Tax Advice for U.S. Expatriates, from Anthony N. Verni
This article is brought to you by Verni Tax Law. If you are a U.S. expat and need an attorney with International experience to advise you on even the most complex tax problems, contact Anthony Verni using the form on the right, or call (908) 904-9794 for an initial consultation. With over 20 years of experience, Anthony delivers successful results to clients living in and outside of the U.S.
Expat Tax Advice: What U.S. Taxpayers Living Overseas Need to Consider
As an US expat who has moved overseas, you probably have many questions about your rights and responsibilities regarding filing US taxes. While US expat tax law can be very complicated, a few simple tips will help you stay compliant and decide if you need expat tax advice.
Expat tax tip #1 Don’t miss the US expat income tax filing deadline
US expats are required to file an US income tax return, regardless of where they live. If you are a US expat living abroad, the deadline for filing your taxes isn’t April 15th but actually June 15th. As an expat, you get two more extra months to prepare your US expat tax return. If you owe money to the IRS, your payment is due by April 15th or you are subject to penalties and interest to the IRS.
As a US citizen or green card holder living abroad, you have to pay taxes to Uncle Sam and most likely taxes in the country you reside in. It’s best to seek expat tax advice from a tax attorney to get the current amount and information about foreign housing deduction and other exclusions that can help reduce the tax you may owe.
Expat tax tip #2 File every year
Faced with adjusting to a new culture and country, some expats simply forget about US income taxes. As a US expat, you need to file your taxes every year. The penalties for back taxes can be high and can even include jail time. Even if you do not earn an income abroad, you should file a tax return in the United States.
It’s in your best interest to file taxes every year due to the statute of limitations with taxes. For example, if you live abroad for 7 years and do not file taxes with the US, the IRS can go back on all those years and estimate what your income was during that period. When you file yearly, it reduces the statute of limitations to only three years. This means that after three years the IRS cannot go back and try to audit or change your returns if you file your taxes. The only exception is when fraud occurs.
Expat tax tip #3 Reduce FBAR penalty fees
Money, penalties and even jail are words attached with Foreign Bank Account Reporting (FBAR). The biggest fear with taxpayers coming forward is not only paying the tax—but also paying the excessive penalties and having the money to do so. The rule of thumb is to find the IRS before they find you.
IRS regulations requires that US expats with offshore accounts, including mutual funds, brokerage accounts, trusts or other type of foreign financial account valued in excess of $10,000 must complete the Report of Foreign Bank and Financial Accounts (FBAR).
An expat taxpayer may be able to reduce FBAR penalties if they do not have a history of past FBAR penalty assessments and there was no civil fraud penalty against the expat for an underpayment for the year in question, due to the failure to report income related to any amount in an offshore account. Other scenarios may qualify an US expat for penalty abatement.
If you are unsure that you are in compliance with FBAR regulations, you should seek expat tax advice from an experienced tax attorney as soon as possible.
Expat tax tip #4 Seek Advice from an US Expat Tax Attorney
Under FATCA, foreign banks are required to report account information owned by U.S. citizens to the IRS. FATCA stands for Foreign Account Tax Compliance Act. As a result, the IRS has become far more aggressive in their collection process as well. Avoid high penalties and even possible jail time by speaking with a skilled and experienced US expat tax attorney today.