Despite Record Number of U.S. Expats Meeting Filing Requirements, 7 of 8 Still Likely Noncompliant
Earlier this year, the IRS sounded optimistic about U.S. expats’ tax compliance, noting almost 1.2 million expats filed a Report of Foreign Bank and Financial Accounts (FBAR) in 2015, an 8 percent increase from the previous year. While this may be encouraging news, it still leaves a number of the estimated 8.7 million U.S. citizens living abroad in violation of the United States’ unique and perhaps still unfamiliar tax requirements, which impact more taxpayers than may be aware of them.
“Expats who have moved abroad may be surprised to learn they still have a U.S. tax filing requirement, but they aren’t the only ones. U.S. citizens who have never lived in the U.S., U.S. citizens who are living abroad temporarily and foreign nationals living in the United States may all have different IRS reporting obligations,” said Roland Sabates, operations director of H&R Block’s expat filing services. “These rules could impact a dual citizen who grew up in New Zealand and is now earning income, a recent college graduate planning to spend the next couple years teaching English in South Korea and a newlywed whose name appears on their British spouse’s foreign bank account.”
|U.S. citizens and resident aliens||anywhere in the world||a tax return||they meet the normal filing threshold.|
|an FBAR||they have foreign bank or other financial accounts totaling $10,000 or more at any point of the year.|
|outside the U.S.||form 8938||their specified foreign assets exceed $200,000 ($400,000 for joint filers) at the end of the year or ever exceeds $300,000 during the year ($600,000 for joint filers).|
|inside the U.S.||form 8938||their specified foreign assets exceed $50,000 ($100,000 for joint filers) at the end of the year, or ever exceeds $75,000 during the year ($150,000 for joint filers).|
File the FBAR by June 30 this year, but next year file it by April 15
United States citizens or residents who own or control foreign financial accounts must file an FBAR if the foreign financial accounts’ combined value exceeds $10,000 at any point during the year. They should submit the form to the Department of Treasury through the BSA e-filing system by June 30. They may also need to include foreign asset information with their tax return (due June 15 for taxpayers who are abroad) on Form 8938, Statement of Specified Foreign Financial Assets. Next year, the FBAR deadline generally moves up to April 15 to coincide with the tax filing deadline.
Even taxpayers who understand their expat and foreign account tax requirements may still find it difficult to do their taxes and submit the necessary forms. For example, just organizing their tax documents can be a major hurdle, as foreign banks or employers may have different reporting requirements or timelines than the U.S. government. And to avoid overpaying their taxes, they need to know if they are eligible to exempt some of their income from taxation or claim a credit or deduction for foreign taxes paid. For help, taxpayers may visit H&R Block Expat Tax Services, where they can access expat tax advisors through the virtual service or to find the nearest office in more than 14 countries and U.S. territories.
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