Filing Requirements For U.S. Taxpayers Living Abroad
US Taxpayers Living Abroad
If you are a U.S. citizen or resident alien living abroad, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or in a foreign country. Your worldwide income is subject to U.S. income tax, regardless of where you reside – whether in the U.S. or in a foreign country.
Generally, you must file a return if your gross income from worldwide sources is at least the amount shown for your filing status in the Filing Requirements table in Chapter 1 of IRS Publication 54.
Gross Income
Gross income includes all income you receive in the form of money, goods, property, and services that is not exempt from the US and while living abroad.
In determining whether you must file a return, you must include as gross income any income that you exclude< as foreign earned income or as a foreign housing amount. If you are self-employed, your gross income includes the amount on the Gross Income line of Schedule C. A very common mistake made by U.S. taxpayers living abroad is that don’t include worldwide income and fail to include excluded foreign income and thus fail to file a required tax return.
Foreign Currency
Amounts that are reported on your US tax return must be in US dollars. If you receive all or part of your income or pay some or all of your expenses in foreign currency, you must translate the foreign currency into US dollars using IRS accepted conversion methods. In addition, all income must be reported on a calendar year basis.
When To File
If you are living abroad, or are in the military on duty outside the U.S., on the regular due date of your return, you are allowed an automatic 2-month extension to file your return without requesting an extension. For a calendar year taxpayer, the automatic 2-month extension is to June 15. It is important to note that any tax liability is still due on April 15 or interest will be charged starting from April 15.
Foreign Bank Account Reporting (FBAR)
FinCEN Report 114 (known as the “FBAR”), must be filed if you had a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country, the value of which exceeds $10,000.
Effective for tax years beginning after December 31, 2015, you must file this form by April 15 each year, with a maximum extension to October 15.
The FBAR form is an information disclosure and not a tax return, so it is filed separately from your individual tax return.
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Tax Samaritan is a team of Enrolled Agents with over 25 years of experience focusing on US tax preparation and representation. We maintain this tax blog where all articles are written by Enrolled Agents. Our main objective is to educate US taxpayers on their tax responsibilities and the selection of a tax professional. Our articles are also designed to help taxpayers looking to self prepare, providing specific tips and pitfalls to avoid.
When looking for a tax professional, choose carefully. We recommend that you hire a credentialed tax professional such as Tax Samaritan that is an Enrolled Agent (America’s Tax Experts). If you are a US taxpayer overseas, we further recommend that you seek a professional who is experienced in expat tax preparation, like Tax Samaritan (most tax professionals have limited to no experience with the unique tax issues of expat taxpayers).
Randall Brody is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics.
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