IRS Taxes for U.S Citizens Living Abroad

IRS Taxes for U.S Citizens Living Abroad:

U.S citizens who are living abroad, need to file U.S taxes. Even though, often have to file foreign income taxes as well. However, International tax treaties do not prevent U.S citizens from having to file U.S taxes. Furthermore, they do stipulate how to avoid double taxation, most often by claiming tax credits when you file. Get Quote for tax preparation services in Maryland.

Tax Preparation Services in Maryland:

Filing as a U.S Expat involves filing more forms. Expats need to claim tax credits to avoid double taxation and also because there are extra reporting rules for many Americans living abroad. Expats that relate to reporting their foreign-registered financial accounts, assets, and business interests.

IRS filing dates for U.S Citizens living Abroad:

U.S Expats may receive an extra two months to prepare for tax preparation service in Maryland. They need to file their IRS tax return until the deadline. However, this is intended to provide time to file foreign taxes first. Foreign tax filing deadlines vary from country to country. In most cases, this date is after June 15, So U.S citizens abroad can also file Form 4868 to request an extension until October 15.

If you do owe any U.S tax, that must be paid by April 15. This avoids having to pay interest on the tax owed, even if you have not filed yet. However, this is true of quarterly estimated payments for U.S social security tax.

In case, you are employed overseas and do not have federal taxes withheld, or if you are self-employed.

Claiming tax credits to avoid double taxation:

If an Expat pays foreign income taxes, he may claim U.S foreign tax credit to ensure you don’t pay tax on the same income twice. In order to claim these tax credits, you need to file IRS form 1116 when filing Form 1040. Moreover, this allows you to claim the U.S tax credits worth the same as the foreign income taxes you have paid.

For U.S Expat living abroad in a country with higher income taxes, this will eradicate your U.S tax bill and may give you additional tax credits to carry forward too. We are well known for tax preparation services in Maryland.

Is the Foreign Earned Income Exclusion a better option?

For those U.S citizens who are living abroad, they don’t need to pay foreign income taxes.  However, they pay foreign income tax at a lower rate than the U.S rate and are often better off claiming the Foreign Earned Income Exclusions.

Also, this is true if all your income is earned, you earn less than around $110,000 and you either spent 330 days outside the U.S in 365 days. Otherwise, you have permanent residence in another country.

A Return for Expat Parents:

U.S Expats who claim the Foreign Tax Credit on Form 116 and who have children with U.S social security members can also claim the U.S Child Tax Credit. Additionally, this provides a tax credit of some amount per child. Clearly, this has already eradicated your U.S tax bill by claiming the Foreign Tax credit.

Note: This is not normally possible if you claim the FEIE (Foreign Earned Income Exclusion).

U.S Self Employment Taxes:

Those U.S citizens abroad, who are self-employed have to pay U.S social security taxes. However, the exception is if they need to pay foreign social security taxes. This is for those who live in one of the 30 countries where the U.S has signed a Totalization Agreement. This agreement prevents double social security taxation.

These countries are Australia, Austria, Belgium, Brazil, Canada, Chile, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, Norway, Poland, Portugal, Slovak Republic, Slovenia, South Korea, Spain, Sweden, Switzerland, the United Kingdom, Uruguay.

Usually, U.S self-employment taxes consist of 15.3% of income. Note that neither claiming the Foreign Tax Credit nor the Foreign Earned Income Exclusion removes the requirement. This exclusion helps to pay U.S social security taxes.

IRS Amnesty Program for U.S Citizens Abroad who have not been filing:

Those U.S Expat who have not been filing your U.S taxes. However, there is an IRS amnesty program for every Expat that allows them to catch up without facing penalties such as Claiming the FEIE or the Foreign Tax Credit. These penalties are known as the Streamlined Procedure.

Furthermore, it is strongly recommended that you seek advice from an Expat tax specialist as soon as possible before the IRS contacts you.

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