Who Needs to File Tax Returns as an American Expat
As an American expat, filing a US tax return may still be necessary, even if you’re living and earning income abroad. In general, you’re required to file a US tax return if your income exceeds a certain threshold, which varies depending on your filing status and age.
For 2023, the threshold for single filers under the age of 65 is $12,850, while for married filing jointly couples under the age of 65, it’s $25,700. If you’re over 65, the threshold is slightly higher at $14,450 for single filers and $27,000 for married filing jointly couples.
It’s important to note that even if you don’t meet these income thresholds, you may still need to file a US tax return if you have certain types of income, such as self-employment income or investment income from US sources.
Foreign Income and Taxes for American Expats
If you’re an American expat earning income in a foreign country, you may be subject to both US and foreign taxes. In most cases, you’ll need to report your foreign income on your US tax return, but you may be able to claim a foreign earned income exclusion or a foreign tax credit to offset some of your US tax liability.
For 2023, the maximum foreign earned income exclusion is $112,100, which means you can exclude up to that amount of foreign income from your US tax return. To qualify for the exclusion, you must meet certain requirements, including the bona fide residence test or the physical presence test.
If you pay foreign taxes on your foreign income, you may also be eligible to claim a foreign tax credit on your US tax return. This credit allows you to offset some or all of your US tax liability with the foreign taxes you paid.
Reporting Requirements for American Expats
As an American expat, you may have additional reporting requirements beyond just filing a US tax return. For example, if you have foreign bank accounts or other financial assets, you may need to file an FBAR (Foreign Bank Account Report) or FATCA (Foreign Account Tax Compliance Act) form with the IRS.
The FBAR form is required if you have foreign bank accounts with an aggregate value of $10,000 or more at any point during the year. The FATCA form is required if you have certain types of foreign financial assets that exceed certain thresholds.
In addition to these forms, you may also need to report other types of foreign income or assets on your US tax return, such as foreign trusts or foreign partnerships.
Penalties for Failing to File
Failing to file a US tax return or failing to report foreign income or assets can result in significant penalties. The penalties for non-filing or late filing can be as high as 25% of the unpaid tax liability per month, up to a maximum of 100%.
If you fail to file an FBAR or FATCA form, the penalties can be even higher, with fines of up to $10,000 per violation or even criminal penalties in some cases.
Getting Help with American Expat Tax Return Filing
Filing a US tax return as an American expat can be a complicated process, with many rules and regulations to follow. It’s often a good idea to work with a tax professional who has experience working with expats to ensure that you’re meeting all of your tax obligations and taking advantage of any available tax benefits.
There are many tax professionals who specialize in working with American expats, and they can help you navigate the complexities of filing your US tax return from abroad. These professionals have a deep understanding of the unique tax issues that expats face, and they can provide you with the guidance you need to ensure that you’re in compliance with all applicable tax laws.
If you’re an American expat in need of tax services, working with a company like Expat Tax Online can help make the process of filing your US tax return much smoother and less stressful. With their deep expertise in expat taxes and commitment to using technology to make the process as easy as possible, you can trust that you’re in good hands with Expat Tax Online.