status by completing all the filing
and asking the IRS to waive any and all
penalties.
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When you sign up for
"Audit Shield" we shall handle all
communications and meetings with the IRS or
state taxing agency, from receipt of the
first notice to completion of the audit.
Specifically will Defend your income tax
returns in an audit through the highest
level of appeals Schedule and attend all
audit appointments Review your tax return
for additional problem areas Review your
documentation before the IRS sees it Make
all audit phone calls Handle all audit
correspondence Prepare requests for appeals
conferences Prepare a U.S. Tax Court
Petition, if necessary Minimize the
financial impact of an audit The starting
price for the current year membership is
$79.99. Past years may be more expensive as
there is a higher likelihood of an audit.
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The rates start with 10%
and go up to 35%. Your filing status
(Single, Married, Married filing Separate
Return, Head of Household and Qualified
Widower) will determine the set of tax
brackets that applies to you. For detailed
lists of tax brackets please
click here
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Are Green Card holders liable for
filing a U.S. tax return?
Yes - if you are a permanent U.S.
resident you are considered to be a
resident for tax purposes and must
file a U.S. tax return, even if you
are currently living outside of the
U.S.
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Is a
U.S. citizen liable for a U.S. tax
return?
The U.S. tax code taxes U.S.
citizens on their world-wide income
regardless of where it is earned,
paid, or received. Living outside of
the U.S. gives you certain tax
benefits that are not available in
the U.S. Nonresident aliens (e.g. an
individual without permanent
residency in U.S.) are subject to
tax only on their US source income.
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I
am a Green Card holder working
for a foreign company, should I
report it to the IRS?
If you work for a foreign company,
you must report your income, as
foreign income on your U.S. tax
return. Your foreign employer should
provide you with a W2 equivalent (a
document that shows your annual
earned income and tax paid through
your employer) and convert those
numbers to U.S. Dollars. In addition
to salary, if you are reimbursed or
receive an allowance for certain
living expenses, you must include
these amounts as income. Examples
are cost of living allowances,
overseas differential, housing
reimbursement or allowance,
education reimbursement for your
children's schooling, reimbursement
of home leave expenses, payment of
foreign tax on your behalf, etc. You
also need to report as income the
fair market value of housing, a car,
meals or other benefits provided by
your employer.
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What
is the foreign earned income
exclusion?
You
qualify for the foreign earned
income exclusion (up to $91,400) if
you are a U.S. citizen or resident
alien (e.g. Green Card holder), you
have a tax home in a foreign
country, and you meet either the
foreign residence test or the
physical presence test.
It is important to keep track of
the dates you are in the U.S. when
you live overseas. These dates will
help determine if you qualify for
the foreign income exclusion, and
they must be listed on IRS Form
2555, Foreign Earned Income, when
you prepare your tax return. If you
are traveling in the U.S. on
business, you will be expected to
report some amount of income as
earned in the U.S. on that trip.
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Can I deduct housing expenses I pay
abroad?
Yes,
all
your housing expenses, including
amounts paid for rent, repairs,
utilities, real and personal
property insurance, furniture
rental, residential parking fees,
etc. can be used to calculate the
foreign housing exclusion or
deduction. Not all expenses are
deductible housing expenses, such as
mortgage interest payments,
telephone charges, the cost of
domestic help, purchased furniture,
deductible taxes, or the cost of
improvements to property. Also, if
your income is below the maximum
exclusion for the year (currently
$91,400), housing expenses are
irrelevant because the housing
exclusion or deduction will not
benefit you.
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Can I deduct foreign
taxes paid?
Yes, income taxes paid to a
foreign country can be claimed as a
foreign income tax credit and can
reduce your U.S. income tax. Your
other option is to deduct these
foreign income tax payments as an
itemized deduction. If you elect to
take the foreign earned income
exclusion (discussed above), the
credit is reduced.
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When
should I file my U.S. tax return?
For most people it is April 15th,
but for U.S. citizens living abroad
or resident aliens (e.g. Green Card
holders) an automatic extension is
given to June 15th. However,
interest on any balance due to the
IRS will be charged from April 15th.
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Where do I file my US
Federal tax return?
If living
abroad, you return should be mailed
to
Internal Revenue Service
Center,
Austin, TX 73301-0215,
USA.
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What
if I change my address?
If you change your mailing address
you should notify the IRS using Form
8822. If you are changing both your
home and businesses addresses, you
need to complete two forms.
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