Not sure where to begin? Take a look at some common expat tax questions.
Yes. U.S. citizens and residents are taxed on their worldwide income. So regardless of where you work, you must report your income as if you worked within the United States. However, certain rules and benefits are available to expats, such as the foreign earned income exclusion.
The Foreign Account Tax Compliance Act (FATCA) is a new law that now requires foreign banks to begin sharing financial information with the U.S. government. This may just mean that your bank will ask you to fill out a U.S. tax document (Form W-9) so they can comply with these rules. But, if you haven't been filing tax returns with IRS, FATCA reporting could result in the IRS discovering your failure to file. An H&R Block Expat Tax Advisor can help you catch up.
According to the IRS, if you fail to file your U.S. tax return while living abroad, it's the same as not paying your taxes as a U.S. resident. You may be subject to thousands of dollars in penalties and you'll be unable to take advantage of special reductions and benefits offered specifically to U.S. expats.
The time to take action is now. The IRS has several non-penalty disclosure programs available to Americans who have honestly overlooked their filing obligations. Our U.S. expat tax experts can help you decide on the best course of action.
Yes. As a U.S. citizen, you can do this if your spouse elects to be treated as a resident. However, this might not be in your best interest. If your spouse files as a nonresident, his or her worldwide income is subject to U.S. taxation. However, there are many tax benefits that wouldn't otherwise be available to a nonresident. If your spouse doesn't file as a resident, you can file as Married Filing Separately or as Head of Household, if you qualify. An H&R Block expat tax advisor can help you decide the best option for your circumstances.
It depends. You will receive a credit against your U.S. tax liability for many of the taxes paid in your country of residence. Often you will owe no tax, but the rules are complex depending on the country where you live. So, check with your expat tax advisor about which foreign taxes you can use to maximize your foreign tax credit.
Yes. The normal rules apply - you might qualify for a credit for the childcare expenses paid to a foreign care provider so that you (and your spouse) can work or look for work. However, you're not obligated to provide a tax identification number for a foreign childcare provider.
Foreign pension plans generally will not qualify for special tax treatment like a U.S. 401(k) or IRA. The contributions you make to the plan are not tax deductible and, in certain situations, you may be taxed on the annual growth in the plan - even if it is not distributed to you!
Fortunately, if you are an expat in Canada, the UK, Germany, Belgium, or the Netherlands, you may not need to worry about these rules because you are covered by an income tax treaty. But, additional U.S. tax reporting obligations may apply to your foreign pension. An H&R Block Expat Tax Advisor can make sure it is reported correctly.
This is a tax benefit that allows U.S. citizens and residents working abroad to exclude up to from their taxes. Expats can exclude only earned income, which includes salary, wages, and so on. So, retired expats living off of Social Security and pension income most likely won't qualify for the exclusion. There are some tests you must meet before you can claim the exclusion, your H&R Block expat tax advisor can help determine whether you qualify.
Usually, if you work as an employee outside the United States, U.S. Social Security and Medicare taxes aren't withheld from your salary. However, there are certain exceptions. (Ex: You work abroad for an American employer.) Instead, your foreign employer might withhold Social Security taxes under that country's system.
If you're self-employed outside of the United States, you'll still owe self-employment tax. This is true even if you're able to exclude all of your foreign earnings from U.S. tax by claiming the foreign earned income exclusion. However, agreements between the United States and many foreign countries may prevent you from being subject to self-employment taxes in both countries.
The same taxes and tax benefits that apply to your home in the United States also apply to your foreign home. So, a gain on the sale of your foreign home is usually tax-free provided the gain is below these thresholds:
$500,000 -- if you're married filing jointly
$250,000 -- if you use any other filing status
This is the Report of Foreign Bank and Financial Accounts (FBAR). It's the IRS reporting requirements of U.S. citizens and residents who own -- or have signature authority over -- financial accounts located outside the United States. This includes foreign branches of banks headquartered in the United States. The reporting threshold is $10,000 for all foreign accounts at any time during the year. Financial accounts covered by this law include:
Savings and checking accounts
Securities and brokerage accounts
Mutual funds and so on
The penalties for not filing the form are quite severe:
If the failure to file is not willful, the penalty is up to $10,000 unless the failure to file was due to reasonable cause.
If willful, the penalty is up to $100,000 or 50% of the total account balances - whichever is greater. There are also possible criminal penalties.
If you aren't sure whether you should file FinCEN Report 114, check with your H&R Block expat tax advisor.
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We specialize in simple to complex U.S. taxes for expats:
Our pricing is tailored to meet the unique situation for each Expat client – from the simple to complex. Our prices are very competitive with local or U.S.-based accountants and a much better value than large accounting firms. We will provide a precise fee quote. Assuming there are no additional forms or complexity once the process begins, the fee you are charged will be the same as the estimate that you receive upfront.
To provide a range, with simple employment income and some bank account interest only, the base price for a tax return prepared and filed is between $250 and $400 USD. Additional costs will apply for:
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